When you are thinking about eCommerce in China, most likely the first name that will come to mind is Alibaba, founded by its iconic entrepreneur Jack Ma. However, another retail giant is at least as worthy mentioning. Jingdong’s JD.com is making steady progress in challenging the hegemony of Alibaba since it went public on the Nasdaq in 2014. Therefore, in our third article in our series “2018 China eCommerce Insights” we will dive into the ins and outs of JD.com and examine for who it is a viable alternative to Tmall. Would you like to know more about the different marketplaces available in China, then please check our article on TMO’s 2018 China eCommerce InsightsIn this first part in our 'China eCommerce Insights' series we deal with several key highlights of the Chinese eCommerce landscape2018 China’s eCommerce Insights. Or if you have missed our article on Tmall Global, then feel free to visit our second article How to Sell in China with Tmall Global. OverviewTmall Global is one of the central channels to enter Cross Border eCommerce in China. Here are the main things you need to know to start.Drive your Business in China: How to Sell on Tmall Global.
Jingdong is China’s second largest domestic B2C eCommerce company with around 24.7% market share. JD particularly adheres to the business philosophy of “Quality First” and “User First”. Furthermore, JD is known for its excellent logistics network with 7 fulfilment centres, over 200 warehouses in China, and operates with more than 5.000 of its own delivery and pickup-stations as you can see in the image below.
In the third quarter of 2017, JD.com’s subsidiary JD Logistics launched its first unmanned sortation centre, a one of its kind in the global logistics industry. The company also laid the groundwork for the rollout of the country’s largest and most advanced drone network. As the capabilities of JD Logistics are ever expanding, JD aims to make its technology infrastructure and services available to a wider range of companies and industries across the globe.
JD.com China Nationwide Logistics Network
JD has also strived to strengthen its position as the most trusted retail platform in China. The company expanded its partnership with Italian fashion brand Armani and worked with several brands such as Reckitt Benckiser and Tiger to establish flagship stores. In addition, JD’s new Toplife platform attracted brands such as La Perla, Trussardi, and Dyson to meet strong demand from Chinese online consumers for luxury products.
Jingdong operates 3 different cross-border eCommerce sales models, namely JD Direct Sales, JD Marketplace, and JD Worldwide. JD can be characterised as China’s largest B2B2C (direct sales) market and dominates in home appliances and consumer electronics. In the direct sales model, JD sources products directly from brands and suppliers after which JD displays them on its domestic website (JD.com) in order to resell it to Chinese consumers. Directly foreign sourced products may be indicated by a sign for the country of origin. JD.com has gathered more than 40 million products in 13 categories, including household appliances, mobile phones, computers, mother and baby, and clothing to serve Chinese online consumers appetite for overseas products as you may see in the image below. The direct sales model guarantees that Jingdong provides its users with faster and better consumer experience.
JD only sources from reputable brands to meet their quality requirements. As such, business development managers are constantly searching for new prospective brands in the product categories mobile communication, household appliances, auto accessories, computers, digital, daily usage, and books. Brands wishing to become a supplier through this model will usually have to already be established in the JD Marketplace or JD Worldwide as it allows Jingdong to judge your brand through a proof of concept method. In the following sections we will first take a closer look at JD Marketplace and turn to JD Worldwide after that.
JD.com Product Categories
Similar to Tmall, JD Marketplace enables well-established, third-party sellers to sell products directly to customers through the JD website and mobile channels. Approved sellers are also able to benefit from JD’s fulfilment infrastructure, marketing and customer targeting services, financing, and other value added services.
A company is eligible to participate in the Marketplace model if they are registered inside mainland China. After which these so-called third-party sellers are able to directly sell products to Chinese online consumers through JD’s channels. Furthermore, to be considered for the Marketplace model merchants must provide:
- An official business license
- A general taxpayer’s qualification certificate
- Proof of the bank account license
- A copy of the legal representative ID card
- A copy of the quality inspection report or product quality certification
- The trademark registration certificate
In line with opening a storefront on Tmall, opening your store using JD’s Marketplace will also require additional specifications:
In order to be able to open a flagship store you must own the relevant trade mark registrations. Furthermore, if you sell multiple brands you must provide proof that the brands belong to the same controller. Lastly, if you are applying for an outlet-type flagship store you must also provide a service-type trademark registration certificate or a trademark application acceptance notice.
To be allowed to open a franchised store you must provide the successive authorisation to sell the branded products of the trademark owner. Moreover, the franchise store is not allowed to carry the same as the brand name of the product.
Lastly, in line with a franchised store you must also provide the successive authorisation to sell the branded products of the trademark owner if you wish to open an exclusive store. Once again, you are also required to provide proof that the brands belong to the same controller if you wish to sell multiple brands.
The entry process for JD Marketplace can be divided into four broad stages, namely:
- Preparation Phase: you must perform an initial scan to assess whether your organisation meets the brand recruitment requirements after which you can prepare and send all required materials. You may also choose to register for the Jingdong wallet at any time regardless of your application status.
- Application for Residency: first you are required to register a personal account and file your company information. In addition, you will have to indicate which shop type you wish to operate and the product category you wish to sell and this also includes the selection of the domain and shop name.
- Audit: through a qualification review (7 working days) your application will be judged and additionally an investment review (5 working days) will be performed before store authorisation (3 working days).
- Opening the Shop: in the last stage an account security verification will take place. Finally, after the payment of relevant fees will be confirmed your shop will be open.
Although companies who are registered inside mainland China are eligible to sell on the JD Marketplace platform, it is important to take into account the costs associated with operating a store. Roughly the costs can be divided into the security deposit, service see, and commission.
