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PUBLISHED : Wednesday, 17 October, 2012, 10:35am
UPDATED : Wednesday, 17 October, 2012, 10:43am

Jingdong’s courier wars: more E-commerce chaos

A new blow-up between Jingdong Mall and one of its main couriers is the latest sign of chaos in China's e-commerce.

BIO

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young’s China Business Blog (www.youngchinabiz.com), commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.”
 

I have been trying to ignore a noisy war of words developing between China’s e-commerce giant Jingdong Mall and one of its key couriers Shentong. I’m finally surrendering and writing about it. I haven’t written for a while about China’s chaotic e-commerce space. This particular issue is part of what looks like a broader growing discord between Jingdong, which also goes by the name 360Buy, and many of the courier companies that deliver the millions of goods that consumers buy online. Such discord is just as much a sign of the chaos that now plagues China’s e-commerce space as it is of the rampant competition that has pushed most major players deeply into the red.

Let’s have a look at this latest flare-up, which has a delivery service named Shentong Express refusing to deliver some goods from merchants to Jingdong’s warehouses. Jingdong typically buys its goods from such third-party merchants, and then stores their products at its own warehouses for eventual delivery to customers. Jingdong was apparently implying that Shentong was slowing or halting some of its deliveries to show its displeasure after Jingdong itself got a license to operate its own rival courier service.

A number of China’s other e-commerce firms have also eyed the delivery business. Many complain that smaller delivery companies are unreliable and offer poor customer service, which ultimately tarnishes their own reputation. In response to Jingdong’s insinuations, Shentong fired back that its refusal to deliver some goods to Jingdong warehouses is purely due to logistical reasons. It said its deliverymen frequently had to wait for long periods for a Jingdong representative to sign for their goods. This created significant delays for the company.  It also complained that some of Jingdong’s orders were simply too big.

This new tiff is apparently just the latest in a series between Jingdong and its couriers, who are reportedly unhappy at Jingdong’s decision to enter the parcel delivery business. I understand the desire of Jingdong and its rivals to improve their delivery service, but I do also think this blow-up will only sow further chaos in an already chaotic e-commerce sector where Jingdong is battling with domestic rivals like Alibaba and Suning.com (Shenzhen: 002024), as well as international players like Amazon (Nasdaq: AMZN) for market share.

Jingdong has become a frequent lightning rod for controversy with this and other similar moves by its talkative founder Liu Qiangdong. Liu made headlines more than a month ago with a heated war of words that reportedly ignited a price war with consumer electronics specialists Suning and Gome (HKEx: 493).People later questioned whether the war was just a publicity stunt. He is also fond of launching a wide range of new initiatives outside his core e-commerce business, entering areas like travel services and real estate.

All these initiatives, including this latest one in the courier business, have caused Jingdong to rapidly burn through its big cash pile, even after it raised a record of more than $1 billion last year. It is reportedly seeking to find new investors now, following its failure to drum up interest in an IPO earlier this year.

At the end of the day, this new blow-up with Shentong is probably just a minor blip on the radar of Jingdong and the broader e-commerce sector. But it does indeed reflect the building chaos and bad will that is building among many of the players involved. In an increasingly hostile climate that is bound to see a growing number of such flare-ups in the next one or two years before a much-needed clean-up finally occurs.

Bottom line: A new blow-up between Jingdong Mall and one of its main couriers is the latest sign of chaos in e-commerce, with a growing number of similar conflicts likely to come in the next one or two years.

The opinions expressed in this article are the author's own. To read more commentaries from Doug Young, click on youngchinabiz.com

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