In this podcast Joshua Halpern interviews Eric Li, Senior Business Developer with JD Worldwide, based in Anaheim, California [Run time: 18:10]
JD Worldwide is the cross-border arm of JD.com. For those of you who haven’t heard of JD.com, it is China's largest online retailer. Yes, Alibaba is the name we all know but they fall more into the marketplace or platform category whereas JD.com has both the marketplace business and will purchase inventory and warehouse and fulfill. JD.com more closely resembles the Amazon model than the Alibaba Tmall model. JD.com states their value proposition as the “ecommerce retail industry leader with a commitment to quality, authenticity, fast delivery and selection, covering everything from fresh food and apparel to electronics and cosmetics.”
We do see JD.com and China in general raising the global bar on delivery speeds by leveraging its nationwide fulfillment network to provide standard same- and next-day delivery covering a population of more than 600 million.
Its platform offers U.S. retailers a gateway to sell directly to Chinese consumers.
They own 57% market share for the direct sales B2C business in China. JD will basically buy inventory and sell to users. And like Amazon, JD invests in warehousing.
There's also a more B2C marketplace model available with JD, and here they represent 34% market share. As a merchant, you can open a shop online and sell. In that case, you have full control over and manage your inventory. It's JD’s version of Amazon.
Eric Li (in the JD Worldwide California office)
The California Logistics Solution
If you go to JD.hk, JD Worldwide's site, you'll find that all the items for sale are from international brands.
If you're a U.S. retailer looking to ship goods to China, the easiest solution is to work with pre-screened logistics companies in California, then send your products to their warehouse. Once arrived, they'll package and handle transport to China, plus also take care of import taxes.
They'll do the paperwork for you and store your goods, which still belong to you at that stage.
These logistics companies are not part of JD but JD can refer names and contacts to you. Then you choose.
The China Logistics Solution
The alternative is to partner with a logistics solution in China. Here again, JD can point you to several providers including JD’s own nationwide delivery network.
You'll ship a large quantity of goods to Shanghai or Hong Kong, which reduces the time it takes to get in the hands of Chinese consumers. They'll be stored within JD’s bonded warehouses before being distributed.
The downside is if you have a lot of inventory that doesn’t sell, it’s going to be stuck in a bonded warehouse for a long time. Then getting it back to the U.S. will be costly.
If you want to take on inventory management yourself, you can do that, just need to create the shipping labels.
Products In Demand, Consumer Trends & The Size Of The Market
What are the most popular products sold by JD Worldwide in China?
At the top of the list are mom and baby products, cosmetics, health supplements, electronics, sports. There's a wide range.
As the middle class continues to grow, quality and branding really drive their spending habits.
Chinese people will trust US brands more than Chinese ones, given the level of quality control and regulations that American companies have to comply with.
Many Americans underestimate how big the Chinese market already is and its future potential to grow.
By way of comparison, the entire e-commerce market in the U.S. is USD 430 billion dollars in 2016, whereas in China it'll hit USD 760 billion this year.
Pricing To Use The Platform, Leverage 3rd Party Service Providers
To start selling via JD, an initial USD15,000 deposit is required up front. It's fully refundable and just marks the commitment from both parties. If a retailer violates the terms of the agreement, then JD will draw on the deposit. But it's very rare.
Then, the platform usage fee is USD 1000 per year.
Your biggest concern as a US retailer is venturing into the Chinese market without trusted local partners. You invariably need partners who are well-equipped, like JD, to help you navigate the marketplace and reach consumers directly.
For sure you should count on hiring a 3rd party service provider to translate your website or product specifications into Chinese and handle your customer service (also sales after service) in Chinese. Your team will work with JD teams to plan promotions, manage inventory, and build up your brand.
This type of service will cost around USD 40,000 a year. There are deals structured around 2-10% fees for sales as well.
In terms of due diligence to assess potential partners, you'd do well to ask them:
How much sales do you think my product(s) can generate?
How much traffic could I generate? How do you know? What’s your method? Do you pay for it?
Truths About Marketing in China
Entering China may be complex in the beginning, but once a brand gets recognized by consumers, then it stays that way for a long time and they will continue to trust you.
Chinese consumers can easily distinguish between international brands which understand and tailor to Chinese culture, and those that don't. There are plenty of examples of large corporates spending lots of resources to create content around their brand and products in China, but totally missed the mark and failed. It was disastrous for them.
It's reasonable for American SMEs to lack trust at first. Going to China takes a leap of faith. Once you get started, and do your homework of course, then it can be very lucrative.
Another advantage with JD is that WeChat, the largest mobile social media network in China is a strategic partner, with over 800 million users in China. The JD shopping entrance on WeChat reaches millions and there's a lot of social media marketing firepower behind their collaboration.
It’s really beneficial to sellers on JD, in addition to the existing 200 million annual active users.
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