Following an announcement on 18 January, JD.com has officially become Shopify‘s first Chinese strategic partner. In this collaboration, JD has offered a particular boarding channel, JD Marketplace, simplifying entry to the Chinese market for Shopify merchants. In return, Shopify will support Chinese JD sellers in expanding overseas and meeting international needs. By joining forces, these two companies have created a new ecommerce channel, opening up the world's biggest market for millions of merchants.
Ecommerce in China: A Land of Challenges and Opportunity
With its dynamism and innovation, ecommerce is an indispensable part of the country's economy. It has become a vital channel for the growth of national exports, employment, tax income, and social development, and for promoting the transformation of traditional industries. With 782 million online buyers (79% of China’s total internet users in 2020) and $2.8 trillion in retail ecommerce sales (52% of its total retail sales by 2021), China has led the global ecommerce business for many years.
Due to colossal market needs and developed digital infrastructure, diversity has emerged rapidly. New ecommerce models like mobile commerce, social commerce, and livestream shopping are now strong strategies for new businesses entering the online market to capture customers. Widespread use of such models also boosts change in the supply chain; the market is now in an era of the customer-to-manufacturer (C2M) model. Customers connect directly to platforms' manufacturers through intelligent manufacturing technology and big data. Manufacturers receive orders from buyers, then design and produce according to those orders, before shipping out the product. Buyers get the product at almost wholesale price because this model excludes middle parties like brands, dealers, and malls.
The market is gigantic and complex. Retail ecommerce is a generalized business format that involves platforms, merchants, brands, customers, service providers, and more. In terms of product types, there are overall ecommerce retailers that cover all product categories, such as Taobao, Tmall, JD, Suning, and Vipshop, as well as vertical retailers like Three Squirrels (food and snacks), Dada (delivery service), and Perfect Diary (women's beauty). The most prominent ecommerce models in China today include livestreaming, boutique, membership, and social media. There is also import and export ecommerce relating to the marketplace.
The level of competition among Chinese ecommerce retailers is fierce. Alibaba Group, at the top of the industry, holds thousands of billions of yuan (hundreds of billions of dollars) in market value, followed by the second layer of retailers – Pinduoduo and JD – with a market value of hundreds of billions of yuan.
If foreign enterprises enter this market using the same strategies as outside of it, the chance that they will create competition is slight. Even a leading company like Amazon, which dominates global ecommerce, withdrew its local business in 2019, after 15 years in China. This was possibly related to its lack of understanding of the market and underinvestment in the Chinese market. China’s strict laws and regulations for foreign businesses entering the big market have also stopped many small businesses and entrepreneurs from setting foot in the country.
Why is Shopify Partnering with JD?
Shopify plans to completely open up its business in this trillion-dollar market through its partnership with JD. As “China's largest online retailer and its biggest overall retailer”, JD held the highest national market share in 2020, of 40.84%, reaching $117.54 billion in retail revenue, and has over 500 million active customers. In January, JD opened its first physical store, Ochama, in Europe, expanding into the western market by introducing a new shopping experience that combines “online ordering and pick-up shops in which robots prepare the parcels, and home delivery service”.
To achieve this scale of business, JD Logistics plays a crucial role. Orders through JD can be delivered in less than 48 hours, thanks to its 1,300 warehouses with 23 million square meters' storage space worldwide. It provides logistic solutions to various types of businesses, from small to medium, from oversized warehousing to cross-border and cold-chain delivery.
What is JD offering to Shopify Merchants?
These valuable resources are now accessible through the JD Marketplace channel on Shopify. JD takes care of everything Shopify merchants need in order to start selling online in China. The onboarding process usually involves a business qualification review, logistics, payment methods, customs records, and many other complicated steps. With JD Marketplace, it can now be completed in just three or four weeks.
How can you activate the JD Marketplace channel? Merchants can easily install the channel in their Shopify stores, create a JD Marketplace account, and sync their Shopify products. Services like product-description translation and currency conversion will be provided automatically on the channel. And it also manages customs and taxes. More importantly, merchants can ship products to a local JD warehouse and JD will forward purchases to customers in China.
JD Sourcing (pro dropshipping) is the other customized channel for this partnership. JD's vast selection of products across all major categories is available now on Shopify. You can find your products from JD Sourcing’s huge product pool, at very competitive prices. JD shipping also fulfils subsequent logistics needs. Another reason to consider the service is that this channel supports dropshipping, which doesn't require goods to be kept in stock, saving money and time.
However, it's too early to tell how Shopify's platform will fare among Chinese merchants using JD's channels. Still, the move will surely pay off in the long run, expanding Shopify's reach and giving it an edge over its competitors.