JD.com had a strong quarter ' but it still faces one major problem (BABA)

This story was delivered to BI Intelligence "E-Commerce Briefing" subscribers. To learn more and subscribe, please click here.JD.com reported strong a Q2 2016 earnings performance, but the company's growth rates have been consistently decelerating since 2014.The e-commerce company's gross merchandise volume (GMV) is still dwarfed by that of competitor Alibaba. However, new efforts in fulfillment, coupled with its acquisition of Yihaodian, could help JD.com gain some ground.Total revenue for JD.com during Q2 2016 grew 42% YoY to reach nearly $10 billion.GMV totaled $24 billion, marking 47% YoY growth.Active customers reached 188 million, growing 65% YoY.Excluding virtual items, JD.com fulfilled over 373 million orders during Q2, 56% more than in the comparable 2015 quarter.Moving forward, a heavy focus will be placed on JD.com's grocery sales, which can be improved by leveraging its drone delivery.Yihaodianwhich JD.com acquiredfrom Walmartis a strong performer in the grocery e-commerce market. In addition to this acquisition, the company plans to continually add new products to its grocery and consumer packaged goods (CPG) categories, reports CEO Haoyu Shen.This poses a challenge for JD.com, as transferring perishables costs more and can lead to damaged goods. To combat such issues, JD.commay combine its efforts in grocery with its drone delivery program. The program allows JD.com to reach consumers more quickly, while also providing access to consumers in rural villages that traditional delivery trucks cannot navigate.By utilizing drone delivery, while leveraging Yihaodian's existing inventory, JD.com may be able to glean a significant advantage in China's grocery e-commerce market. Competitor Alibaba recently invested in its own online grocery startup, but it pales in comparison to Yihaodian's existing user base and brand recognition.To receive stories like this one directly to your inbox every morning, sign up for the E-Commerce Briefing newsletter.Click here to learn more about how you can gain risk-free access today.Join the conversation about this story
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