---
title: "The Midlife Crisis of Traditional E-commerce"
description: "Entering 2024, Alibaba and JD.com, two giants that have witnessed the transformation of China's internet industry, are struggling to maintain the 'accelerated' pace of their glory days. Facing the strong rise of new competitor Pinduoduo, the old leaders are anxious about growth. A close look at their financial reports reveals the answer to the growth problem. Now, to prevent further erosion of market share, Alibaba and JD.com are proactively seeking change. In fact, the competition in e-commerce may go far beyond this, and it is foreseeable that the e-commerce industry will no longer be a battlefield for just two oligarchs. Giants in low-speed growth..."
author: "初识"
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published: "2024-10-26"
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# The Midlife Crisis of Traditional E-commerce

> Entering 2024, Alibaba and JD.com, two giants that have witnessed the transformation of China's internet industry, are struggling to maintain the 'accelerated' pace of their glory days. Facing the strong rise of new competitor Pinduoduo, the old leaders are anxious about growth. A close look at their financial reports reveals the answer to the growth problem. Now, to prevent further erosion of market share, Alibaba and JD.com are proactively seeking change. In fact, the competition in e-commerce may go far beyond this, and it is foreseeable that the e-commerce industry will no longer be a battlefield for just two oligarchs. Giants in low-speed growth...

Entering 2024, Alibaba and JD.com, two giants that have witnessed the transformation of China's internet industry, are struggling to maintain the 'accelerated' pace of their glory days. Facing the strong rise of new competitor Pinduoduo, the old leaders may be anxious about growth. A close look at their financial reports reveals the answer to the growth problem. Now, to prevent further erosion of market share, Alibaba and JD.com are proactively seeking change. In fact, the competition in e-commerce may go far beyond this, and it is foreseeable that the e-commerce industry will no longer be a battlefield for just two oligarchs.
**Giants in Low-Speed Growth**
With the first half of the year over, the performance of the three major domestic e-commerce giants has been released one after another. In the first half of 2024, Alibaba's total revenue was 465.11 billion yuan, a year-on-year increase of 5.1%, with net profit of 24.941 billion yuan, a year-on-year decrease of 54.6%; JD.com's total revenue was 551.446 billion yuan, a year-on-year increase of 3.9%, with net profit of 20.959 billion yuan, a year-on-year increase of 59.7%; Pinduoduo's total revenue in the first half of the year was 183.9 billion yuan, a year-on-year increase of 104.9%, with net profit of 60.007 billion yuan, a year-on-year increase of 182.9%. From the perspective of revenue and net profit, all three giants maintained revenue growth, especially Pinduoduo, whose revenue growth was quite impressive, becoming the most profitable among e-commerce giants, while Alibaba, which previously sat firmly on the e-commerce throne, saw its net profit fall into negative growth in the first half of the year. Combined with the performance of these leading companies over the past few years, the growth rates of Alibaba and JD.com have been far lower than that of Pinduoduo. According to the performance data disclosed by the three companies, from 2021 to 2023, Alibaba's revenue growth rates were 27.6%, 19%, and 2% respectively; during the same period, JD.com's revenue growth rates were 27.6%, 9.9%, and 3.7%; while Pinduoduo's revenue growth rates were 58%, 39%, and 90% respectively. At this point, it is clear that the performance growth of Alibaba and JD.com has slowed significantly, while Pinduoduo, as a 'latecomer', has seen its growth climb all the way. Performance is often the most truthful result, reflecting that Alibaba and JD.com, which once competed with each other, no longer have each other as their only opponents, and the e-commerce field is no longer a battlefield for just two giants, but a melee among three or even multiple parties. From the actual situation, Alibaba and JD.com have entered a period of low-speed growth. In economics, there is a term called 'diminishing returns to scale', which means that as an economy grows to a certain extent, its growth rate will slow down. For Alibaba and JD.com, it seems they are also facing diminishing returns to scale. Their scale and business layout are quite large and extensive, increasing the complexity of management, leading to a decline in efficiency. By breaking down Alibaba's various business segments, one can get a glimpse of why its performance has fallen into low