E-commerce giant Alibaba Group Holding Ltd. has set up a second headquarters in Beijing to gain a stronger foothold in the northern areas, with the move expected to heat up competition with its Beijing-based rival JD.com Inc., the China Daily reported.
Founded 16 years ago in Hangzhou, capital of Zhejiang Province, Alibaba made the announcement on Thursday, Sept. 24, making Beijing its new base as part of its twin-hubs strategy to aggressively advance its business development as well as strategy in northern regions of the country.
"Only with the synergy between Hangzhou and Beijing, consumers in North China or even across the whole country can be better served," the statement said.
Analysts see the strategy as a response to the slow growth of online shopping in the country. The move was also aimed at getting more market share from its rival, JD.com Inc.
Lu Zhenwang, an independent Internet expert and the chief executive officer of the Shanghai-based Wanqing Consultancy, said that Alibaba dominates the e-commerce market in the Yangtze River Delta and Pearl River Delta and its vendors and delivery partners are close to these markets.
Lu cited online shoppers in Zhejiang Province, Jiangsu Province and Shanghai who get free delivery of goods they buy on Alibaba's online platforms, due to the company's cluster effect in the region.
"However, in North China, especially in Beijing, JD.com is more popular among online shoppers with its fast delivery service and its offerings in consumer electronics," Lu noted.
In terms of business models, Alibaba and JD.com do not differ from each other; Alibaba's market share is also bigger than JD's. But Lu said that Alibaba needs to work harder and improve its performance in north China, with the country's overall online shopping growth momentum slowing.
iResearch Consulting Group reported that the country's online shopping market grew 39.6 percent year-on-year to 872.5 billion yuan ($136.7 billion) in the second quarter of this year, lower than last year's market growth of 46.1 percent year-on-year for the same period.
Alibaba said in its statement that it will pour in unlimited resources in northern markets in China, including its online business-to-consumer shopping service Tmall, and Cainiao Logistic Services, as well as integrate online and offline resources from its shopping mall partners Suning Commerce Group Co. Ltd. and Intime Retail (Group) Co. Ltd.
"Apart from gaining a new growth point in e-commerce, Beijing as a second hub can also bring Alibaba other benefits because as the capital city of China, Beijing has a critical position in politics, media and talent," Wang Xiaoxing, analyst with Analysys International, said.
"To be honest, Hangzhou is not that attractive to lure some of the country's best talent to work for Alibaba," Wang said.