Recently, a piece of news that "BABA JD.com grabbed the US online retail market" swept the Internet, causing a heated discussion among netizens.

"when BABA and JD.com enter the American market, Amazon.Com Inc will probably panic."

So what is the context of the news?

BABA's B2B platform and OfficeDepot, the world's largest seller of office supplies, announced a cooperation agreement on March 4, marking the former's first heavyweight partnership in the United States.

At the same time, on the same day, JD.com, BABA's competitor, also reported that he also began to sell goods in the United States through Alphabet Inc-CL C's e-commerce platform. Consumers can buy about 500 items, including keyboards, headphones and kitchen appliances, from JD.com 's Joybuy brand through GoogleExpress.

As soon as the above news comes outBy the close of trading on Monday, BABA shares were up 1.83 per cent and JD.com shares were up 0.56 per cent.

(source: Futu Securities)

(source: Futu Securities)

However, what is even more curious behind these two pieces of news is whether Ali Jingdong's "sea plan" is feasible in the United States, and what drives them to enter the US market one after another.

First, the things that enter the American market

The American market has always been a dream place for domestic enterprises. BABA, Huawei and other well-known domestic enterprises have tried to open the door of the United States many times, but they were ambitious and failed for various reasons.

However, recently, BABA and JD.com 's series of actions in laying out the US online retail market have shown us the determination of Chinese companies to enter the US market.

1. BABA: the first heavyweight partner in Meijian

On Monday, BABA's B2B platform announced a cooperation agreement with OfficeDepot, the world's largest seller of office supplies. According to the agreement, at the initial stage of the cooperation, BABA will create a new network access address, connect to Audi's website, provide services to small and medium-sized enterprises in the United States, and provide them with exclusive discounts on some of the most important products and services.

It is worth mentioning that through this partnership, BABA has access to 10 million commercial customers and 1800 sales agents in Audi's office. at the same time, it also enables Audi customers to establish contact with BABA's global network of 150000 suppliers and provide next-day delivery services. The two sides also indicated that they would expand their services to small and medium-sized enterprises in the future, including the provision of logistics and sales channels.

In response, Audi Office CEOGerrySmith said:

"this cooperation will bring enterprises together to provide products and services. We really brought world power back to the United States. "

2. JD.com: sell goods through Alphabet Inc-CL C platform

It is worth mentioning that JD.com 's move to sell goods through the Alphabet Inc-CL C platform mentioned above is the first achievement since Alphabet Inc-CL C invested 550 million US dollars in JD.com in June last year.

As the world's largest search engine, Google accounts for 29.2% of the global search engine query market share. Alphabet Inc-CL C has more than 50% of the US search engine market share and a market capitalization of more than US $700 billion. JD.com, as the second largest e-commerce platform in China, has a large amount of goods, a perfect logistics system and a professional supply chain. Together, JD.com will get huge traffic through Alphabet Inc-CL C in the United States. Alphabet Inc-CL C can also break into e-commerce with the help of JD.com to earn more advertising revenue.

In this regard, the Nikkei pointed out thatAs the US e-commerce business lost momentum, Alphabet Inc-CL C, through a partnership with JD.com, gained a way to capture overseas demand and gained an advantage over its competitors by including Chinese electronics retailers.

In fact, it should be noted that this is not the first time BABA and JD.com have entered the US market.

In recent years, BABA has repeatedly tried to open the door to the US market, but has been repeatedly frustrated. Alipay, for example, was shut out, while Aliyun officially suspended its expansion plans in the United States in September 2018, while withdrawing from competition with Alphabet Inc-CL C and Amazon.Com Inc.

On the other hand, on JD.com 's side, it was rumored to be partnering with US retail giant Walmart Inc in 2016. According to the cooperation agreement, Walmart Inc will receive about 145 million Class A common shares newly issued by JD.com, accounting for about 5% of JD.com 's total issued shares, while JD.com will take over the e-commerce platform No.1 store under Walmart Inc.

However, it should be noted that neither side is going well. In addition to BABA's Alipay and Aliyun failed, JD.com also failed to enter the US market, and Liu Qiangdong also caused "coquettish" back because of a trip to the United States. In addition, due to the crackdown on our national enterprises by some US policies, these Chinese companies entering the US market have also chosen to withdraw one after another.

