The battle between Alibaba and JD.com

The competition between Chinese e-commerce giants Alibaba and JD.com has been on for years. Will this be a win-win game?

Editorial

In the morning of 11 November 2017, JD.com reported more than RMB100 billion (US$15 billion) gross merchandise volume (GMV) during the Singles Day period. One hour later, Alibaba also shared that its GMV for the same day had reached RMB100 billion (US$15 billion).

This is the first time JD.com has released the Singles Day GMV figure. JD.com managers have refused to talk about the figure in past years. This is probably because JD.com has never achieved a volume on this scale before. This year JD revealed the GMV even before Alibaba. It is a signal that JD.com is narrowing its gap with Alibaba.

Sources: Alibaba, Labour Daily

The battle between Alibaba and JD.com has been raging for years

Alibaba is an online transaction platform. It charges a fee for transactions. Jack Ma, the founder of Alibaba, insisted that this is the most profitable model. JD.com is a B2C platform. It has adopted its own logistics system.

Jack Ma has on many occasions expressed disdain for JD’s model. “JD’s model is to buy goods at a low price and sell them at a higher price. It is hard to profit this way. This is a stupid model”, Jack Ma said at a Stanford Speech in 2011.

Ironically, Jack Ma invested in Suning in 2015 and Hema in 2016. Both Suning and Hema have the same model as JD.com’s.

JD.com’s founder and CEO Richard Liu, on the other hand, criticised Alibaba’s model as “paid listing”. “Taobao (Alibaba’s e-commerce platform) lists the merchants who pay most on the top. This model will burden the merchants and eventually damage the interest of consumers”, said Richard Liu.

He also attacked Alibaba for its inability to deal with the sale of fake goods on Taobao. Although, Alibaba spends RMB1 billion (US$15.08 million) each year on a team of 2,000 people to root out and remove counterfeit goods from Taobao and Tmall.

The battle extends to logistics

There are more than 60,000 employees working within JD.com’s logistics division. Jack Ma once dismissed JD.com’s self-operating logistics model as “money burning”. However, the rapid logistics system has been a major reason why consumers buy from JD.com.

On 26 September 2017, Alibaba invested RMB5.3 billion (US$801 million) in Cainiao, a new tech logistics company. Alibaba also announced that it would continue to invest RMB100 billion (US$15.1 billion) to build its global logistics system over the next five years.

JD.com announced its plan to put RMB20.5 billion into the development of an unmanned logistics operating system within five years. Each new investment pushes the other company into exploring new, cutting-edge logistics solutions. Consumers will benefit from the impending logistics war between the two Chinese e-commerce leaders.

Both companies are eying up overseas expansion

Alibaba and JD.com have also been seeking opportunities in overseas markets. JD.com invested US$1 billion in Go-Jek, an Indonesian ride-hailing company. On 31 October 2017, it announced a US$19 million investment in the online fashion brand Pomelo, located in Bangkok.

Alibaba began expanding overseas even earlier than JD.com. In 2016, Alibaba invested US$1 billion in Lazada, aiming to expand its marketplace in Southeast Asia.

The battle between Alibaba and JD.com will rage on. It is hard to tell who will emerge as the winner. The battle will likely spur each other on and ignite innovation. Both of them may emerge victorious and benefit from the healthy competition.