China's Mobile Economy

Chapter 4 The Omni-Channel Age of e-Retailing

JD.com will become a tragedy. I have warned everyone of JD.com's model from the very first day.”

This statement was apparently part of a private conversation between Jack Ma, the founder and chairman of Alibaba, and his personal friend. In the private conversation Jack Ma criticized the business model of its e-commerce archrival JD.com, but without his knowledge, his friend incorporated it into a new book. Thus, Mr. Ma's colorful commentary became public knowledge in early 2015, creating a drama for billions of Chinese people during the New Year's holiday season.

At the core of Mr. Ma's comment was the sustainability of JD.com's business model. “It's not that we are better,” he said, “It's an issue of direction.” Similar to Amazon, JD.com holds inventories at its own warehouses and arranges deliveries from its own distribution network. Jack Ma reasoned that such a model would eventually become prohibitively expensive, because JD.com “may need to hire 1 million people” when “daily e-retailing packages reach 300 million in 10 years”. Hence his advice: “Never ever touch JD.com.”

Alibaba's Jack Ma did apologize for calling JD.com a tragedy shortly after the post went viral on China's social media, saying that it would be both ignorant and a real tragedy if there could only be one right e-commerce model for China's internet market. JD.com accepted the apology, but in its reply it highlighted its own model's core value by stating: “we ...