January 2, 2014, 12:10 PM

China’s No. 2 online retailer posts its first profits

For the first time since launching in 2004, Jingdong Mall breaks into the black in the third quarter of 2013. It says gross merchandise sales last year exceeded 100 billion yuan ($16.39 billion), up by two thirds from 2012.

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Jingdong Mall achieved profitability in the third quarter of 2013, after nine years of losses since its founding in 2004, the Chinese e-commerce company’s founder and CEO, Richard Liu, reported at a press conference last week.

Liu also disclosed that the value of merchandise sold on Jingdong’s e-commerce site, JD.com, exceeded 100 billion yuan ($16.39 billion) last year, an increase of two-thirds from 60 billion yuan ($9.8 billion) in 2012. Jingdong sold 70% of the merchandise itself, with the other 30% sold by the 30,000 outside retailers that sell on JD.com’s marketplace. Marketplace sellers had accounted for 20% of sales in 2012 and Liu projects they will represent 50% of JD.com’s gross merchandise value in 2015.

Jingdong Mall is No. 3 in the Internet Retailer Asia 500, a ranking of retailers in the Asia-Pacific region by their online sales.

Jingdong “will have a three-digit growth rate in 2014,” Liu told the news conference, meaning its sales will at least double this year over last year. He projects growth coming from the company making more loans to online sellers, cooperating more closely with offline retailers and through international sales.

Jingdong began lending money to sellers on its marketplace in July, and said loans grew at a 30% month-over-month rate, totaling 500 million yuan ($83 million) in November. He did not report a full-year figure for 2013, but projected that the lending business would grow 30% in 2014. Jingdong’s major competitor, Alibaba Group, No. 1 in the Asia 500, also has a program for lending money to merchants that sell on Alibaba’s Taobao and Tmall online marketplaces.

The collaboration with bricks-and-mortar retailers includes a pilot Jingdong launched in December with Beijing convenience store chains that take orders via JD.com and promise delivery within 10 minutes. The chains upload the inventory available in each store to Jingdong. When a consumer places an order, Jingdong identifies the nearest store with the desired item and dispatches an employee to pick up the item and deliver it to the consumer. Jingdong staffs some 1,400 delivery stations across China, including many in major cities, so that it can quickly deliver items in heavily populated areas.

Liu said Jingdong will continue to invest in its own delivery service after spending 3.6 billion yuan ($590 million) on logistics in 2013. He says Jingdong can provide same-day delivery in dozens of large cities in China and three-hour delivery in six of them. Jingdong, along with several other major online retailers has invested heavily in building a delivery system, making up for the lack of any nationwide delivery services in China similar to UPS or FedEx in the United States. Jingdong, for example, has hired 14,000 workers for its delivery operation and built warehouses with 1.2 million square meters of space, big reasons why it had not been able to break even until late 2013 despite strong revenue growth.

Turning to Jingdong’s international business, Liu announced Jingdong plans to expand this year into neighboring Asian countries where there are many residents of Chinese ancestry. Jingdong began selling directly to consumers in Singapore in August in collaboration with a local online retailer, iknow.com.sg.

According to Liu, Jingdong doesn’t have a plan to enter directly into Europe or the United States, but will ship parcels to those markets to meet the demands of overseas Chinese online shoppers.

He also emphasized that Jingdong will try to ensure good quality of the goods that its ships to other countries. He cited Jingdong research that shows 80% of parcels sent from Chinese e-retailers to Russian consumers are counterfeit products or copycat mobile handsets.

“If Jingdong enters this market, we must provide something different to ensure the high quality of products and services,” Liu said.

Jingdong also disclosed the following facts and figures, all as of Nov. 30, 2013:

Registered users: over 140 million

Mobile apps activated: over 100 million

Orders placed via mobile apps: more than 15%

Suppliers and vendors: nearly 40,000, including nearly 30,000 merchants that sell on POP, JD.com's marketplace platform

Average daily page views from PCs: around 220 million

Average daily unique views from PCs: around 21 million

SKUs on JD.com: over 10 million

Logistics centers: seven, located in Beijing, Shanghai, Guangzhou, Shenyang, Wuhan, Chengdu, and Xi'an

Delivery stations: nearly 1,400 throughout China

Customer pick-up stations: nearly 300 throughout China

Total warehouse area: 1.2 million square meters

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