As a university student in Beijing in the Nineties, I opened a restaurant with money I earned writing software code. I took pride in the business and believe my customers appreciated the quality of the food we made. Unfortunately, certain employees stole money until there was nothing left.
My first business was a failure.
I learned two lessons. First, make smart choices about whom you entrust to run your business. Second — and more importantly — take pride in what you create and respect the work other people put into creating something of quality and value.
It was this experience, and the values I took away, that formed the cornerstone of my current company, JD.com, now China’s largest e-tailer.
When most Westerners think about business in China, they think of the massive potential of the market and the ubiquity of intellectual property violations, in about equal measure. But for my generation of Chinese — where entrepreneurship and innovation is our dream — there is a greater appreciation of what it takes to create something of value, such as a product or a brand, and a greater desire to safeguard it. As someone who understands the pain of having something stolen out from under him, when I started out in the e-commerce industry I vowed to create a platform that would minimize the risk of that happening to others.
E-commerce has unquestionably revolutionized the retail market in China. It has provided a viable and hugely successful solution to the problem of China’s weak retail network, which has long been a frustrating obstacle to those looking to sell clothing, fashion accessories, shoes, food or pretty much anything else to Chinese consumers.
One of the many positive developments for international brands — and for JD.com — is that ever-more sophisticated Chinese consumers are increasingly aware of the value and importance of quality goods. Beyond the widely reported safety scandals, Chinese people want high-quality, fashionable products. In China, well-known international brands are often associated with those traits.
The demand for imported products like baby clothes, handbags — even globally known toy brands — has never been higher. In China, people will pay a premium for products that they can trust, especially for children’s products in a country where most families still only have one child.
E-commerce has been a game changer. When I was growing up in the small city of Suqian, Jiangsu, it was unimaginable that we could buy sneakers from America or food from Europe. The younger generation growing up today doesn’t think twice about buying Adidas sneakers, Gap jeans or California wine from their iPhones.
This has been good news for all parties. Chinese consumers suddenly have many more options. As a result, domestic brands have had to improve their products or risk losing out. For international brands, the promise of the Chinese consumer market is beginning to be realized.
Yet the shift from shopping in dodgy stalls for goods of questionable provenance to buying on e-commerce Web sites has not eliminated all the problems. It’s true that e-commerce has left a clearer paper trail and the government has wisely plowed resources into tackling the scourge of knockoffs online. Nonetheless, determined counterfeiters continue to ensure that fake — and sometimes dangerous — goods keep making their way into the homes of Chinese families.
And not all companies in the Chinese e-commerce community are fully committed to authenticity. The addiction to the easy profits that come from sales of counterfeits has been hard to break.
While some in the industry believe that a complete shift away from counterfeits is too costly to accelerate, I’ve always believed that accepting the blight of substandard-quality products in our ecosystem is a recipe for long-term disaster.
This is why we have built an e-tail model where we hold the merchandise and why we have focused on a marketplace system that keeps the number of stores at a level that allows for strict oversight.
Accepting less would be bad for Chinese consumers, and bad for companies committed to innovation and product safety everywhere.
Counterfeits undercut consumer confidence in product safety and quality. Parents want to know that the brands they are buying — from juice to crayons — offer the assurance that their products will help their children grow up safe and healthy. Equally, companies and individuals who spend time and effort to develop the best products want to know that their intellectual capital will be respected and protected.
The relationship between Chinese consumers and brands around the world faces an inflection point. Global producers and most Chinese consumers want the same thing: safe, authentic products. But skepticism persists on both sides about the quality of what e-commerce sites are selling.
Winning back the trust that has long been absent in the market will take significant time and effort. We know this well at JD.com. We have built our business on a foundation of authenticity, yet still get questions from skeptical consumers, who have become numb to the industry plague of counterfeits. With this kind of cynicism, even an occasional counterfeit or substandard product erodes the bonds of trust that we work so hard to build with consumers and suppliers.
Today, global brands and Chinese consumers can finally connect in ways that they have long sought. Yet this dream can only be realized if the people who link the two in modern China — those of us in e-commerce — are willing to do the hard work it takes to ensure every single product we sell is real.
Richard Liu is the founder and chief executive officer of JD.com, the largest e-tailer in China and Alibaba’s biggest competitor. JD.com completed an IPO in May 2014, selling 93.7 million shares at $19 and raising $1.78 billion. It trades under the symbol JD on the Nasdaq exchange.