Alibaba is currently China’s most successful e-commerce platform, but its place at the top is becoming increasingly uncertain in a growing, competitive market.
According to the Boston Consulting Group, China has more online shoppers than any other country in the world — an estimated 242 million. By next year, consumers are projected to spend about $1,000 online annually, making e-commerce a $242 billion market and accounting for 8 percent of all retail sales in the country. By 2020, that figure may rise to 2.7 – 4.2 trillion yuan ($420 billion to $650 billion at current exchange), according to data from McKinsey.
Though foreign retailers have been attracted to the rich market, Chinese companies are those that have found the most success. According to iResearch, the most successful business-to-consumer e-commerce platforms in 2013 were as follows:
- Alibaba’s Tmall (50.7 percent share of sales)
- JD.com (17.1 percent)
- Tencent (5.6 percent)
- Suning (5 percent)
- Amazon China (2.2 percent)
- Vipshop (2 percent)
- Gome (1.9 percent)
- Dangdang (1.8 percent)
- Yihaodian (1.4 percent)
- Vancl (0.7 percent)
Alibaba is without a doubt China’s number-one e-commerce company; its profits for the year ended March 31 rose by 175 percent to $3.71 billion on revenue of $8.44 billion. Later this year, the company is also slated for a multibillion-dollar initial public offering.
Alibaba’s Taobao, a C2C platform, has contributed greatly to its success. C2C business accounts for about 65 percent of e-commerce in China, and Taobao is at the very top of the market, accounting for 95 percent of this business. Hosting eight million venders, Taobao functions not only as a retailer, but also as an important resource for product research. As Women’s Wear Daily notes, Taobao is “used as Google is in the West as a starting point for researching products.”
Chinese consumers are also increasingly using mobile devices for e-commerce transactions; last year, 9.2 e-commerce transactions were made with mobile devices, a figure that is expected to double by 2016. Alibaba has responded to the boom accordingly. In June, the company bought out mobile browser operation UCWeb Inc., a transaction that it hopes will “enable deep synergies between the companies by marrying Alibaba’s strengths in e-commerce, cloud computing and big data technology, and UCWeb’s leading market position and technology in mobile.”
Also known as Jingdong, JD.com is China’s second-largest e-commerce enterprise according to transaction volume. The company’s wide selection of products has drawn comparisons to Amazon, though 85 percent of its sales are in the electronics sector.
Though JD.com’s success has been considerable, and the company currently has a market capitalization of around $27.45 billion, Jeff Walters, managing director and partner for the Boston Consulting Group, warns that its future success is not guaranteed.
“Alibaba makes a ton of money from advertising, whereas JD.com is trying to make money selling products, which is a challenging proposition whether you are JD.com, or anyone else, frankly,” Walters said.
Many believe that Tencent “poses the biggest threat to Alibaba’s reign as China’s e-commerce king.” The company has made its name with strategic investments in JD.com and the extreme popularity of its social media service, WeChat, which now has 355 million active users.
“Tencent’s home run with WeChat has raised the stakes for all incumbent Internet players, and the acquisition by Tencent of a 20 percent stake in e-commerce provider JD.com illustrates the increasingly competitive stance of the two companies towards each other,” says Duncan Clark, chairman of Beijing-based technology consultancy BDA China Ltd. “Anything that can drive mobile users or traffic to Alibaba will be seen as accretive in this context.”
Tencent also boasts an online-to-off-line service called Weigouwu that some analysts believe could be a “game changer” for Chinese retailers. The app allows consumers to scan product codes to find informations on the product, add it to their personal shopping list, and purchase it on WeChat.
image credit: leon lee