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Chinese ecommerce platform JD is lesser known amongst international audiences, but its mid-annual 618 shopping festival generated almost $25 billion in gross merchandise value this past June. The company has a 33% share of China’s B2C ecommerce market and generates more direct revenues than Alibaba. Google’s latest $550 million strategic investment in the company is the latest in a series of partnerships JD has orchestrated, as it seeks to challenge Alibaba and Amazon for ecommerce dominance in both China and the rest of the world.

JD’s Direct Retailing Model Gives it a Strong Competitive Advantage

JD’s business model is distinct from that of Alibaba’s in that it is a direct retailer – meaning that it purchases inventory wholesale and sells products directly to individual customers, rather than simply acting as an intermediary between buyers and sellers. Approximately 92% of its business comes from direct sales, whereas for Amazon this figure hovers around 50%.

JD stocks its own inventory in its vast proprietary network of nearly 500 warehouses across China, each of which is situated strategically close to consumers to ensure fast delivery. JD also employs an in-house delivery force of over 65,000 warehousing and delivery workers. During the 618 festival this year, JD was able to deliver 90% of its goods within two days.

This dedication to customer service requires a significant amount of capital to sustain, but JD has been able to stand out from its competitors.

JD claws its way up to a 33% market share in an industry where Alibaba was previously thought to be unbeatable.

Richard Liu, CEO of JD.com delivering goods during their ‘618’ Mid Year Sales Source: Internet

The Borderless Retail Alliance

To compete with Alibaba, JD has enlisted the help of numerous partners. In China, this includes internet giants Tencent and Baidu, in addition to its partnerships with the likes of vertical-focused ecommerce platforms Vipshop and Meili Inc. Tencent owns 18% of JD’s shares and partnered with JD to invest $864 million in China’s third largest ecommerce platform Vipshop this past December. JD made its claim to fame by selling electronics to a predominantly male user base, and such partnerships with Vipshop and Meili, both of which sell a combination of apparel and cosmetics, help the company appeal to a broader female base.

America’s largest retailer Wal-Mart owns 10% of JD’s shares and has been a strategic partner since 2016 when it first sold its ecommerce division Yihaodian to JD Google, despite having a limited presence in the China market, announced a $550 million investment in JD this past June. Both of these strategic partnerships will be key as JD prepares to expand its business overseas.

Google’s Data Will Help JD Catch Up Overseas

Ecommerce platforms such as JD spend an enormous amount of money on search ads every year, to ensure that their products show up in search results. As they grow bigger, however, internet users can go directly to ecommerce platforms to search for products, which presents a threat to Baidu’s and Google’s search ads business. Partnering with JD allows Google to hedge against this problem.

Google’s extensive ecommerce data can give JD better insights into the buying behavior of users, and JD will have a better idea of how to target users via Google’s broad ads network. This will be a significant asset as it attempts to catch up with local competitors in Southeast Asia, Europe, and the US.

Wal-Mart and JD Make the Perfect Couple

US retail giant Wal-Mart has been partners with JD since 2016 when it sold its online business Yihaodian to JD in exchange for a 5% equity stake worth $1.5 billion. That stake has since grown to 10%. In China, Wal-Mart leverages JD’s marketplace and users to sell directly to Chinese consumers online, complementing its offline business in the country. For JD, Wal-Mart is a key supplier for the JD Daojia platform, which is an on-demand delivery service that delivers groceries to customers within a one-hour time frame.

JD also sells its goods offline in Wal-Mart stores and uses them as distribution centers from which last-mile delivery can be carried out. Since JD is an online retailer without many offline retail stores, the addition of Wal-Mart’s physical locations across China is a considerable asset as it looks to expand its user base via omnichannel marketing strategies. JD is planning to expand to the US market by the end of this year, and the potential expansion of this partnership model means that JD may have a chance to catch up with Amazon, especially since the two can leverage economies of scale and source goods in bulk.

JD Dao Jia partnered with Wal-Mart on sales promotion Source: Internet

JD Goes Global

With an impressive set of partnerships under its belt, JD has the capability to challenge Alibaba and, potentially Amazon, on the global stage. JD has already set up international ecommerce site Joybuy in Spain this year and is looking to expand to Germany. JD has also launched local websites in Thailand and Indonesia under the JD brand. JD has publicly announced its intention to enter the US market by the end of 2018, with a beachhead office located in Los Angeles. The company plans to undercut its competitors and also help Chinese brands like Xiaomi expand to the US.

