JD's CEO Richard Liu criticizes high delivery platform commissions, calls for public welfare: internal speech

"The technologies and knowledge we’ve acquired should never be used to exploit restaurant owners or delivery workers, nor to deceive or endanger consumers with unsafe food."

Today, a recording of an internal speech by Liu Qiangdong (Richard), founder and CEO of China's e-commerce giant JD.com, regarding JD's food delivery business has been circulating online. The full text was published on the WeChat public account Cai Shang 财熵.

This highly colloquial internal address has been shared by many media outlets such as Sina Finance and Caijing.com, although its authenticity has not yet been confirmed through authoritative channels.

In the speech, Liu criticized the excessively high commissions charged by current food delivery platforms in China, which he claimed leave merchants, delivery riders, and consumers all suffering. He explicitly stated that JD's food delivery service will never make more than a 5% net profit, with a particular focus on the welfare of delivery riders.

Two months ago, JD announced it would provide full social insurance benefits for its delivery riders, making it the first company in China to do so.

Below is the full translation of the speech.

In my opinion, we need to clearly define the business model, positioning, and ultimate vision for JD's food delivery service. We cannot blindly expand without a clear understanding of these aspects.

Over the past ten years, the food delivery industry has developed rapidly in China. As we can see, platforms (you know) are now earning hundreds of billions annually in commission fees. From the perspective of basic consumer needs, this model is problematic. Food-related businesses, like restaurants, traditionally have low-profit margins. I've also run a restaurant, and to be honest, it doesn't make much money. Yet, in this essential consumer industry, we now see a model that can generate thousands of billions in revenue and hundreds of billions in profit. It's surprising—this business model, driven by food delivery, is unique to China. Other countries do have food delivery services, but none charge commissions as high as those in China, with the average commission now reaching 25%, and sometimes even more than 30% when you factor in advertising fees.

What’s the result of this? The harm caused is that restaurants, in order to survive and make a profit, keep cutting their quality, especially in terms of food safety. As you've probably seen online, there have been reports of unhygienic practices, such as washing whole chickens in bathrooms or having rats and cockroaches in kitchens, sometimes even in delivery-only restaurants where there's no dine-in service. These are shocking examples.

And let's not forget, the people responsible for these practices aren't just negligent—they should be arrested for their actions. But if we dig deeper, we must ask: why have things come to this point? Why have these individuals lost all respect for the food they're selling? At the core of this issue is the food delivery platform's monopoly, which takes too much commission. The platforms are making too much money, while restaurant owners are struggling. It's wrong that the people helping restaurants sell their food are becoming some of the richest individuals in the industry.

So, today I'm setting the first rule for JD's food delivery service: JD's food delivery should never make more than 5% net profit. Just like with our home appliances, JD appliances should never exceed 5% profit. If it does, I will hold someone accountable. What we want is to operate in a way that limits our profit-making ability and desire, following the principle of making just enough. We must make money because we need to survive and grow, but we need to be clear about how much we should earn in each industry. From day one, we need to set the upper limit at 5%, which includes commissions, advertising fees, and all the investments that merchants make. All of that combined, our total net profit should never exceed 5%.

Second, I want you all to think carefully. I'm asking our HR system to evaluate whether it's possible to provide full benefits, including social insurance, for all our full-time delivery workers who work every day. There will definitely be full-time and part-time delivery workers. Can we offer full benefits to the full-time ones? You need to calculate the cost increase and tell me how much each delivery will cost as a result. As for the part-timers who work only a couple of days a week, we can't provide them full benefits.

For the part-timers, I'm asking Allianz JingDong General Insurance Company to design a separate commercial health insurance plan for them, ensuring that if they get seriously ill, they can get medical reimbursements. You all need to research this. We'll provide commercial health insurance for part-time employees and calculate how much each order will cost as a result of this insurance, and how much more that will add to our costs. This might raise the cost a bit, but I personally believe that this investment will improve employee dedication, retention, and service attitude. So, this is the second thing to consider: how can we protect the livelihoods of our delivery workers, especially after their retirement.

Third, we're all well-educated, right? We have a lot of high-level technology, but I hope our technology can help reduce social costs and improve the efficiency of society. However, our algorithms and technologies, the knowledge we've gained, should not be used to exploit restaurant owners or delivery workers. Our knowledge should not be used to deceive or cheat consumers into eating unsafe food. That's not right. So, the third thing I want to address is that JD food delivery must tackle food safety issues. We may not have the capability today, but we will work toward this goal in the long run.

Any business model, any company that starts by being greedy and only focusing on making money will never last. It will never survive for 50 or 100 years. It's simply impossible. We might make less profit than others; our net profit margin might be three to five times lower, but I believe that if we focus on longevity, if we focus on steady, sustainable growth, we'll outlast others. Over time, we'll gain the recognition of consumers, as well as the recognition of the restaurant industry. This is my vision for JD's food delivery service: a model that can solve issues related to the restaurant industry, delivery workers, and food safety for consumers.

The solution, at its core, is to sacrifice some of our profit. We earn less money, but we put that money back into the system. This way, we can prevent restaurants from being forced to cut corners, leading to food safety issues, and we can also ensure that delivery workers aren't overworked, ensuring their well-being in the future. They won't lose hope or confidence in their lives. Lastly, we won't overburden consumers either.

Ultimately, I want to be able to confidently order from JD food delivery for myself, for my parents, or for my kids, knowing it's safe. I want to be able to choose our service. You all know what I mean, right?

All of us in the food delivery business, including JD's executives, must respect this principle. Every senior leader who orders food delivery for their own children should understand this. I've said enough for now. I've asked HR to quickly calculate the costs. Of course, we can't immediately provide all our delivery workers with full benefits, but we can start by offering full benefits to a small portion of the full-time employees who work with us every day and are willing to sign long-term contracts with the company. Enditem