Alibaba, JD.com Look East to Japan to Boost Product Selection

NEW YORK (TheStreet) -- As the two main e-commerce companies in China, Alibaba (BABA) and JD.com (JD) are both looking to bring the best quality products to their marketplaces, and Japan is surfacing as one of the arenas for this battle.

Both Alibaba and JD have been making an effort to bring Japanese products on their sites to boost the selection for consumers.

On Monday, JD launched "Japanese Mall" to host Japanese products in a centralized location. Just a few days before that, Yahoo! Japan and Alibaba announced that they are working on a partnership to help bring more Japanese sellers to Tmall, Alibaba's business-to-consumer marketplace. It's unknown at this time which brands the companies are courting to add to their marketplaces.

The moves signify the importance of selling imported goods, specifically from Japan, to Chinese consumers. With an increase in counterfeit and fake goods in China, Alibaba and JD are under more pressure to stave off any illegal behavior and sell only authentic goods. Turning to imports from other countries is one way to do that.

"Our country malls, including French, Korean and Japanese, offer a reliable way for brands and consumers to connect through a trusted channel," said Josh Gartner, a JD spokesman. "Japan has long been a popular country for imports on JD.com, so choosing it for one of our first country malls was a logical fit. Japanese brands in areas like electronics and baby products have always sold well, and Japanese Mall allows us to expand our offer in a wider range of categories."

Alibaba has similar goals in bringing genuine imports to Chinese consumers.

"Cross-border trade efforts in relation to Japan are all about bringing high-quality goods and services to Chinese consumers," Alibaba spokeswoman Molly Morgan said.

In recent months, China and Japan have worked to thaw their relationship.

Japan is not the only source for imports, but it seems to be a popular choice, one that is receiving a lot of interest from Chinese consumers.

"There is healthy demand in China for Western and Japanese goods," said Wedbush analyst Gil Luria, who rates Alibaba at outperform with a price target of $115. It therefore makes sense that Alibaba and JD are trying to make these items available on their sites.

When looking to increase an e-commerce business, companies can either expand their audience and marketing to consumers in new locations or demographics, or expand product selection, which is what Alibaba and JD appear to be doing.

"The overarching thing is building the seller base from other countries into China," Morningstar analyst R.J. Hottovy said. "That's the root of international expansion now. It's probably a smart move, the most capital efficient way to get outside sellers familiar with the marketpalce and expand beyond."

And as Alibaba and JD duke it out for Chinese consumers, they're likely going after the same targets, trying to get the best selection possible.

Will one have better luck in Japan than the other? "In Japan, I think they're fairly well on equal footing at this point," Hottovy said.

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