JD.com Global Expansion in U.S. and Europe Key to Profits

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The Financial Times reports that JD.com founder and chief executive Richard Liu told the newspaper that it plans to launch operations in France, UK, and Germany as early as next year (2019).

This news comes on the heels of an announcement just a few days earlier that the company is planning U.S. expansion with a beachhead location in Los Angeles and a potential tie-up with shareholder Walmart to manage some of the U.S. logistics.

JD.com is the largest rival to Alibaba Group and has been working to catch up in the domestic Chinese market to its competitor. But the company is also expanding in strategic international markets to claim its stake of the global eCommerce business.

United States

JD.com believes it will find friendly U.S. consumers on the West Coast of the U.S. due to its larger mix of Chinese born and Chinese-American population. That is why it chose Los Angeles as its first foray into the U.S.

The current political protectionist climate in the U.S. will see JD.com take various strategies for expansion in the U.S. But targeting Los Angeles and the U.S. West Coast may provide the most natural path.

Over time, if the company can establish itself as a trusted eCommerce source, expansion into middle America will be much easier. Especially if JD.com and Walmart decide to bring co-branding to the online platform.

But that is pure speculation as to-date the only mention of Walmart has been the logistics network.

Liu said online sales in the U.S. should start by the second half of 2018.

Europe

In France, the company expects to spend over $1.2 billion to build out a local logistics network over the next two years. JD.com will also launch a European research center in Cambridge, England with focus on artificial intelligence and big data in early 2019.

Recently, Liu met with British Prime Minister Theresa May in Beijing during her official trip to China. After the meeting, JD.com announced they had committed to sell over £2 billion of UK Products to Chinese consumers over the next two to three years.

It does appear JD.com believes the political climate in Europe allows it to put more emphasis on going it alone.

However, the company may enlist some local logistics help for last mile delivery. But otherwise, JD.com is going full steam ahead building out its own logistics network of warehouses and large scale freight movement.

International Expansion Important to JD.com

Liu stated to the Financial Times that international expansion is essential to the company as he expects within ten years to make up half of the company’s profits from global markets.

“JD’s rule is that once we decide to do something we never limit the money.”

Richard Liu, Founder and CEO JD.com said in Davos, Switzerland while attending the World Economic Forum

In the Financial Times article, Liu stated he believes investing in building its own logistics network is a crucial strategy for global success.

While others rely on DHL, UPS, FedEx, and others to help with global logistics, JD.com is building an eCommerce specific infrastructure from scratch.

“Our efficiency mostly comes from the management technology of our logistics. We built our logistics to be online from day one.”

Richard Liu, Founder and CEO JD.com

It is interesting to note that for Europe, JD.com is following that plan outlined by Liu. But for the U.S., the company is planning to lean on Walmart for warehousing and logistical support.

While this appears to be a bit contradictory, it may show the power Walmart has over JD.com as a shareholder. As of last year it owned more than 12 percent in the Chinese online marketplace.

And to be fair, Walmart is not going to be any help in Europe to JD.com. The only remaining footprint the giant U.S. retailer has there is Asda (UK) after its miserable failure to crack to German market.

Competition is Good

It is a bit ironic that coming from a “managed economy” in China, two of the largest online companies will fight it out in the global eCommerce free market model.

This competition may be very healthy for Western brands as they seek access to the Chinese market. And with infrastructure investment by both JD.com and Alibaba Group in Europe and the U.S., this may bring some real competition to Amazon.

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