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The expanding e-commerce market in China is giving rise to a different group of successful companies

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Online shopping in China is expected to continue growing, with major e-commerce players such as Alibaba and JD.com facing competition from new entrants. E-commerce’s share of retail sales in China reached 37.5% in 2023, significantly higher than in the U.S. where it remains below a pandemic-era high of 16.4%. Alibaba’s co-founder Joe Tsai believes online shopping in China will reach 40% of retail sales in the next five years, creating opportunities for companies that are able to capture this growth. Recently, PDD Holdings overtook Alibaba in market capitalization, leading to positive ratings from Goldman Sachs analysts who upgraded PDD’s stock and raised their price target.

As China’s e-commerce players prepare to showcase their performance during the ongoing 618 shopping festival, analysts have differing opinions on the future prospects of companies like JD.com. While Morgan Stanley has an equal-weight rating on the stock, UBS analysts are more bullish and believe shares can reach $40. JD.com has been focusing on the domestic market, while Alibaba has been investing in its international business, particularly its AliExpress platform. The partnership with David Beckham reflects Alibaba’s efforts to expand its global presence and increase brand recognition.

Despite Alibaba’s ongoing investment cycle, JPMorgan’s China Internet Analyst Alex Yao remains positive on the company’s outlook, expecting improving domestic e-commerce market share to drive better monetization in the future. However, it’s parent company ByteDance’s platform Douyin that has captured significant market share in China, surpassing individual players like JD.com, Taobao, and Tmall. Goldman Sachs predicts Douyin will continue to gain market share in the coming years, potentially surpassing PDD. Tencent’s WeChat Video Account platform is also expected to retain a small percentage of GMV market share through 2026.

Another player to watch in the Chinese e-commerce sector is Kuaishou, a video streaming platform that reported a 28.2% growth in e-commerce GMV in the first quarter of this year. Analysts are optimistic about Kuaishou’s ad and e-commerce monetization strategies, forecasting strong revenue growth in the coming quarters. Despite a drop in livestreaming revenue, which accounts for a significant portion of total revenue, Kuaishou is expected to continue growing its e-commerce GMV revenue by 25% this year. CMB International has set a price target for Kuaishou shares that is significantly higher than current levels, reflecting their positive outlook on the company’s future performance.

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