Fortress Europe next target for Chinese giants
The battle of the giants coming to Europe
JD & Alibaba vs Amazon…in Europe?
If the Chinese e-commerce giants Alibaba and JD.com are to have any chance of competing in the lucrative European market, they need to offer a customer experience closer to Amazon’s best-in-class offering. Cheap prices is a start but isn’t a world-beating formula on its own. Delivery is crucial to a first-rate customer experience.
A European home
JD.com has supposedly had plans to make a major play in Europe for some time – perhaps management was distracted by its failed Australian experiment.
According to reports, representatives of JD Logistics (JD.com’s logistics arm) is currently touring Europe to choose a good base on the continent.
Why Europe and Why now?
Amazon is continually reinforcing its position in Europe through strong development of its last mile competence. Despite an attractive product-price mix, the Chinese are way behind on customer experience here. Marek’s own experience when ordering on Alibaba is a point in case; almost inexistent track and trace and 4+ weeks delivery time (TBC as the item still hasn’t arrived and a month has passed).
Recent research has shown that customers will prefer e-shops with a customer centric last mile and by contrast, avoid those which are unable to offer the choice and quality they demand.
How to secure a (last mile) base in Europe
It is for this reason that Alibaba and JD.com are looking for the best way to make this happen. While any network doesn’t need to be asset heavy, they must have a European base with localised customer service and state of the art interactive delivery management solutions. More importantly, they need to move away from cost only thinking, in favour of customer experience…in the way that Amazon does.
So what are the options? There are no pan-European networks available right now; Hermes does cover several important markets and has been looking for a strategic investor (who can offer synergy) for some time, it is rumoured that DPD could be close to finalising something here. Other than this, there are several opportunities in Central and Eastern Europe. Our best bet would be to set up a large “consolidator” type business using the leverage of their volumes to secure attractive agreements with all key carriers and to then slowly build up their own competence to complement this, in much the same way Amazon has done, several years ago. Moreover, if they are smart (and the Chinese are, for sure), they can look at creating a strong out of home footprint of lockers and PUDOs, at the same time.
Logistics world domination
So who will be first, JD or Alibaba? As a specialist in high-tech and hyper-automated logistics, JD.com’s dream is to become a world’s leader in logistics via Europe and then in the rest of the world. It is interesting to note that Google and Walmart have already invested in JD. Time will tell how this evolves, but our opinion is that things will be hotting up in the European last mile…and soon!
Both Alibaba and JD are making concrete steps to create their initial European hubs. Alibaba signed a deal with the Belgium government for a 220k sqm warehouse at the Liege airport which will open next year, and JD has held high level meetings with the Dutch government for a similar operation in Zeebrugge.
Both Alibaba and JD have logistics business units, Cainiao and JD Logistics, which are very well capitalized and are likely to IPO in the near future. Having a meaningful European presence will increase the value of those businesses, outside of the core ecommerce platforms.