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China’s largest e-retailer aims to raise $1.5 billion in an IPO in the U.S.
JD.com disclosed its plans in a filing today with the U.S. Securities and Exchange Commission. Its major competitor, giant marketplace operator Alibaba is expected to follow suit in coming months.
Senior editor, China
JD.com’s biggest competitor, Alibaba Group Holdings Ltd. is also expected to go public in the near future, possibly in the U.S. While the two big online marketplaces Alibaba operates, Taobao and Tmall, account for a majority of China’s e-commerce sales, Alibaba, like eBay Inc., is a pure marketplace operator that doesn’t sell on its own behalf. Most of JD.com’s revenue comes from selling merchandise it owns, and its sales put it at the top of the rankings of China’s web retailers in Internet Retailer’s soon-to-be-published China 500.
The prospectus filed with the SEC describes the company’s rapid growth since it was founded in 2004 by Richard Qiangdong Liu. The company says the value of goods sold on its e-commerce site increased 124% from 32.7 billion yuan ($5.4 billion) in 2011 to 73.3 billion yuan ($12.0 billion) in 2012. In the first nine months of 2013, the company’s GMV reached 71.7 billion yuan ($11.8 billion). 67% of the value of merchandise sold on JD.com is sold by the company itself and the rest by the 23,500 outside merchants that sell on its marketplace.
If JD.com had been a U.S. e-retailer, the nearly $8 billion it sold on its own behalf in 2012 would have put it on par with Walmart.com, No. 4 in the Internet Retailer 2013 Top 500 Guide.
The company also reported that it became profitable in 2013, booking net profit of 60 million yuan ($10 million) in the first three quarters of 2013, as compared to net loss of 1.4 billion yuan ($229.5 million) in the first nine months of 2012.
JD.com’s revenue, including from sales of its own products and services, and fees from marketplace sellers, increased 96% to 41.4 billion yuan ($6.8 billion) in 2012 from 21.1 billion ($3.5 billion) yuan in 2011. Revenue for the first nine months of 2013 was 49.2 billion yuan ($8 billion).
JD.com and Alibaba are the biggest beneficiaries of the rapid growth in Chinese consumers shopping online.
Chinese market research firm iResearch projects China’s e-retail market grew 42% from 1.303 trillion yuan ($215 billion) to 1.850 trillion yuan ($305.2 billion) in 2013. By contrast, the country’s total retail only grew 13.1% last year, according to National Bureau of Statistics of China.
JD.com began as a retailer of personal computers and now electronics category still account for 82% of its revenue. General merchandise represents 14.9% of sales and services 3.1%.
Seeking to offer a wider selection of products, and better compete with Alibaba’s dominant shopping sites, JD.com launched its marketplace in 2010. By the end of 2013, the approximately 23,500 third-party sellers were offering approximately 23.5 million SKUs through JD.com, according to its prospectus.
JD.com, which formerly was known as Jingdong Mall and its web site as 360buy.com, says it will use the funds it aims to raise to expand its fulfillment infrastructure, including building new warehouses.
The company has invested heavily in its fulfillment network in recent years, hoping to gain an edge over Alibaba in a country where there is no national delivery service similar to UPS or FedEx in the U.SJD.com says it currently operates 82 warehouses with a total area of over 1.3 million square meters in 34 cities, as well as 1,453 local delivery stations in 460 cities across China. The company’s 40,000 employees include 18,005 delivery personnel, 8,283 warehouse staff and 4,842 customer service agents, as of December 31, 2013.
In China, most large online retailers, such as JD.com and Amazon China, build their own delivery networks to ensure good service and to keep up with competitive pressure to provide fast delivery. JD.com says it provides same-day delivery in 31 cities and next-day delivery in another 206 cities across China.
The e-retailers also indicated in its prospectus plans to expand its business overseas, saying it will consider strategic initiatives such as setting up overseas web sites, warehouses and payment systems to reach new international customers.
In a press meeting last December, company founder Liu announced plans to expand this year into 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 plan to sell directly online in Europe or the United States in the near future, but that it will ship parcels to those markets to meet the demands of overseas Chinese online shoppers.