JD.Com has Amazon Potential

JD.com is the largest ecommerce company in China based on revenue. The company has 250 million customers.

*JD.Com has partnered with Tencent:*
• By sharing big data, the two companies have developed a tool that allows brands to target niche users, in an effort to reduce broad-sweeping ads and focus on consumers who are most likely to buy certain products.
• Tencent provides data on what public accounts people follow and which companies or celebrities they may like on WeChat.
• JD.com, in turn, has transactional data that can show what users have bought through the JD platform. Together, the data can help brands drill down and target specific demographics that are likely to want to purchase certain products.
• For Tencent, which has a 20% stake in JD.com, the brand building provides advertising revenue. About 80% of all ad revenue the company gets comes from mobile.
• JD.com, meanwhile, generates revenue from sales on the WeChat platform.

*JD.Com has strategic alliance with Wal-Mart:*
• JD.com's ability to partner with Wal Mart to exploit a Chinese online consumer market that is far bigger than US.
• Wal Mart entered China in 1996 and operates 433 store location, employing 100,000 associates.
• Wal Mart would be able to tap on JD.com significant based of online customers and vast same day delivery network.
• JD.com's customers would gain access to a wide range of new and imported items from Wal Mart and Sam's Club that are not widely available in China.

JD.com's strategy is simple: sell quality Chinese goods at lower prices than his competitors. Richard Liu (CEO) wants half of JD's revenue to come from abroad in 10 years, hopefully evenly distributed between Southeast Asia, the US and Europe.

*JD and Amazon share many similarities in their development:*
• Both companies provided full category and one stop consumer shopping platforms.
• Both purchased and marketed on their own, controlling the supply chain, and both opened their platforms to third party sellers.
• Both scaled up big through significant investment and left little opportunity for mid-sized ecommerce companies. Both seek rapid growth rather than profits, as long as cashflows are positive.
• Both believe in economies of scale: the bigger the company, the cheaper it could buy from wholesalers and the stronger the channel capacity.

However Amazon relies on delivery companies like FedEx and UPS, while JD builds their own delivery service.

Richard said: "Success in retail, is to understand consumers and deliver what they need into their hands. A retail business only needs to do 2 things: cut costs and improve efficiency.

JD is that it’s transitioning from money loser to moneymaker, a key ingredient to moving stock prices higher.

Currently e-commerce share of total retail sales in China is 20%. Internet peneration rate is 53%. China population growth rate is 0.59%. When the numbers above grow, JD.Com will benefit.

Share price of JD.com has fallen 20% from its peak in January 2018. This may be a good opportunity to buy.

For more information on JD.com, you can go to: https://youtu.be/byaoYAiVTEg


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