China-based e-retailer JD.com has been expanding its reach aggressively with new types of merchandise and services, and stands as an example of how some of the largest web merchants in the world’s second-largest economy are seeking growth through diversity.
As they vie to appeal to China’s growing legions of online shoppers, the biggest merchants are aggressively introducing private-label merchandise and adding new types of products, such as imported food and beverages. And big Chinese web merchants such as JD.com, the largest online retailer in the Internet Retailer 2015 China 500, are offering their customers more than just merchandise by moving into such areas as consumer lending, insurance, ticketing and travel.
As reported in the June issue of Internet Retailer magazine, JD.com announced that the value of goods sold on its e-commerce site reached $41.9 billion in 2014, a 107% increase year over year. That includes sales by outside merchants on the marketplace portion of JD.com. JD.com has become the largest Chinese retailer of computers and mobile phones, even including offline retailers. And it may just be scratching the surface of its potential. “I believe we could have a bigger market share,” Richard Liu, the retailer’s founder and CEO, recently said.
Central to its strategy is offering more selection to cater to the desires of China’s growing middle class, Liu says. Like many big Chinese e-commerce companies, JD.com is adding products from foreign brands and retailers to widen its selection of Western goods. “We are focused on continuing to partner with international brands—Gap, Forever 21, Nine West and Steve Madden are just a few of the companies that opened stores on JD.com in 2014,” Liu said. “Chinese consumers are extremely excited about getting easier access to international brands.”
JD.com has also been trying to set itself apart, and to compete more effectively with giant Chinese online marketplace operator Alibaba Group Holding Ltd. by handling its own logistics, including owning its own warehouses and delivery vehicles rather than relying on other companies. The Beijing-based JD.com is expanding its logistics networks into smaller cities and villages. Same-day delivery covered 134 cities at the end of 2014, four more than it had as of Sept. 30. JD.com now operates 123 warehouses and 3,210 smaller delivery facilities, the company says. “In the future we plan to recruit 100,000 agents in Chinese villages who can make deliveries, take orders and make loans to rural residents,” Liu said.
For JD.com and its rivals, growth is coming largely from the steadily increasing ranks of Chinese consumers buying online. The number of Chinese web shoppers grew 20% to 361 million in 2014 compared with 302 million a year earlier, according to Chinese research organization China Internet Network Information Center.
While many of China’s biggest web retailers have traditionally competed mainly on price, the landscape has changed as Chinese online shoppers become increasingly mobile, social and sophisticated, says Christy Li, Fung Business Intelligence senior research analyst. “The new generation of consumers is becoming discerning and knowledgeable, thanks to increasing Internet accessibility and engagement in social networks,” she says. “They are more interactive, like to obtain product information from social networks and share their feedback across social media platforms.”
Chinese shoppers are spending a growing portion of money with online retailers. The 500 largest e-commerce players in China increased their sales 59.1% last year, well above the country’s roughly 50% e-commerce growth rate, according to the China 500. That means the big are getting bigger. JD.com and several other large Chinese e-retailers more than doubled their online sales last year.
That type of growth curve is unique; there aren’t any other large e-retailers around the world that have experienced as fast of growth as these Chinese companies, including Amazon.com Inc. That growth is being propelled by Chinese merchants’ heavy investments in mobile shopping technology, logistics and connecting their websites and physical stores.
For much more, read the June issue of Internet Retailer magazine here for free.