Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD) are fierce rivals in China's e-commerce market. Alibaba's Taobao and Tmall generated 58% of the country's digital sales last year, according to eMarketer, while JD.com ranked second with a 16% share.
Alibaba's core commerce business, which posted 51% sales growth last quarter, is still faring much better than JD's business, which grew just 21%. However, both companies face the risk of a slowdown in the Chinese economy, so they're both diversifying into adjacent markets.
Alibaba's expansion efforts include streaming media, smart speakers, and other businesses. The efforts don't usually overlap JD's, which mostly focus on expanding its logistics platform as a service and selling ads for its marketplace.
However, both companies offer cloud services -- Alibaba offers Alibaba Cloud, the biggest cloud platform in China, while JD provides the much smaller JD Cloud. That's why the battle between these two tech giants is now pivoting away from the retail market toward data services like business analytics.
Dangling the big data carrot
Alibaba and JD both recently started offering data analytics services. Alibaba's initiative, A100, integrates years of consumer shopping data into a merchant's other services. For example, merchants can link facial-recognition data to A100 and instantly know a customer's preferences when they walk into a store. JD's service works in a similar way.
Alibaba and JD are merging their treasure troves of online shopping data with brick-and-mortar shopping data. This will enable the companies to launch new products, streamline their operations, and/or craft better ad campaigns. The rapid growth of facial recognition technologies in China -- which is backed by big tech companies like Alibaba, Tencent (NASDAQOTH:TCEHY), and Baidu -- also makes it easier to track individual shoppers at brick-and-mortar stores.
The integration of Alibaba and JD's marketplaces into other apps supplies even more data. Alibaba is integrated with Alipay, the most widely used payments platform in China. JD is integrated with Tencent's WeChat, the most popular messaging app in China, as well as its payment platform WeChat Pay (second in the market after Alipay). Both Alipay and WeChat host "Mini Programs" in their apps (for games, purchases, and other services) which accumulate even more data for merchants and advertisers.
Promising results but no meaningful revenue (yet)
Major companies are already signing up for Alibaba and JD's services. Alibaba's A100 customers include P&G (NYSE:PG), Nestle (NASDAQOTH:NSRGY), and Chinese snack giant Bestore, while JD serves P&G's rival Kimberly Clark (NYSE:KMB).
Nestle reduced its number of warehouses in China from four to one after streamlining its orders with A100's real-time data. Bestore, which encourages shoppers to save their facial data when they pay with Alibaba's face-scanning payment tablets in its stores, recently told Reuters that it can now craft campaigns to target specific niches of customers with Alibaba's data -- including those who own SUVs, have families, or prefer salty foods.
Kimberly Clark redesigned its Huggies diapers for the Chinese market after reviewing JD's data, which sparked a 60% increase in Huggies sales on JD Mall last year. JD also launched ID-linked checkouts for convenience stores in Hong Kong, which reduced average checkout times by 30%. It's also been dabbling with a data-linked chatbot that determines a user's mood to "empathize" with customers.
Those results look promising, but they won't generate any revenue since Alibaba and JD are offering the services for free. However, Alibaba and JD's data services are still impressive showcases for their big data and cloud abilities, which could lock in major merchants and tighten their grip on brick-and-mortar stores over the long term.