Looking back at the domestic e-commerce landscape over the past decade, the industry has seen significant changes, especially with the rise of Pinduoduo (PDD.US) and ByteDance, putting traditional e-commerce platforms like Alibaba (09988.HK) and JD.com (09618.HK) under pressure.

Not only in e-commerce but the entire internet industry is moving towards innovation and connectivity. This aligns not only with regulatory directions but also with the needs of an evolving era. Following the historic “wall-breaking” handshake between Alibaba and Tencent (00700.HK) announced in early September, Alibaba quickly held a “meetup” with another major competitor, JD.com.

The Taobao and Tmall apps are set to officially integrate JD's logistics, while JD will also integrate Alipay for payments. Both sides are providing their core capabilities to each other.

This marks the end of an era where internet giants built high walls and established barriers to enhance their competitiveness. Now, those walls are coming down, allowing all businesses to compete on the same stage.

Sub-businesses that once thrived under the protection of these internet giants will now form broader collaborations, seeking optimal partners to unlock business potential and improve efficiency. This is the most significant handshake between Alibaba and JD.com in over 20 years. For years, the two companies have been in fierce competition, vying for merchants and consumers through traffic, commissions, and subsidies, while also establishing independent logistics and payment systems.

In the early days of competition, each sought to extend its reach and draw users into its ecosystem. Following 2010, e-commerce giants quickly emerged, each developing its own payment methods, which forced users to navigate multiple systems. Before 2011, JD.com had supported Alipay, but following issues related to fees, the relationship soured, leading to court battles over "choose one" policies.

In recent years, companies have gradually opened up, allowing cross-platform links and advertisements. However, they had not touched on core services like payments. For instance, ads for Fliggy started appearing on QQ Music, and from 2021, Tencent Video and News included advertisements linking to Taobao.

This year, major companies have taken a more significant step toward openness. Prior to its partnership with JD, Tencent and Alibaba also reached a truce. In early September, Taobao announced plans to introduce WeChat Pay to enhance consumer shopping experiences.

Currently, the domestic e-commerce sector is entering a new phase. On one hand, Pinduoduo has secured a place in the market, while short video platforms like Douyin and Kuaishou (01024.HK) have introduced new business models like live commerce, becoming strong competitors to traditional e-commerce platforms.

Kuaishou joined the "trillion-dollar club" in GMV in 2023, and alongside Alibaba and JD, platforms like Pinduoduo, Douyin, and Kuaishou have also surpassed one trillion in GMV. Their rapid growth has encroached on the market share of established platforms, impacting the revenue growth of Taobao and JD.

For JD.com, its revenue in the second quarter of this year grew only 1.2% to 291.4 billion yuan, marking the lowest quarterly growth since its IPO. Revenue from electronics and home appliances declined by 4.6%. However, thanks to cost reductions and net income increases, JD’s net profit surged 92.1% year-over-year to 12.644 billion yuan in Q2.

On the other hand, the e-commerce industry faces multiple challenges. As the internet matures, the cost of acquiring new users is rising, and e-commerce platforms are shifting from a competition for traffic to a competition for existing users, leading to "traffic anxiety" for traditional platforms. With cautious consumer spending, low prices have become a storm in the e-commerce market, making it difficult for Alibaba and JD to compete with Pinduoduo on price.

With Alibaba and Tencent, as well as JD, breaking down barriers and opening up their ecosystems, a more equitable competitive environment has emerged. The interconnectedness of these internet giants presents more opportunities for merchants and platforms to grow and acquire customers.

Notably, to enhance consumer experience, Alibaba is making significant moves in Hong Kong. The Taobao Hong Kong platform recently announced an investment of 1 billion yuan to improve local consumer experiences, launching a limited-time free shipping service for orders above a certain amount, with over 1 billion products eligible.

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