The JD and Central joint-venture (JV) is off to a slow start. From initial plans to launch in May 2018, it has delayed its full launch to August 2018. Is this a sign that this ambitious JV is off to a rocky start? After all, before being able to compete with giants such as Alibaba’s Lazada, and SEA’s Shopee, one has to first actually launch.
Also, with just 6 months away from marking the end of 2018, JD seems to be struggling with its multi-country entry plans – initially slated to happen before the end of this year. So, what’s our take on JD and Central? Here’s what we think.
JD wants to move fast, will it end-up doing the hand-holding?
Having collaborated with many Chinese companies, we are well aware of their global ambitions, as well as their willingness to move fast, and establish traction. What JD might lack in terms of local operation prowess, it tries and compensate with data and technology.
While it is clear that this JV will spare no expense, money does not solve everything – when it comes to who finally makes the decision – Central or JD executives?
As JD clearly holds a huge technological advantage over its partner, will it be willing to spend extra time to hand-hold its partner or instead, go out on its own and do battle? It is clear they have to move fast, and needs to be nimble, to grab its pound of flesh in the ever-competitive ecommerce landscape of Thailand.
Does this mean stepping on its partner’s toes? One is a fast-moving ecommerce giant, another is an ultra-traditional corporation, that only has experience of turning its ecommerce businesses that it bought (such as Zalora) into a money-sucking black hole. One side may end up hand-holding the other, and this does not do well for either side’s massive ego.
Categories in focus cannot help the company scale
Another interesting thought is that, Central (potentially) aims to mobilize its premium categories (such as branded fashion, branded goods, and premium quality products). While it was rumored that such categories do well for some of its business units, one might argue that in Thailand, the market may not be as big or scalable.
After all, the average median salary is only around THB14,000 or less than US$450 per month. For a population that’s not seeing much growth, but instead experiencing rapid aging in its demographics; the “luxury demand” it is seeking might not be found locally.
Instead, it might find itself in an uphill battle in categories that are already dominated by existing players such as fashion (Pomelo), electronics & appliances (Lazada), and so on. Infact, Central’s arch-enemy (CP) under its flagship company – Ascend, launched into ecommerce a few years ago, but did not see a happy ending. It launched iTrueMart with the naive belief that it could capture a chunk of the market, but it ended up not working too well as it couldn’t compete with Lazada’s massive offering, and generally lower prices.
Clash of cultures (and one side may not be hungry enough)
As the wise saying goes – only the hungry succeed. While JD is hungry for a taste of success in Southeast Asia, we wonder if Central is. After all, it holds a comfortable position in Thailand and Vietnam. A mostly family-oriented company, it does not go too much against its grain. As such, it has failed to retain much talent. But as a business, it is still profitable.
While the true reason for Central’s entry into ecommerce in a big way remains elusive (perhaps to compete with CP – a family rivalry of sorts), suffice to say, Thais do not hold their Chinese counterparts in higher regard. Also, since they do not have a common language – communication between marketing, operations and IT will be a huge challenge – trust us, we have been there.
All in all, we still believe that the Thailand (and Southeast Asian) market has enough room for another ecommerce giant. After all, the ecommerce penetration levels are still relatively low (around high single digits in percentage).
In addition, as consumers ourselves, more competition means better services. However, based on our experience – this JV will not be without issues and challenges. In the end, it would be interesting to watch billionaires duke it out – on one side: Central/JD and on another: Alibaba.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected]