JD Challenges Alibaba In C2C, Mobile

JD makes moves at C2C site Paipai

With its new IPO now firmly in the past, e-commerce giant JD.com (Nasdaq: JD) is finally getting back to business as it seeks to challenge industry leader Alibaba. Two of its newest moves in that drive both look quite exciting, and are part of its recent equity tie-up with leading social networking company Tencent (HKEx: 700). One of those has JD making a major personnel move in its underdeveloped C2C e-commerce business that it recently acquired in the Tencent tie-up. The other has JD on the cusp of launching a major new sales channel over Tencent’s wildly popular WeChat mobile messaging service.

From a broader perspective, I personally welcome JD’s sudden eagerness to get back to the job of boosting its core e-commerce business, since its IPO had become a major distraction for much of the past 2 years. JD finally floated its shares on the Nasdaq last week, in a strong offering that raised $1.8 billion and saw the company’s stock rise 10 percent on its first trading day.

In the spirit of getting back to business, let’s look at the latest 2 developments from JD and what they might mean as it tries to challenge Alibaba. Both developments are a direct result of JD’s March tie-up that saw it sell 15 percent of itself to Tencent. As part of that deal, Tencent merged its B2C e-commerce service, known as Yixun, into JD’s own core B2C service. Tencent also handed over its C2C service, the eBay-like (Nasdaq: EBAY) Paipai, to JD to manage.

In one of the first major moves since those changes, JD has announced a major new management shift at Paipai. The move is relatively straightforward, and will see an industry executive named Lin Chen take over as head of business development at Paipai, coming to the company from his former job as CEO of luxury goods e-commerce firm Yintai.com. (English article)

I’ll admit I’m unfamiliar with either Lin Chen or Yintai, but the move seems to indicate that JD intends to try to build Paipai into a serious business. Industry watchers will know that China’s B2C sector is relatively competitive, with Alibaba controlling about half and JD about a quarter of the market. But C2C, which sees consumers sell products directly to each other, is completely dominated by Alibaba’s popular Taobao service. Obviously it will take more than an executive appointment by JD to challenge Alibaba’s dominance; but this move does seem to indicate JD could become more aggressive on C2C in the coming months as it tries to build up the business.

In the other major news bit, media are reporting that a launch is imminent for a specialized JD shopping channel on one of the top pages of Tencent’s WeChat service, in what could become a major new source of business for JD. (Chinese article) This particular development was first disclosed last month (previous post), and the latest reports say JD is aiming to have the feature go live in time for a big promotional event on June 18.

Tencent reported earlier this month that it currently has a massive 400 million active users for WeChat, and the company is working hard to find ways to earn money from the service. E-commerce certainly looks like a good way to achieve that goal, even though Alibaba has had less success in its similar partnership with microblogging leader Weibo (Nasdaq: WB). This Tencent-JD initiative could stand a better chance of success due to both companies’ better record at execution, and I’m quite optimistic we could see big results from this WeChat e-commerce move in the next 12 months.

Bottom line: The newest moves from JD show it is preparing to mount major new challenges to Alibaba in the C2C space through its Paipai service, and in B2C through its coming WeChat tie-up.

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