JD.com Starts Free-Zone Imports in Challenge to Alibaba

JD.com Inc., China’s main e-commerce rival to Alibaba Group Holding Ltd., started a service that will speed imports such as electric toothbrushes and infant car seats to consumers through free-trade zones.

The new JD Worldwide service will expedite deliveries of international goods to local consumers, said Leo Li, vice president of JD.com. The business will use the zones to make brands more available outside the biggest cities, he said.

“While big cities are our traditional stronghold, we are expanding quite well in smaller cities and we think that will be a huge growth market for foreign brands,” Li said in e-mailed responses to questions.

JD.com, which is backed by Tencent Holdings Ltd., is betting on demand for direct sales of imported goods in a country where counterfeits have plagued online marketplaces, including Alibaba’s. Companies including Nestle SA and Danone have said they plan to work with China-based e-commerce providers on direct sales of infant formula after a 2008 scandal prompted Chinese to seek out foreign-made brands.

“Mothers are a key target group,” said Li. “Ensuring authenticity is both our challenge and opportunity.”

Alibaba Chairman Jack Ma said he would work with the Chinese government to block knock-offs from its Taobao Marketplace and other online malls, according to a statement posted in February on the website of the country’s consumer watchdog. The comment came less than three weeks after another regulator, the State Administration for Industry and Commerce, accused Alibaba of tolerating merchants who sell fakes online.

‘Without Inconveniences’

Chinese shoppers can use JD Worldwide to order goods from hundreds of brands and sellers in overseas markets including Australia, France, Germany, Japan, South Korea, New Zealand, U.K. and the U.S., according to a statement. The service lets shoppers buy “without the typical inconveniences associated with international shipping, customs and language issues,” the Beijing-based company said.

JD.com’s American depositary receipts increased as much as 3 percent to a record high in New York.

“Foreign goods, which are becoming more popular, can have their price doubled when they are imported into China,” Jun Zhang, head of China Research at Rosenblatt Securities Inc. in San Francisco, said by phone on Wednesday. “The free-trade zone saves on import-related costs, which lets foreign companies sell their product on JD.com at a much cheaper price.”

Product Categories

The e-commerce company didn’t name which brands would be available through the service.

The new JD Worldwide service will offer 150,000 product categories from 1,200 brands, the company said. It will feature both direct sales by JD.com, and marketplace channels for merchants, including San Jose, California-based EBay Inc.

EBay will have a channel on JD Worldwide. Bigger rival Amazon.com Inc. opened a store on Alibaba’s Tmall in March.

EBay’s store on JD.com offers products including Oral-B electric toothbrushes and Graco car seats, for example.

China created the Shanghai area for simplified customs clearance in September 2013 and has announced plans for at least three more free-trade zones in Guangdong and Fujian provinces and Tianjin city.

“EBay is working to unlock better selection for Chinese consumers and expand the global reach of EBay sellers,” Jean-Francois Van Kerckhove, vice president of global expansion for EBay, said by e-mail.

— With assistance by Edmond Lococo, Spencer Soper, and Stephen Stapczynski

Before it's here, it's on the Bloomberg Terminal.