JD.com founder and internet entrepreneur Richard Liu is considering expanding the online giant into Australia. Source: News Corp Australia

That is the conclusion of Invast’s chief market analyst Peter Esho, who has just returned from a trip to China and was gobsmacked by the pace and scale of the digital revolution taking place there.

He says the slowdown in overall Chinese GDP doesn’t capture the explosive growth in the tech space and widespread acceptance of online shopping, especially on mobiles.

Nasdaq-listed JD.com is the Chinese equivalent of Amazon, second in size only to Alibaba. It started out selling electronics and has since moved into fashion, cosmetics, food and virtually every other consumer category (25 million SKUs in 2013 and it seems to have stopped counting since then).

With its own logistics infrastructure, its promise of same-day delivery has whacked physical shopping in parts of China.

Mr Esho believes that JD.com is eyeing the Australian market as part of its expansion plans in a push that could disrupt global competitors.

“JD.com is considering an expansion into Australia which will see the Chinese online retailer potentially pipping Amazon.com to become the first truly global online retailer with an Australian operation,” he says.

This could not only disrupt traditional stores, but many online retailers whose business model has been based on importing from Chinese manufacturers and selling to Australian consumers.

“JD.com removes that middle-market opportunity,” Mr Esho says, because it would link Chinese manufacturers directly with Australian consumers with same-day delivery.

Despite years of speculation, Amazon has yet to set up a local operation in Australia, with rumours about warehouse space amounting to nothing. Its prices and shipping have also steadily risen in recent years, making it less attractive to local consumers.

JD.com however has already established relationships in Australia including a logistics agreement with Australia Post after it set up its own Australian online mall earlier this year, which sells goods from Australian producers directly to Chinese consumers.

It has signed up firms including Treasury Wine Estates, Blackmores and meat business Sanger to tap swelling demand from middle-class Chinese for well-regulated Australian food and health products. The company also bought a small stake in Murray Goulburn, and now sells its milk powder at about a 100 per cent mark-up.

The Australian mall joined similar stores from the United States, Japan, France and South Korea selling authentic international brands on JD.com into a country flooded with cheap knock-offs.

JD.com is one of the world’s largest e-commerce firms, with a market capitalisation on the Nasdaq of $US38 billion. It has 118 million active customer accounts and filled 689 million orders last year, according to its most recent results. Annual revenue growth is 61 per cent and the shares gained 4 per cent in 12 months, while Alibaba slumped 25 per cent.

Within China, JD.com has 166 warehouses in 44 cities and delivers many products within one hour of the order being placed. Compare that with some online Australian retailers where one or two days can go by before even a confirmation email is sent to the shopper.

Online shopping has slowed in Australia in recent months, growing at an annual rate of 7 per cent in August, according to NAB’s monthly online retail sales index. That is slightly faster than the comparable growth at retailers (excluding cafes and restaurants) of 4.7 per cent.

Overall, online retail makes up about 7.1 per cent of retail spending, a similar proportion to the e-commerce market in the United States although annual growth in the US is a much faster at 14.1 per cent, according to the Commerce Department. In China, online retail grew 50 per cent last year.

If a new global entrant with an established logistics model and massive buying power takes aim at the Australian market, it will not only undercut existing players but could also expand the market for an efficient, reliable everything store.

“We are a large, unserviced market,” says Mr Esho. “A lot of the problem with online is the delay in delivery, and that’s JD’s competitive advantage.”

Business Spectator