While it is still early stages, what is certain is that JD’s global expansion will be very interesting to watch going forward.

Written by Don Zhao, Co-founder and Executive Director of Azoya 

 

THE HISTORY

The company synonymous with denim goes back far in time. Levi Strauss & Co essentially crafted the first pair of blue jeans in 1873 and marked Levi’s as a heritage brand, and its creator, Levi Strauss as the inventor of the quintessential American garment.

The first pair was made from denim, the traditional fabric for men’s workwear and they became a fast success, originally known as ‘overalls’ until the 1960s until baby boomers coined the garment, ‘jeans’ instead.

Fast forward over a hundred years with the rise of various designer denim brands like Seven For All Mankind and True Religion and fast fashion, the company needs to re-introduce itself to the next wave of shoppers.

Now, in 2017, the household name employs a salesforce of 22,000, 50 plants and offices across 35 countries. Levi’s is making a comeback by leveraging the rise athleisure, the return of the classic, worn-out denim jacket and today’s digital tools.

The first Levi’s location in 19th century

THE INNOVATION

Levi’s first innovation was the creation of the 501 denim jeans itself, back in the 1870s, for working men.

In 2002, Robert Hanson, former Levi’s President, began focusing on women after Levi’s overall sales has plummeted 40%, from $7.1 billion in 1996 to $4 billion at the end of 2002.

He also reached out to 14,000 individuals and got them to try on Levi’s in order to design the perfect fit for different body types, including ‘sexier’ styles for men. Hanson also deployed two brands, Red Line and Pure Blue, with a price range of $35-95.

“We’ve been accused of trying to be everything to everybody in the past,” admits Hanson. “This time, we have to be one thing to everybody.”

The company’s makeover also included the layout of its offline stores. Walk into any Levi’s and notice its jeans are stored the way you would display fine wines or valuable relics. But was this enough against the newer, flashier denim brands?

“Levi’s is going to have to prove to people that the product is competitive from a style and quality standpoint, and that has to be based on something more than the heritage of Levi’s, which seems to be their endless fallback position,” said Hamilton South, partner at luxury consulting firm HL Group.

THE STRATEGY

The digital age has allowed the company to experiment.

Earlier this year, Levi’s partnered with Google to launch Project Jacquard, a tech ‘wearable’ collab between the two. Wearers can control certain actions on their smartphone by tapping and swiping a nearly invisible fabric touch interface woven into the left wrist of the classic Levi’s denim jacket.

Project Jacquard from Levi’s x Google

The Jacquard jacket will sell for $350 this fall.

“Expect digital assistants, cellular connectivity, and connections to larger systems, both at home and at work. At the same time, expect to see a proliferation in the diversity of devices brought to market, and a decline in prices that will make these more affordable to a larger crowd,” says IDC Wearable’s team research manager Ramon T. Llamas.

More recently, Levi’s has become a part of Amazon Prime Wardrobe, the new initiative for Prime customers to order items to their home to try on without buying.

President and CEO Chip Bergh said in a statement. “Our direct-to-consumer business continues to drive our results with both brick and mortar and ecommerce growing double digits.”

In Q3 2016, Levi’s reported that net income rose 69%, partly due to cost cutting efforts and rising revenues. Revenue growth was mainly due to direct to consumer sales, which grew 14% for both offline store sales and ecommerce.

IN SOUTHEAST ASIA

Levi’s has recently emphasized ecommerce in the region, through a shop-in-shop on Lazada Thailand, and a brand.com earlier this year with ecommerce enabler, aCommerce.

Levi’s pop-shop, implemented by aCommerce

aCommerce shares that the brand tested the market with a popshop first – a simple branded landing page where customers can choose to buy from a few items. The positive feedback reinforced the brand’s decision to commit to ecommerce as another distribution channel alongside its 77 offline stores in Thailand.

Levi’s also has shop-in-shops on Lazada’s platforms in Indonesia and Malaysia.

