The interconnection of domestic internet platforms is undergoing a more radical transformation.

Following Taobao's announcement on September 27th to integrate with WeChat Pay, it has been reported that JD.com Logistics will be gradually integrated into Taobao Tianmao in the near future, and JD.com will also be included in Cainiao Network. Additionally, JD.com will integrate with Alipay for payments.

During the Spring Festival this year, Taobao advertised on WeChat Moments, and there was already discussion about the interconnection of large tech companies at that time. However, if they merely treat each other as traffic entry points, this form of cooperation has actually been quite common on major platforms in recent years, with examples such as various mini-programs like Meituan and JD.com on WeChat. None of these connections have separately integrated each other's core foundational services into their own platforms.

This interconnection, however, directly targets the two core foundational services of e-commerce – the payment system and logistics system.

As a significant collaboration primarily involving JD.com and Taobao Tianmao, the two largest domestic e-commerce platforms, combined with Alibaba Group's leadership changes and strategic adjustments over the past year, as well as the current development status of the two platforms, Xin Lizhang believes that Alibaba is likely the primary driving force behind this collaboration.

However, simply describing this collaboration as "further moving from isolation to interconnection" does not fully capture its significance in the history of domestic internet platform development. We need a more precise description.

Platforms like Alibaba and JD.com, born in the early days of the internet, have built their own foundational services to form a closed-loop business synergy that is almost ingrained in their DNA. Platforms that emerged during the prosperity of internet services have a completely different top-level mindset when building their businesses. Currently, with the cooperation between Alibaba and JD.com, two types of platforms – infrastructure-focused and non-infrastructure-focused – and their related foundational service platforms are about to engage in a new round of niche competition.

Therefore, while this collaboration between Alibaba and JD.com aligns more closely with Alibaba's current development narrative, JD.com's willingness to cooperate is also due to the fact that its biggest competitor is no longer a similar platform like Taobao Tianmao.

01. A Collaboration That Better Aligns with Alibaba's Narrative

In September last year, Wu Yongming took over as CEO of Alibaba Group, and later that year, he concurrently assumed the role of CEO of Taobao Tianmao, coinciding with Pinduoduo's market value surpassing that of Alibaba for the first time in November. In his letters to employees after taking up both positions, Wu mentioned the idea of "re-entrepreneurship."

As for how to re-entrepreneur, internal personnel adjustments or organizational changes at Alibaba may not have a direct impact on the business level, and any new platform rules added by Alibaba platforms like Taobao Tianmao may be too specific. However, Alibaba's collaboration with JD.com tangibly demonstrates Alibaba's reconstruction at the business level.

Cainiao Express and Cainiao Post Stations will be integrated into JD.com, while JD.com Logistics will be integrated into Taobao Tianmao. Additionally, JD.com will integrate with Alipay, and Taobao will integrate with WeChat Pay. Once fully implemented, JD.com and Taobao Tianmao's foundational services in payments and logistics will become increasingly similar.

This means that the core competitiveness and differences between JD.com and Taobao Tianmao, the two major e-commerce platforms, will shift to the product offerings themselves. This is primarily reflected in the diversity of product categories on the platforms and users' perceptions of the platforms' strong categories. In terms of product category diversity, Taobao Tianmao naturally excels over JD.com. However, for categories like 3C electronics, users may be slightly more inclined to purchase from JD.com than Taobao Tianmao. However, for clothing, especially women's clothing, Taobao is undoubtedly the first choice.

Therefore, with similar payment and logistics services, JD.com's stronger categories are likely to be encroached upon by Taobao Tianmao, while Taobao Tianmao's stronger categories will be difficult for JD.com to surpass in the short term.

At the end of August, JD.com announced an additional investment of 1 billion yuan to comprehensively develop its apparel category, accompanied by a series of specific initiatives such as fashion weeks, Redbook promotions, and partnerships with the British Fashion Council, aiming to establish JD.com as a hub for trendy fashion products. It is unclear to what extent this move is related to JD.com's collaboration with Alibaba, but based on the current collaboration, JD.com clearly needs to strengthen its weaker categories. Taobao Tianmao, on the other hand, does not need to focus as much on this aspect, suggesting that JD.com will need to do more in terms of product offerings in the future.

In terms of the payment system, Alibaba has shown a willingness to break down barriers in recent years. Although news of Taobao integrating with WeChat Pay only emerged recently, insiders revealed that as early as 2021, Taobao had proactively approached Tencent to request integration with WeChat Pay, but was rejected. Previously, there were rumors of Taobao testing WeChat Pay functionality on a small scale, and public opinion is generally favorable towards Taobao integrating with WeChat Pay, believing it will bring more WeChat Pay users to the platform.

On the other hand, JD.com and Alipay stopped cooperating in 2011, and their renewed partnership will undoubtedly bring incremental benefits to both sides. However, current data shows that WeChat Pay holds a larger market share than Alipay in electronic payments, and JD.com has been closely cooperating with WeChat Pay for several years. Therefore, the incremental effect of integrating payment services may be smaller for JD.com than for Taobao Tianmao.

In terms of logistics, compared to Taobao Tianmao's relationship with Cainiao, JD.com has a deeper tie with JD.com Logistics, and to a large extent, JD.com Logistics is one of JD.com's core competitive advantages in e-commerce. Sharing JD.com Logistics with Taobao Tianmao requires JD.com to strike a better balance between its logistics advantages and its own logistics development.

