(Corrects paragraph one of March 17 story to reflect Ma's
apartment had more than one room)
* Share of China online retail fell for first time in 2013
* IPO in U.S. could exceed Facebook's $16 bln in value
* Tencent, JD.com tie-up sharpens e-commerce challenge
* Niche players, retail brands also step up competition
By Adam Jourdan
SHANGHAI, March 17 Alibaba's dominance of online
retail in China faces its biggest-ever challenge as the firm
founded by Jack Ma in an apartment 15 years ago lines up a U.S.
initial public offering that could value the firm at around $140
In a rare blip, Alibaba Group Holdings lost
market share last year while its nearest rivals all grew,
according to Euromonitor. The market research firm sees China's
internet retail market tripling from 2012 to over $300 billion
in 2018 as the country's smartphone-savvy shoppers buy
everything from plane tickets to sneakers online.
China's biggest social media company, Tencent Holdings Ltd
, is leading the revolt, linking the country's most
popular messaging app, WeChat, with the number two e-commerce
An array of smaller rivals is also clawing away at Alibaba's
lead, while household retail names like Nike Inc and Gap
Inc are increasingly striking out away from the giant's
Tmall electronic platform to set up more distinctive online
stores of their own.
"In China shopping is a social activity. You want to tell
friends about it, recommend it - it's a smartphone activity, and
whoever owns that organisational ability also has a hold over
how a person shops," said Frank Lavin, Hong Kong-based chief
executive of Export Now. Lavin's company helps global firms set
up shop in China through Alibaba's Tmall.
Alibaba's e-commerce prospects at home loom large after Ma's
firm said on Sunday it was starting plans for a long-awaited
listing in the U.S. - potentially the biggest-ever IPO by an
Internet company - which could surpass the $16 billion raised by
social media giant Facebook Inc in 2012.
Alibaba still held a sturdy 45.1 percent of China's
e-commerce market last year, down from 46.1 percent a year
earlier, according to Euromonitor, and remains bullish in the
face of Tencent, JD.com and others. It is beefing up its mobile
services to keep up with China's legions of smartphone users.
Alibaba did not respond to repeated requests for comment for
this story, though the firm's executive vice chairman Joe Tsai
was upbeat about the firm's e-commerce prospects in an interview
with Reuters in Hong Kong last week.
Alibaba is now battling rivals on multiple fronts. Alongside
JD.com, heading for a $1.5 billion IPO of its own in the U.S.,
are well-funded vehicles like household appliance retailer
Suning Commerce Group Co Ltd and Wal-Mart Stores
Inc's grocery retailer Yihaodian.
Smaller niche players like cosmetics specialist Vipshop
Holdings Ltd are also growing in stature. And with
global and local brands peeling away from Tmall, the trend is
likely to see Alibaba's market share extend its fall, said Bryan
Wang, Beijing-based vice president for Forrester Research.
"We have definitely seen a lot more customers asking us in
the last year about how to get away from Tmall," said Wang.
Popular Internet clothing retailer HSTYLE has partly flown
the nest. Competing with brands like H&M and Uniqlo, it has
branched out from just having a Tmall outlet and now books half
its sales through its own site and on JD.com and Tencent.
"As a mature Internet brand we're looking to provide more
individual service to our shoppers," Zhao Yingguang, founder and
chairman of HSTYLE, told Reuters in an interview, describing his
brand as one of the leading women's apparel retailers on
Alibaba's platforms. "We go and sell our products where the
Alibaba's vast resources have helped it see off weaker
players so far such as Otto Group, 139shop.com, Mecox Lane,
Newegg.com and others, but the remaining contenders are more
seasoned in competition with Alibaba - and ambitious.
JD.com still lags some way behind Alibaba in second place
with a 14 percent market share last year, up fractionally from a
year earlier. But its IPO plans and the deal with Tencent -
a less well-known name outside China than Alibaba, but worth
almost $150 billion by market value - will give it new financial
and operational resources.
Tencent, meanwhile, hopes its JD.com tie-up will help it to
extend its presence in "the fast-growing physical goods
e-commerce market", Tencent president Martin Lau said in a
statement. The deal also arms JD.com with the 225 million
monthly active users of the WeChat messaging service in China.
As well as technology leading change, consumers themselves
are developing new habits, becoming more picky and looking to
get more for their money.
"I am leaning toward specialist stores now, because the
service is often better than the giant retailers and the
delivery I always find is faster," said Grace Lin, 20, a student
in Shanghai. "It's not necessarily that I use Tmall less now,
but I do use other stores more."
Lin often shops on cosmetics specialist Vipshop's online
site. The firm saw revenue climb 145 percent in 2013, while
customer numbers shot up 130 percent over the same period,
according to an earnings conference call this month. Vipshop
almost doubled its market share to 1.8 percent last year.
Suning, a traditional electronics retailer with a strong
bricks and mortar presence, is bulking up its online presence,
as is rival Bain Capital-backed Gome Electrical Appliances
Holding Ltd. Both raised their market share last year.
Yihaodian leverages majority owner Wal-Mart's global name
and product range, while other niche players such as Jumei and
Yesmywine.com corner specific markets in cosmetics and alcohol.
MA VS MA
Alibaba's Jack Ma has locked horns repeatedly of late with
his rival at Tencent, co-founder Pony Ma - a namesake but
unrelated. Rhetoric from the two internet giants has grown
increasingly barbed as competition has raged from gaming and
microblogs, to taxi hire app price wars and online payment
systems that are now the subject of close scrutiny by China's
When Tencent launched a "red envelope" feature for WeChat,
which let users send money gifts by smartphone over the Chinese
New Year, Jack Ma wrote it was a "Pearl Harbour attack" on his
company's Alipay payment system, referring to the unexpected
bombing of the American port during World War II. Tencent said
over 8 million people used the WeChat feature.
Alibaba-invested Weibo Corp, a popular Twitter-like social
media platform, filed for a $500 million U.S. IPO of its own on
Friday, as it looks to defend its position against fierce
competition from Tencent's WeChat.
WeChat does indeed present a threat to Alibaba. In a
research report in December, Standard Chartered said its payment
function, known in Chinese as Weixin, paired with its wide
popularity, could be a "killer weapon" for Tencent to take
market share in mobile e-commerce.
China has some of the most active mobile web users in the
world. The country's mobile Internet users hit 500 million in
2013, and is estimated to hit 750 million by 2017, according to
data from China-based consultancy iResearch.
"The wind is blowing against Alibaba and the biggest risk is
coming from the mobile sector," said Zhang Chenhao, executive
director at e-commmerce-focused investment advisory firm Gold
"Firms are all lining up - the school of Tencent or the
school of Alibaba - and the camps are forming," said Zhang.
(Reporting by Adam Jourdan in SHANGHAI; Additional reporting by
Jane Lee in JINAN, Paul Carsten in HONG KONG and SHANGHAI
newsroom; Editing by Kenneth Maxwell)