Delivery has emerged as the new battleground for China's e-commerce giants, as they jostle to win local consumers with faster and cheaper shipping services, in a sign of an intensifying competition in the sector amid weak consumer spending.
JD.com, the Beijing-based e-commerce company founded by Richard Liu Qiangdong, on Wednesday lowered its free-shipping minimum order to 59 yuan (US$8.2) from 99 yuan. It marked the first time in eight years that the company has updated its free-shipping policy after a hike in the minimum qualifying amount in 2016. Customs Broker
Subscribers to the firm's JD Plus service, akin to Amazon Prime, are now entitled to unlimited free delivery, compared with five free deliveries a month previously.
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The move comes as Cainiao Network, the logistics arm of Alibaba Group Holding, has rolled out same-day and next-day door-to-door delivery in 300 Chinese cities, as well as half-day express delivery in eight major cities, including Shanghai, Hangzhou, Shenzhen, Guangzhou, Dongguan, Foshan, Huizhou and Chengdu.
The new Cainiao Express service, which forms part of a string of initiatives unveiled in June by incoming Alibaba chairman Joe Tsai, was launched in collaboration with Tmall Supermarket. Alibaba's Taobao Tmall Commerce Group is also setting up its own logistics department to meet its unique delivery demands.
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Delivery charges and service quality are key factors determining success in China's heated online-shopping competition, according to analysts.
"Free shipping is a very effective means to compete in a crowded market and draw users from lower-tier markets," said Zhuang Shuai, founder and chief analyst at e-commerce consultancy Bailian.
He noted that Pinduoduo, a Chinese e-commerce platform known for its cut-to-the-bone prices, has surged in popularity thanks partly to its free shipping services, available for a vast range of goods sold on its app.
JD.com has in recent months pivoted to a low-cost strategy to tap lower-tier markets by allowing smaller merchants to open stores on its platform, signalling a departure from its traditional business model that focused on wooing established brands to its platform.
"We want our platform to cater to more consumers and more of their needs ... and to satisfy those needs, we will have to have a bigger supply [of goods]," Wang Xiong, a JD.com executive in charge of the firm's strategy direction, told the Post in June.
While JD.com's new free-shipping policy may have a short-term impact on the firm's revenue, it is manageable after the company recorded robust sales and income growth for the June quarter, according to Chen Tao, analyst with Beijing-based market consultancy Analysys.
JD.com reported a 50 per cent rise in net profit to 6.6 billion yuan for the three months ended June 30, while revenue rose 7.6 per cent to 287.9 billion yuan. Alibaba's Taobao and Tmall saw a 12 per cent increase in revenue to 115 billion yuan during the same period. Both JD.com and Alibaba credited solid sales at the 618 mid-year shopping festival for its earnings performance.
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