In Malaysia, Levi’s partnered with music streaming service, Deezer, to introduce its 2015 fall women’s denim collection. A custom built Levi’s in-app page was created via the Deezer platform, including a nationwide contest to encourage consumers to submit empowering songs to a collective playlist called #LadiesinLevisMY, which went viral on social media.

Levi’s x Deezer campaign, Malaysia 2015

THE FUTURE

Levi’s is conditioning its relevancy in the fashion world through a digital strategy to boost its classic products i.e. the 501 jeans and remain relevant. At the same time, while rightfully refusing to discard its heritage.

It might want to rethink the Google jacket though.

The second installment of the eIQ BRAND Series covers the quintessential sports brand, Nike. The trademark ‘swoosh’ is seen on famous basketball players, track stars and probably on your own feet. Founded by Phil Knight and his University of Oregon track coach in 1964, how did they build such a brand phenomenon?

THE HISTORY

Nike can attribute its cult-like following and 48% market share in America’s athletic footwear sector (2015) to high profile athlete sponsors across the world like basketball legends Michael Jordan and Lebron James, a stubborn founder (thank you Shoe Dog) and a well-thought out sales strategy.

Nike’s infamous “Just Do It” slogan.

Websites like StockX have banked on Nike’s popularity in the street fashion circuit by trading sneakers to make money, similarly to how shares are traded on the stock market. Michael Jordan’s line of sneakers, Air Jordans, is considered a collectors’ item and have in fact been sold for $104,000.

Source: StockX ‘s most valuable Jordan releases, 2015-2016

The company has built a global, extensive offline presence scattered across the globe from its home grounds in the US to Finland, China and Hong Kong and over the years, Nike has launched sub-brands that include Nike golf, Nike+, Air Force, Air Max, Nike Skateboarding and Nike Pro.

Nike’s latest figures stand at approximately $3.74 billion in revenue, compared to Adidas’ $877.6 million (2016).

Nike is not only famous for creating running shoes that improve performance during track & field, but also for its continuous innovation. The company’s master storytelling is still influencing shoe designs today.

“We’re connecting what we’re doing today back to Nike’s heritage,” says Dennis Reeder, Ekins training manager, under Nike.

THE INNOVATION

Nike is everywhere.

The company has a mobile app, Nike+, that works like a concierge service. Not only can users use the app to manage purchases, collect rewards points, and book spots at running events, they can also scroll through new collections on their feed.

The app also offers free standard shipping on every order, option to speak with product experts or chat live. Users of Nike+ can also reserve newly released items, and head to the local branch to make a payment.

Nike+ is soon to be available globally and handled by a team of tech entrepreneurs working out of Nike’s digital studio in New York City.

Source: Nike+

Never one to shy away from testing, the ‘Just Do It” advocates also created its own Youtube series to complement its marketing campaigns that garnered over 80 million views.

But it’s the company’s running shoes, continuously tweaked, ripped apart and rebuilt to be more impressive than the last is the prize that keeps fans coming back.

Last year, it teamed up with BBH Asia Pacific to launch an Unlimited Stadium campaign that brought light to a shoe shaped running track in Manila.

The stadium features a 200-metre running track lined with LED screens, where 30 runners at a time are invited to engage in a virtual race against avatars of themselves.

The much anticipated release of Nike VaporMax and relaunch of Nike AirMax through a Kiss My Airs offline and online campaign all drops more money into Nike’s brand equity bank.

THE STRATEGY

Nike has been doubling down on its digital efforts to fully commit to a multi-channel strategy. The company announced only a few days ago that it would slash 1,400 jobs to expand its direct to consumer sales online.

This was following March 2017, when the sportswear giant reported an 18% jump in digital sales. 2016 brought in an estimated $1.51 billion in digital sales and recorded a 49% jump in digital sales in Q1 2017.

“The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” says Mark Parker, Nike Inc’s chairman, president, and CEO. “Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”

Making web inventory available in stores became a priority for Nike after the retailer conducted a survey that asked shoppers who walked out without a purchase why they didn’t buy anything.

“The No. 1 reason they walked was that they couldn’t find what they were looking for,” said Christiana Shi, President of direct-to-consumer at Nike.

