Watch out, Amazon.com. A Chinese e-commerce company is out to redefine notions of customer service. If you think free shipping in two days is fast, how about in three hours?
In cities across China, customers can order everything from fresh produce to a new laptop, get it delivered for free the same day, pay cash on delivery and even refuse the goods at the door if they fail to meet expectations.
It’s all part of a strategy of JD.com (formerly 360buy) to become China’s largest e-commerce company and expand globally. China’s booming and highly competitive e-commerce market gets more interesting all the time, and JD.com is a major player to watch.
JD.com stands for parent company Jingdong, which has grown to become China’s largest online company that sells directly to consumers, with 100 million registered users, 5 million orders a day, and a whopping 60 billion RMB in sales ($10 billion) in 2012. The company rebranded itself earlier this year and may be planning a U.S. IPO.
Jingdong Vice President and General Manager Shi Tao, who spent more than three years working for Amazon China, visited Seattle this week to introduce the company and meet with prospective customers and partners.
JD.com operates differently than its major competitor, Alibaba’s Tmall, in that Jingdong spent years building its own network of warehouses and fulfillment centers, allowing it to manage its own delivery rather than simply matching buyers and sellers or relying on third parties to ship the goods.
“Chinese consumers want to shop on the platform with the best experience, especially shipping and post-sales customer services,” Shi said. In May Jingdong introduced nighttime and three-hour delivery services in six Chinese cities: Beijing, Shanghai, Guangzhou, Chengdu, Wuhan and Shenyang. The company offers same-day delivery in 27 major cities and next-day delivery in more than 150 cities across China.
[Related Post: Q&A: JD.com, China's leader in online direct sales to consumers]
Tmall is still the leading B2C company in China overall, with more than 51 percent of the market, compared to Jingdong’s 17 percent, according to iResearch. Amazon China has about 2 percent of that market.
Speaking to a Seattle audience this week, Shi was asked about Amazon’s prospects in China and offered a critique of its approach, basically saying that Amazon wasn’t localizing enough or responding quickly to market conditions in China. Before joining Jingdong in 2010, Shi was an Amazon China vice president responsible for Books, Audio-video, Software and Games categories.
“The decision is not always fast, not always flexible, based on local market,” he said.
“Amazon believes in everyday low price, but in China customers are really attracted by promotions themselves and discounts. Customers demand in certain season you have to offer big promotions but Amazon never wanted to do that.”
Jeff Zhu, a manager at Amazon.com who was attending Shi’s talk, said that Amazon does have a self-run delivery service in five or six major cities in China. He acknowledged that it takes a long time to make decisions but said China is only one market for Amazon, and the company looks to invest where it will get the best returns.
China’s e-tailing industry has posted 120 percent annual growth since 2003, and online sales in China could reach $650 billion by 2020, according to McKinsey Global Institute.
Intense competition for customers in China has produced quirks in the market, such as buyers ordering the same product from several companies at once, paying for the first one that shows up at their door and sending the rest away. Shi said such practices can get customers blacklisted, but they still result in about 2 percent in returns for JD.com.
Whether the company’s strengths can translate into major wins outside China remains to be seen.
Two Seattle-area retail companies – The Finest Accessories and Brown & Haley– said they were leaving their options open and working with multiple e-commerce platforms to ensure they would have access to a wide variety of Chinese customers.
Shi said Jingdong was following Amazon’s FBA model of fulfilling orders for other e-tailers, and looking to develop an online payment solution similar to Alibaba’s Alipay. In his U.S. visit, Shi aimed to get a better understanding of American consumer behavior. Jingdong launched its international website JD.com Global last year and targets mainly consumers in Chinese communities.
Jingdong is still weighing options to expand its offices first into emerging markets or the U.S., Shi said, but the answer to whether the company is going global is clear: “Yes, definitely.”
Editor’s Note: contextChina is a Seattle-based media company following the growing impact of China on the Pacific Northwest across business, technology and policy. Follow contextChina on Twitter @contextchina. Kristi Heim, the founder and managing editor of contextChina, has written for publications including the Seattle Times, the Asian Wall Street Journal and the San Jose Mercury News.