JD.com’s growing fortunes is a testament to its increasing competitiveness against Alibaba, which is still making waves as it plots its rise in markets outside China. (Photo : Getty Images)
Alibaba is currently the undisputed king of retail in China, but its closest competitor JD.com is treading towards an upward trajectory, what with its revenue increase prompted by its expansive logistics network comprising around 250 warehouses throughout the country.
JD.com reported a 47 percent year-over-year (YoY) revenue increase in Q4 2016, during which it incurred $11.6 billion. Throughout 2016, the e-commerce giant recorded $37.5 billion in revenue, which is a full 44 percent increase from $26.4 billion in 2015, according to Business Insider.
The key to JD.com's revenue increase lies on the strength of its gross merchandise volume (GMV)--the aggregate value of goods sold through its online platform, which increased by 44 percent at $94.8 billion in 2016. Plus, JD.com increased its business-to-consumer (B2C) share to 25 percent in 2016 from 18 percent the previous year.
Undeniably, JD.com's growing fortunes is a testament to its increasing competitiveness against Alibaba, which is still making waves as it plots its rise in markets outside China. Nonetheless, JD.com credits its rise to a business model that is vastly different to that of Alibaba's.
Firstly, whereas Alibaba is an entire marketplace where buyers flock to different merchants selling on its online platform, JD.com acts as the sole merchant directly selling to consumers. Such approach is enabled through JD.com's burgeoning network of warehouses throughout China, numbering around 250.
Secondly, JD.com takes full responsibility for item delivery, effectively setting it apart from Alibaba's marketplace approach. That, of course, entails JD.com to sell its goods more expensively to compensate for additional costs, compared to Alibaba's price-down approach to increase merchants' competitiveness.
Lastly, JD.com also offers a marketplace where sellers can advertise their wares to consumers. Although that only accounts for 6 percent of JD.com's revenue, it nonetheless adds greater variety to its direct-selling nature, which constitutes almost the entirety of its revenue.
Nonetheless, JD.com acknowledged the need for further funding of its logistics costs, hence its decision to sell JD Finance, its online finance service, for $2.1 billion. Currently, a Chinese investment group is eyeing JD Finance; JD.com is set to receive 40 percent of the company's after-sale pretax profits.