speed. Alibaba's business map covers a wide range of areas, including e-commerce, cloud computing, digital media and entertainment, innovative projects, and technology development, divided into six major segments: Taotian Group, Cloud Intelligence Group, Alibaba International Digital Commerce Group, Cainiao Group, Local Life Group, and Digital Media and Entertainment Group. Among them, the e-commerce segments such as Taotian Group are Alibaba's main and core business segments, currently accounting for about 40% of Alibaba's total revenue, serving as the foundation of Alibaba's business and the main source of profit. According to Alibaba's fiscal year 2022-2024 performance data, Taotian Group's proportion of Alibaba's total revenue has been gradually declining, from 69.5% in fiscal year 2022 to 46.2%. In fact, as early as 2021, the revenue of this segment fell into negative growth for the first time, and Alibaba's overall net profit also declined by 25% year-on-year. At that time, Alibaba attributed the decline in net profit to investment in new businesses, and then-CEO Zhang Yong also stated that Alibaba would continue to adhere to the multi-engine growth strategy. Looking at Alibaba International Digital Commerce Group, it is Alibaba's fastest-growing segment in terms of revenue, with a growth rate of 32% in the first half of 2024, mainly covering international retail and international wholesale. Among them, international retail businesses include AliExpress, Southeast Asian e-commerce platform Lazada, Turkish e-commerce platform Trendyol, and South Asian e-commerce platform Daraz. It is not difficult to see that Alibaba's platform services have covered retail and wholesale businesses in a considerable number of regions globally, especially its AliExpress Choice business, which has expanded the range of suppliers and better meets the needs of local consumers abroad. As for the other four major segments, among them, Cainiao Group's growth rate has remained above 20%, while the growth rates of Local Life Group and Cloud Intelligence Group have not changed much. Therefore, the slowdown in Alibaba's overall growth is largely due to the slowdown in its e-commerce segment performance. Now looking at JD.com, it also has a wide range of fields, including retail, logistics, health, industry, technology, and private brands. According to departmental segments, it can be divided into JD Retail, JD Logistics, and others. Undoubtedly, JD Retail has always occupied the majority of JD.com's total revenue and is JD.com's core business segment, covering self-operated business, platform e-commerce business, and omni-channel business. This segment revolves around JD Mall and is the main source of JD.com's revenue and profit. By quarter, from Q2 2023 to Q2 2024, JD Retail's revenue was 253.28 billion yuan, 212.059 billion yuan, 267.646 billion yuan, 226.835 billion yuan, and 257.072 billion yuan respectively. It can be seen that revenue has been unstable, but fortunately, the overall revenue base is stable. JD Logistics covers services such as warehousing and distribution, express and freight, and bulky items. From Q2 2023 to Q2 2024, the revenue of this business segment was 41.033 billion yuan, 41.663 billion yuan, 47.201 billion yuan, 42.137 billion yuan, and 44.207 billion yuan respectively, with a cliff-like decline in Q1 2024 and a slight recovery in Q2. In addition to the two major business segments of retail and logistics, JD.com's other business revenue accounts for a relatively small proportion and has been shrinking, but it does not have a significant impact on the overall revenue base. Overall, the slowdown in performance of Alibaba and JD.com is related to their e-commerce businesses. Regarding the current low-speed growth period of JD.com and Alibaba, Zhuang Shuai, founder of the 'Zhuang Shuai Retail E-commerce Channel', believes that on the one hand, due to the huge scale of the e-commerce industry and the huge scale of JD.com and Alibaba themselves, the e-commerce industry has entered a mature period, and growth will naturally slow down. On the other hand, offline retail formats such as membership stores, discount stores, community stores, and instant retail have intensified competition with e-commerce. In fact, besides the sheer size of Alibaba and JD.com, it seems inseparable from their neglect of new e-commerce. For example, Alibaba once focused on Tencent as its main competitor, and the two sides repeatedly competed in multiple fields, so much so that when Pinduoduo was implementing its 'low-price' strategy, Alibaba did not take it to heart at all. Now this young e-commerce company, which was once seen as a bit 'low' in the eyes of e-commerce giants, has truly impressed Alibaba and JD.com, and even forced them to change their strategic direction.
**Past Glory**
Alibaba created an era of mass entrepreneurship. As Jack Ma said, to make 'it is easy to do business in the world', the emergence of Taobao greatly promoted the transformation of business and employment models in China and even globally. In 2003, Taobao started its e-commerce business. Initially, Taobao adopted the C2C (consumer-to-consumer) model, mainly providing an online trading platform for individual sellers and consumers, allowing small and medium-sized merchants and individuals to open stores online and sell goods. Later, Taobao introduced more convenient search engine technology, which could provide consumers with more accurate product information through keywords and related recommendations. In the early days, Taobao's free policy attracted a large number of sellers to join, but this enriched the platform's own supply but also led to an excess of SKUs. In 2005, Taobao established its dominant position in the e-commerce field, with a C2C market share of 58.6%. Just one year later, this share rose to 83.6%. In the same year, Alibaba underwent a large-scale business restructuring, splitting into B2B and C2C business groups, with the group's strategic focus shifting towards the C-end. In 2009, Zhang Yong, then general manager of Taobao Mall, proposed the 'Double 11' shopping festival, aiming to create a shopping festival during the relatively quiet retail period between National Day and Christmas to increase platform transaction volume and revenue. This Double 11, originally teased by single young people as 'Singles' Day', gradually became a global shopping carnival, driving the development of the entire e-commerce ecosystem. According to iiMedia Research data, from 2009 to 2023, the total transaction volume of China's e-commerce platforms during 'Double 11' showed an upward trend year by year, increasing from 0.52 billion yuan in 2009 to 1,138.6 billion yuan in 2023. With the expansion of its business, Alibaba gradually formed a diversified business structure including B2B, B2C, C2C, payment, cloud computing, etc., and Alibaba's business empire also rose. In September 2014, Alibaba was listed on the New York Stock Exchange, becoming the largest IPO in U.S. history, raising up to $21.8 billion, and if the over-allotment option was included, up to $25 billion. At its peak, Alibaba's market value exceeded $400 billion, becoming the first company in Asia with a market value exceeding $400 billion. At that time, Alibaba's market value was on par with companies like Apple, Google, Microsoft, and Amazon. In terms of employment, Alibaba also made significant contributions. In 2020, the School of Labor and Human Resources of Renmin University of China released the 'Alibaba Full Ecosystem Employment System and Employment Quality Research Report'. According to the report, in 2019, Alibaba's economic ecosystem contained 69.01 million employment opportunities; among them, e-commerce platforms like Taobao drove nearly 50 million employment opportunities, an increase of nearly 9 million compared to the previous year. Compared to Taobao providing a place for mass entrepreneurship, JD.com added 'speed' and 'quality' on top of that. In 1998, JD.com was founded by Liu Qiangdong in Zhongguancun, Beijing. Initially, JD.com was just an agent for products like CDs and disks. In 2004, JD Multimedia Network was launched. Affected by SARS, Liu Qiangdong decided to close all offline counters and fully transform to online e-commerce, and JD.com officially entered the e-commerce field. In 2007, JD.com decided to build its own logistics system. At that time, domestic consumers had increasingly high requirements for e-commerce logistics, and third-party logistics services could no longer meet JD.com's requirements for speed and service quality. At that time, JD Mall's daily order processing volume exceeded 3,000. By 2010, Liu Qiangdong had led the JD.com team to complete the full construction of its 3C products, build three major logistics systems in Beijing, Shanghai, and Guangzhou, and establish a nationwide sales network based on four logistics centers in North China, East China, South China, and Southwest China. According to relevant data statistics, from 2004 to 2010, JD.com's annual sales increased from 10 million yuan to 10.2 billion yuan, with a compound annual growth rate as high as 217.27%. Pinduoduo's current performance growth climb is exactly like this stage. In 2014, JD.com was successfully listed on the Nasdaq in the United States, with a market value of $29.7 billion at that time, attracting attention from many leading companies such as Tencent and Walmart, and starting multi-party strategic cooperation. In 2022, JD.com's cross-border network total warehousing area increased by more than 70% year-on-year, operating 90 bonded warehouses, direct mail warehouses, and overseas warehouses globally. Now JD.com has developed into China's largest self-operated e-commerce platform. Especially JD.com's self-operated model and warehousing and logistics system, in the e-commerce battle, JD.com successfully attracted a large number of loyal users by relying on the above advantages. Facing past glory, the slow performance growth has to make the two giants anxious.
**Young Upstarts**
The main source of anxiety for Alibaba and JD.com is the rise of young e-commerce companies like Pinduoduo. Take Pinduoduo as an example. In 2015, it started as an agricultural product retail platform, creating a new model of agricultural product retail characterized by group buying. Later, it used models like 'bargaining' and 'group buying' to acquire new users, focusing on 'cheapness'. Going to the sinking market and gaining consumers from third- to sixth-tier and even more sinking markets was a helpless move for Pinduoduo under the dominance of Taobao and JD.com, but it was also a necessary measure to achieve 'curveball salvation'. When Pinduoduo was born, Alibaba's market value was already quite high, with revenue reaching 12.293 billion yuan and strong profitability; while in 2016, Alibaba's transaction volume exceeded 600 billion yuan, and Alibaba broke through 3 trillion. Probably at that time, Ma Yun and Liu Qiangdong never imagined that one day this young upstart would sit on the 'Iron Throne' of e-commerce. It is worth mentioning that when Alibaba was competing with Tencent, the two sides began to gradually penetrate each other's fields. For example, Alibaba launched DingTalk, while Tencent invested in e-commerce platforms like JD.com and Pinduoduo. The emergence of Pinduoduo was more like providing an 'emotional outlet' for Tencent. In July 2018, Pinduoduo successfully listed on Nasdaq. On the first day of listing, its stock price soared by 40%, with a market value of $24 billion. Since its listing, Pinduoduo's growth momentum has been quite rapid. In May 2024, Pinduoduo disclosed its Q1 2024 financial report, achieving revenue of 86.81 billion yuan, a year-on-year increase of 130.66%. On that day, Pinduoduo's market value reached a new high of $204.27 billion, officially surpassing Alibaba. From birth to listing, Alibaba took 15 years, JD.com took 16 years, while Pinduoduo, this 'upstart', took only 3 years. And Pinduoduo's rapid growth has successfully caused Ma Yun and Liu Qiangdong to have a strong sense of crisis. The rise of Douyin e-commerce also poses considerable challenges to Alibaba and JD.com. Although Douyin started with short videos, the live-streaming e-commerce sales promoted by Douyin in the later period have, to a certain extent, diverted users who might have flowed to Alibaba and JD.com. And Douyin's user base is also large enough. According to QuestMobile data, as of September 2023, Douyin's monthly active users reached 743 million, a year-on-year increase of 5.1%. In 2023, Douyin e-commerce's GMV increased by 46% year-on-year. This year, Douyin e-commerce's GMV target is 4 trillion yuan, an increase of nearly 50%. In this way, it is bound to divide the traffic in the e-commerce field. In addition to Douyin, another short-video giant Kuaishou's performance in the e-commerce field cannot be underestimated. As of September 2023, Kuaishou's monthly active users were 457 million, and its full-year e-commerce GMV in 2023 also exceeded one trillion yuan. In addition, although Xiaohongshu's e-commerce development is relatively slow, it has accumulated a large number of female users through its community and note content. It promotes product sales through the 'community + e-commerce' model, which makes it easier to achieve a closed loop from planting grass to pulling grass. And in Xiaohongshu's 2023 e-commerce strategy, it also began to build top anchors, attracting merchants and creators by providing traffic tilt. Xiaohongshu's e-commerce business also achieved profitability for the first time in 2023. Although the e-commerce business revenue accounts for a relatively small proportion, Xiaohongshu's growth momentum in the e-commerce field is also quite strong. According to data released by Xiaohongshu, in the first half of 2024, the number of small and medium-sized merchants on Xiaohongshu increased by 379% year-on-year, and the GMV of small and medium-sized merchants increased by 436% year-on-year, with strong momentum. How to compete with young upstarts is a problem that traditional e-commerce companies have to think deeply about.
