Chinese ecommerce group Alibaba has long dominated China’s Rmb2.8tn ($451bn) online retail market. However, there are signs that its smaller competitor, JD.com, is closing the gap。
According to data from FT Confidential Research, a Financial Times research service, the popularity of JD.com has soared in recent months to a record high. Nearly 45 per cent of respondents in China Confidential’s first quarter 2015 survey of almost 2,000 online shoppers said they regularly shopped on JD.com. As recently as the first quarter of 2013, just 30 per cent of shoppers surveyed said they regularly shopped there。
英国《金融时报》旗下研究服务“投资参考”(FT Confidential Research)的数据显示，京东的人气在近几个月升至历史新高。《中国投资参考》2015年第一季度对近2000名网购者的调查显示，接近45%的受访者表示，他们经常在京东购物。在2013年第一季度的调查中，表示经常在京东购物的受访者还只有30%。
Although Alibaba remains the clear market leader, both of its consumer ecommerce sites — Taobao and Tmall — declined in popularity in the latest quarter, while JD.com was up sharply。
JD.com’s fast-growing popularity is largely due to its rapid expansion of logistics in smaller cities and its strategic alliance with Chinese internet group Tencent, in place since mid-2014.
While consumers living in first-tier and wealthy eastern coastal cities were early adopters of ecommerce, their counterparts in smaller cities and inland provinces arguably have a greater demand for internet shopping because they have a less-advanced bricks and mortar alternative. How far and how fast ecommerce companies can deliver goods to consumers in smaller cities correlates directly to their popularity。
JD.com has invested heavily in expanding into smaller cities in recent years, greatly increasing its popularity. By the end of the first quarter of 2015, JD.com had 3,539 delivery and pick-up stations in 1,961 cities and counties nationwide, up from 3,210 in 1,862 cities and counties at the end of 2014 and 2,523 stations in 1,780 cities and counties in the second quarter of 2014.
Meanwhile, JD.com’s partnership with Tencent has given the retailer access to the latter’s massive userbase — Tencent’s WeChat and QQ mobile apps alone have about 1bn users。
JD.com’s promotional activities on WeChat and QQ, such as distributing virtual hongbao — red envelope gifts — during lunar new year, have increased its popularity among price-sensitive, mass-market consumers who previously looked for bargains on Alibaba’s consumer-to-consumer site Taobao。
The quality of delivery services also matters. JD.com has invested heavily in its own logistics network, which, although costly, has enabled it to maintain strict oversight and achieve quick, accurate delivery. The delivery quality has supported JD.com’s popularity among China’s increasingly demanding consumers。
By contrast, merchants on Alibaba overwhelmingly rely on third-party logistics companies to serve a vast number of geographically dispersed buyers. This has left these merchants unable to match JD.com’s delivery speed or service quality, denting the popularity of Alibaba’s two websites。
In China Confidential’s survey, 36.3 per cent of respondents said Alibaba’s business-to-consumer site Tmall was one of the two ecommerce sites they most regularly used, down 0.7 percentage points quarter on quarter. Furthermore, although Alibaba’s Taobao remained the most popular ecommerce site, its popularity fell for the second successive quarter: 50.6 per cent of respondents said they most regularly used Taobao — down 4.2 percentage points year on year and 1.5 percentage points quarter on quarter。
The declining popularity of Taobao lowered the combined percentage of survey respondents that regularly used Alibaba’s two consumer ecommerce sites to 87 per cent, down from an all-time high of 90 per cent in mid-2014.
Almost all other online retail sites, including Dangdang and Amazon China, have seen declines in popularity over the past year as the two market leaders, both buoyed by bumper US initial public offerings last year, invest heavily to extend their dominance。
Although Alibaba remains the clear market leader and continues to invest heavily, China Confidential expects JD.com to gain further ground, helped by the company’s ongoing investment in logistics and its growing consumer base。
However, continued heavy investment and the high cost of its self-operated model mean the company remains unlikely to post a profit in the near term。
JD.com’s net loss widened to Rmb710.2m in the first quarter, up from Rmb454.3m in the fourth quarter of 2014.
Its investment-led approach is enabling JD.com to slowly close the gap on Alibaba, reflected in rising popularity and relative share price outperformance over the past year. But it remains to be seen how long investors will be prepared to wait for the asset-heavy online retailer to post a profit。