Online shopping in China is widely expected to grow. It’s less clear how much longtime players such as Alibaba and JD.com will benefit. “You have relatively strong insurgent players coming in,” James Yang, Hong Kong-based partner at Bain and Company told me last week. “This is going to be not just a two-player game, but a three, four, five-player game,” he said. E-commerce’s share of China’s retail sales climbed to 37.5% in 2023, up from 27.9% in 2019, according to Bain. The data showed that in Asia, the country ranks first by far in e-commerce penetration. In the U.S., official data show e-commerce penetration remains slightly below a pandemic-era high of 16.4% of retail sales. In a bid to boost confidence in Alibaba, the e-commerce giant’s co-founder Joe Tsai told CNBC’s Emily Tan earlier this year that online shopping is set to reach 40% of retail sales in China in the next five years — an opportunity he said the company is poised to capture after its restructuring last year. Yang agreed with Tsai’s forecast on rising e-commerce penetration. “There’s many folks that I’ve spoken to in the industry, at some point the guess is 50-50, because at the end of the day there is a role for physical stores,” he said. “Who is going to enjoy that growth?” Yang said. “The growth formula and the incremental growth is different from before.” Temu parent PDD Holdings recently surpassed Alibaba again in market capitalization . Goldman Sachs analysts on May 24 upgraded PDD to buy from neutral, just two months after a downgrade in March. “We believe China eCommerce is emerging as one of the more undervalued sub-sectors within China internet (against high-single digit industry GMV growth),” Goldman Sachs analysts Ronald Keung and David Ma said in the note. GMV, or gross merchandise value, measures total sales over time. The Goldman analysts pointed to adtech upgrades that can boost advertising revenue, strong free cash flow generation and global expansion that’s not yet priced in. They raised their valuation on Temu to $19 billion, from $18 billion, based on a model that excludes the company’s U.S. business due to geopolitical concerns. The analysts also increased their price target on PDD from $145 a share to $184 — about 21% above the U.S.-listed stock’s close on Thursday. China’s e-commerce players will
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