#Asia Alibaba does not dominate China, JD.com poses real threat to e-commerce giant


Alibaba consistently gets compared with Amazon, but this week’s earnings reports prove the comparison to be a media fallacy

Alibaba FINAL (1)

Alibaba is China’s Amazon correct? That’s the narrative we’ve been reading about for years. Too bad it is wrong.

Unlike the US market, in which small e-commerce companies are forced to find a niche in a world dominated by Amazon, China’s Jingdong Mall (JD.com) not only competes directly with Alibaba but by certain metrics has surpassed the global e-commerce giant.

The most glaring example is that JD.com makes more than twice as much money as Alibaba.

Yes, you read that right. According to Q2 2016 results released this week, Alibaba generated US$4.8 billion in revenue over the period as compared with JD.com’s US$9.8 billion in the same quarter.

Obviously, this does not tell the entire story — Alibaba is known as much for asset acquisition as it is for its e-commerce platform and companies like Ant Financial, AliPay and Cainiao logistics are market leaders in Asia.

To highlight this point, JD.com made the Fortune 500 list of the world’s largest companies for the first time this quarter (#366) while Alibaba did not. But, because Fortune 500 uses revenue as its metric, the list ignores industry specific statistics. For e-commerce, Alibaba’s gross merchandise value (GMV) of RMB837 billion (US$126 billion) was far above JD.com’s RMB160.4 billion (US$24.1 billion) GMV.

Furthermore, Cainiao is handling 42 million packages per day and Alipay is further integrating into the consumer base — its usage increased by more than 60 per cent all major sectors of the Tmall marketplace and 202 per cent in the Tmall Supermarket.

Alibaba Cloud user numbers rose by 156 per cent from last year — ending the quarter with 577,000 paying users and generated US$187 million in revenue. But, for perspective, those numbers are paltry compared to to Amazon Web Services’ US$2.89 billion revenue.

Also Read: No more online medicine sales, Alibaba’s online retailer Tmall says

For every uppercut from Alibaba, JD.com counterpunches with a move that present an equally optimistic future.

The one that stands out is the late-June strategic tie-up with Wal-Mart — easily the world’s largest retailer and one that generates the second highest revenue of any company globally.

“The two companies will collaborate on e-commerce, including further building the Yihaodian brand and business, launching a Sam’s Club flagship store on JD.com, pursuing O2O initiatives, and leveraging one another’s supply chains to increase product selection for customers across China,” read the JD.com earnings report.

The company has over 100,000 merchants on the platform, 234 warehouses in China and 6,756 delivery and pick-up stations.

Both companies have successfully transitioned into mobile-first enterprises, with JD.com fulfilling just under 80 per cent of orders through mobile and Alibaba seeing a higher monetesation-rate from mobile as compared to desktop for the first time in its history.

The major difference between the two companies is mostly media perception. Alibaba consistently gets compared with Amazon and Jack Ma is an icon, Liu Qiangdong is not.

But, Alibaba is not Amazon.

Here’s why — The story of Jet

Last July, the serial entrepreneur named Marc Lore — who sold Diapers.com to Amazon for US$545 million in 2010 — started an e-commerce platform named Jet with the explicit directive to compete with Amazon.

The company planned to start a subscription service in which users pay US$50 per year to become a member and receive serious discounts on delivery costs.

Three months after its launch, the company raised US$500 million led by Fidelity and was ready to take on the giant at the top of the beanstalk.

Well, in this fairytale the giant won. On August 8, 2016 Wal-Mart bought Jet for US$3 billion.

While it can be viewed as a success for investors’ wallets, Jet failed in its original goal of taking down Amazon — and it only took about a year.

Also Read: Tencent, Baidu, JD.com double down on Bitauto with US$550M investment

Amazon has a stranglehold on the US e-commerce market. Sure, small companies can find their niche and make a nice living, but once they actually start to compete with Amazon, Bezos can take a loss in the specific vertical, undercut the product prices and either force the company to shut down or buy it (as he did with Lore’s Diapers.com).

Alibaba cannot do this because if it falters in a vertical, Jack Ma can be confident JD.com will step in to fill the void. Amazon can crush its competition, while if Alibaba tries the same tactic, JD.com can fight back.

Each company has its strengths and weaknesses, but to brand JD.com as the little brother to Alibaba is an unfair label. Whether the media narrative would like to admit it not, the two companies are equals.

And that’s what makes it so interesting.

Photo courtesy of Alibaba.

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