
Alibaba, JD.Com Battle Over Selling U.S. Brands in China
NEW YORK (TheStreet) -- Alibaba (BABA) - Get Report and JD.com (JD) - Get Report are stepping up their battle to sell U.S. brand-name merchandise in China.
Both companies have been rivals in China for years. Now, their duel for Chinese consumers has been brought West.
On Monday, JD launched its U.S. Mall, an online platform where Chinese consumers can find American-made goods. This follows Alibaba's recent efforts to get more U.S. brands on its site as well.
Neither is ready to tackle the U.S. consumer just yet, but both realize the potential in getting authentic U.S. goods for the counterfeit-ridden Chinese market.
"It's safe to say that they both want the same thing -- [to feed] this hunger for Chinese consumers to consume big Western brands," said Wedbush analyst Gil Luria.
Alibaba founder and Executive Chairman Jack Ma visited the U.S. last month to get more American sellers on the company's platform. "We need more American products to go to China," Ma said at an Economic Club of New York gathering at the Waldorf Astoria on June 9.
Then, a month later, JD founder and CEO Richard Liu visited New York City to invite American sellers to join his company's newly launched U.S. Mall.
When asked about JD's cross-border efforts in the U.S., Bob Christie, an Alibaba spokesman, said JD was late to the game.
"Imitation is the sincerest form of flattery," Christie said. "This is an attempt to copy our strategy, but as a narrow electronics platform, JD can't copy the size, scale and diversity of our user base, our logistics and distribution advantage, and our broad category appeal to Chinese consumers."
The head of JD's U.S. Mall, Belinda Chen, responded with the following statement: "JD.com is known as the leader in creating the most effective strategies for consumers and brands, from protecting IP through our e-tail model where we control the supply chain, to our world-leading same-day delivery capabilities. On the cross-border platform we are again setting the standard by giving brands and customers the choice of e-tail, where we own the merchandise, and marketplace."
To be sure, it would be hard to argue against Alibaba's huge reach in China. The company was attracting 350 million annual active buyers as of May 7. JD, on the other hand, had 105.2 million annual active customers as of May 8. Alibaba reported $96.6 billion in gross merchandise volume for its most recent quarter, while JD reported $14.2 billion.
The problem with going solely by those numbers, though, is that it's comparing apples and oranges.
Alibaba is best compared to a company like eBay (EBAY) - Get Report, hosting zero inventory of its own, shipping zero inventory on its own -- it works with a logistics company called Cainiao, which is 40% owned by Alibaba -- and serving as a marketplace for third-party sellers.
JD, on the other hand, is often compared to Amazon (AMZN) - Get Report, since it hosts both its own inventory and that of third-party sellers, and it delivers products on its own. JD claims to be the largest "online direct sales company," since Alibaba does not actually function as a retailer, but rather as a platform for retailers.
Either way, the rivalry may be irrelevant, according to Erik Gordon, a professor at the University of Michigan Ross School of Business. "Consumers in China don't care how much bigger Alibaba is," he said. "Consumers care about finding the merchandise they're looking for and the brands that signal 'cool' status in China."
That makes signing up American brands even more important. JD recently announced it would be the exclusive seller of Taylor Swift merchandise, which could certainly qualify for "cool status."
And when it comes to attracting sellers, Alibaba certainly has a wider reach, but that may not be the only factor that decides which company gets to sell a given company's goods.
Just ask Dane Ratliff, who owns the health-food store Lum and Sue's, and attended the JD event in New York. Ratliff is interested in JD because he thinks the audience it attracts will be more aligned with his brand. JD tends to attract a wealthier consumer that is more concerned about quality and authenticity, he said, whereas consumers who visit Alibaba may just be looking for the cheapest item.
At the end of the day, this doesn't have to be a winner-takes-it-all game.
"Right now there's just so much growth," said Kevin Carter, founder of The Emerging Markets Internet & Ecommerce ETF (EMQQ) - Get Report. "There really is a lot of opportunity for all these companies to continue to grow and expand to other online segments beyond just delivering a box with toothpaste."








