By Lara Farrar
with contributions from Amanda Kaiser
 on November 16, 2015

BEIJINGJD.com said Monday that its third-quarter net revenue jumped 52 percent to 44.1 billion renminbi, or $6.9 billion, as losses widened due to the growing costs of the company’s direct sales business and marketing efforts.

Executives said net revenue growth was above expectations.

China’s second-largest e-commerce platform and Alibaba’s number one rival said its net loss attributable to ordinary shareholders was 530.8 million renminbi, or $83.5 million, compared to 164.4 million renminbi, or $25.8 million, for the same period last year.

Gross Merchandise Volume, or GMV, for the third quarter of grew 71 percent to 115.0 billion renminbi, or $18.1 billion.

This is a big month for e-commerce in China. Both JD.com and Alibaba reported strong sales growth on Singles’ Day, the world’s largest online shopping blitz that takes place Nov. 11. JD.com said it saw its total orders for the day increase by 130 percent while its gross merchandise value grew 140 percent, compared with its Singles’ Day sale last year.

Alibaba said consumers spent $14.3 billion on its shopping platform for Singles’ Day, beating analysts’ expectations and smashing the Chinese e-commerce giant’s 2014 sales record of $9.3 billion worth of merchandise.

JD executives said during an earnings call on Monday that they are “very encouraged” by growth in the third quarter despite intensified competition in the industry and relatively slow consumption growth in China.

Against the backdrop of slowing economic growth, retail sales rose 11 percent year-on-year for the month of October, a marginal increase from the 10.9 percent jump in September. October’s retail sales were the fastest yet for 2015.

Sidney Huang, JD.com’s chief financial officer, said the e-commerce company projects net revenue for the fourth quarter to grow between 47 percent and 51 percent on a year-on-year basis, including “some level of conservatism” because of the competitive landscape in China as well as uncertain economic conditions.

Slowing macro conditions “could impact our business,” Huang said. “But the extent has been small in the third quarter. We are confident that with better customer experiences, we are in a better position to weather any macro headwinds.”

Executives addressed the decision to shutter Paipai.com, its consumer-to-consumer platform. “At the end of the day, it is impossible to control counterfeits [on the platform],” Richard Liu, JD.com’s chief executive officer, said. “Only B2B platforms can offer a high quality customer experience.”

China’s e-commerce sector has been under increasing pressure from the government to eradicate the sale of grey market and counterfeit goods. Rival Alibaba has also faced increased scrutiny in recent months from government regulators expressing concern about the alleged sale of fake goods on Taobao.com, its consumer-to-consumer site.

JD.com’s flash sales business, launched in early 2014, saw a 300 percent year-on-year increase with apparel, cosmetics and accessories contributing to the bulk of sales.

Executives also highlighted JD.com’s competitive advantage in terms of delivery, noting that around 90 percent of orders are delivered on the same or the next day, a record that beats rivals in the marketplace.

Sales via mobile devices are also growing. Fulfilled orders placed via mobile phones accounted for roughly 52 percent of total orders fulfilled in the third quarter, an increase of more than 210 percent from the same period last year.

Capturing sales via mobile phones is one of the most important strategies in China’s e-commerce market now. JD.com has inked a deal with Tencent, which operates WeChat, a mobile chat application, to link consumers directly with its e-commerce platforms.

Liu, JD.com’s ceo, said the partnership with Tencent puts JD.com “at the fingertips of virtually every Chinese mobile online consumer and continues to drive rapid user growth.”

 

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