Therefore, while the collaboration is mutually beneficial, it largely aligns more closely with Alibaba's current development narrative. It is reasonable to speculate that Alibaba is the primary driving force behind this situation.

02. Niche Competition Between Infrastructure-Focused and Resource Integration-Focused Platforms

In fact, when Wu Yongming took over as CEO of Alibaba, he mentioned, "On the basis of not affecting strategic linkage effects, we should allow more business cooperation to follow market principles."

That is, while maintaining internal linkage advantages, businesses should also independently seek external development to maintain their core competitiveness in their respective sectors. Balancing these two aspects will be the mainstream narrative for all large infrastructure-focused platforms in the future.

Such infrastructure-focused platforms grew during the early days of the internet, when everything had to be done manually. The popular mindset at the time was to build closed-loop businesses by establishing foundational services independently. However, in recent years, this mindset has been rarely mentioned. In contrast, non-infrastructure-focused platforms that emerged during the prosperity of internet resources, such as Pinduoduo, Douyin, and Kuaishou, have their core competitiveness in their understanding of the business itself and their ability to integrate resources.

As Zhang Yiming of ByteDance said, "Understanding the matter is the most crucial thing. Your understanding of the matter is your competitiveness in it." This is the typical mindset during the prosperity of internet resources. Relying on this mindset, platforms like Douyin and Pinduoduo have achieved remarkable results. Especially Douyin, which has ventured into e-commerce, on-demand services, supermarkets with hourly delivery, and food delivery, has a mainstream narrative of specific traffic patterns combined with business resource integration.

Moreover, platforms that grew during the prosperity period have more flexible and imaginative business layouts. Therefore, while Alibaba is likely the primary driving force behind this collaboration between JD.com and Alibaba, JD.com is willing to participate because, as leading e-commerce platforms that emerged during both the early and prosperity periods, their biggest crisis often comes not from each other but from up-and-coming players.

To address these crises from up-and-coming players, it is a wise move for JD.com and Alibaba to form an alliance. This view is not new, but it needs to be seen from two perspectives. On the one hand, it is necessary to examine whether platforms' core e-commerce services have more possibilities after breaking away from their closed-loop foundational businesses. On the other hand, they both need to continue enhancing the competitiveness of their foundational services.

Especially in terms of logistics infrastructure, from warehousing, distribution, to last-mile services, and various delivery timelines such as standard shipping, next-day delivery, hourly delivery, and instant delivery, Cainiao and JD.com Logistics face competition from other players at every stage and timeline. These competitors are supported by non-infrastructure-focused platforms mentioned above, with Douyin being a typical example. Its business scope covers almost all the delivery timelines mentioned above, with express delivery provided by STO Express, SF Express, and same-city delivery services provided by Shunfeng Express and Flash Express.

These companies that solely provide foundational services can thrive with the support of resource integration platforms. After all, Same-day Express, which specializes in same-city delivery, has already gone public, and Flash Express was also listed on Nasdaq recently. The layouts of these foundational delivery service companies should give JD.com Logistics a sense of urgency.

In fact, JD.com Logistics has sought cooperation with other major e-commerce platforms in the past. In 2022, JD.com integrated with Douyin's "Yinxuda" service, aiming to provide high-quality delivery services such as door-to-door delivery to Douyin users. However, the service received a lukewarm response. Meanwhile, JD.com fully opened its logistics interfaces in 2023, no longer requiring merchants to use JD.com Logistics exclusively. Compared to Cainiao's flexible franchise model, JD.com Logistics' self-operated model, which resembles a heavy asset, needs to actively seek external development to maintain its core competitiveness.

Therefore, while the collaboration between Alibaba and JD.com aligns more closely with Alibaba's current development narrative, JD.com is willing to cooperate because growing alongside a similar yet communicative competitor offers the potential to withstand long-term, dimensional attacks from different types of competitors in the future.

Regarding Wu Yongming's statement, "On the basis of not affecting strategic linkage effects, we should allow more business cooperation to follow market principles," Alibaba already has a typical example in Alipay.

As previously mentioned in Xin Lizhang articles, Ant Group's self-developed large model is being used in Alipay's new platform, ZhiXiaoBao. Although Alipay's market share in electronic payments is currently smaller than that of WeChat Pay, Alipay is building a platform based on payments, with content and services as its core, aiming to tap into new markets and further differentiate itself from WeChat in competition.

Whether it's infrastructure-focused platforms and their core businesses or non-infrastructure-focused platforms and the third-party services they support, they are all engaged in a new round of niche competition.

03. Final Thoughts

Alibaba's vision is to become a centenary enterprise, and at least based on its performance during the first year of the new-old leadership transition, this vision remains full of hope. For JD.com, its mission this year, as stated by Liu Qiangdong in March, is "technology-driven to make life better."

Infrastructure-focused platforms have ambitious visions, but achieving them requires constantly breaking out of their comfort zones and embracing each other.

With Pinduoduo and Douyin eyeing the market aggressively, Alibaba's "re-entrepreneurship" is urgent in this collaboration, while JD.com is taking a long-term view.

Both companies want to know who will be left swimming naked in their e-commerce business when the tide recedes.

*Images in the headline and article are sourced from the internet.