JD.com puts France at the heart of its internationalisation strategy
today Jan 29, 2018
On 22nd January, Chinese e-commerce giant JD.com held the first press conference at its new Parisian headquarters. Visiting the city to attend the dinner hosted by French President Macron for the senior executives of 140 of the world's top corporations, JD.com's International President, Winston Cheng, took the opportunity to introduce Florent Courau, the group's new General Manager France, and to discuss JD.com's internationalisation plans.
"You're our first visitors," said a smiling Winston Cheng as he welcomed the journalists inside the group's 400 m2 offices located in avenue George V. Offices which, unlike those in Cambodia or Indonesia, are not designed to host local sales events. On the contrary, their role is to act as gateways to the Chinese market, like the other local branches which are set to open in New York, Los Angeles, Tokyo, Melbourne, London, Milan and perhaps in Germany. "France is a very significant country for the deployment of our international network, if not the most important one," said Cheng.
But why is France so crucial? "France lies at the cross-roads of our international development pathways, and is crucial for the premiumization of Chinese consumption," said Florent Courau. "The luxury industry is increasingly digitalised, something which makes brands question their image, prices, experience and margins. But it's a necessary switch, since without the internet, in China, you wouldn’t be able to reach a whole segment of the market. In beauty products, a market in which France is well represented, there are heavy customs duties in China, which are about to ease up. Besides, over there we are seeing an erosion in the [market share] of major brands, to the benefit of smaller ones like Caudalie," added Courau.
To attract consumer brands, JD.com doesn't simply rely on its 266.3 million active users, but also on its logistics capabilities, having set up the most significant logistics network in China. "Perhaps worldwide," said Cheng proudly, underlining that the group's existing French logistics resources could in time be boosted by the creation of a delivery centre. Meanwhile, a dedicated office is operating in France, as JD.com looks forward to reaching the level of French consumer product sales it recently pledged to achieve with the French goverment.
The group can also rely on its technology resources: via Tencent (WeChat), of which it is an exclusive partner, JD.com is able to offer targeted support to Western brands seeking to tap the Chinese market. In addition, JD.com is able to act as a retailer, buying stocks and selling products directly to consumers. Its roots are B2C, as opposed to the C2C origins of its main competitor Alibaba. "When you invest your own money, you make sure it is for something authentic and high-quality," said Courau.
Once the world's factory, since the 2000s China has become the most coveted consumer market for Western brands. However, the yearning of Chinese consumers for foreign fashion labels is becoming less intense, to the benefit of local brands. "Fashion is indeed the category in which local products are growing the most, but this doesn't mean that there is no longer any room for foreign brands," said Courau.
At a time when several Western luxury brands have experienced setbacks, isn't there the risk that this shift towards China could bump into a few obstacles? "There has been some disruption," said Florent Courau. "But certain marketing practices have been cleaned up in the country, following the introduction of anti-corruption measures. Besides, the price differential with foreign markets is diminishing, since Chanel chose to align its prices. Some organisations, which developed too fast, have actually suffered for this new-found uniformity. But I don't think that luxury brands are distancing themselves from China. They are simply deploying more calibrated strategies."
Last year, JD.com invested in Farfetch, the London-based luxury e-tailer, and it also launched the Toplife website, dedicated to European luxury labels, raising question marks about the two sites' relative positioning. "Farfetch offers a broad range of brands in Europe, but perhaps not their full product choice," said Winston Cheng. "Toplife wants to showcase a large number of brands in China, but also an extensive product range." Asked if JD.com was considering other investments, in the retail channel or in French digital fashion players, Cheng simply replied: "Yes, we are open to all opportunities."
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