The solution? Give store associates mobile devices to complete transactions and help shoppers find out-of-stock items.

“We are telling them, ‘Hey, buy three sizes. Buy three colors. Ship us back what you don’t want.’ We know that if they get what they want, and they’re happy, they come back,” said Shi.

Nike is also reportedly close to selling directly on Amazon in the US. This would raise competition for brick-and-mortar sporting goods retailers, and also put pressure on rival athletic brands. Currently, Nike’s presence on Amazon is limited to third party sellers and unlicensed dealers. Through the partnership, Nike could weed out excess, discounted inventory available at the marketplace through third-party retailers and sell more full-price products through the online channel

IN SOUTHEAST ASIA

Nike’s presence in Southeast Asia is extensive, both offline in department stores, shopping malls and at flagship stores and through ecommerce across the region, solely selling through its own platform.

Nike Thailand ecommerce website

 

Last year, it teamed up with BBH Asia Pacific to launch an Unlimited Stadium campaign that brought light to a shoe shaped running track in Manila.

The stadium features a 200-metre running track lined with LED screens, where 30 runners at a time are invited to engage in a virtual race against avatars of themselves.

Nike’s shoe shaped running track

The company practices what it preaches; high performance, endurance and pushing its limits.

Nike Philippines Inc held 24% of value share within the sportswear in the Philippines in 2016.

THE FUTURE

True omni-channel retailing and digital investment are all part of Nike’s ambitious roadmap, in which the company vows to grow its ecommerce business to $7 billion by 2020.

The company has already gotten a head start on the online retail trend by pushing a ‘digitized’ shopping experience through its Nike+ app and mobile in-store touchpoints.

But for Nike to reach its ambitious goals of making ecommerce a significant part of total sales, the company must look at building awareness around itself with Gen Z, while maintaining its core character of catering to the performance of athletes and sneakerheads across the globe.

Here’s what you should know today.

1. Indonesia’s payments startup Kioson raises funding from gadget distributor

Kioson, a direct competitor of Grab owned Kudo has raised a round of investment from MKNT, an Indonesian stock exchange listed firm that distributes gadgets, prepaid phone vouchers and SIM cards.

MKNT now owns 4.94% of Kiosan.

The online-to-offline model established by startups like Kioson and Kudo in Indonesia is seeing some traction. They both work in a similar way. Kioson equip local store owners with an app through which they can order and resell phone credit or physical goods from online stores. The store owners become ‘agents’ that bridge the online-offline gap, and make money on commission.

Kioson’s app offers a wide range of services. It integrates with online shopping portals like Tokopedia, Elevenia, and Berrybenka, lets customers settle bills for electricity and water, order TV subscriptions, apply for loans, or make money transfers.

Through its partnership with MKNT, Kioson will boost its inventory of telecommunication products and services.

Read the rest of the story here.

 

2.  Delivery Hero seeks $4.9 billion valuation as IPO price set

The company and current owners will sell as much as 996 million euros in stock for 22 euros to 25.50 euros apiece, according to a statement. Rocket Internet owns about 35% of the company.

Shares of Rocket Internet have been rebounding in recent months on expectations of a successful IPO of Delivery Hero, which seeks more funds to compete in the cut-throat restaurant-meal delivery market.

Delivery Hero expects trading to begin on the Frankfurt stock exchange on June 30. The offering is for about 39 million shares, including an over-allotment, and the company said it will have about 172 million shares outstanding after the IPO.

Delivery Hero operates a variety of brands including Lieferheld, Foodora and Foodpanda, through which it either brokers deliveries from restaurants or brings the food to customers’ homes itself, by bicycle.

The food delivery sector is notorious for stiff competition, with rivals spending big on marketing to dominate a country because usually, the winner takes all.

Read the rest of the story here.

 

3. Recommended Reading: The direct to consumer landscape

So what’s the direct to consumer model. Well it’s an innovation in supply chain which typically involves skipping out the middle man, so stock goes from factory to consumer. Traditional retailers being skipped out, which is just music to their ears. Not. This theoretically results in better prices for consumers and higher margins for startups.

The world is changing and the big boys are still waiting for the bus while everyone’s ordering a diverse and inclusive Uber. In short, they need to stay relevant and buying kids is a safer strategy.

