INTERNET: Tencent, JD Join Alibaba in Singles Day Courting Frenzy

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Bottom line: A growing alliance between JD.com and Tencent could start to seriously challenge Alibaba’s dominance of China e-commerce in the next 2 years, as the rivals use the upcoming November 11 Singles Day to showcase their prowess.

JD joins Nov 11 courtship of online shoppers

This year’s November 11 Singles Day shopping extravaganza is shaping up as a guerrilla courtship of Chinese online shoppers by the nation’s 2 e-commerce leaders, as each vies for supremacy on a date that’s become the world’s busiest for online buying. Just days after leading operator Alibaba (NYSE: BABA) announced its own grand plans to seduce shoppers, rival JD.com (Nasdaq: JD) has come out with its own counter scheme that aims to court China’s hordes or singles in an alliance drawing on its growing ties with leading social networking (SNS) operator Tencent (HKEx: 700).

The stakes in this brewing war are huge. Last year alone, Alibaba reported 278 million orders worth $9.3 billion around the promotion that it created on the November 11 holiday, which represents the epitome of singledom due to its numerical representation as 11-11, or four 1’s. JD declined to give a sales value for its orders last year, but said it posted 14 million orders, which would translate to far more modest but still significant sum of about $500 million worth of merchandise sold based on Alibaba’s rate.

Those amounts are still far short of the more than $50 billion in estimated sales during the US Black Friday period that falls on the day after Thanksgiving each year. But they are more than double the estimated $2 billion in spending during the US Cyber Monday online shopping festival that comes the Monday after Thanksgiving and is the closest thing to China’s November 11 Singles Day.

JD.com has long been a distant second to Alibaba in the e-commerce market, but has been gaining momentum over the last year following its equity tie-up with Tencent, owner of the hugely popular QQ and WeChat social networking (SNS) platforms. The pair later launched a dedicated shopping channel on WeChat, which boasts more than 500 million users, and now are once again pooling forces in their just-announced November 11 collaboration to lure buyers away from Alibaba.

Empowering Independent Merchants

Their newest collaboration takes direct aim at Alibaba, which operates online marketplaces populated by third-party merchants. JD.com previously used a more conventional model that saw it sell all merchandise on its site to consumers directly, helping to control quality and delivery times but greatly reducing the variety of products it could offer. But lately the company has been moving into Alibaba’s model, and is taking a new step forward in that direction with this latest initiative that will launch around this year’s Singles Day promotion.

Wording in the announcement is quite brief and vague, saying only that the new partnership will give third party merchants a variety of digital marketing tools that leverage JD’s and Tencent’s resources for selling over mobile platforms. (company announcement; Chinese article) Thus, presumably Tencent could gather data on the online activities of QQ and WeChat users, and then make that information available to third-party merchants to help them better target the most appropriate customers.

The move looks like more of a longer-term effort to lure away third-party merchants from Alibaba’s popular Taobao and Tmall online marketplaces, but JD and Tencent are smartly choosing the hype-filled Singles Day holiday to kick off the new collaboration. Their announcement comes a week after Alibaba held its own Singles Day countdown launch event. During that kick-off in its hometown of Hangzhou, Alibaba made its own strategically important announcement that it would move the event headquarters to Beijing where it should draw far bigger crowds of reporters. (previous post)

Alibaba has followed up that initial launch with more details, including its forecast that this year’s event will feature 6 million products from 40,000 merchants, including 5,000 international brands from 25 countries. The actual November 11 event at Alibaba’s headquarters is also turning into an extravaganza in its own right, including a lineup of undisclosed stars who will perform in a program directed by Feng Xiaogang, arguably one of China’s hottest directors.

I honestly don’t know where all of this is going, and suspect that shoppers could ultimately burn out on all this consumption-oriented merrymaking over the next few years, especially if China’s slowing economy puts a damper on spending. But until that happens, we can probably expect more bells, whistles and other frills in this booming courtship between Chinese e-commerce companies and shoppers that has quickly morphed into an online spending binge like no other.

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