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Alibaba rival JD.com to top sales target as Chinese shoppers flock to Internet

Two Jingdong, also known as JD.com, couriers chat at the entrance to the company's Haidian district delivery station in Beijing, November 20
Two Jingdong, also known as JD.com, couriers chat at the entrance to the company's Haidian district delivery station in Beijing, November 20

By Adam Rose

BEIJING (Reuters) - JD.com, China's second-largest e-commerce site, is set to exceed 100 billion yuan ($16.47 billion) in annual sales for the first time in a market that has drawn investment from global retailing names such as Amazon and Wal-Mart.

Sales volumes will likely eclipse the company's target of 100 billion yuan compared with 60 billion yuan in 2012, JD.com said in a press release on Monday. The smaller rival of China's Alibaba Group Holding Ltd said it has broken even for the first three quarters of the year and may turn profitable at any time, declining to be more specific.

China's business-to-consumer e-commerce sales may surpass $180 billion this year due to a rising Internet penetration rate, expanding middle class incomes and a steadily improving distribution network, according to New York-based market research firm eMarketer.

The country's e-commerce prospects have attracted investment from Wal-Mart, which now owns roughly 51 percent of Chinese e-tailer Yihaodian. Amazon bought e-tailer Joyo.com in 2004, which eventually became Amazon China.

"The market itself is growing, we're also growing our market share," JD.com's Chief Operating Officer Shen Haoyu told Reuters in a telephone interview on Monday. "People are getting more comfortable with buying online."

As a private company, JD.com does not release revenue figures, and would not say if it broke even in previous years.

"We're not making crazy money, but we're not losing crazy money," Shen said.

JD.com, previously known as 360Buy, has done well enough to attract foreign investors.

Over the past six years, it has secured $2.23 billion from investors including the Ontario Teachers' Pension Plan and Saudi billionaire Prince Alwaleed bin Talal's Kingdom Holding Co, using these funds to expand its logistics network and employ aggressive pricing tactics.

But despite its fast growth, JD.com still stands in the shadow of its main B2C competitor, Alibaba's Tmall, which dominates 51.1 percent of the market, according to Chinese Internet market research firm iResearch. JD.com has 17.5 percent and Amazon China controls just 2.6 percent.

JD.com has tried to differentiate itself by operating its own network of couriers and warehouses, a factor it says ensures timely and efficient delivery. Tmall and Alibaba's online B2B marketplace Taobao still depend on merchants and external courier firms for their logistics.

"If they can continue to build their niche in the market place, because of their reputation for good service, their reputation for good products ... they have firm ground to stand on," said Ben Cavender, principal analyst at China Market Research Group.

But the gap between the two competitors is still large. During a 12-day sale centered around China's equivalent of Cyber Monday, JD.com's turnover reached $1.6 billion, far less than Tmall and Taobao, which had one-day turnover of $5.7 billion combined.

IPO SPECULATION

The high-profile cash infusions from abroad have fuelled speculation about a possible initial public offering.

JD.com was valued at $7.3 billion in late 2012 after a round of financing. At the time it denied reports it was planning an IPO before 2013.

In 2011, Thomson Reuters publication IFR reported that an IPO valued at $4-$5 billion was imminent. The sale did not materialize.

On Monday, Shen said JD.com does not have specific plans for an IPO.

"The company will pick the right time to IPO. We'll consider the market situation, we'll consider the company's situation. At this point we don't have specific plans," he said.

The e-tailer is not the only target of speculation.

Shen said the timing of a possible Alibaba IPO is not a factor for JD.com.

(Reporting by Adam Rose; Editing by Ryan Woo)

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