Price-conscious Chinese consumers, particularly those in the tier 3 and 4 cities, are increasingly using e-commerce platforms, according to Donal Reynolds, investment director for global equities. He particularly likes China’s JD.com.
“JD.com has a fully-integrated logistics company with about 20,000 staff and 100 warehouses. A key differentiator of its business is that 80% of orders receive a same day or next day delivery service,” he wrote in a research note.
He said it is currently the second largest e-commerce company and growing faster than market leader Alibaba.
Reynolds believes that JD’s alliance with Tencent, China’s leading social-media player, could challenge the Alibaba-Weibo alliance.
Earlier this year, MSCI announced that effective November, it will include Alibaba and Baidu into its MSCI China Index. Nitin Dialdas, CIO of Mandarin Capital Partners told Fund Selector Asia in September that he expects other major companies such as JD.com and Ctrip to be added in the future.
Reynolds also likes other technology stocks such as TMall and VipShop.
“Vipshop is a prime example of a company that uses a SoLoMo [social, mobile and location] strategy to drive sales. The [precision-targeting] nature of its business allows the firm to have 900 brand partners and dispose of excess inventory at reduced prices without damaging the brand value.”
“What is clear about these platforms is that they find their niche and deliver on their proposition,” Reynolds said. “The scale of opportunity is significant. This is irrespective of the highly-competitive environment and a slowdown in economic growth.”
