JD.com chief Richard Liu sees drone delivery as the way to reach China's rural consumers

BYSaheli Roy Choudhury
Published 6:00 PM ET Sun, 18 June 2017

Using robotics for parcel delivery could help to bring down costs and transform the logistics industry, according to the founder of China's second-largest e-commerce player.

Speaking exclusively to CNBC, Richard Liu, founder and CEO of JD.com, said drone technology, in particular, could allow retailers like JD.com to offer delivery services in out-of-the-way locations, without incurring high logistics costs.

"Today we have over 70,000 delivery men working on the street. It's high cost, you know," he said. "If you can use robotics to deliver a parcel, the cost will be very low."

JD.com and rival Alibaba are already established players in China's top-tier cities such as Beijing and Shanghai. But China's rising middle class is opening newer markets for retailers in smaller cities and the countryside, where the infrastructure is not yet as well-developed as the bigger cities for cost-efficient ways of doing business.

"In the past, it's very hard to do business in the countryside, because the logistic fee is very high, the cost is too high," said Liu. According to him, this is where drones, flown from the cities to the countryside, to deliver parcels, instead of cars or vans, could taper the cost.

"That kind of logistic fee will drop down at least 70 percent, so on our balance sheet, I think it will be profitable," he said.

Cost of global parcel delivery, which excludes pickup, line-haul, and sorting, already amounts to approximately 70 billion euros ($78.38 billion) according to a 2016 report from McKinsey & Co. China, along with Germany and the United States, accounted for more than 40 percent of the market, and e-commerce was the largest driver of growth.