On the 31st of October last year, JD.com introduced a mini-program inside WeChat called Jingxi.
That year, on the Singles day, Jingxi's debut was marked with the sale of over 60 million items in one day. It's not big in Chinese terms. On that day, JD.com and Alibaba together did over $60B. So Jingxi is a rounding error.
Back in the US, USPS is about four quarters away from going insolvent. They have an emergency fund of $25B sanctioned but there are some wire transfer issues of a political kind that has meant that the money has not hit the accounts of USPS yet. In an unrelated matter, Trump called USPS a 'joke'. USPS averted a crisis, thanks largely due to Covid related increase in parcel volume and to a smaller extent, with the rate increase for international shippers.
The rate increase means that Chinese shippers won't get lower rates they were used to getting because China was classified as a 'developing country'. Read the above comment by Trump for a better contextual appreciation now.
In September, Amazon is going to get suddenly very transparent. They are going to publicly disclose who the Amazon sellers are. It wouldn't matter much to you and me because we all know most sellers are from China and we are no Mark Zuckerberg. We don't speak Cantonese or Mandarin.
But Jingxi, USPS, and Amazon are linked, as you'd have expected by now, from my clever attempt at non-linear story-telling.
It's not just about eCommerce. There is geopolitical reordering that is happening and eCommerce is right in the middle.
Even before Covid, there were trade tensions between the US and China. Covid happened and China's initial reluctance in sensitizing the world about the scale of the impending disaster put a big dent in cross-border trust. China's escalating border conflict with India and India's unexpected reaction of pulling TikTok from the app stores became an easy playbook for the US to adopt.
Sensing antagonistic posturing and nationalistic policies by large trade partners, China is already advising its big businesses to cater to domestic demand. The export juggernaut is hedging. It has a domestic market that is underserved - especially the tier 3 to tier 6 cities. Enter Jingxi.
Jingxi's explicit focus is to help Chinese exporters (read, Amazon sellers who sell in the US) to build, distribute, and collect payments for products that are focused on the tier 3-6 cities. They are building enabling infrastructure to do 'Just in time' deliveries from factories directly to homes in these cities. The Chinese exporters are rushing to fulfill the demand.
The continued existence of USPS and its favorable rates are the bedrock of Chinese seller expansion in America. The relative anonymity on the Amazon marketplace also helped. With those competitive edges no longer available and the general hostile climate that exists in political corridors, Chinese eCommerce sellers are likely to focus inward. Jingxi is just the beginning.
The black swan event in 2020 for eCommerce is not Covid (which will indeed redraw the market in the short term). The lasting event is the unfavorable political climate which could only get cemented further if Trump 2.0 happens. With nationalistic trade policies in place, we'd see a lot of 'proactive' transparency measures like Amazon making the seller information public and USPS increasing the rates for Chinese sellers.
The Chinese government and eCommerce giants are preparing for the winter.
eCommerce is unlikely to get localized but it surely is going to get pricier for you and me to buy products.
PipeCandy is a market intelligence platform that tracks the global eCommerce & 'direct to consumer' landscape.
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