Tencent acquires JD.com shares

We have recently written about the rise of Chinese B2C e-commerce. In this article, we will sketch the outline of the current market situation, especially considering the recent news about Tencent acquiring a 15% stake in JD.com.

Chinese e-commerce market consolidation

There are two major players in the market, and one of them has made an important move recently. China’s Tencent Holding, the owner of QQ and WeChat messengers, will pay $215 m for the 15% stake in JD.com, one of the most popular B2C e-commerce platforms.

JD.com (previously 360buy.com) is convenient, reliable, and very popular among customers, who can purchase brand products at a reasonable price. Payment methods include cash paid to the courier, and in major cities, the goods are delivered within 24 hours. As for 2012, JD.com had a 15.5% market share, but it has grown to 17.5% in Q1 2013.

The main competitor of JD.com is Taobao owned by Alibaba Group. Taobao has been the leading C2C platform for a long time and is also developing its own division Tmall.com, which offers B2C interactions, facilitating the sale of foreign brand products. Taobao’s main strength is Alipay escrow-based payment system, which secures transactions between buyers and sellers. Taobao and Tmall hold an impressive 51.3% share of the Chinese e-commerce market.

Amazon.cn is still trying to get its foot in the door and secure its position as one of the three biggest online retailers in China, but it is still a long way. The company engages in price wars and accepts losses at the initial stage, hoping to attract more customers. Last year, Amazon Kindle was made available for Chinese readers, offering many cheap and free-of-charge e-books. Amazon, according to various sources, holds no more than 1-3% of the market share. The delayed start of Kindle may have contributed to these unimpressive results.

The recent move by Tencent shows that it may be gaining ground. The company gets most of its revenue from computer and mobile games, but the fast development of Chinese e-commerce may radically change its income structure.