JD.com and Alibaba are pushing for the European market
Already today, German online retailers have to compete directly with Amazon . But in the near future, the competitive environment could become even more challenging as JD.com and Alibaba , the Chinese e-commerce giants , are pushing into the European market. But until recently, the expansion plans of the two companies were only slightly specific. However, with the recent appearance of Richard Liu , the founder and current CEO of JD.com, it was made clear that the company is going on the offensive . According to the founder, it should not be the focus of the company to sell more products from Germany to China. Rather, more products should be sold in Europe . According to Liu, it's all about detail. The strategy for tapping the European market is expected by the end of the year. In addition, an office is to be opened in Germany.
For established providers, this means that Chinese online retailers are about to enter the market . At the current time both companies are to carry out the construction of the infrastructure , because this is urgently needed for a successful market start.
Alibaba continues to deny its role as a competitor
Less proactive is the approach of Alibaba , because the company denies until today that it wants to be a direct competitor for the German online retailers. However, the construction of the logistics hub in the Belgian city of Liège suggests something different. Accordingly, the 4P Express , the logistics partner in which Alibaba is directly involved, is working on the construction of a shipping warehouse near Prague . This shipping warehouse should also be used for the supply of the German market .
According to Olaf Rotax , an e-commerce advisor to Accenture , the pressure on German retailers is mounting. However, a major acquisition such as DHL , Otto or Zalando would be needed for the market entry in Germany. For the JD.com boss Liu such a purchase would be within the possibilities , if a good chance would arise. But the JD rival Alibaba to the boss Jack Ma leaves no doubt about their own ambitions. Accordingly, the company wants to be successful not only nationally but internationally . Alibaba wants to open every city and every household, according to Jack Ma. The long-term goal of the company is to deliver to every location within 72 hours. To realize this goal, the company plans to invest 13 billion euros over the next five years. The goal of this investment is the expansion of our own logistics network.
Above all, the breathtaking growth of the two Chinese companies can convince. Both companies grew by nearly 50 per cent a year , so Oliver Wyman's estimates foresee a combined turnover of nearly 550 billion euros in 2025 . This would exceed the turnover of the ten largest German online retailers .
Challenge for German online retailers
The successful concept of the Chinese companies is based on the creation of their own ecosystem . On the other hand, classic online retailers rely on pure online sales . For example, Alibaba combines the Tmall shopping platform with the popular Alipay payment service . For millions of Chinese, this business model is already taken for granted. To take this development into account, the German drugstore chain Rossmann and the Kaufhaus Ludwig Beck have already adapted the payment service . Thus, Chinese tourists should be included in the circle of potential customers. But JD.com even goes a step further, linking e-commerce to the popular social network WeChat of major shareholder Tencent . This approach blurs the boundaries between online commerce and social commerce . In addition, JD.com can create individual offers for customers thanks to the WeChat data . Also the own payment system of the Chinese Facebook is used by JD.com.
If they enter the market in Europe, Chinese suppliers will bring this modern way of trading to Europe and, accordingly , confront established competitors such as Amazon, Zalando or Otto with new and unknown challenges. In particular, the important factor of capital is not a big challenge for Chinese companies. However, the corresponding infrastructure would have to be created in advance. This is one of the biggest challenges facing Hannes Streek , Head of Consumer Goods and Commerce at Fiege , because so far JD.com has had the entire logistics infrastructure in its own hands. In particular, the shortage of staff and space in Europe will make it difficult to reproduce these conditions . Thus, the company can either rely on acquisitions or on outsourcing .
Alibaba is based on the Ebay business model and does not act as a dealer. In turn , JD.com can be described as a Chinese Amazon because the company also offers its own products. Thus, JD.com would have to find areas in which their own products are superior to those of Amazon , so that also European customers rely on the service. In particular, areas in which Amazon still has no unachievable market leadership, are thus particularly attractive to the company. Foremost among these is the area of fashion . After a successful start has been realized, the establishment of other business areas can be advised. But securing exclusive rights for the distribution of Chinese brands such as Xiaomi could also be used to build up a market position. In the long term, successful Chinese product ideas will probably be marketed under their own brand on the European market. In summary, however, all scenarios mean that the German online trade is facing a new challenge .