I think the answer is yes and no. “Yes” – on ecommerce, but “No” overall. Here is why:
- The difference of Alibaba and JD.com’s ecommerce business model
- Tmall and JD.com ecommerce traffic in China
- The focus of Alibaba and JD.com going forward
The difference of Alibaba and JD.com’s ecommerce business model
Let’s take a close look at Alibaba’s ecommerce capabilities:
- Taobao.com – this is the start of Alibaba, a platform offered to small merchants in China and let them sell products to consumers directly (C2C). Taobao is known to have counterfeits and knockoff products.
- Tmall.com – a platform offered to brands or distributors to sell products. It’s different from the Taobao, in which that Tmall ensures all products sold are authentic.
- Tmall.hk – Alibaba’s cross-border ecommerce platform to help oversea companies sell products directly to China without the need of incorporating locally.
It’s worth mentioning that Alibaba’s ecommerce strategy has always been on providing the platform(s) to empower merchants and companies to sell to Chinese consumers. It’s core value is in the platforms offered. Next, let’s take a look at the JD.com. Its two well-known products are:
- JD.com – An ecommerce site started by selling electronics and technology products. Hence, it has accumulated users who are tech-savvy and mostly male consumers over the years.
- JD.hk – JD.com’s cross-border ecommerce answer to the Tmall.hk.
JD.com’s ecommerce strategy revolves around 1) product reselling and 2) online pop shop. In the reselling model, JD.com buys products and resells, while the pop shop model aims to provide the JD.com’s ecommerce traffic and marketing service to companies.
As you can see, JD.com’s business model is inherently self-conflicting. For example, a company on the JD.com has to compete against not only industry competitors, but potentially itself – previously sold products to the JD.com.
Tmall.com and JD.com ecommerce traffic in China
Tmall.com is still the market leader on ecommerce traffic in China. Refer to this figure provided by the U.S. Commercial Service.
In terms of traffic, Tmall.com is still the market leader, while JD.com is the 2nd. In average, the traffic ratio between Tmall.com and JD.com are: 3:1 during non-peak seasons, and 6:1 during peak seasons, respectively. JD.com’s strength is in its logistic network, which is one of the factors leading to its recent acquisition of Yihaodian, previously owned by Walmart.
The focus of Alibaba and JD.com going forward
Since Alibaba started with offering ecommerce platforms, it has quickly expanded to other sectors recently. For example:
- Finance: Alipay – the most-used payment system in China.
- Cloud Hosting: Aliyun – the leading cloud service provider to website hosting solution in China.
- Export: Aliexpress – Alibaba’s solution to help oversea companies source products from China.
- Entertainment: Alibaba has also started to enter the entertainment and leisure market with its recent investment in Youku, China’s leading online content streaming service provider.
JD.com is also transforming, but in a different way. Since 2 years ago, its focus has been on growing logistical and delivery capabilities to tier-3/4 cities in China. This strategy is betting against the future growth of ecommerce market coming from Chinese rural areas. While it definitely sets JD.com apart, it has also turned JD.com into a service-oriented company in which the cost structure is on headcounts, delivery infrastructure, and products.
It’s interesting to see what the next five years would entail for both companies. In the end, I think JD.com is a tough competitor to Tmall.com, but not to Alibaba.