JD, fashionably late

Ever since Richard Liu, the founder of JD (China’s #2 e-commerce giant) married his beautiful trophy wife, 20 years his junior, he has tried to make his appearance look more fashionable. So have his business strategies gradually become.

 

  • In June 2017, JD invested USD397 million to become the largest shareholder of a global high-end fashion marketplace Farfetch.
  • In October 2017, JD debut its own luxury e-commerce platform “Toplife” which aims to rival Alibaba’s Luxury Pavilion.
  • In December 2017, JD with its beloved ally Tencent, co-invested a total of USD863 million to buy stakes in Vipshop, an e-commerce site offering high quality branded products at a discount to retail prices for limited time periods.
  • In the beginning of 2018, JD is forming a joint venture with Meili, the biggest Pinterest like social e-commerce company in China. Meili is, in fact, the brainchild of Tencent which in 2016 maneuvered the USD3 billion merger deal between Meilishou and Mogujie, two social e-commerce startups in intense rivalry during the past 5 years(Till this day the two entities still operate their business independently, though on the paper the corporate structure has been consolidated). It is said JD will collaborate with Meili to roll out something new very soon, which will be reportedly run as a WeChat mini-program (aka those little apps inside Wechat). Because Meilishou and Mogujie already launched their own mini-programs in WeChat (see below Mogujie example), we suppose there will be a third wheel with different name. 

 

 

JD used to be the store for men, the first destination to look for consumer electronics. But now it aspires to be the store for women as well, especially high-end fashion. The transformation should not be that easy. According to some sources, in 2017, over 44 apparel stores actually left JD.com and moved exclusively onto Alibaba’s Tmall.

 

For years, JD has been an underdog in China’s online apparel market. Underdog, we mean below chart:

In 2016, Alibaba’s two e-commerce behemoths Taobao and Tmall dominate almost 80% market share in this vertical, even though JD has managed to gain a small and incremental slice of the pie during the past two years. Obviously, it is not much of progress.

 

 

So if you are the forever #2 player trailing behind Alibaba, what is going to be the most effective strategy for gaining a bit more power in short period of time? The answer: by swallowing your #3, #4, #5 players…

 

That is exactly how JD has been doing lately. But the tactic would not have worked like a charm, had JD not wedded to Tencent, especially leveraging the reflected glory of WeChat. Fashion brands are educated that they should capitalize on Wechat to generate traffic and conversion. That is why piles of articles in the media constantly write about tips and recommendations about Wechat marketing strategies, the holy grail to tap deeper into Chinese customer’s heart and wallet. Few luxury brands even started to sign the exclusive partnership with JD, such as Sanit Laurent and Alexander McQueen. 

 

Therefore after every move carefully orchestrated by Tencent, JD perhaps stands a good chance of being the late bloomer in the success of e-commerce fashion.

 

Author: Cecilia Wu