- First, the security deposit ranges between 10.000 and 100.000 RMB depending on the product category. This deposit is refundable if you decided to leave the JD Marketplace.
- Second, the service fee is a monthly payment between 500 and 1.000 RMB depending on the chosen product category.
- Lastly, JD will charge a commission based on your sales. This commission ranges between 1% and 8% varying with the shop type and product category.
In 2015 Jingdong has launched JD Worldwide (JD.hk) as a multi-language global cross-border sales platform in order to seize the cross-border eCommerce market and accelerate Jingdong’s international progess by offering products directly purchased from overseas. Similar to Tmall, JD Worldwide operates as an online mall where the organisation hosts foreign brands’ storefronts (or stores). Currently the company has opened several national and regional pavilions as you can see in the image below. JD Worldwide offers international merchants the ability to tap into the Chinese market even if they do not have a physical presence in China. By leveraging their partnership with international logistics companies such as DHL, Australia Post, and YAMATO as well as JD’s proprietary nationwide logistics network, JD Worldwide provides global shipping and warehousing solutions that ensures that products from around the world are delivered to the doorsteps of Chinese customers. JD Worldwide is open for brands legally registered outside mainland China.
Europe Regional Pavilion on JD.com
A company can participate in JD Worldwide if they are registered outside mainland China, where these foreign merchants can tap directly into the Chinese market without having a physical presence in the country. The following requirements must be met by foreign merchants:
- Be an overseas registered entry
- Have an overseas public bank account (USD settlement)
- Be the brand owner or possess the brand authorisation
- Provide the company establishment information
- Provide the company tax payment certification
- Provide corporate legal identification and appoint an authorised representative as well as a shop contact person
Furthermore, JD Worldwide targets well-known overseas brands, brand agents, or well-known retailers and B2C websites that have not yet entered the Chinese market in the following categories: mother and baby, health products, food, clothing, bags, and cosmetics.
JD Worldwide also requires foreign merchants to fulfil a number of operating process- as well as after-sales requirements, such as:
- Commodities: products originally sold overseas must be genuine and 100% authentic. Therefore, only direct mail and goods shipped through bonded areas can be sold.
- Webpage and Labelling: the page information needs to be described in Chinese, use international metric units, and be equipped with Chinese customer service.
- Online Service: you must have Chinese customer service personal and download and install Chinese customer service software as well as answer customer questions in Chinese.
- Logistics: products should be dispatched within 72 hours of ordering.
- After-sales Services: you must provide return points, contact person and contact information in mainland China.
In order to be able to open a flagship store you must provide the original valid trademark of the brand (®) and also the necessary market sales certification materials. If you are applying as an outlet-type flagship store you must provide the trademark registration certificate and one level authorisation as well as the letter of the right to sell from the trademark owner. For well-known retail stores and B2C websites you need to provide physical store or website photos.
To open a franchise store foreign merchants must supply the original brand name (®) of overseas valid registration. Furthermore, you must also provide brand trademark registration and full-chain brand sales authorisation within four levels starting from brand side. Some brands may also be required to provide first-level branding authorisation.
If trademark holders of multiple authorised brands, you are required to provide proof that the brands belong to the same controller. Again, you must also provide brand trademark registration and full-chain brand sales authorisation within four levels starting from brand side. And the brand should be a registered trademark (®) or trademark under registration (™).
The entry process for JD Worldwide differs somewhat from the JD Marketplace as you are required to seek contact with the Business Development manager for the particular product category in which you wish to sell. Therefore the process will resemble the following:
- You must prepare all the documents which were aforementioned and send the to the relevant Business Development manager.
- After an initial check you will receive a registration link (you must closely follow the directions provided as the system is in Chinese).
- Approval process.
- After approval you must pay the security deposit and platform service fee.
- After payment is received the shop status will be changed to ‘open’.
The costs associated with operating any of the aforementioned stores can be roughly the costs can be divided into the Security Deposit, the Platform Usage Fee, and the Commission.
Firstly, the security deposit will be 15.000 USD per year. Furthermore, the platform usage fee will be 1.000 USD monthly and for certain categories such as accessories, sports and outdoor, jewelry, watches, etc. 3.000 USD per month. And finally, JD Worldwide will also charge a technical service commission fee which ranges from 2% to 5%. An extra charge of 0.75% may be applicable if you rely on Jingdong’s logistic services.
You can find more details in our recent Chinese Online Marketplace Fees - A Look Into Setup CostsWant to know more about China's largest online marketplace fees? TMO Group has extensive experience and in this blog we provide an overview of setup costs.article on marketplace setup fees.
Other relevant documents from Jingdong: Jingdong Global POP Fee Standards List
Jingdong offers an alternative entry strategy compared with Tmall. In particular, foreign merchants may rely on warehouse services provided by Jingdong or can alternatively use their logistics services. JD is a suitable alternative especially for merchants wishing to sell household appliances and consumer electronics. However, a downside still is that creating a storefront on JD also requires significant capital.
Are you curious about alternative business strategies to sell to Chinese online consumers? Then please stay up to date as we will continue our series on “2018 China eCommerce Insights” by diving into China’s most powerful social media WeChat and how you can use it to sell directly to its millions of Chinese users. Also, feel free to contact us for a market opportunity scan or an eCommerce strategy development proposal at firstname.lastname@example.org.
If you enjoyed this article, we suggest you take a look at our piece on China Marketplace Store SetupTMO Group can help with China marketplace store setup on a.o. Tmall, JD, Kaola and Xiaohongshu in addition to branded eCommerce.Chinese Marketplace Store Setup for instructions on setting up a storefront on one of China’s popular eCommerce marketplaces.