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JD.com holds annual sale

JD’s record breaking sales Source: gbtimes.com

JD.com, one of the largest Chinese online retailers and Alibaba competitor, announced that the company generated 100 million orders on its annual one-day sale in  June, according to Internet Retailer. This marked a 60% increase compared to the same sale last year.

12x Spike in Foreign Brands in Chinese Ecommerce Sale

Foreign brands contributed to this surge, as sales within JD.com’s section for foreign-brand items were 12 times greater than last year’s sale. Sales on Apple smartphones, Lenovo laptops, Beats headphones,and Nestle food products were all comparatively greater than China-based brands in their respective categories. This stems from Chinese consumers’ growing desire for foreign-made goods amid concerns about quality and safety standards. By 2020, more than a quarter of the population will shop digitally for foreign products, according to eMarketer in its first analysis of the consumer trend. More than 60% of Chinese consumers would pay more for products made in the U.S. rather than China, according to The Boston Consulting Group.

Sales on Apple, Lenovo, Beats and Nestle food products were all greater than its Chinese counterparts. This stems from Chinese consumers’ growing desire for foreign-made goods amid concerns about quality and safety standards.

Sales days to generate online retail business during off season.

Online retailers around the world are offering one-day summer sales in order to generate business during the off season. Companies such as JD.com and Amazon note their highest sales during the winter holiday season. Amazon had its first Prime Day in July 2015 and generated 18% more sales than it did on Black Friday in 2014, reports Fortune.

This is also happening in Southeast Asia. More than 130 ecommerce sites in Indonesia are joining forces to hold the three-days promotions called Harbolnas (National Online Shopping Day) where the transactions recorded is up to $158 million (Rp 2.1 billion).

More online retailers could host these types of one-day promotions in order to generate off-season sales and increase brand awareness before the winter holiday season.

By Rara Kinasih
Wal-Mart Yihaodian Fails in China, B2C bloodbath

(Hint: It’s a red ocean bloodbath), Image source: FactsRider

Its demise was inevitable. Since its 2008 launch, Wal-Mart’s online grocery business Yihaodian struggled to gain traction in China in the red sea of deep pocketed local B2C ecommerce players. Finally, Yihaodian has thrown in the towel and being sold to ecommerce Goliath JD.Com. The recently announced deal means JD will take over Yihaodian online and Wal-Mart will acquire a 5% stake in JD.com.

The Chinese branch of Sam’s Club, an American chain of membership-only retail warehouse clubs owned and operated by Walmart, will open a flagship store on JD.com, and the two companies will link their supply chains, broadening the range of imported goods. Wal-Mart, No. 8 in the China 500, will receive approximately 145 million newly issued Class A shares of JD.com in the transaction. So why and how did Wal-Mart’s seemingly successful Yihaodian fail so quickly in China?

 

Wal-Mart Yihaodian Fails in China Acquired by JD.com

Wal-Mart Yihaodian fails in China because the B2C market in China is a bloodbath. Smaller or global players will be hard-pressed to succeed there.

Wal-Mart’s Yihaodian fails in China, but why?

Walmart’s China strategy sought to establish itself as a source of high-quality food products after a series of safety issues in China, but failed because it could not adapt to local culture and buying patterns. It could also not compete with the economies of scale that giants JD and Alibaba wield. In TechCrunch last year, Sheji Ho and I predicted this when writing Forget China, There’s a Gold Rush in Southeast Asian Ecommerce Sphere

“In the Chinese ecommerce race the market giants have taken too large a lead for too long in China.

“Smaller” players such as Amazon, Rakuten, and Neiman Marcus entering the market struggle to compete because of fewer domestic resources, a lack of understanding of the Chinese market, as well as slower execution. Recent examples include Macys and Neiman Marcus shutting down their China ecommerce initiatives and Amazon throwing in the towel and opening a store on Tmall, China’s largest B2C marketplace.

With Tmall and JD owning close to three quarters of the Chinese B2C ecommerce market, there just isn’t much room for both “smaller” global and local players like Yihaodian, Suning, Amazon and VIPShop to compete. They cannot tap into the economies of scale enjoyed by the market leaders. B2C ecommerce is a winner-takes-all market where the rich get even richer.”

With nearly 6,000 delivery and pickup stations in approximately  2,500 counties and districts across China compared to Yihaodian’s mere 250 hubs, it sadly did not have a strong chance.

Cross-border ecommerce isn’t the answer either

Nonetheless, the company seemed optimistic last year. At a logistics conference in Shanghai, Yihaodian senior manager Yang Shenling said with confidence that ‘cross-border is the last blue ocean for Chinese ecommerce.’

The inbound cross-border market is estimated to be 155 billion RMB ($25 billion) and is expected to grow to a whopping 1 trillion RMB ($164 billion) by the end of 2018 according to The China e-Business Research Center cited by Shenling. But when we asked Yihaodian how big its new cross-border business was in terms of percentage of total company sales it turned out to be only 2% and projected to go up to 10% over the next five years.

Ten percent is still a very small number and getting there would be an uphill battle as the quality and safety of domestic products will no doubt increase over the next few years thanks to increased government pressure and regulation. As quality improves, there will be no need for Chinese consumers to look abroad.

In many ways, cross-border ecommerce in China can be seen as a desperate move to cope with the fact that the domestic market is reaching saturation. And despite all the hype, it is still a very small business compared to the Chinese domestic ecommerce market.

Lucky for them, JD.com has been doubling down on winning the food category. Last August, it bought a 10% stake in Yonghui, a rival that specializes in fresh food. From the Yihaodian acquisition, the company stands to gain credibility of a global brand in its efforts to be seen as a more trusted food retailer in the rightfully suspicious Chinese food ecommerce landscape.

Businesses are realizing that China is a Venus Flytrap – plenty of allure but crushing once inside.

This is just the beginning as global players are increasingly realizing that China is a Venus Flytrap – plenty of allure but crushed once inside. They instead start to look longingly south towards the real blue ocean- Southeast Asia. Expect China’s B2C ecommerce bloodbath to get a lot murkier as global and smaller ecommerce players learn the Amazon and Yihaodian China lesson the hard way.

By Felicia Moursalien

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