Could JD Sourcing carve out a niche for JD.com in the war against cross-border e-commerce giant AliExpress?
JD.com has strong competitors in the domestic market and the cross-border business. In mid-January 2022, the company became Shopify’s first strategic partner in China, and thus, JD.com seemed to have gained a competitive advantage in the cross-border race of the Chinese e-commerce giants.
Much like collaborations, the introduction of the branded dropshipping service JD Sourcing also shows for JD.com’s capabilities in global shipping and warehousing. Dropshipping is a method of completing orders that does not require the existence of an online store to keep products in stock. Instead, the seller sells the item and then forwards the sale’s order to a third-party supplier, who then directly ships the order to the buyer.
Because of their business model, dropshipping businesses focus on marketing, management, and customer service rather than stockpiling goods and complicated logistics. No-stock and low-input sales methods are particularly popular with small merchants and rookie businesses.
According to Forrester Research, in 2017, dropshipping accounted for 23 percent of all online sales worldwide, which is equivalent to about $85 billion a year. 34% of Amason’s sales are made by dropshippers who use the website to list their products. Dropshipping sales have also grown in unison with the growth of the entire e-commerce space in recent years.
PingWest registered for a Shopify store trial to see how sourcing apps work. There are hundreds of sourcing and dropshipping apps on the Shopify App Store, many of which are built on AliExpress, much like the Shopify-owned dropshipping service Oberlo.
Being Alibaba’s cross-border e-commerce platform, AliExpress utilizes its parent company’s experience as China’s largest online marketplace and thus can offer a wide range of products in various categories at very competitive prices. It outperforms JD.com in product categories, dropshipping availability, and pricing.
However, the shortcomings of AliExpress are also quite apparent when it comes to user experience and product quality, which means that JD.com has room to catch up. Unlike JD.com, AliExpress does not allow retailers to import goods in bulk, nor does it provide order and tracking number synchronization, which is the reason why third-party service providers like Oberlo have risen in popularity.
“Products on AliExpress are from different suppliers, meaning that the quality rate is unstable, which directly affects your customers’ satisfaction and repurchase rate,” said Rebecca Gee, who has 2 years of dropshipping experience with AliExpress, on Quora.
Although JD.com joined the sourcing and dropshipping business several years later than AliExpress, it seems to be the relatively more reliable one in terms of product quality and customer service. The user interface of JD Sourcing is straightforward, and searching for products in JD.com’s inventory is easy – sellers can upload their products to the Shopify store with just one click.
According to the company’s tutorial video, it lets retailers sell white-label products sourced from JD.com or request products they want to sell by providing an image or a link. All products can be shipped quickly directly from JD’s warehouses, many of which already exist in the US, reflecting the company’s continuous efforts in overseas logistics investment.
The company prides itself on its Amazon-like in-house logistics division, which it sees as the cutting edge that sets it apart from the rest of the competition. “JD’s logistics arm has been leading the international expansion efforts for the group…This is the biggest difference in terms of global expansion compared with other companies. What we provide are integrated and closed-loop services. This is what enables us to perform generally well in overseas markets,” Xin Lijun, the newly-appointed chief executive of JD’s retail business sector, said in an interview with CNBC in November.
If the advantages of JD’s self-operated logistics services in China – efficiency, stability, and good organization – can reach the overseas markets, it would be a significant move of empowerment for JD Sourcing. JD’s Global Fulfillment Centers are currently distributed in the US, Germany, Poland, the UK, Netherlands, the UAE, Australia, Thailand, Indonesia, Malaysia, Vietnam, and others.
Compared to Alibaba’s aggressive worldwide expansion, JD.com’s overseas presence is relatively low-profile. The corporation has established itself in Southeast Asia through investments in the local e-commerce enterprises and forming joint ventures. It launched JD.ID in Indonesia in 2015 through a JV (joint venture) with a local company, then set up a JV with Thailand’s largest retailer Central Group to launch the online marketplace JD Central. In Vietnam, the Beijing-headquartered company invested in the local e-commerce site Tiki.vn, which is a part of the Vietnamese entertainment and social media company VNG.
Not every move is guaranteed to go smoothly, so the company is also trying to focus more on providing services for business owners. After Joybuy’s online marketplace curated for the Russian market didn’t manage to challenge AliExpress successfully, JD.com transformed it into a B2B (business-to-business) trading and service platform that accommodates buyers and sellers on a global scale. It also provides professional, comprehensive foreign trade services and focuses on industry-related solutions for customers with foreign trade requirements.
The recent launch of JD Sourcing is a big step forward in its overseas strategy, bringing it closer to its goal of being a “supply chain-based technology and service provider.”