Alibaba makes Beijing a hub

Visitors experience Alibaba Group Holding Ltd's virtual magic face-changing tech at an international information technology expo in Beijing. The e-commerce giant is making Beijing its second headquarters in China with plans to gain stronger foothold in the country's northern areas, a move that is expected to heat up competition with its biggest online shopping rival JD.com Inc. [Photo/China Daily]

Move expected to help e-commerce giant achieve a stronger foothold in northern areas

E-commerce giant Alibaba Group Holding Ltd is making Beijing its second headquarters in China to gain a stronger foothold in the country's northern areas, a move that is expected to heat up competition with its biggest online shopping rival JD.com Inc.

Alibaba, which was founded 16 years ago in Hangzhou, capital of Zhejiang province, announced on Thursday its so-called twin-hubs strategy, which makes Beijing its new base to aggressively advance its business development as well as strategy execution in northern regions of the country.

The company said in a statement, "Only with the synergy between Hangzhou and Beijing, consumers in North China or even across the whole country can be better served."

Analysts said the strategy appears to be a response to slower growth momentum and the goal is to grab more market share from its rival, the Beijing-based JD.com Inc.

The Hangzhou-headquartered Alibaba dominates the e-commerce market in China's Yangtze River Delta and Pearl River Delta. Even Alibaba's vendors and delivery partners are in close proximity to these markets, said Lu Zhenwang, an independent Internet expert and the chief executive officer of the Shanghai-based Wanqing Consultancy.

For example, online shoppers in Zhejiang province, Jiangsu province and Shanghai can enjoy free delivery of a lot of goods they buy on Alibaba's online platforms, given the company's cluster effect in the region.

"However, in North China, especially in Beijing, JD.com is more popular among online shoppers with its fast delivery service and its offerings in consumer electronics," said Lu.

Alibaba and JD.com have nothing in common in terms of business models. Alibaba's market share is still significantly bigger than JD's. But Lu said with China's overall online shopping growth momentum slowing, Alibaba needs to work harder in North China and compete harder with JD.com, in order to improve future performance.

China's online shopping market grew 39.6 percent year-on-year to 872.5 billion yuan ($136.7 billion) in the second quarter of this year. In the same quarter last year, the market grew 46.1 percent year-on-year, said iResearch Consulting Group.

Alibaba said in its statement that it will invest unlimited resources in northern markets in China, including its online business-to-consumer shopping service Tmall, and Cainiao Logistic Services. It will also integrate online and offline resources from its shopping mall partners Suning Commerce Group Co Ltd and Intime Retail (Group) Co Ltd.

"Apart from gaining a new growth point in e-commerce, Beijing as a second hub can also bring Alibaba other benefits because as the capital city of China, Beijing has a critical position in politics, media and talent," said Wang Xiaoxing, analyst with Analysys International.

"To be honest, Hangzhou is not that attractive to lure some of the country's best talent to work for Alibaba," he said.