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Cross-border growth potential predicted as e-commerce firm signs delivery pact with postal operator
JD.com Inc, China's largest online direct sales company, has taken a further step in overseas expansion in Russia by teaming up with Russian Post, the national postal operator.
The two parties signed a strategic cooperation agreement on July 29 in Moscow, in which Russian Post is authorized to directly deliver goods from en.jd.com to locations within Russia.
Under the deal, the delivery of parcels from abroad would be conducted through designated postal operators in China and other countries.
Delivery of goods ordered on en.jd.com will be faster than normal shipments from China, said Sergey Malyshev, deputy general-director of Russian Post, according to media reports. Eighty percent of the products delivered by Russian Post are Chinese goods, Malyshev said.
The partnership with Russia's largest logistics company will help ensure prompt and reliable delivery of goods to Russian customers, said Victor Xu, who runs JD.com's international business.
In May, JD.com entered into a contract with SPSR Express, another Russian logistics service provider, according to media reports. Other JD.com partners in Russia include online retailer Ulmart and online wallet companies Yandex.money and Qiwi.
"Choosing to partner with local e-commerce platforms and logistics operators will facilitate JD.com's process of expansion in Russia, as these local companies understand the market better and have access to large customers," says Zhang Zhouping, senior analyst with the China E-commerce Research Center, a major third-party research institute in China.
As more and more Chinese e-commerce companies seek to expand overseas, Russia has become an important battleground because it is believed to have great potential for cross-border e-commerce.
In comparison, other European countries enjoy better infrastructure in terms of e-commerce development, including complete logistics networks and consumer demand for online shopping, Zhang says.
"Russia, as an emerging country in the cross-border e-commerce sector, holds huge potential for growth and it will be a lucrative market."
Russia is Europe's largest single Internet market by users, and its e-commerce industry is growing fast, said Xu, who spoke during a news conference in June in Moscow to launch a Russian-language site.
"I'm optimistic about the prospect of cross-border e-commerce business in Russia," says Wang Xiaoxing, an analyst with the information technology consultancy Analysys International in Beijing.
Russia is one of the export destinations with fastest growth for China, and it is also a partner in China's Belt and Road Initiative, which was proposed by President Xi Jinping in 2013 to promote growth along the maritime and overland routes of the ancient Silk Roads, Wang explains.
Last year, cross-border e-commerce business in Russia was worth about $7 billion, with $4.4 billion contributed by online purchases made in China, according to Russian media.
Last year, the goods China imported from Russia were valued at $41.6 billion (37.4 billion euros), up 4.9 percent from the previous year, while the value of goods China exported to Russia increased 8.2 percent year-on-year to $53.7 billion, according to the General Administration of Customs.
Another e-commerce giant in China Alibaba Group Holding Ltd, which is JD.com's main competitor, also puts Russia high on its overseas expansion agenda.
Transaction sales generated from Russia have exceeded 30 percent of AliExpress' total sales, says Ebrun, a Beijing-based Chinese e-commerce consulting firm. AliExpress is the cross-border e-commerce site Alibaba launched in 2010.
AliExpress has become the most visited e-commerce site in Russia, according to a survey conducted in July of 2014 by market research company TNS.
Jack Ma, founder and chairman of Alibaba, has told Xinhua News Agency that his company will increase investment in human resources and technology in Russia.
In addition to growing cross-border transactions via AliExpress, many retailers in Europe have come to know more about products that the Chinese market offers online, and they often visit China before placing large orders, says Wang.
"Another practical effect that e-commerce platforms in China have is that they help to improve information equivalence between Chinese and foreign players," Wang says.
Zhang says: "Even though AliExpress has taken a fairly large market share in Russia's cross-border e-commerce sector, there is great market potential for JD.com to develop."
Zhang says the current percentage of online shopping customers in Russia's total population is not large.
Although JD.com does not own its warehouses or agencies in Russia, Xu said all these facilities will be added with the development of its business in the country.
JD.com and Russian Post are working to integrate their IT systems, said Xu. Russian customers will be able to track the status and location of their parcels in the postal operator's mobile application when integration is complete.
huangying@chinadaily.com.cn
