Formula races Alibaba v Tencent: the battle for China’s e-commerce deliveries
I N 2019 RICHARD LIU told couriers working for JD.com that the Chinese e-commerce giant he founded would cancel their base pay after a 2.8bn yuan ($438m) loss the previous year, its 12th consecutive one in the red. Riders would make only a commission on deliveries. If the company did not cut back on spending, Mr Liu warned, it would go bust in two years.
Far from collapsing, two years on JD Logistics, JD.com’s delivery division, is on a roll, fuelled by a boom in Chinese e-commerce (see chart). Its parent company’s revenues jumped by 39%, year on year, in the first quarter, to 203bn yuan. On May 26th Pinduoduo, an upstart rival that also offers customers delivery by JD Logistics couriers, reported quarterly sales of 22bn yuan, 239% higher than a year ago.
The State Post Bureau expects logistics companies to deliver more than 100bn parcels this year, twice as many as in 2018. Overall spending on logistics in China is projected to hit 16trn yuan in 2021 and surpass 19trn yuan by 2025. That would make it the world’s largest market. The logistics business has also avoided the worst of the crackdown against Chinese big tech, which has seen firms such as Alibaba and Tencent (which owns a large stake in JD.com) taken to task by the Communist authorities over their growing power.