**Stock Game, Increment Mining**
2023 was a year when e-commerce collectively turned to strive for 'low prices'. In this war, there were Alibaba, JD.com, Pinduoduo, Douyin... In fact, for the sinking market, Alibaba and JD.com had considered it before. JD.com even used low prices to pull Suning and Dangdang off the market throne, but later both believed that consumption upgrading was the future, and both treated low prices as a supplement to their main business. For this reason, they launched Taote and Jingxi for defense. However, the above measures were not thorough enough. It was not until Pinduoduo came to the fore at an extremely fast speed that the two finally made up their minds to face the enemy head-on. In terms of low-price strategy, Alibaba and JD.com, due to their fundamentally different business models, took different routes. Alibaba's Taotian first reduced marketing costs by reducing merchant investment and giving higher traffic weighting to low-priced goods; another was to use AI to replace service providers and reduce costs. JD.com, on the other hand, promoted low prices by attracting traffic, and for this purpose, it also launched the 'Hundred Billion Subsidy' activity. In addition, it expanded traffic sources by cooperating with platforms like Douyin and Xiaohongshu. Pinduoduo's low-price strategy is innate, engraved in its genes. It has accumulated a large number of users by incentivizing users to invite friends to 'fleece wool' and 'cut a knife'. Pinduoduo, in its youth, is already unshakable in its low-price strategy. However, low-price competition is not the king's way. Although it can accumulate a consumer base in a short period of time, in the long run, it ultimately harms consumers themselves. In 2024, the low-price war in e-commerce was paused. Entering the low-speed era is inevitable, but low speed does not necessarily mean low prices. Douyin e-commerce adjusted the priority of its business goals, no longer putting 'price power' first, but turning to pursue GMV growth. Taobao and Pinduoduo also adjusted their business focus, no longer simply pursuing low prices, but making GMV growth the primary goal. As for the current situation where e-commerce inevitably falls into low-speed growth and thus starts a low-price war, an industry insider gave his opinion: e-commerce only needs to guard its own advantageous positions, because some consumers have already recognized the platform advantages of major e-commerce companies and will naturally make corresponding choices. For example, most people will choose JD.com for home appliances and digital products, Taobao for clothing, and Pinduoduo for small items... Now, the supermarket mindshare is the next place for e-commerce companies to focus on. After all, only by competing for supermarket mindshare can they attract and retain consumers, and increase customers' shopping frequency and loyalty. At present, platforms such as JD.com, Alibaba, Douyin, Meituan, and Kuaishou are all laying out supermarket businesses. For example, JD.com announced that it will invest 10 billion yuan to strengthen its supermarket business. Its CEO Xu Ran even said, 'JD Supermarket is one of the important battlefields for JD.com to win the next decade.' Tmall, as one of Alibaba's early explorations in the retail industry, has optimized the user experience by launching services such as 'half-day delivery' and 'next-day delivery', and even plans to invest 1 billion yuan to focus on creating 'super products'. Douyin Supermarket uses its strong content ecosystem and user base to improve user experience through 'door-to-door delivery' and 'next-day delivery' services. Meituan, on the other hand, competes for market share in the supermarket business by transforming into a full-category retail platform 'Xiaoxiang Supermarket' and deeply laying out in the local life field. It can be said that only by doing a good job in the supermarket business can e-commerce companies guard their user base and prevent existing markets from being eroded. In addition, the next focus point for e-commerce companies is AI large models, which is the next gold mine. According to iiMedia Research's '2024 China AI E-commerce Industry Research Report', in 2020, the scale of China's artificial intelligence core industry had already reached 150 billion yuan, and this value is expected to reach 1 trillion yuan by 2030. Moreover, the scale of sub-fields in China's artificial intelligence core industry is also expanding, which will provide new growth poles for the e-commerce industry. According to the report, many e-commerce platforms have already applied intelligent product selection functions, and the e-commerce industry has become one of the core commercial application scenarios of AIGC. Among them, digital humans have become the key direction of AI e-commerce. The AI e-commerce industry will achieve comprehensive intelligent transformation from the e-commerce operation end, supply chain end, and consumer end, strongly empowering e-commerce with high-tech. This is also true in reality. Alibaba's Alimama platform has launched the '1+1+3 innovative business model', that is, 'LMA large model technology + 1 revolutionary product + 3 merchant support plans', attempting to stimulate new growth momentum through AI technology. JD.com released its first AI large model 'Yanxi', revealing a 'three-step' strategy, demonstrating its applications in e-commerce, logistics, and health fields. Seizing the AI high ground may help major e-commerce companies better strengthen new growth poles. In addition, regarding the next growth pole for traditional e-commerce and new e-commerce, Teacher Zhuang Shuai believes there are two aspects: first, accelerate integration with offline, and vigorously invest in developing instant retail business; second, actively expand global business and develop cross-border e-commerce platforms. It is worth mentioning that even under such a general environment, JD.com's pace of salary increases has not stopped. On September 13, JD.com, after three consecutive rounds of salary increases in early 2024 and mid-year, started another salary increase. That is to say, after embracing 'timing' and 'location', JD.com still does not forget 'people harmony'. In summary, facing the rise of new e-commerce, traditional e-commerce companies in midlife crisis are not sitting still, but actively embracing change in the rapid changes of the times, striving for a balance with new things.


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