After Alibaba’s very brief and highly controversial stint as a member of the International AntiCounterfeiting Coalition last year, JD.com has joined the roster of the American Apparel & Footwear Association (“AAFA”). According to a statement from the Chinese e-commerce giant, "JD.com, as a member of AAFA, will collaborate with international fashion labels on the issues related to intellectual property protection, as the group continues to invest on introducing top worldwide brands to Chinese consumers via its JD.com website.”
Beijing-based JD.com – which is one of the two largest business-to-consumer online retailers in China in terms of transaction volume and revenue, following just behind Alibaba – has generally managed to stay out of the unfavorable spotlight, while Alibaba has emerged as the most problematic of platforms in China, with its TaoBao site landing on the U.S. Trade Representative’s “Notorious Markets” blacklist for a number of years in a row and the company landing on the receiving end of a number of lawsuits from luxury brands.
The Washington, DC-based AAFA represents more than 1,000 world famous brands, such as mass market companies like Gap, Tommy Hilfiger, and Levis, as well as more fashion-oriented brands like Calvin Klein and Marc Jacobs. It’s decision to align itself with JD.com “may run the risk of ruffling the feathers of some members,” according to the World Trademark Review, which is exactly what happened in the case of Alibaba and the International AntiCounterfeiting Coalition. After Alibaba's acceptance, over a dozen of the Coalition's most prominent members, including Gucci and Tiffany & Co., among others, threatening to leave the group if Alibaba’s membership was not rescinded.
Alibaba v. JD.com
So, how - exactly - does JD.com, the first Chinese e-commerce site to join the ranks of the AAFA, differ from its closest rival, Alibaba? JD.com founder Richard Liu, one of China's richest entrepreneurs, says that by managing the entire supply chain, JD.com can ensure the authenticity of what it sells and offer better service.
According to Forbes, "Nearly all of the goods that JD sells directly to consumers come from a network of 234 warehouses. (The rest is sold by the brands, their distributors or other formally registered businesses.) JD controls its deliveries as well. Around 60% of its 114,000 employees are engaged full-time in delivering packages." And consumers have responded; "some consumers in China are drawn to JD because of its reliability," the publication noted last year.
Liu Yungang, the 35-year-old general manager of an Internet-equipment company in Shanghai, told Forbes that he believes the products he buys from JD's warehouses are more authentic. "A lot of items I bought from Taobao turned out to be counterfeit - clothes, electronic accessories and a Zippo lighter," he says. "Counterfeits are rare in JD's [online] store."
Yet, this level of integration and oversight - and the resulting level of reliability - has not been cheap. Between the significant amount of resources required to construct warehouses, pay tens of thousands of staff members for delivery purposes and invest in new businesses, JD.com did not turn a profit following its 2014 IPO ... until recently. The company surprised analysts on Monday by achieving its first profitable quarter since going public two years ago, which it says was helped by Chinese consumers' ever-increasing use of smartphones to shop.