Opinion

The Great Debate

from Breakingviews:

China’s other e-commerce giant is priced to go

By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Being second has its advantages. JD.com, China’s number two e-commerce company, has set an indicative range for its initial public offering that values it at around $23 billion. That’s far behind the $100 billion-plus price tag attached to rival Alibaba. But it leaves room for a decent performance.

Next to Alibaba, JD.com is an also-ran. It had 6.8 percent of China’s online shopping market in 2013, while its larger rival had around 84 percent, according to figures from iResearch. Moreover, JD.com loses money because it is investing heavily in logistics to handle delivery of its products. That’s an overhead that Alibaba, which matches buyers and sellers online, doesn’t have to worry about.

The best way to value JD.com up is as a multiple of its forecast sales. Assume that transactions on JD.com grow at the same 31 percent rate as the Chinese market is forecast to expand this year, and 55 percent of that value is converted into revenue. In that case, JD.com’s top line for 2014 would be 91 billion yuan ($14.6 billion).

Amazon, another serial investor with razor-thin margins, trades at 1.5 times this year’s sales, based on Eikon estimates. On the same multiple JD.com would be worth $22 billion - at the low end of the company’s IPO range.

It’s time to retire Cyber Monday

It’s that time of year again. Time for Americans to gather, eat turkey with all the fixings, and give thanks for what they’ve got. It’s also time for our old friend Cyber Monday — the Monday following Black Friday — one of the biggest shopping days of the year. But frankly, it’s a holiday we can do without.

I have nothing against online shopping. I’d much rather sip a cappuccino and shop in the comfort of my own home than endure long lines and fight with other harried customers in the post-Thanksgiving rush. But this holiday no longer reflects the realities of digital shopping in 2013.

First mentioned in an announcement by Shop.org on November 28, 2005, Cyber Monday was dreamed up by marketers to address a legitimate consumer need. Few U.S. consumers had high-speed Internet access at home, and it was reasoned that a dedicated day to encourage people to shop online when they returned to work the following Monday would give a boost to holiday sales.

Ecommerce loses immunity to economy woes

— Eric Auchard is a Reuters columnist. The opinions expressed are his own –

For years, Web retailers have touted their convenience and efficiency over conventional retailers, and enjoyed surging double-digit sales growth, especially in the crucial year-end holiday shopping season.

But the steady draining of consumer confidence reflected in recent government data and the latest market research reports suggest the online retail industry is bracing for a humbling first-ever year of flat or even contracting holiday sales.
amazon
Ecommerce, for reasons tied to both the global economic crash and Web-specific factors, is poised to fall harder than the much maligned retail store industry, itself struggling with recent high-profile bankruptcies and widespread signs that consumers are looking to sharply curtail their spending.

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