You are here

China e-commerce competition intensifies as JD.com, Alibaba go niche

ALjd.jpg
China's JD.com Inc has ratcheted up competition with Alibaba Group Holding Ltd through a US$1.55 billion deal with an online car sales portal, as the e-commerce giants gun for high-value markets like cars, tourism and homes.

[HONG KONG] China's JD.com Inc has ratcheted up competition with Alibaba Group Holding Ltd through a US$1.55 billion deal with an online car sales portal, as the e-commerce giants gun for high-value markets like cars, tourism and homes.

Following over a year of fervent investment activity in China's tech sector, niche e-commerce markets are now in vogue as targets, analysts say. Taking stakes in specialists like Bitauto Holdings offers an avenue into big-ticket purchases which fall outside major e-commerce companies'traditional focus of day-to-day goods.

Such tie-ups also lend smaller firms some of their bigger peers' clout, directing potential customers their way from websites like those of JD.com and Alibaba. "JD.com is trying to position itself as the go-to e-commerce platform, and this could be an important category expansion for them," said John Choi, a Hong Kong-based Internet analyst at Daiwa Capital Markets.

JD.com's deal late last week was the company's biggest ever, with its share of the investment in Bitauto valued at US$1.35 billion. Chinese social networking and video game giant Tencent Holdings Ltd, which owns 17.6 per cent of JD.com, will also take a 3.3 per cent stake in Bitauto.

Beijing-based JD.com will take 25 per cent of Bitauto, giving China's second-biggest e-commerce player a foothold in auto sales. Bitauto will in turn benefit from JD.com's much larger audience and brand recognition, as the online retailer drives traffic to the car sales specialist.

China's vehicle market, the world's biggest, may expand 7 per cent this year, roughly matching last year's growth, although just half the pace of 2013 as the economy slows, according to the China Association of Automobile Manufacturers.

Other specialist areas attracting players like JD.com, Alibaba, Tencent and Baidu Inc include tourism and pharmaceuticals. Last month, JD.com and investment firm Hony Capital led a US$148 million round of funding in travel company Tuniu Corp.

Alibaba invested 2.81 billion yuan (US$454 million) in a hospitality technology provider in September to help the e-commerce firm develop its own travel business.

Last week, JD.com Chief Executive Richard Liu in a press release on the Bitauto deal signalled that investments in specialist commerce companies would continue for some time. "This investment is a major step forward in our long-term strategy of partnering with industry leaders in the vertical categories most important to our customers," said Mr Liu.

REUTERS