Now, judging from BABA and JD.com 's renewed foray into the US online retail market, we can see that they still have not given up their dream of entering the US retail market. If you ask BABA and JD.com: what is the other side of the sea?

The author guesses that the word "market" is the best answer.

Second, the opportunities and challenges behind the march.

Before we talk about the US retail market, let's take a look at a set of data.

According to the latest data, the total volume of retail sales of consumer goods in China reached 18.0018 trillion yuan in the first half of 2018, an increase of 9.4 percent over the same period last year, while the transaction volume of the online retail market reached 4.081 trillion yuan, an increase of 30.1 percent over the same period last year, accounting for 22.7 percent of the total retail sales of consumer goods. However, it should be noted that in the first half of 2018, the number of online shopping users in China increased by only 10.2% compared with the same period in 2017.

This means that although there is still a large growth in the size of the trading market, the odd number will eventually appear a relatively saturated state as the Internet population dividend fades.

In other words, in this state of domestic saturation, entering the American online retail market has become an inevitable choice for BABA and JD.com.

In fact, there are great opportunities in the online retail market in the United States.

On the one hand, the online shopping trend of American consumers is still developing, and the American e-commerce market is still a blue sea.

According to relevant data, the growth rate of the US e-commerce market is three times that of traditional retail, with a growth rate of about 15%, while the growth rate of brick-and-mortar stores is only 5%. In addition, industry analysts believe that the online shopping trend of American consumers is still developing, and it is estimated that by 2023, 85% of retail shopping in the United States will be conducted online.

At the same time, the study also found that the growth rate of e-commerce was as high as 18.1%. According to Statista, a data research firm, the penetration of e-commerce in US society will grow rapidly, and consumers' preference for online shopping will become stronger, which means that there are still many opportunities for US e-commerce to continue to conquer the territory, while physical retailers will face further pressure on their capital structure.

On the other hand, offline retail in the United States is experiencing a cold winter, and online retail can take advantage of the opportunity to break through.

According to media reports, clothing giant Gap announced that it would close 230 stores in the next two years within 48 hours of the past weekend. Jesse Penny will close 18 department stores. LBrands, the parent company of Victoria's Secret, will close 53 stores this year. Even Tesla plans to close its stores and turn to pure online sales. In addition, data show that the US brick-and-mortar retail industry has closed thousands of offline stores since the beginning of 2019, and even Macy's, which is familiar to the Chinese, has closed dozens of stores.

However, it should be noted that at present, most of the shopping spending of American consumers does not go to online shopping, accounting for only 36%, and more (64%) goes to brick-and-mortar stores. This also means that online e-commerce is expected to grab more consumption share in the cold winter of US brick-and-mortar stores.

In response, some analysts said that the US brick-and-mortar retail industry suffered a "cold winter", mainly due to the impact of e-commerce, the failure of business philosophy to keep up with changes in consumer tastes and the sequelae of over-expansion. Deutsche Bank believes that with the increasing loss of passenger flow in the department store industry and the fact that the industry as a whole has lost the possibility of finding expansion profits because of structural problems, there may be little hope that the situation in the entire US department store industry can be reversed.

Therefore, it is not difficult to see that at a time when such opportunities and challenges coexist, BABA and JD.com 's large-scale layout of the US online retail market is undoubtedly a wise choice.

III. Conclusion

In fact, when BABA and JD.com enter the American online retail market, on the one hand, it is necessary for itself to seize the market, and on the other hand, it can also bring some innovative thinking and give new vitality to the current American retail industry.

In view of the current situation of the retail industry in the United States, many people in the industry have long pointed out that "the entry of BABA and JD.com into the United States is after all a good way to inject vitality into the United States and alleviate its predicament."

Chris Walton, a Forbes columnist, once pointed out that BABA's new retail is the best answer for US brick-and-mortar retailers to alleviate their difficulties. "it eliminates the old thinking of US brick-and-mortar retailers and gives them hope for further success," he wrote. "

On June 21st Fortune, the world's most influential business magazine, published a long article by its executive editor, AdamLashinsky, on its front page. He believes that Chinese Internet companies, represented by BABA, are profoundly changing the world. However, because Western readers generally do not use the products of Chinese Internet companies, BABA and other Chinese Internet companies are not specifically understood and concerned by Western society. In response to this situation, Lashinsky issued a warning:

"the pattern of the world's scientific and technological power is about to change, and those who are unprepared for the coming speed will be left behind by the times."