Alibaba and JD.com shake hands and make peace

Authors | Wang Xiaojuan, Liu Baodan

Editor | Zhou Zhiyu

After more than a decade of hidden struggles, the two giants in the e-commerce industry, Alibaba and JD.com, unprecedentedly embraced each other.

Wall Street News confirmed on September 26th from informed sources that Taobao and Tmall APP are about to officially integrate JD.com's logistics; in addition, JD.com will also officially integrate Alipay payment. Both parties are providing each other with their core capabilities.

This means that the stage where internet giants each built their own business barriers to form their own competitiveness is now a thing of the past. Now, the barriers are being broken down, and all businesses are competing on the same stage.

Subsidiary businesses that were once sheltered under the massive systems of internet giants will also form broader business collaborations to find their best partners. By exploring the potential in their businesses, they can further enhance efficiency.

This is destined to be a brutal elimination game. Those who can form their own alliances are the ones who can survive in this competition.

Openness

It is unexpected that Alibaba and JD.com, who have been fighting in various areas such as merchants, prices, and services, will open up their most important business to each other after years of entanglement.

The handshake between the two parties is the largest cooperation in the 20-plus years since the establishment of their platforms. Whether it is Alipay for Alibaba or JD Logistics for JD.com, they are the foundation of each other's respective ecosystems.

Specifically, in the future, when consumers shop on Taobao, merchants can choose to use JD Logistics for delivery. This cooperation is expected to be implemented in October; JD Logistics will also integrate with Cainiao Express and Cainiao Post Stations.

For merchants and consumers, this will provide more flexible choices and stimulate the business growth of JD Logistics and Cainiao Logistics.

For platform merchants, the turnover rate of goods can be further improved, and the complexity of management will be greatly reduced.

Previously, merchants with stores on both JD.com and Taobao needed to manage goods on both platforms separately. Now, with Taobao integrating JD Logistics, there is no need to separately stock up and arrange inventory. The integrated supply chain solution provided by JD Logistics can also expand the customer base of more brand merchants from Tmall.

The delivery cost for JD.com merchants is also expected to further decrease with JD Logistics integrating Cainiao Express and Cainiao Post Stations.

In March last year, JD.com fully opened its logistics interface, allowing merchants to use third-party logistics other than JD Logistics to cope with the increasing transaction frequency and decreasing average order value trend on the platform.

As the e-commerce industry shifts from simply competing on low prices to the "service competition" stage, a more diversified service system can help platforms create a better environment for merchants, meet their diverse needs, and enable platforms to achieve more growth, reflected in data such as GMV.

Beyond the express delivery business, this cooperation also extends to the payment field. JD.com will also open its e-commerce platform to Alipay, in addition to JD Pay, UnionPay, and WeChat Pay.

To some extent, this can alleviate the impact brought by Taobao and Tmall's integration with WeChat Pay.

Shen Meng, a director at Xiangsong Capital, told Wall Street News that the interconnection between JD.com and Alibaba, like the previous interconnection between Alibaba and WeChat, is the implementation of previous policy requirements, which can reduce consumers' usage costs Some consumers have expressed that they used to shop on JD mainly because of its speed. Now that JD's express delivery is integrated into Taobao, the delivery time for shopping on Taobao will be even faster. Moreover, Alipay can now be used on JD, eliminating the need to switch back and forth, making it much more convenient.

In short, Alibaba and JD are moving in a relatively parallel direction, which is beneficial for platforms, merchants, and consumers. The goal is to create greater value through deeper cooperation.

Breaking Down Walls

Interconnection among internet giants has become the trend in the industry.

Over the past twenty years, China's internet industry has gradually moved towards openness after experiencing fierce competition and confrontation. This is not only a natural progression of industry development but also an important practice of the internet spirit.

In the early stages of competition, each company tried to extend its reach and bring users into its own ecosystem. From the 2010s onwards, e-commerce giants quickly emerged, each developing its own payment methods. For the sake of convenience, users had to use a combination of these methods.

For example, before 2011, JD.com also supported Alipay. However, Alipay was later discontinued due to factors such as fees, leading to a sharp decline in the relationship between JD and Alibaba. Especially as competition intensified in the e-commerce sector, they even resorted to legal action over forcing merchants to choose between them.

When the conflicts between the companies reached a certain level, regulatory actions were taken. In 2021, the Ministry of Industry and Information Technology proposed to ensure the normal access of legal website links. That same year, Alibaba was fined 18.2 billion yuan for violating the Anti-Monopoly Law.

Subsequently, the companies emphasized openness at a macro level, but it was limited to sharing links in the past, rather than the extreme chaos or blocking that occurred before, far from being truly open.

In recent years, the openness of the companies has expanded, including not blocking each other's links, advertising appearing on each other's platforms, and providing core business redirection functions. However, core businesses such as payments have not been touched. For example, advertisements for Fliggy began to appear on QQ Music. Starting in 2021, advertisements for Tencent Video, Tencent News, and Taobao links in WeChat can directly jump to Taobao.

However, this year, the major companies have significantly opened up their core businesses. Before joining hands with JD, Tencent and Alibaba had already reconciled. In early September, Taobao released a "Consultation on Adding WeChat Payment Capability" to enhance consumers' shopping experience, with plans to add WeChat payment capabilities on Taobao.

Compared to the superficial openness in the past, the current opening of core businesses is driven by underlying business logic.

For Alibaba, this cooperation introduces JD Logistics, which can provide consumers with a better shopping experience, aligning with the development philosophy of "user first."

In his first all-staff letter in September last year, Alibaba's CEO Eddie Wu wrote that putting users first is the strategic focus. To create the best user experience, one must seek the broadest openness and cooperation, including with companies that are traditionally seen as competitors.

For JD, this is even more crucial. With Taobao's annual e-commerce transaction volume reaching 80 trillion yuan, there is an opportunity to handle the largest volume of transactions on the domestic e-commerce platform, greatly benefiting the development of JD Logistics.

This will allow internet giants to improve efficiency by providing users with greater convenience as they enter the era of stock saturation and face a bottleneck in user growth. It is both about openness and extending their reach into each other's territories The major companies are splitting their businesses to grow independently, which requires breaking through previous barriers. Introducing another powerful competitor also helps to promote more intense competition, allowing companies to reduce costs and increase efficiency.

After barriers such as payment restrictions are removed, competition naturally shifts back to product quality, pricing, and services provided by each company. To a certain extent, openness brings a fairer competitive environment, providing users and businesses with more choices. To continue growing, companies need to have more practical capabilities to attract users.

Especially with the rapid rise of new giants like ByteDance and Pinduoduo, the traditional internet landscape has been disrupted. Former leaders such as Alibaba, Tencent, and JD.com must also join forces to rapidly pursue their respective business goals.

As times change, the relationships among industry leaders are also evolving. Emphasizing openness, cooperation, and efficiency, the internet industry has entered a new era