You may have noticed a new Chinese company in the tech news recently: JD.com aka Jingdong. Formerly known as 360Buy, the company has been growing rapidly in the past year, increasing its market cap from $36.93B to $66B YTD. In terms of traffic, JD is now the 21st most visited website in the world. Currently, JD is the largest Chinese retailer by revenue.
JD started operations in 1998 in a four-square-meter unit in Beijing with just $1800. The company was founded by Liu Qiangdong (also known as Richard Liu) as a consumer electronics retailer. In 2007, JD began focusing on their logistics network so they could control all aspects of their supply chain.
Most of JD’s current revenue comes from its business-to-consumer (B2C) operations. What this means is that JD is similar to Amazon; they (the business) sell to individuals (the consumers). Consumer electronics are still a large portion of JD’s sales, with 85% of the company’s revenue in 2014 coming from CE sales.
Since 2016, JD has been working with an unlikely partner: Walmart. In June of 2016, Walmart handed over its Chinese e-commerce business to JD in exchange for a 5% equity stake. And in August of 2017, the companies ran the first joint JD-Walmart shopping festival.
JD is also connected to another Chinese tech titan: Tencent. Tencent acquired 15% of JD in 2014 and in 2016 became JD’s largest shareholder with a 21.25% equity stake. JD and Tencent have been cooperating through WeChat, Tencent’s massively popular messaging client.
JD‘s closest rival is TMall, Alibaba’s B2C marketplace. “According to L2’s newly released Insight Report on Alibaba, over 90% of Index CPG brands maintained official flagships on Tmall in 2014 but only 26% had an official JD.com shop. Now, in 2017, the percentage of CPG brands with an official shop on JD.com has surged to 98%.” As noted before, JD is heavily B2C focused, with only ~6% of its revenue coming from B2C sales; Alibaba is the opposite, being far more known for its business-to-business (B2B) enterprise.
When compared to Amazon, JD looks like a small player in the B2C sector. For example, in 2016, Amazon’s revenue was $136B, while JD’s was meager $39B. At the time of writing, Amazon stands at a market cap of $474B, while JD is at $66B.
While headquartered in Beijing, JD has been expanding internationally. JD has a general international site, https://www.joybuy.com/ and has been working on expanding into the Thai and Russian markets and the Southeast Asian market in general.
Considering JD is now of considerable size, what strategic investments has it been making?
In June 2017, the company invested $397 million into Farfetch, an online luxury goods marketplace. This deal allows JD to gain credibility in the luxury e-commerce space, while its competitor Alibaba remains ridiculed for knock-offs.
In May of 2017, JD made a $1.2B investment in Go-Jek as part of the firms move to tap into Southeast Asia. Go-Jek is a ride-hailing and courier startup based in Indonesia. This move could help JD with last-mile logistics in Indonesian deliveries, and perhaps deliveries in other countries as Go-Jek expands.
And, in August of 2015, JD made a $630M investment in Ele.me, a customer-to-customer meal ordering service based in Shanghai.
For a full lists of JD’s investments, see their Crunchbase profile.
When analyzing Chinese-based companies, its important to understand their standing with the party. In China, how well you’re viewed in the eyes of the party is first and foremost.
In just the past few weeks, JD’s founder has stated that with technological advancement, China will be able to have full Communism, with all companies being state-owned. He wrote that “we are far from a communist society, but … the light of communism will always shine on us.”
In addition, as said so eloquently in another Medium article about JD:
I have two company-external reasons to be super bullish on JD as an investment in the Chinese economy. These two reasons are affected by government decisions:
- The Chinese government wants their core online economy to be made up of Chinese-founded businesses
- The Chinese government … wants to protect their citizens in a way to drive economic growth
It appears that Richard, and JD as a whole, is properly following the party lines and is positioned nicely for success.
Full disclosure: I am currently employed by Amazon.com and all opinions in this piece are my own.