JD.com, the Chinese online retail giant, has revealed plans to start retail sites dedicated to selling luxury goods. This comes in the wake of Alibaba Group revealing similar plans as the two Chinese e-commerce firms fight for high-end shoppers. According to the Wall Street Journal it was the JD.com’s chief executive officer, Richard Liu, who went public with the news on Monday.
Earlier this month Alibaba unveiled a platform for selling luxury brands which included British label Burberry and Spanish label Loewe. Two months ago JD acquired a stake in Farfetch, a UK-based e-commerce platform that caters to a high-end clientele at a price of $400 million.
According to analysts, JD.com enjoys more trust from high-end shoppers compared to its rivals whose reputation has been damaged by the proliferation of fakes on their sites.
“Wealthier people prefer to buy from JD when it comes to expensive items, such as goods over Rmb1000. They are more concerned with fakes on T-Mall and Taobao [another rival site],” Shaun Rein, an analyst at Shanghai-based consultancy China Market Research Group, said.
The news that JD.com is launching a luxury products platform coincided with the Chinese e-commerce firm releasing its second quarter results which showed that it recorded a loss despite the fact that there was sales growth. In the three months that ended on June 30, JD sustained a net loss amounting to $42.3 million. Net revenues on the other hand increased by 44% year-over-year largely thanks to the increasing spending power of the middle class in China.
The number of annual active accounts rose by 37% to reach 258 million while the average amount that each user spent on the e-commerce site also increased. Steven Zhu predicted that JD.com will be the main beneficiary of the consumption growth expected to be witnessed in the world’s most populous country. According to Zhu JD.com is eating into the market share of T-Mall and it is also enjoying higher user growth compared to its rival.
Earlier in the year, JD reported a profitable quarter, the first since the Chinese online retailer went public in 2015. JD’s market capitalization now stands at $66 billion and it was at one point expected to surpass the market value of Baidu, the Chinese online search giant. Analysts are however of the view that it will take some time before JD’s profitability can catch up to that of T-Mall or Baidu.