JD.com (NASDAQ: JD) and Alibaba (NYSE: BABA) dominate the e-commerce landscape in China. JD.com, the largest direct retailer in the country, squares off against Alibaba’s Taobao and Tmall, the top third-party online marketplaces.
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Comparing Strategies
While JD.com still predominantly relies on its first-party marketplace, it has been expanding its third-party platform to attract more merchants and customers. In contrast, Alibaba’s Taobao focuses on consumer-to-consumer transactions, with Tmall catering to larger merchants and brands.
Both companies manage their own shipments through logistics subsidiaries. JD recently spun off its unit, JD Logistics, in an IPO, while Alibaba initially planned a similar move for its Cainiao logistics unit but shelved the idea.
In addition to its core marketplace, Alibaba owns Lazada in Southeast Asia, Trendyol in Turkey, and AliExpress in the cross-border segment. In comparison, JD’s expansions outside of China have been limited, focusing mainly on strengthening its domestic e-commerce foothold.
Alibaba also boasts the largest cloud infrastructure platform in China, Alibaba Cloud, while JD operates an array of new businesses encompassing cloud services, financial technology, and healthcare.
Once holding a virtual duopoly in China’s e-commerce sector, JD and Alibaba now encounter stiff competition from PDD (NASDAQ: PDD), a rapidly-growing player in discount goods and online produce markets.
Growth Trajectories
JD.com saw revenue climb by 28% in 2021, followed by 10% in 2022, and a modest 4% in 2023 amid challenges like zero-COVID lockdowns and intensified rivalry. In contrast, Alibaba registered a 19% revenue surge in fiscal 2022, tapering to 2% in fiscal 2023 and picking up slightly to 8% in fiscal 2024.
While PDD exhibits astonishing progress with a CAGR of 61% from 2020 to 2023 and a projected 68% growth rate in 2024, fueled by initiatives such as its online agricultural platform and the expanding Temu cross-border marketplace.
Profitability Metrics
JD.com, deriving most revenue from its resource-intensive first-party marketplace, operates at lower margins compared to Alibaba, which leans on its higher-margin third-party model. Both companies witnessed substantial efforts in margin enhancement over the past years, with JD’s EPS more than doubling in 2023 and Alibaba’s rising by 14% in fiscal 2024.
Trading at attractive valuations – JD at a forward P/E of 10 and Alibaba at 13 – both stocks, however, face valuation pressures from geopolitical tensions between the U.S. and China.
The Winning Bet: Alibaba
Given Alibaba’s diversified portfolio and superior growth rates, it appears poised as the stronger contender for a recovery compared to JD. While both may benefit from a peaceful resolution in U.S.-China relations, Alibaba’s broader scope positions it as the more promisingly resilient choice.
Considering an Investment
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon and JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.