Ecommerce Guide

JD.com Announces Plans To Challenge Alibaba’s Growing Dominance

It was revealed today that China’s second largest ecommerce company JD.com will be opening more than one million JD.com convenience stores across China in the next five years. Half of these will be in rural areas with local owners being able to order goods through JD.com’d specialist application software. JD.com will be responsible for all logistics and supply issues.

The move will see JD.com able to tap into a greater and more diverse customer base in China with statistics from Kantar Retail, the international consultancy revealing that there are currently approximately seven million small convenience stores in China which account for a surprising 40% of all shipments in all retail channels.

Jason Yu, general manager of consumer research firm Kantar Worldpanel, said:

“The network of stores will help JD to enhance its O2O presence in the fast-moving consumer goods sector. To address the last-mile delivery challenge, the move can help consumers to order products at nearby stores. While it brings business to those convenience stores, it also makes those stores an entry point to the JD platform so that it can increase its penetration among shoppers.”

Lu Zhen Wang, CEO of the Shanghai-based Wanqing Consultancy added, “JD has strengths in delivery and distribution in rural areas. Establishing offline stores will help JD cover more areas and access to more consumers.”

The move is just part of JD.com’s strategy to combat the ever growing dominance of China’s number one ecommerce company Alibaba. The company, that has a number of subsidiaries including AliExpress has recently seen it team up with a number of European retailers including Sainsburys and Aldi to launch online stores on ecommerce sites run by the Alibaba Group. In response, this has seen JD.com recently announce a new partnership with Wal-Mart, owners of the UK supermarket Asda to sell Asda goods on its ecommerce platforms in clear strategy to attract more of China’s ever growing middle class shoppers who crave quality European goods. Asda will primarily be offering food and health products on JD.com that will include coffee, tea, biscuits, energy bars and baby food.

This overseas online shopping sector will see significant growth over the next few years with eMarketer, the leading market research firm predicts that by 2020, it will be with $1577 billion per year up from $86 billion in 2017. However, some ecommerce commentators have expressed scepticism as to the actual sales performance of foreign supermarket goods. Lu Zhen Wang, CEO of the Shanghai-based Wanqing Consultancy said:

“Selling foreign supermarket products online is a nice touch to enrich the two platforms’ online offerings. But I don’t think foreign supermarkets can create significant sales in China via this cross-border shopping model. Compared with their rich selections in home markets, there is only a limited number of items that are suitable to ship to Chinese shoppers.”

 

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Over the next few years we can expect to see more initiatives by both JD.com and Alibaba to increase their overall market share.

Scott Bretton

Scott Bretton

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