Read the rest of the story here.

 

 

Here’s what you should know today.

1. Grab confirms it will acquire Kudo to boost digital payments

The ride-hailing startup confirmed in a statement today it has signed an agreement to buy Kudo for an undisclosed sum.

Behind the acquisition is Grab’s interest in expanding its digital payments ecosystem, GrabPay.

Through Kudo, it taps into an already existing payments platform and online-to-offline channel. The startup’s most obvious asset is approximately 40,0000 agents who use the app to sell things like prepaid phone credit, tickets, household items, and fashion.

Read the rest of the story here

 

2. Indonesia’s Bhinneka shares updates on IPO goals

The Indonesian ecommerce platform for electronic goods and gadgets has the ambition to strengthen its offline store network.

The company plans to open another five to 10 offline stores, though they did not give further details in which city they are going to locate in

Bhinneka has implemented several business models, including B2C, B2B, and B2G.

This year, Bhinneka also aims to increase revenue from its B2B line for up to 40%. The company is also still on track for an IPO.

Read the rest of the story here.

 

3. Amazon is trying to push past Walmart by going directly to big brands

Amazon is working to convince major brands they’d be better off selling their goods directly to shoppers.The news service obtained an invitation Amazon sent to packaged goods companies for a meeting to discuss the initiative, which would require them to package their products in new ways.

The grocery business has been one of the most resistant categories in the shift to online spending. Not only do most shoppers prefer to pick their own produce, but fresh food is a notoriously low-margin business. It requires a sophisticated supply chain and quick sales to prevent items from spoiling.

Read the rest of the story here.

 

4. Recommended Reading: What does Amazon’s acquisition of Zouq mean for the future of retail?

Retailers are already reporting lower revenues and rents in malls in Dubai and Abu Dhabi are stagnant, according to JLL consultants, and likely to decline in secondary locations.

Retailers are battling a higher US dollar, which erodes any price advantage, particularly for tourists, and a weaker economy

S&P analyst Sapna Jagtiani told Arabian Business in February that “footfalls in the malls are stable”. However, shoppers are buying less. The deep pockets, data and experience of Amazon in the Middle East will speed up the region’s ecommerce boom.

Read the rest of the story here.

Here’s what you need to know.

1. Lazada partners with Unilever to capture Southeast Asia’s online retail growth

Lazada, has joined hands with Unilever in hopes of grabbing a bigger slice of the region’s online retail market in fast-moving consumer goods.

Lazada’s FMCG product category grew by 181% in 2016 over 2015, making it the platform’s strongest growth category.

The two companies will work closely together on supply chain, fulfillment, data, marketing, social commerce and talent development to grow their business’ reach in the region.

The partnership will allow Unilever to test new products before deciding whether to send them offline, while also allowing the company to offer exclusive products to Lazada shoppers.

Read the rest of the story here.

 

2. Unilever acquires minority stake in direct-to-consumer skincare brand True Botanicals

The deal is Unilever Ventures’ first with a direct-to-consumer luxury skincare brand, and demonstrates the appeal of natural products and digital business models to beauty investors.

Olivier Garel, head of Unilever Ventures said:

From a business perspective, the direct distribution enables the company to invest much more than has been traditional in the product quality and the shopping experience

True Botanicals is available at Barneys New York and natural beauty retailer Follain, but the company doesn’t anticipate brick-and-mortar sales ever exceeding 20% of its turnover.

Read the rest of the story here.

 

3. WeChat expands in Europe in bid for global advertisers and payments partners

Owned by Tencent Holdings Ltd., WeChat is looking to launch an office in the U.K. and another European country, alongside its existing presence in Italy.

WeChat is now focusing more on business-to-business, encouraging Western brands to sell products on the WeChat platform.

In Europe, the focus is first on fashion and luxury goods, and will in time expand to travel and broader retail services. WeChat is hoping its expansion in Europe will convince more high-profile brands onto the platform, to also reach Chinese tourists visiting Europe.

Tencent could be trying to do what Alipay is doing, but there’s much more uncertainty in terms of when the business could take off, as it would need to overcome many regulatory hurdles.

Read the rest of the story here.