Asia Business Channel

Japanese Trading House Itochu Plans to take on Alibaba and JD.com in China

Japanese trading company Itochu along with telecom company KDDI and financial services company SBI Holdings are investing $67 million USD (7.6 billion yen) in an e-commerce venture that will focus on selling Japanese products to the Chinese market in an effort to expand opportunities in China’s internet sector.

The Itochu and partners investment will be into the Tokyo-based startup Inagora, which operates Wandou, a Chinese-language e-tailer with some 3 million users. Itochu has previously invested around $900,000 in the company and will now hold a roughly 20% stake, making it the second-largest shareholder behind founder and CEO Yongbiao Weng.

The Wandou website around 40,000 offerings, with a focus on clothing, cosmetics, and foods from a variety of international and Japanese brands including Japanese food producer Ajinomoto and Japanese fashion label Samantha Thavasa.

China’s cross-border e-commerce market is growing rapidly with goods from Japan seen nearing $18 billion USD in 2020. The country’s top three e-commerce leaders have a strong grip on the cross-border segment with Alibaba Group Holding commanding a roughly 40% share, while second-place JD.com holds a 20% share and third-place NetEase having a 15 ~ 20% market share.

Itochu has already taken an initial first step into the cross-border market by launching a high-end site in spring 2017 with Chinese state-owned conglomerate Citic. However, Itochu realized that breaking into the Chinese market require savvy marketing and chose to invest in Inagora, which has been very successful in creating videos that introduce Japanese products to Chinese consumers.

Itochu’s strategy will be to supply a variety of products for Inagora’s site and will have the site carry local specialty items from across Japan stocked by convenience store chain FamilyMart, another member of the Itochu group. To further support the venture, Itochu Logistics, which operates in more than 100 Chinese cities will cooperate with Inagora, which plans to expand its current warehouse and distribution network.

In order to encourage companies to list their products in Inagora, the venture will hire additional sales staff and the company plans to be aggressive to expand its business into Malaysia and Taiwan in 2018. Inagora projects $130 million USD in sales this year, a 600% increase over its 2016 level, and is projecting $900 million USD in transactions in 2019 and $1.5 billion USD in 2020.

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