64 | FORBES ASIA NOVEMBER 2016
clothing from sellers she has come to
trust. “You hear about Taobao’s coun-
terfeit problem all the time, and you
don’t want to take any risks,” she says.
Alibaba strongly defends its record
in fighting counterfeiting. “Our China
retail platforms have over 430 mil-
lion active shoppers and over 100,000
brands, a testament to the trust that our
customers have in us,” says a company
spokeswoman. “Consumers buying on
Taobao are fully protected as we pro-
vide money-back guarantees in the case
of legitimate complaints.”
Liu isn’t done investing. Having
covered China’s major metropolises,
JD in 2015 began expanding its sales
network deep into the country’s vast
hinterland. By year-end JD expects to
have penetrated roughly half of China’s
villages—or some 300,000 of them. The
company has started experimentingwith drones to deliver orders to remote
areas, but the expansion, says Liu, will
also cause a huge surge in JD’s work-
force—and all the pitfalls that entails.
“How can we make sure the thousands
of JD employees working everywhere
in China, thousands of kilometers away
from Beijing, are providing the same
quality of service and earning the same
word-of-mouth that we enjoy in the
city?” he asks. “That is going to be a
very important task for management.”
That’s not the only challenge, either.
Watching the same consumer trends,
JD’s rivals are far from idle. An Alibaba
ailiate called Cainiao is building its
own nationwide system of warehouses
and ofering other logistics services to
help the company’s shopping platforms
and other e-commerce outfits match
JD’s eicient delivery. Last year Alibaba
also invested $4.6 billion in Chinese
electronics retailer Suning, which al-
lows Cainiao access to that company’sJD didn’t stay small for long. Dur-
ing the outbreak of the deadly SARS
virus in East Asia in 2003, when many
people stayed away from public areas,
Liu woke to the notion that more and
more shoppers would prefer to remain
comfortably at home and buy online
rather than haul themselves to physical
stores. A year later he began marketing
his electronics gear over the Internet.
Yet he quickly ran into a problem.
Delivery services back then were a
mess. Customers complained that their
orders arrived late or in battered condi-
tion. In 2007 Liu determined that JD
had to build its own logistics network
if it was to succeed. That decision, he
says, “paved the way for the subsequent
years of rapid growth.”
He might be right. Some consum-
ers in China are drawn to JD because of
its reliability. Liu Yungang, the 35-year-
old general manager of an Internet-
equipment company in Shanghai, says
he spends $1,500 a year on JD, buying
mostly appliances and electronics, but
adds that he hardly ever uses Alibaba.
JD’s fast delivery is the main reason.
“Sometimes I make impulse buys, hop-
ing to get hold of the product real soon,”
he says. “With JD, you can count on the
TV set you purchased in the morning
being installed in your living room in the
afternoon.” He also believes the products
he buys from JD’s warehouses are more
authentic. “A lot of items I bought from
Taobao turned out to be counterfeit—
clothes, electronic accessories and a
Zippo lighter,” he says. “Counterfeits are
rare in JD’s own store.”
Better quality lured high school
teacher Zhang Xiaochun, 54, to JD
as well. The resident of Xuzhou buys
some $1,000 of everything from cat
food to appliances on JD annually and
uses Taobao only to purchase certain
extensive distribution network. The
deal also gives Alibaba a boost in sales
of electronics and appliances–still a
core JD business. (JD says it sells half of
all appliances purchased in China.)
Liu, though, believes he can stay a
step ahead. To ensure that his delivery-
men—who interact with the shopper
most frequently—are hardworking and
customer-oriented, Liu has turned to a
carrot-and-stick approach. He claims to
pay as much as twice the going market
wage to lure the best talent, but to keep
these jobs, deliverymen must maintain
a high level of service. Two serious com-
plaints from consumers are suicient
to earn that worker a pink slip. “We are
educating every employee to treat our
customers with respect,” he says.
He has also taken drastic measures
to bolster JD’s trust among shoppers.
Fearing his brand could get tarnished
by counterfeiting, Liu chose to com-
pletely shutter JD’s Taobao-style
marketplace, Paipai.com, last year, once
it become clear that he faced an uphill
battle fighting fake goods on the site.
“Counterfeiting is always our enemy,”
he says. “It works against us because
we profit by charging a premium. If our
customers found that we are also deal-
ing with counterfeiting, they would not
be willing to pay that premium.”
JD is looking to expand its oferings,
too. In June it announced it would take
control of Wal-Mart’s e-commerce site
in China, Yihaodian, which is strong in
groceries. (In return Wal-Mart received
a 5% stake in JD, which it later dou-
bled.) The American retailer’s popular
Sam’s Club also opened a flagship shop
on JD’s mall.
The good news for Liu is that the
Chinese continue to shop online at a fu-
rious pace. Forrester expects annual on-
line retail sales in China to surge to more
than $1.1 trillion by 2020—nearly twice
as much as last year. Liu is convinced
his business formula is well positioned
to capture it. “The timing is right,” he
says. “We are coming into a better set of
conditions for our growth.”
Jane Ho contributed to this story.FORBES ASIA
CHINA’S 100 RICHEST — RICHARD LIU
F“WITH JD, YOU CAN COUNT ON THE TV SET YOU
PURCHASED IN THE MORNING BEING INSTALLED
IN YOUR LIVING ROOM IN THE AFTERNOON.”