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China 2016: CATEGORIES IN BRIEF | Retail Analysis


What a diference a year makes. In September 2014, Alibaba raised $25 billion in a record IPO on the New York Stock Exchange. It entered the BrandZ™ Top 100 Most Valuable Chinese Brands at number two, after Tencent. This year, Alibaba’s brand value declined 20 percent and the brand fell to number three in the BrandZ™ China 100. The brand faced both internal and external challenges, including increased competition, particularly from JD.com, and concern over counterfeit products on its sites. 

It is important to consider these challenges in the context of Alibaba’s overall business. On November 11, or Singles Day, a Chinese reversal of Valentine’s Day that celebrates singles rather than couples, a holiday Alibaba promoted into a national shopping binge, the brand sold $14.3 billion in merchandise in 24 hours. The online sales included 5,000 overseas brands from 25 countries. Alibaba’s success selling overseas merchandise in China is part of a larger intention to build a global brand and reach more shoppers outside of China as the domestic economy slows.

For now, however, China is Alibaba’s key market. And like most strong merchants, Alibaba faces some strong competitors, most notably JD.com, China’s number two e-commerce retailer, with 23.9 percent market share compared with 64.4 percent for Alibaba’s Tmall, according to Kantar Retail. JD.com originated in 1998, a year earlier than Alibaba, as an online store called Jingdong Mall, and after an interim name change to 360buy.com, it became JD.com in 2013. It enjoys several advantages when compared with Alibaba, which trails JD.com in delivery efciency because, unlike JD.com, Alibaba does not own much of its delivery system to the last mile.JD.com’s key advantage, however, is its partnership with Tencent, the giant Internet portal. Consumers can access JD.com through WeChat, Tencent’s ubiquitous social networking site. This access point simplifies life for the consumer who can text, shop, and pay without switching online platforms. Alibaba lacks equivalent strength in social media and its core competence remains the retail transaction. 

Alibaba ofers merchandise on two sites, Tmall and Taobao Marketplace. Tmall is a business-to-consumer site that features around 70,000 brands, including well-known global leaders. Taobao, an online bazaar, ofers over 800 million items from small business and consumer sellers. Shoppers are losing confidence in Taobao because of the danger of buying counterfeit products. Taobao is weakening in Brand Power, the BrandZ™ measurement of a brand’s competitiveness. Tmall is strengthening in Brand Power, but more slowly than JD.com.