Tencent acquires JD.com shares

Chinese e-commerce market consolidation

We have recently described the rise of Chinese B2C e-commerce – in this article, we will sketch the outline of the current market situation, especially in the light of the recent news about Tencent acquiring 15% stake in JD.com, which was revealed today.

tencent JD.com

 There are two major players on the market and one of them has made an important move today. 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 platform. JD.com (previously 360buy.com) is convenient, reliable and very popular among the customers, who can purchase brand products on 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 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 the 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 transaction between buyers and sellers. Taobao and Tmall hold the impressive 51.3% share in the Chinese e-commerce market.

Amazon.cn is still trying to get their foot in the door and secure position as a one of the three biggest online retailers in China, but it is still a long way. Company engages in the prices 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 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 the revenue from computer and mobile games, but the fast development of the Chinese e-commerce may radically change their income structure.