(The author is a Reuters Breakingviews columnist. The
opinions expressed are her own)
By Wei Gu
HONG KONG, Nov 20 (Reuters Breakingviews) - The Amazon of
China defied the down-round blues. With a new investment round
unveiled last week, e-commerce upstart 360buy.com, aka Jingdong
Mall, saw its valuation swell by 15 percent in a year. Despite
widening losses, venture capital continues to pour money into
China’s crowded e-commerce space. But as players feverishly
compete for market share by discounting, profits look ever more
After snagging another $300 million from Tiger Global and
Ontario Teachers Retirement Fund, 360buy is now valued at some
$7.6 billion. That’s up from $6.6 billion a year ago, when
Digital Sky Technologies, Sequoia Capital, Tiger and the family
controlling Wal-Mart injected capital, despite speculation among
VCs in China that Jingdong would struggle to raise money at a
Trouble is, more money is likely to lead to more promotions.
Heated competition and widespread discounting by new entrants
pushed early comers, such as Dangdang (DANG.N), into the red.
Analysts don’t expect the online bookseller to turn a profit
until 2015. Jingdong’s loss is expected to widen in 2012 to $300
million as it strives to triple its sales and catch up with
Alibaba’s Tmall. Online clothier Vancl’s goal to become
profitable in the fourth quarter still looks a tall order.
New arrivals in recent years have led to more frenzied
competition. Amazon (AMZN.O) and Wal-Mart (WMT.N) have both
invested in local players. Even eBay (EBAY.O) is mulling a
return to the Middle Kingdom, inking a recent partnership with
domestic luxury goods site Xiu. Meanwhile, domestic electronics
chains Suning (002024.SZ) and Gome (0493.HK), as well as China’s
most valuable Internet firm Tencent, have launched their own
online shopping sites.
Alibaba, thanks to its first-mover advantage, still leads
the pack. Its Tmall and Taobao sites saw $3 billion combined
sales in just 24 hours on Nov. 11. That makes their “Double
Eleven” sales worth more than double America’s entire “Cyber
Monday” shopping spree, which brought in $1.3 billion in 2011,
according to ComScore.
The market’s growth makes it alluring. Last year, e-commerce
volumes in China rose 29 percent year-on-year to almost $1
trillion, or 13 percent of GDP, as generous investments like
360buy’s have enabled uncompetitive players to tough it out.
360buy’s existing investors, along with its promotion-addicted
customers, may cheer another up-round. But at some point the
industry must learn to support itself beyond equity capital.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Jingdong Mall, which runs online shopping site 360buy.com,
closed a fourth round of funding last week, raising $300 million
of new investment from Tiger Global Management and Ontario
Teachers Retirement Fund. The company is valued at $7.6 billion,
according to people close to the transaction.
- In April 2011, Jingdong raised $1 billion from Digital Sky
Technologies, Sequoia Capital, Tiger and the Walton family,
allowing a valuation of $6.6 billion post money, said the
sources. At the time, Chinese media had widely reported DST
invested $500 million for a 5 percent stake, implying a
valuation of $10 billion.
- Reuters: China's 360buy closes funding round, valuing
company at $7.3 bln-media [ID:nL3E8MD2LZ]
Open sesame [ID:nL4E8GL3LL]
- For previous columns by the author, Reuters customers can
click on [GU/]
(Editing by Rob Cox and Katrina Hamlin)
((Reuters messaging: email@example.com))
Keywords: BREAKINGVIEWS JINGDONG IPO
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