(Chinese Version)

Transnational e-commerce will certainly be one of the hot-button issues in China in 2015. Even Chinese Premier Li Keqiang referred to it several times and attached great importance in his annual work report during the two sessions. Driven by state strategies like “One Belt And One Road” and “Internet Plus”, more and more bonded zones are established in China. There is no doubt that the era of transnational e-commerce has already come.

Tmall International was launched in February 2015, while JD International was just launched in April, 2015. JD’s previous Overseas Shopping platform will be integrated into this new platform. In no more than a year, two major online retailers in China have both launched their transnational e-commerce platforms and tried their best to seize the market.

Transnational e-commerce is comparatively more complicated than traditional e-commerce, since it adopts a different set of management system in product management, storage and logistics, after-sale service, etc. That’s why it even takes giants like JD and Tmall much time and great efforts to enter this market.

Different business models

Although both JD International and Tmall International are basically online platforms for overseas shopping, JD is more than a platform for retailers that provide overseas shopping service, since it sets out to help Chinese consumers directly purchase overseas products and send them back to consumers, while Tmall is merely a platform. When it comes to supply chain, products on Tmall International are all from bonded zones, whereas JD International’s supply chain is more diverse, since consumers can both buy products already stored up in bonded zones, and also order products not included in the bonded zones. JD will directly send the products to consumers from abroad or via the bonded zones. When it comes to management models, Tmall only serves as a platform and it is retailers’ responsibility to deliver the products to customers, whereas both JD and retailers are responsible to deliver the products to consumers on JD International.

While Tmall is merely a platform and charges retailers with high technical support fees, JD International charges lower technical support fee since it is both a retailer of overseas products and an open platform for other retailers. While Tmall cares more about its own profitability, JD makes sure that both JD and other retailers on its platform will make profits. As is shown above, the operation philosophy of two companies differs quite a lot.

JD’s advantage lies exactly in its own overseas direct purchase service. JD started as a retailer itself and has already adopted the Business to Consumer (B2C) model, which helped JD win a large crowd of consumers. That’s why JD continues to adopt this model when carrying out its overseas direct purchase service. On the contrary, Tmall carries on the “light model” of Alibaba and only serves as a platform for other retailers. There’s no doubt that in the short term, JD International will win a larger crowd of consumers in overseas shopping market than Tmall International.

Different models, similar development stages

JD and Alibaba differ a lot. Years ago, Tmall loosened its entry standard for retailers applying to open shops on its platform in order to win a larger market share than JD. It is probable that Tmall will do the same when grabbing overseas shopping market. In contrast, JD concentrates more on user experience and credit of retailers and will only gradually pass the application of retailers.

In the first half of 2014, while JD was busy getting listed on NASDAQ, Tmall first launched its overseas shopping platform. In 2015, we might expect a few more moves by JD to catch up with Tmall, while Tmall, as it always did, will develop faster and seize a larger market share at the expense of lowering entry standard. Before officially launching JD International, Liu Qiangdong, CEO and founder of JD, met with French premier and Korean Minister of Commerce of and reached a series of consensus to set up a France Official Shop and a Korea Official Shop on JD International. A good amount of products are already available in these two shops right now. The launch of JD International marks JD’s efforts to enter overseas shopping market and even enter overseas market.

Although JD International and Tmall International adopts completely different business models, both of them have to take into consideration China’s state policies when carrying out their overseas shopping service. In general, overseas shopping market is still quite small. In this sense, both JD and Tmall are only at the early stage of developing in this promising market.

JD collaborates with eBay to compete with Tmall

In 2006, defeated by Alibaba, eBay withdrew from Chinese market. Almost a decade later, eBay collaborates with JD International and re-enters the Chinese market.

China’s online retailing market has been dominated by online retailing giants like Taobao and JD, so there’s no room for eBay to directly re-enter the Chinese market. However, eBay chooses to re-enter the Chinese market via JD International’s platform.

While eBay will help JD build its global supply chain with a large amount of overseas retailers on eBay’s platform, JD will help eBay “revenge” on and compete with Alibaba. As the old saying goes, the enemy of your enemy is your friend.

It would be a lot more interesting to have eBay in the competition between JD International and Tmall International. The advantage of Alibaba lies in its huge amount of Chinese retailers, while eBay is rich in American retailers. JD, however, features B2C model and diverse supply chain. If JD makes full use of eBay’s potential, it could develop more swiftly.

Up with big online retailers, down with smaller ones

Although Tmall and JD are not the earliest online retailers to conduct overseas shopping business, they will surely dominate this market with the help of their huge user base. It is expected that JD International will further change the structure of the transnational e-commerce market. While JD boasts high quality and diverse supply chain, Tmall will, as always, loosen the entry standard to attract as many overseas retailers to open shops on its platform. Those small and medium-sized online retailers conducting overseas shopping business, however, will have a tough time.

These online retailers should get ready to reform, otherwise they would soon be driven out of the market. For those transnational e-commerce startups, B2C model is the necessary trend and necessary reform should be carried out to survive, since with the launch of mega platforms such as JD International and Tmall International, consumers will soon shift to these platforms.

The inconvenient truth is that the transnational e-commerce market is bound to change. More broadly, however, such change is good news for consumers, since incompetent online retailers will gradually be driven out of the market while JD International, Tmall International is to and dominate.

(The article is published and edited with authorization from the author @Liu Huafang, please note source and hyperlink when reproduce.)

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.