In 2017, Wal-Mart Stores Inc (NYSE: WMT) has proven that there’s plenty of room for two e-commerce giants to thrive in the U.S. market. According to Stifel analyst Scott Devitt, there’s no need for U.S. investors to pick between Alibaba Group Holding Ltd (BABA) and JD.com Inc (JD) in China.
Devitt says the massive Chinese e-commerce market is large enough to comfortably support multiple winners. While Alibaba and JD continue to compete with each other for market share, both will likely deliver huge growth numbers in the years ahead.
Stifel says e-commerce will account for 20 percent of China’s total retail sales within two year’s time. The firm expects total online sales in China to grow at a compound annual growth rate of 16 percent over the next three years and hit $1 trillion by 2019. In the first nine months of 2017, online sales in China grew 34 percent, according to the National Bureau of Statistics.
“We have followed the development and growth of the eCommerce market for many years and believe Alibaba and JD are both well-managed and well-positioned leaders in China,” Devitt says.
He says the two domestic companies have effectively shut down attempts by Amazon.com (AMZN) to tap into the Chinese market and should both be well-positioned to reap the rewards of a number of long-term catalysts.
Devitt says both Alibaba and JD have opportunities to improve their delivery logistics, expand their presence in rural markets, integrate online and offline channels, target mobile shoppers and increase operational efficiencies. In addition, overall e-commerce penetration in China is only about 34 percent (compared to 65 percent penetration in the U.S.), leaving plenty of room for growth.
“Alibaba and JD.com have both achieved significant scale and are investing in initiatives that we expect will benefit long-term growth,” Devitt says.
Despite year-to-date gains of more than 40 percent each for U.S. e-commerce leaders Amazon and Walmart, JD and Alibaba have outshined…
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