The insight: Both Alibaba and JD.com are expanding their ecommerce capabilities as they look to capture more spending from cautious Chinese consumers and defend their businesses from growing competition.
- Alibaba introduced an “instant commerce” feature to Taobao in late April that will deliver shoppers’ orders in under an hour. The retail giant also partnered with fast-growing Xiaohongshu to allow merchants to embed product links in social posts.
- JD is making an aggressive—and expensive—push into food delivery, challenging established leader Meituan.
How we got here: The companies’ offensive maneuvers come amid signs of a recovery in China’s retail landscape: Both reported better-than-expected retail growth in the previous quarter, despite deflationary pressures.
- Alibaba’s domestic ecommerce business, which comprises Taobao and Tmall, grew 9% YoY to 101.4 billion yuan ($14.15 billion), an acceleration from the previous quarter.
- JD reported its fastest growth since 2022, with sales rising 16% YoY and net income up 53%. That’s in part thanks to quick uptake for its food delivery service, which now handles nearly 20 million orders daily—roughly one-fifth of Meituan’s 2024 peak.
But looking past the topline growth, conditions appear more challenging.
- Both companies are spending heavily to establish a foothold in the quick commerce and food delivery spaces, respectively—a strategy that is not only a risk to profits, but also likely to exacerbate the price wars (and deflationary risk) roiling the retail landscape.
- That’s earned both companies—along with Meituan—a warning from Beijing to tamp down their increasingly aggressive efforts to compete with one another.
- At the same time, it’s unclear whether the uptick in consumption will be maintained once government subsidies run dry.
Our take: Much like their US counterparts Amazon and Walmart, both Alibaba and JD clearly see convenience as an important growth opportunity as consumers become more discerning. Those investments could enable the two companies to weather any further decline in sentiment stemming from the US-China trade war.