How do the top listed Chinese and American e-commerce companies compare?
In the United States, Amazon, eBay, and Walmart are the largest e-commerce companies by gross merchandise volume. In China, the biggest e-commerce firms are Alibaba, JD, and Pinduoduo. Tencent is a big investor in JD and Pinduoduo, and an internet giant in its own right. All of these companies are listed outside of mainland China, and have continued to innovate in order to survive and grow.
US v Chinese e-commerce industry development
In the US, consumers spent $513.61 billion online in 2018, an increase of 14.2% from last year. E-commerce represents a rising share of the retail industry, representing 14.3% of total retail sales in 2018 and over half of all retail sales growth. The industry is continuing to grow and mobile phone shopping, while not as popular in the US as in China, is expanding.
In 2018, Chinese online retail sales expanded by 24% from 2017, totaling 9 trillion RMB. Some of the sales are solely domestic, while others involve cross-border e-commerce. Improvements in cross-border payment and logistics have boosted these sales. In fact, in the past three years, the growth of cross-border e-commerce business has been over 50% for imports and exports. The top e-commerce trading provinces are Guangdong, Zhejiang, Beijing, Henan, Shangdong, Shanghai, and Chongqing.
China’s e-commerce industry experienced a rapid development period between 2009 and 2015, particularly after 3G was officially commercialized. Tmall and VIPshop went online during this time, and domestic e-commerce companies launched a wave of listings. Then, after 2016, e-commerce entered a period of mature development. Sales expanded into a variety of categories, and logistics and after-sales services were optimized. Commercial businesses grew their cross-border online businesses at this time. B2C is the main channel of online shopping, and mobile sales are high. B2C sales revenues were 265.2 billion RMB in 2017, while C2C revenues amounted to 174.5 billion RMB.
Alibaba v. Amazon
Alibaba (NYSE: BABA) has three times the merchandise volume that Amazon does, while Amazon has about double the market capitalization and far greater revenue. In China, Alibaba.com, along with Taobao and Tmall marketplaces hold over half of the country’s online retail market share, while Amazon is approaching half of the US online retail market share. Both Alibaba and Amazon have relatively low levels of net profit. However, Alibaba’s operating margins are much higher than Amazon’s, falling in at 31.28% in mid 2018 versus Amazon’s 2.31%.
Amazon’s (NASDAQ: AMZN) sales grew 31% between 2017 and 2018, to $232 billion. Amazon company has benefited from both direct sales as well as the use of third-party marketplace sales to drive its transaction volume and expand its market share. In addition, Amazon has a subscription-based business model called Amazon Prime. Alibaba’s business model is different, acting as a middleman between buyers and sellers online. Its largest site, Taobao, is a fee-free market place, while a fee can be paid to rank higher on the site’s search engine. Tmall caters to larger retailers.
Both Alibaba and Amazon also offer cloud computing services, which have helped to increase profits for both companies. Amazon Web Services provides cloud computing services and data storage space, which are used by large firms like Netflix and Unilever. Alibaba offers cloud services mainly for domestic use, though the company has plans to expand services globally. Additional business areas include Amazon Video and Amazon Go for Amazon, and AliMusic, Alibaba Pictures, AliHealth, and AliSports for Alibaba.
eBay and Walmart v. JD and Pinduoduo
eBay (NASDAQ: EBAY) is much smaller than Amazon, with only 7.2% of retail ecommerce market share in 2018. The site has 180 million active buyers, but has faced some barriers to expansion because it is perceived as selling only used items, as opposed to Amazon, which is viewed as purchasing new items. The online company is attempting to look somewhat more like Amazon in order to boost its market share, combining product listings on the same item in order to help customers find the lowest price and offering customers a Best Price Guarantee to guarantee customers the lowest price of any website.
Walmart (NYSE: WMT) registered 4.0% of online sales, and the company is putting a lot of resources into expanding e-commerce. Its marketplace is gaining more sellers and offers goods that may not be sold in stores. The company has cooperated with upscale brands such as Lord and Taylor in order to move toward higher value products. In addition, Walmart has added hundreds of automated pickup towers in the past couple of years to allow customers to pick up general merchandise, cutting shipping costs.
Tencent-invested JD (NASDAQ: JD) has a strong logistics network with over 500 warehouses and 7,000 delivery stations. The company is able to ship 90% of its orders to customers by the next day. JD partners with international brands to help them reach Chinese consumers. In terms of direct online sales, JD.com is the number one e-tailer in Asia.
Pinduoduo (NASDAQ: PDD), another Tencent-invested firm, has rapidly increased its market share, and currently ranks third in e-commerce sales behind Alibaba and JD.com. Pinduoduo provides discount purchases for consumers who buy directly from wholesalers or factories. The company relies on Tencent’s WeChat to distribute the group buying plans, and handles 20 million orders every day. The firm raised $1.63 billion on the NASDAQ.
Tencent (HKG: 0700) is an internet giant that owns stakes in Chinese e-tailers. The company uses its popular social media platform WeChat to enable online shopping. Tencent is also known as a gaming powerhouse.
Of these companies, Amazon’s stock price has the greatest value, followed by Alibaba, Walmart, Tencent, eBay, JD, and Pinduoduo. (include stock price trend chart here) All of these firms have different features and continue to innovate in order to expand their market share. As a result, the e-commerce industry in both the US and China appears to be unstoppable at present.