Chinese e-commerce company JD.com (JD) is the second largest (by transactions) after Alibaba (BABA), explains David Fried, editor of The Buyback Letter.
As of August, JD.com had more than 314 million annual active user accounts, which is a large chunk of China’s 800 million internet users. (For context, rival Alibaba had twice the number of users.)
JD is gearing up to face off with Amazon (AMZN) more directly in its home market, with JD setting up a U.S. online store (aided by Google) to serve the domestic market. JD has already been selling things to Americans, through a partnership with Walmart.
So running a domestic online store would allow JD to sell directly to American consumers, which will help it diversify its customer base. Currently, the majority of its revenue is generated in China. For context, the U.S. online retail market was worth $453.5 billion in 2017, up from $391 billion in 2016.
JD will give Amazon a run for its money, but it won’t be necessarily easy for JD. Amazon has the very successful Prime loyalty program, and Amazon has partnered with SNAP so that all the teens and millennials using Snapchat (80 million) are sent directly to Amazon when they want to buy something online.
JD is getting into artificial intelligence and automation, unveiling new products based on cutting-edge tech (drone delivery, self-driving trucks, automated warehouses). It’s spending a lot to do that — Q2 tech expenses were up 70% year-over-year.
Q2 showed net revenues from online direct sales up 29% from the prior-year quarter. That accounted for 90% of the total Q2 sales, driven by demand for home appliances, food and beverage, cosmetics, home furnishing and baby things.
The company is expected to show Q3 revenue of $15.80 billion (up 25.54% from the prior-year quarter). Shares outstanding have been reduced by 15.448% in the last 12 months.
