After the emergence of smaller, homegrown B.C. players gaining access to China’s booming e-commerce market, the China-based giants of the sector have now started eyeing Canada and Vancouver in their quest to expand beyond Asia.
The biggest such player, Beijing-based JD.com, recently made a stop in Vancouver in its three-city Canadian promotional outreach tour, pitching its online retail store to local businesses as the easiest and safest way for B.C. small and medium-sized enterprises (SMEs) to reach the lucrative Chinese market.
JD.com (Nasdaq:JD), a member of the Fortune Global 500, had revenue of $49 billion last year and employs 122,000 people. It might not be a household name in the West, but most people will recognize its biggest competitor and contemporary – Jack Ma’s ubiquitous Alibaba Group (NYSE:BABA), based in Hangzhou, China.
Jerome Ma, JD.com’s corporate vice-president, told a gathering of 70 business executives at the Vancouver Economic Commission office on July 28 that the company decided to look to Canada for companies seeking to sell their goods in China online, mainly because Canada presents a good business culture fit for the more low-key approach that JD takes.
“JD is trying to make sure that we are successful in an ethical way,” Ma said, noting the e-commerce platform’s one-strike policy against fraudulent vendors as proof of JD’s commitment.
“Sometimes, when you go to China, there are a lot of ways to be successful. But are you being ethical? That’s the corporate culture we have, and I think you also see it in Canada.
“Why do you think tourists from other countries pretend they are Canadians when travelling outside their own borders? Because people respect Canadians for their core values.”
Recently, local players like Sachiel Connect have risen up to try to link Canadian food growers and producers of other products to Chinese consumers. Alibaba itself announced this month it is hosting its Gateway Canada event in Toronto on September 25 to “educate Canadian companies, agribusinesses, entrepreneurs and the travel and hospitality industries about tapping the rapidly growing demand among Chinese consumers.”
“Canada’s high-quality products, fresh food and travel experiences are highly sought after by China’s large and growing middle-class population who are looking online for the best products and experiences around the world,” said Jack Ma in a written release about the Gateway event. “Modern China has the potential to be a big opportunity for Canadian businesses of all sizes.”
The Chinese online retail market has recently grown at a ferocious pace, as integration with social media apps and improved logistics networks and supply chains pushed sales to a record US$750 billion, according to a Goldman Sachs (NYSE:GS) report in March. That figure is more than twice the total in the United States, ranked second in e-commerce market size.
The same Goldman Sachs report projects Chinese e-commerce sales to reach US$1.7 trillion in 2020, although Jerome Ma cautioned Vancouver businesses that the market is far from being a magic bullet for B.C. SMEs looking for a sure way in. That’s why, Ma said, JD.com will carefully discuss future prospects with each interested company looking to enter China through JD to determine the best fit.
The Vancouver Economic Commission’s Asia Pacific Centre director, Joan Elangovan, said one of the biggest challenges facing B.C. firms looking to get into the game in China is the sheer immensity of the market, which can present an SME with major logistics issues if a product proves popular and generates demand among JD.com’s 265 million customers.
“You have to be able to scale up,” Elangovan said. “We want to see Canadian companies grow, prosper and provide jobs here, but you have to be ready to satisfy the demand if it comes.”
But Elangovan added that the interest is already high among the 70 businesses that attended JD.com’s Vancouver gathering, noting the attendance far exceeded the original plans to have 30 groups present. The Vancouver Economic Commission even had to turn some interested parties away due to limitations of the venue’s space, and one company travelled from as far away as Edmonton to take part.
“This obviously has the potential to be a game-changer,” Elangovan said, noting the dominance of SMEs as a major part of the Canadian economy. “The potential is tremendous, but it’s by no means an easy process…. I’ve seen good deals fall through despite being good deals.”
She added that working with JD.com – currently without a Vancouver office – may present some additional challenges for interested B.C. SMEs, but she said JD has not ruled out adding a local presence in the future.
“This is just the first step in the process, and JD is trying to see what market they have here in Vancouver. If they are successful, I have no doubt we’ll see more specific developments follow.”
She added that the commission has already been in contact with other e-commerce platforms making preliminary outreach to Vancouver’s business community.@BIVnews