INTERNET: JD, LightInBox Step Up E-Commerce Globalization
Bottom line: New global e-commerce moves by JD and LightInTheBox look well conceived and could yield some strong results, while Baidu’s new e-commerce investment reflects its lack of focus and broader strategy in the space.
A flurry of e-commerce moves are in the headlines today, including new globalization steps by number-two player JD.com (Nasdaq: JD) and the struggling LightInTheBox (NYSE: LITB). Meantime, search leader Baidu (Nasdaq: BIDU) is also in the headlines as it searches for its own e-commerce business model, with reports it has made a major investment in a site being developed by PC giant Lenovo (HKEx: 992). The flurry of moves reflects the hyperactive state of competition in China’s e-commerce market, which requires constant innovation in order to survive.
E-Commerce Globalization
Let’s start on the globalization front, where JD has just launched a new area on its e-commerce mall dedicated to goods imported from France. (company announcement) Meantime, LightInTheBox, which sells Chinese goods to people outside China, has finally made a move that it should have taken long ago and set up an off-shore warehouse in North America, one of its most important markets. (company announcement)
E-Commerce News
JD’s new French Mall roll-out comes just a week after the company announced a similar imported foods initiative that looks like part of a broader push to offer more foreign products over its platforms. (company announcement) JD said a priority in the French Mall initiative will be a focus on high quality and product authenticity, in a jab at larger rival Alibaba (NYSE: BABA), which last week was at the heart of a scandal involving the huge number of fakes on its Taobao C2C marketplace.
This particular initiative looks quite focused and well designed, as Chinese consumers have recently developed strong tastes for French products like wine and cosmetics. JD’s importation of those products will ease buyer concerns about paying big money for fakes, and I do expect the site will do well. JD’s imported product move also looks like a challenge to global rival Amazon (Nasdaq: AMAZ), which also recently launched a major imported goods initiative to differentiate itself from the pack. (previous post)
Next let’s look at LightInTheBox, which has struggled as it tries to build up a business selling cheap Chinese goods to customers in Europe and North America. The company realized that shorter delivery times might help to fix its problems, and last year opened a warehouse in Europe, one of its top markets. Now it has just opened a similar center in North America, and made its first delivery from the warehouse in the US state of Nevada last week.
LightInTheBox shares tumbled in the first part of last year over investor disappointment about its development, and I suspect that customer unhappiness about long waits and import complications involving products shipped from China were probably a factor behind its poor performance. Thus these 2 new locally based warehouses look like a smart step, and could lay the groundwork for some much improved performance in the next 2 years.
Finally let’s look at Baidu, which has struggled for the last 5 years to find an entry to e-commerce. Two of its early major projects failed, including one with Japan’s Rakuten (Osaka: 4755), and lately it seems content to become a passive investor in other people’s initiatives. Baidu was an investor in a major e-commerce initiative announced last year by real estate giant Wanda, and now it looks set to take a similar role in another service getting set for launch by Lenovo.
Media are citing an unnamed source saying Baidu has invested $100 million in the Lenovo venture, to be called ShenQi and set for launch in April. ShenQi would be an online-only venue for Lenovo products like PCs and smartphones. As an investor, Baidu may get special access to install its growing suite of apps on smartphones sold via the service. The $100 million price tag looks like an expensive way to buy such access, and I really don’t see Baidu gaining much advantage in the e-commerce space through this move.
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