Alibaba and JD.com cautious in moving into US market amid trade uncertainty

E-commerce giants from China like Alibaba and JD.com are moving cautiously to launch operations in the US amid the uncertainties of the ongoing China-US trade war and other major challenges, including high logistics costs.

A new complementary cooperation model has been adopted to keep their costs and risks under control, experts said.

Alibaba.com, the world's largest business-to-business (B2B) trading platform, on Monday co-launched a new online destination with Office Depot, a leading US B2B integrated distributing company providing business services, supplies and products.

The new online destination will provide US small and medium-sized businesses (SMBs) access to Alibaba.com's global supplier network, offering them the most important products, services and exclusive discounts, as well as logistics and sales channels, according to a press release sent to the Global Times.

Through the collaboration, Alibaba.com can reach more than 10 million US business customers. It has a sales force of about 1,800 people and a marketing demand engine that drives more than 450 million combined stores connected with Office Depot.

Alibaba has extended its plan to empower SMBs in the US through the cooperation, which can offer services like "next-day delivery" to more US consumers, said Zhang Zhouping, director of the Cross-border E-commerce Department of the E-commerce Research Center based in Hangzhou, capital of East China's Zhejiang Province.

On the same day, JD.com, China's second-biggest online shopping service, said it had launched its business on Google Express, a Google e-commerce platform in the US. Through the platform, shoppers in the US can buy about 500 products from JD.com's Joybuy in-house brand, including keyboards, headphones and kitchen appliances.

This is the first outcome of a partnership that began with Google's $550 million investment in JD.com last June.

The reported cooperation between JD.com and Google is a case of win-win cooperation between a Chinese products provider with a complete supply chain and a huge global technology operator with hundreds of millions of users, Zhang told the Global Times on Tuesday, adding that it's also a major step for JD's "boundaryless sale" plan on a global scale.

Great challenges

Softening domestic demand, as well as the growing power and expanding need of China's e-commerce companies, has had them looking at the global market for a long time. However, they are facing many challenges in the course of localization, logistics guarantees and supply-chain building.

In terms of the US market, there are even more challenges. "The policy challenge is the most significant one," Zhang said. "Although China and the US are inching to a likely (trade) deal, the uncertainty and ongoing effects are still great."

Cao Lei, head of China's E-Commerce Research Center, told the Global Times on Tuesday that the US has a well-developed retail industry and the e-commerce companies there are also very strong.

"For Chinese e-commerce companies, the time- and money-consuming logistics link is another major challenge," Cao said.

Although the challenges are huge, the US market also presents great opportunities. Zhong Rixin, an independent analyst of e-commerce based in Beijing, said that Chinese goods account for a high percentage of the products on big US e-commerce platforms such as Amazon and Walmart. "Google invested in JD.com largely because of JD's advantages in terms of the supply chain," Zhong said. 

New model

To be successful in the US market, which is different from China or other markets like India, China's e-commerce companies must find a new model instead of taking over local operators or building their own overseas platforms, a report released by the E-commerce Research Center on Tuesday showed.

Alibaba and JD.com have found a low-cost, trial-and-error model. Their complementary cooperation with local corporations means lower costs and risks, but higher efficiency. It also shows their cautious stance in the US market, said Cao.

"The cooperation model is a real-life example of I'll-scratch-your-back-if-you-scratch-mine," Zhang said. "It offers both sides a chance to expand their virtual retail reach, while offering more scope for Chinese companies to fit in."

(GLOBAL TIMES)