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Jingdong will compete more directly with top e-commerce player Alibaba.
Unlike in the West, the vast majority of retail purchases in China take place on online marketplaces where many merchants compete, particularly the Taobao and Tmall shopping portals operated by Alibaba Group Ltd. Alibaba’s biggest competitor, Jingdong Century Trading Co., has made clear it aims to dramatically increase its share of sales on China’s web marketplaces.
While its POP marketplace accounts for 20% of the sales today on JD.com, Jingdong’s e-commerce site, the company aims to increase that to 50% by 2016, Jingdong founder and CEO Qiangdong Liu said last week at the company’s initial gathering for retailers and technology providers to merchants that sell on JD.com, formerly known as 360Buy.com. Jingdong, No. 3 in the 2013 Internet Retailer Asia 500 rankings and No. 2 among Chinese companies on that list, opened the POP marketplace as a platform where other merchants can sell in 2010. POP stands for “plan of open platform.”
Jingdong, which launched in 2004 as a web retailer of consumer electronics products, claims that over 60 million consumers have registered with its site and that nearly 10,000 merchants now sell on JD.com in 12 product categories, including books, furniture, food and cosmetics. Jingdong says it average 500,000 orders and more than 100 million page views per day. The company has been particularly aggressive in building out its delivery infrastructure, and says it now directly fulfills orders to consumers in 400 Chinese cities.
While Jingdong’s online sales nearly doubled last year to $9.63 billion, according to the Internet Retailer Asia 500 Guide, the company is far behind Alibaba, which accounts for 90% of online marketplace sales in China, according to e-commerce analyst Chengdong Li.
Jingdong’s Liu addressed Alibaba’s dominance in his remarks, without mentioning his competitor by name. “It is not a good sign when a platform occupies more than 50% market share,” Liu said. “Jingdong sees the POP business as a key business driver in the future, and Jingdong hopes to provide more options to merchants and customers.”
Analyst Li says the various Chinese e-marketplaces are strong in different categories. For example, he says, Tencent, No. 8 in the Asia 500, VIPShop (No. 4) and Dandang (No. 16) are strong in clothing. Yihaodian (No. 42) is strong in food sales. Wal-Mart Stores Inc. bought a controlling interest in Yihaodian last year.
Following in the footsteps of Alibaba’s Tmall, Jingdong has created flagship stores that give large companies their own branded storefronts on JD.com. They must pay a $970 fee plus commissions of 5-30% and hold trademarks on the brands they sell. Alibaba created Tmall in 2008 as a platform for large brands that sought a way to sell online away from the free-for-all of Taobao where some 7 million merchants offer their goods and where price competition tends to be intense.
Despite the growing competition among online marketplaces in China, Alibaba continues to post robust growth in revenue and profit, as disclosed last month in the quarterly earnings report of Yahoo Inc., which retains a 24% stake in Alibaba even after selling part of its Alibaba holdings last year.
Yahoo reported the following financial results for Alibaba Group for the first three months of 2013 versus the same period in 2012:
- Revenue increased 71.5% to $1.382 billion from $806 million;
- Gross profit grew 91.7% to $1.018 billion from $531 million;
- Net income increased 189.4%to $680 million from $235 million.