The growth of online shopping in China is expected, but the benefit to established companies like Alibaba and JD.com is less certain. James Yang, a Hong Kong-based partner at Bain and Company, suggests that new strong competitors are entering the market. E-commerce accounted for 37.5% of China’s retail sales in 2023, up from 27.9% in 2019, according to Bain. China leads in e-commerce penetration in Asia, while US e-commerce penetration remains slightly below a pandemic-era peak of 16.4% of retail sales. Co-founder of Alibaba, Joe Tsai, expressed his confidence in the company’s ability to capture the growth in online shopping, which he expects to reach 40% of retail sales in China in the next five years. The growth in e-commerce is also supported by Yang. The increasing value of PDD Holdings, parent company of Temu, surpassed Alibaba’s market capitalisation again recently. Goldman Sachs analysts upgraded PDD to buy from neutral, citing potential growth in advertising revenue, strong free cash flow generation, and global expansion. Their valuation of Temu increased to $19 billion, excluding the company’s U.S. business due to geopolitical concerns. The performance of China’s e-commerce companies will be evaluated in the upcoming 618 shopping festival. Despite intense competition, UBS analysts are optimistic about JD.com, particularly in the supermarket category. Alibaba has increased investment in its international business, with AliExpress recently signing David Beckham as its global brand ambassador. TikTok parent ByteDance’s app Douyin is gaining market share in China, with brands and influencers primarily using it for sales through livestreaming. Douyin is expected to match PDD’s market share of 21% next year and surpass it by reaching 22% in 2026, according to Goldman Sachs. The video streaming platform Kuaishou, listed in Hong Kong, reported a year-on-year growth of 28.2% in e-commerce GMV in the first quarter. Analyst Sophie Huang at CMB International predicts a 25% growth in Kuaishou’s e-commerce GMV revenue this year.
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