Investing in Japan
Success Stories JD.com Jingdong Japan Co., Ltd.
Chinese online retail sales giant JD.com (the Jingdong Group) held an opening ceremony in Tokyo on July 12, 2017 to celebrate the establishment of its Japanese base JD.com Jingdong Japan Co., Ltd. Chairman and CEO Richard Liu came to Japan for the occasion and gave a presentation on the company’s operations.
Leading EC company boasting high growth rate
Founded in Beijing in 1998 and listed on the US NASDAQ Stock Market in May 2014, JD.com is now one of the top ten companies in the world in terms of the global e-commerce (EC) market share. It is a growing company with 140,000 employees and about 260 million users, engaged in operating its own EC mall and direct online sales. The company chalked up sales of about 15.8 trillion yen in 2016, with its sales of Japanese products increasing by more than 110% year-on-year. Its strategy of joining forces with Tencent Holdings Limited, a leading Chinese IT company and JD.com’s largest shareholder, has enabled JD.com to reach more than 900 million potential users. At the same time, the company is preparing the environment in order to develop its business even further. One of its efforts is offering sales promotion proposals based on integrated data from the EC market and social networking services by employing big data.
JD.com has grown rapidly thanks to its distribution network and style of direct sales. Possessing 335 warehouses and deploying delivery staff to 50,000 towns, JD.com is able to cover most parts of China with its own distribution network. In addition, the company’s partnership with over 50,000 stores enables consumers to pick up the products they have purchased online from nearby stores on the day of the purchase or on the following day. JD.com recorded an average delivery time of 11 minutes when iPhone 7 made its debut on the market. The company also enjoys other advantages: with the inventory turnover period being 17 days, it is able to keep down costs thanks to a shorter inventory cycle than offline stores, and the company has been contributing to the thorough elimination of counterfeit products by forming cooperative relationships with manufacturers.
Background to entering the Japanese market
Its purpose for establishing a Japanese subsidiary was to strengthen the procurement of Japanese products and develop direct business with Japanese manufacturers. Having a base in Japan allows JD.com to supply more Japanese products to the Chinese market, and it could also provide Japanese companies with a golden opportunity to increase their exports. Mr. Liu explains that the growing attention to Japanese products in the EC market in recent years has been driven by a change in Chinese consumption patterns. Most Chinese consumers used to attach importance to making purchases at low prices. Recently, however, a growing number have come to value brands, quality and the safety of products more highly as household incomes increase. Another change is observed in the means used to purchase Japanese products, from direct purchases while visiting Japan on vacation to those made online. JD.com decided to establish its base in Japan to meet the demand of Chinese consumers for Japanese products, with an eye to improving the efficiency of procurement and to progressing toward direct business with Japanese companies. In addition to sales via its online site, JD.com intends to actively invite Japanese companies to set up their own online stores on its EC mall, raising expectations that Japanese companies will also be able to expand their overseas sales.
As more and more Chinese consumers have come to demand high product quality and safety, business interactions between JD.com and Japanese companies have thrived. In May 2016, JD.com began cross-border EC operations targeting Chinese consumers in cooperation with an affiliate of Yamato Holdings Co., Ltd. In July 2017, JD.com concluded a letter of intent with Yamato to form a comprehensive alliance, aiming to expand its domestic cold chain (chilled distribution network) and cross-border logistics. This collaborative move—which combines Yamato’s technology for delivering chilled perishables while maintaining low temperatures with JD.com’s distribution network in China—is expected to produce synergy effects. In addition, the company made an agreement with Mitsubishi Chemical Corporation in June 2017 on JD.com’s adoption of Mitsubishi’s plant factory system and technological tie-ups in the areas of vegetable cultivation and hygiene control. JD.com is determined to branch out into the perishables business in cooperation with Japanese companies to meet consumers’ demand for fresh and safe food.
Future business outlook
Going forward, JD.com will focus on sales expansion and technological improvement. With its advance into Japan, the company expects its sales volume to rise further. On the technological side, Mr. Liu explains that the company has already introduced robots, which are operating in its warehouses. The company is even discussing the possibility of adopting self-driving trucks in the future. These technological initiatives are based on the company’s strategy of improving its global competitiveness by increasing delivery efficiency. To further develop business in Japan, JD.com is striving to increase the number of Japanese products delivered to Chinese consumers and also planning to further bolster its online-shopping sales by investing in Japanese small and medium-sized enterprises. Mr. Liu says enthusiastically, “We will continue to grow by strengthening cooperation with our Japanese partners.”
Presentation by CEO Liu at ceremony
Support from JETRO
To assist JD.com in establishing its Japanese subsidiary, JETRO’s Invest Japan Business Support Center (IBSC) provided the company with support, including the following: provision of a temporary office and information related to registration and personnel matters; referral of JD.com to appropriate service providers—including consultants on administrative documents, licensed tax accountants, banks and real estate agencies—as well as Japanese companies after confirming whether the needs of each of them fit those of JD.com; and the provision of assistance in relation to various events.
(Interviewed in July 2017)
|June 1998||Established Beijing Century Trading Co., Ltd. (JD.com) in Beijing, China|
|August 2017||Established JD.com Jingdong Japan Co., Ltd.in Tokyo|
JD.com Jingdong Japan Co., Ltd.
|Established in||August 2017|
|Business Overview||EC mall management and online sales|
|Capital||30 million yen|
|Parent company||Beijing Century Trading Co., Ltd. (JD.com)|
|Address||1-1-1-703, Otemachi, Chiyoda Ward, Tokyo, Zip code: 100-0004|
- Provision of a temporary office
- Assistance in incorporation procedures (registration, labor)
- Support in search of property
- Assistance with public relations
- Introduction of service providers (administrative scriveners, accountants/tax accountants, financial institutions, real estate agencies)
- Business-matching support