Nov. 21 (Bloomberg) — JD.com Inc. said its partnership with China’s most popular instant message applications will help narrow the gap in e-commerce with Alibaba Group Holding Ltd.
Tencent Holdings Ltd.’s WeChat and Mobile QQ apps, which each have more than 450 million active users, helped JD.com boost mobile orders more than sixfold in the third quarter from a year earlier, billionaire founder and Chairman Richard Liu said in an interview yesterday in Wuzhen. As smartphone prices in China fall below $50 per device, rising adoption among rural users will drive even more mobile e-commerce growth, he said.
JD.com’s $2 billion initial public offering in May gave the e-commerce company funds to expand reach by adding warehouses, delivery vehicles and technology as it steps up competition with Alibaba, which raised a record $25 billion in its September IPO. JD.com has waged a come-from-behind campaign for a decade in the personal computer era, and the battle for the nation’s 1.28 billion mobile phone users will speed the process, Liu said.
“The market is large and I’m sure Alibaba will continue doing a good job,” Liu said. “JD.com will do a better job.”
JD.com and Alibaba have different business models. JD.com follows a model similar to billionaire Jeff Bezos’s Amazon.com Inc., where the company manages inventory and sells products such as home appliances, books and clothes directly to consumers. Alibaba provides the platform that brings buyers and sellers together.
More Profitable
Alibaba said this month that it processed orders valued at about 556 billion yuan ($91 billion) in the three months ended in September, the first set of financial results since the IPO. JD.com handled transactions valued at about 67.3 billion yuan in the same period, the company reported this month.
Alibaba has also been more profitable. Alibaba’s net income fell 39 percent to 3.03 billion yuan in the period. JD.com, China’s second-largest e-commerce company by orders processed, reported a net loss of 164.4 million yuan, compared with a profit of 75 million yuan a year earlier.
Mobile accounted for about 35.8 percent of of Alibaba’s orders in the period, the company reported, while JD.com reported getting about 29.6 percent of its completed transactions from mobile in the quarter.
Unfazed
The numbers don’t intimidate Liu.
“Back in 2004 when JD.com started out, the business had only a few tens of thousands of yuan; we had nothing,” Liu said. “Alibaba at that time was already a super big company. The gap betweenJD.com and Alibaba then was 100 times today’s.”
One reason for Liu’s confidence is Tencent, which bought a stake in JD.com in March. That is giving users of its instant messaging applications easier access to JD.com and generating traffic.
Another reason is JD.com’s investment in building out its own logistics system, which will help as rising mobile usage in the countryside means more orders coming from outside large cities.
“JD’s high-speed growth will exist for a long time,” Liu said. “We spent eight years for network logistics. That network is now bearing fruit. All of this will boost our performance and maintain high-speed growth for the long term.”
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