WHO’S AFRAID OF ANOTHER CHINESE WEBSHOP?

Recently, JD founder Richard Liu named internationalisation the core strategy for future development. JD aims to help 1,000 Chinese brands sell abroad within the next 5 years. This month, more details have erupted.

On July 9th, JD launched the "Seed Merchant Recruitment Plan", introducing a new semi-managed model with overseas warehouses as the core (most probably JD Logistics warehouses). JD is responsible for overseas marketing and promotion, while merchants are responsible for order fulfilment and after-sales service. Merchants only pay 50% of the standard 7% commission in the first year.

The plan covers nine markets: the US, UK, Singapore, Malaysia, Thailand, Vietnam, Australia, Japan, and South Korea. The first batch of merchant recruitment will focus on high-potential categories, including 3C digital, home appliances, furniture and home accessories, sports and outdoor, clothing and underwear, maternal and child personal care, and Chinese food.

Here's why I think we shouldn’t be as worried about JD as we are about Temu and Shein (for now):

▶️ JD has a bad track record in cross-border ecommerce and stopped its Thai and Indonesian operations a few years ago.

▶️ JD's Ochama initiative, which was launched as laughable robot stores in NL and later became a pick-up concept, has not fared well. It claims to serve 24 European markets, but the actual sales volume there remains a mystery.

▶️ JD relaunched the Joybuy brand, which it used for several failed initiatives before, as a B2C webshop in the UK earlier this year. It hasn't generated much buzz yet.

▶️The semi-managed model has shown limitations for other players, as many merchants are hesitant to take on the risk of storing inventory in overseas warehouses.

▶️JD seems to be in a bit of an identity crisis. Besides suddenly entering the food delivery business, founder Liu, who has returned from semi-retirement, calls the last five years 'lost years'. He announced up to six or seven new strategic initiatives.

▶️JD's plan seems to mainly rely on its global logistical infrastructure, but as we’ve seen with other players, having a good customer acquisition strategy is more critical for success. And JD has not previously demonstrated the ability to effectively recruit local consumers through Joybuy and Ochama.

▶️In China, JD’s strength lies in selling reliable 3C brands. However, unlike inexpensive goods, there is no shortage of local webshops to purchase such products outside of China. Consumers might be reluctant to buy higher-priced items on another new Chinese e-commerce platform.

▶️ Last but not least, JD’s merchant recruitment seems to be promising, selling to Chinese diaspora users of the JD app. That would seriously limit the potential market size and be a severe lack of localisation. It would end up like Ochama, being just another platform that is primarily used by the Chinese diaspora.

-Ed