Alibaba Group Holding Ltd dominates the Chinese e-commerce market, but the rising number of newcomers is something that the group has to watch for. One big threat that the Chinese firm has to watch out for is JD.com, says a report from the Wall Street Journal.
Rising rivalry in Chinese online retail market
The rivalry between the two is so intense that it has been nicknamed “the great cat and dog war,” signifying the mascots of Alibaba’s Tmall website and JD.com. Alibaba’s recent effort to woo the Uniqlo brand of basic-fashion clothing away from JD.com suggests the importance and the growing rivalry in the world’s biggest online retail market, which last year had a volume of 2.82 trillion yuan ($441bn), says the WSJ.
Around 80% of all the Chinese online shopping sales passes through Alibaba and its other sites of which Taobao is the most important, holding around eight million sellers. For JD.com’s, Paipai does the same work, but its actual number of sellers is not known.
In the Q1 2015, Alibaba’s share was 58.6%, which was more or less same than the last year, while JD.com’s was able to raise its market share to 22.8% from 19.2% for the same period, says the report citing data from iResearch.
Though for the year ended March, Alibaba’s total volume transaction was 2.44 trillion Yuan, which was bigger than the next five big players, the firm accepts the competition is rising. In an interview to the WSJ, Alibaba Executive Vice Chairman Joseph Tsai, said the competition “is just the nature of the business, especially in China,” adding “The market is so big and the potential prize of winning is so attractive, you have a lot of entrepreneurs as well as capital backing them.”
Alibaba feeling the heat
More and more niche players are making efforts to get a piece of booming Internet spending including Jumei International, a Chinese online seller of beauty products; Vipshop, an electronic discount fashion retailer; Yihaodian, a Chinese Internet grocery store.
The rising rivalry is already showing on the Alibaba balance sheet. Last week, the firm posted less than expected revenue for the June quarter.
After a gloomy 2Q, there are reports suggesting many of the hedge funds have sold their stake in the firm. A report from the New York Times claims that the Tiger Global sold 6.6m shares of the Chinese firm, which is almost its entire stake in the online giant. Viking Global Investors also shed a major portion of its stake in Alibaba. Apart from the Hedge Funds, many analysts have also lowered their price target on the stock, citing near-term headwinds.