JD.com, China’s second-largest e-commerce site, is set to exceed 100 billion yuan ($16.47billion) in annual sales for the first time in a market that has drawn investment from global retailing names such as Amazon and Wal-Mart.

Sales volumes will likely eclipse the company’s target of 100 billion yuan compared with 60 billion yuan in 2012, JD.com said in a press release on Monday. The smaller rival of China’s Alibaba Group Holding said it has broken even for the first three quarters of the year and may turn profitable at any time, declining to be more specific. China’s business-to-consumer e-commerce sales may surpass $180 billion this year due to a rising Internet penetration rate, expanding middle-class incomes and a steadily improving distribution network, according to New York-based market research firm eMarketer.

The country’s e-commerce prospects have attracted investment from Wal-Mart, which now owns roughly 51% of Chinese e-tailer Yihaodian. Amazon bought e-tailer Joyo.com in 2004, which eventually became Amazon China. “The market itself is growing, we’re also growing our market share,” JD.com’s Chief Operating Officer Shen Haoyu told Reuters on Monday. “People are getting more comfortable with buying online.”

As a private company, JD.com does not release revenue figures, and would not say if it broke even in previous years. “We’re not making crazy money, but we’re not losing crazy money,” Shen said.

JD.com, previously known as 360Buy, has done well enough to attract foreign investors. Over the past six years, it has secured $2.23 billion from investors, including the Ontario Teachers’ Pension Plan and Saudi billionaire Prince Alwaleed bin Talal’s Kingdom Holding Co, using these funds to expand its logistics network and employ aggressive pricing tactics. But despite its fast growth, JD.com still stands in the shadow of its main B2C competitor, Alibaba’s Tmall, which dominates 51.1% of the market, according to Chinese Internet market research firm iResearch. JD.com has 17.5% and Amazon China controls just 2.6%.

JD.com has tried to differentiate itself by operating its own network of couriers and warehouses, a factor it says ensures timely and efficient delivery. Tmall andAlibaba’s online B2Bmarketplace Taobao still depend on merchants and external courier firms for their logistics.

“If they can continue to build their niche in the marketplace, because of their reputation for good service, their reputation for good products… they have firm ground to stand on,” said Ben Cavender, principal analyst at China Market Research Group. But the gap between the two competitors is still large. During a 12-day sale centred around China’s equivalent of Cyber Monday, JD.com’s turnover reached $1.6 billion, far less than Tmall and Taobao, which had one-day turnover of $5.7 billion combined.

 

Taken from The Economic times 24 Dec. 2013