Amazon and Shopify are omitted as they are based in the U.S and Canada and dominate in these regions and Europe, where Alibaba (NYSE: BABA) has far less of a footprint. Instead, we delve into three companies in various emerging markets that are providing Alibaba with stiff competition.
JD.com (NASDAQ: JD) is one of Alibaba’s main competitors, although it remains relatively unknown. It is second in terms of market share in China’s e-commerce space. Tech giant Tencent owns a considerable stake in the business, and JD.com is also a member of the Fortune 500.
JD.com has faced many headwinds in recent years, which have undoubtedly weighed on the stock price such as the trade war, while CEO Richard Liu was also arrested on sexual assault allegations.
Annual active customer accounts increased by 24.8% to 387.4 million — greater than the entire U.S population. This base is growing, driven by new customers, including 70% from lower-tier cities in China and accounting for roughly 50% of GMV (gross merchandise volume) in Q1. A growing middle class and the largest consumer market in the world is likely to benefit JD.com in the years to come.
JD.com operates similarly to Amazon operating a website, logistics, and warehousing, and one day delivery as standard. Unlike Alibaba, it manages its logistics and holds inventory, which can be advantageous due to the economies of scale. It is also investing in drone technology which has been in commercial use since 2016.
JD.com is responsible for one of China’s biggest shopping events of the year “618”, and is often viewed as a measure of the health of the Chinese consumer. JD.com recorded ¥269.2 billion or $38.05 billion dollars in sales, up 33.6% from the year previously, which is level with Alibaba’s Singles Day, albeit over a longer time period.
In the past three years, revenue has nearly doubled, and in Q1 of 2020, revenue increased by 20.7% year-over-year. JD.com did not provide guidance due to the impact of COVID-19.
Sea Ltd’s (NYSE: SE) name stands for the geographical region in which it operates, Southeast Asia, with a population of over 585 million people. Sea Ltd operates three divisions with significant tailwinds — gaming, e-commerce, and payments. It operates in a region with a growing middle class and increasing internet penetration levels.
Garena is the only profitable division and a key driver of growth for the company. Its hit mobile game, “Free Fire”, has 80 million daily active users, and over half of the company’s revenue comes from this division. “Free Fire” was also the highest-grossing game in Latin America and Southeast Asia in Q1 of 2020.
Shopee is Sea Ltd’s e-commerce division and was launched in 2015 and is the region’s e-commerce leader. It is ahead of Alibaba’s Lazada in Southeast Asia in terms of GMV, and in Q1 of 2020, GMV was 74% higher than a year previously at $6.2 billion. SeaMoney is the third division and was launched in 2014, and TPV (total payment volume) for the quarter exceeded $1 billion. Much of the population in the region is unbanked, which leaves a tremendous runway for growth.
Sea Ltd appears to be only getting started and is already a leader in the e-commerce market, which may spell trouble for Alibaba’s expansion plans outside of China.
MercadoLibre (NASDAQ: MELI) is undoubtedly the leader in e-commerce in Latin America and operates the MercadoPago payments division. MercadoLibre has beaten off competition from Amazon and Alibaba to become the leader in the region, perhaps due to local knowledge and ability to navigate challenging economic and political climates.
MercadoLibre posted impressive results in Q2 of 2020 with revenue up 123.4% year-over-year to $878.4 million, while GMV was up by $5 billion — 101.5% in local currencies. These results were driven by a change in consumer behavior accelerated by COVID-19. MercadoPago also experienced significant growth with total payment volume up 142% in local currencies and fintech revenue increasing by 34% at $296 million.
With 605 million people in Latin America and massive growth in e-commerce and fintech, there is still a long runway for growth.
Alibaba is the clear leader in e-commerce in China, and both cloud and e-commerce divisions are still growing significantly. Although they may not be the leader in other geographical areas, if they can capture even a portion of these emerging markets, there is still significant room to grow.
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