PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to buy our ADSs.
Our Business
We are the largest online direct sales company in China in terms of transaction volume in 2012 and the first nine months of 2013, with a market share in China of 45% in the third quarter of 2013, according to iResearch, a third-party market research firm. Our gross merchandise volume, or GMV, increased from RMB32.7 billion in 2011 to RMB73.3 billion in 2012 and RMB86.4 billion （US$14.1 billion） in the first nine months of 2013.
We provide consumers an enjoyable online retail experience. Through our content-rich and user-friendly website www.jd.com and mobile applications, we offer a wide selection of authentic products at competitive prices which are delivered in a speedy and reliable manner. We also offer convenient online and in-person payment options and comprehensive after-sales services. In order to have better control over fulfillment and to ensure customer satisfaction, we have built our own nationwide fulfillment infrastructure and last-mile delivery network, staffed by our own employees, which supports both our online direct sales and our online marketplace businesses. We have established strong relationships with our suppliers as we develop our online direct sales business. Leveraging our strengths, we launched our online marketplace business in 2010, which has allowed us to significantly expand our selection of products and services.
As a result of our superior customer experience, our business has grown rapidly. The number of products we offer has grown from approximately 1.5 million stock keeping units, or SKUs, as of December 31, 2011 to approximately 7.2 million SKUs as of December 31, 2012 and further to approximately 25.7 million as of December 31, 2013. We foster an interactive user community that discusses, rates and reviews our products and services. We believe we have the largest online product review database of any online direct sales company in China with approximately 247 million product reviews generated by our customers to date. We had 12.5 million, 29.3 million and 35.8 million active customer accounts and fulfilled approximately 65.9 million, 193.8 million and 211.7 million orders in 2011, 2012 and the first nine months of 2013, respectively.
Timely and reliable fulfillment is critical to the success of an online retail business. Given the underdevelopment of third-party fulfillment services in China in terms of both warehousing and logistics facilities and last-mile delivery services, we made a strategic decision in 2007 to build and operate our own nationwide fulfillment infrastructure. We believe we have the largest fulfillment infrastructure of any e-commerce company in China. We operated 82 warehouses with an aggregate gross floor area of over 1.3 million square meters in 34 cities and 1,453 delivery stations and 209 pickup stations in 460 cities across China, staffed by 18,005 delivery personnel, 8,283 warehouse staff and 4,842 customer service personnel, as of December 31, 2013. Leveraging this nationwide fulfillment infrastructure, we deliver a majority of the orders directly to customers ourselves, more than half of which were delivered on the day the order was placed or the day after. As of December 31, 2013, we provided same-day delivery in 31 cities under our 211 program and next-day delivery in another 206 cities across China.
We are a technology-driven company and have invested heavily in developing our own highly scalable proprietary technology platform that supports our rapid growth and enables us to provide value-added technology services. Our technology platform currently has the capacity to process up to 30 million orders per day and record the status of 1.5 billion SKUs. In addition, our sophisticated business intelligence system enables us to refine our merchandise sourcing strategy to manage our
inventory turnover and control costs and to leverage our large customer database to create customized product recommendations and cost-effective and targeted advertising.
We introduced an online marketplace in October 2010 to leverage our brand recognition, our large and growing customer base, our extensive transaction data, our fulfillment infrastructure and our proprietary technology platform. Our online marketplace allows us to provide customers a much greater selection of products. As of December 31, 2013, our online marketplace accounted for approximately 23.5 million of the approximately 25.7 million SKUs offered on our website. Our online direct sales and marketplace businesses together made us the second largest B2C e-commerce company in China, with a 17.5% market share based on transaction volume in the third quarter of 2013, according to iResearch. We attract and select third-party sellers to offer authentic products to our customers through our online marketplace. We monitor third-party sellers' performance and activities on our online marketplace closely to ensure that they meet our requirements for authentic products and high-quality customer service. In addition to basic transaction processing and billing services, we offer third-party sellers a suite of value-added fulfillment and other services.
Our business has grown substantially in recent years. Our total net revenues increased from RMB21.1 billion in 2011 to RMB41.4 billion in 2012 and from RMB28.8 billion in the first nine months of 2012 to RMB49.2 billion （US$8.0 billion） in the first nine months of 2013. We had net losses of RMB1.3 billion and RMB1.7 billion in 2011 and 2012, respectively. In the first nine months of 2013, we had net profit of RMB60 million （US$10 million）， as compared to net loss of RMB1.4 billion in the first nine months of 2012.
Our Industry
China's retail industry has experienced substantial growth as a result of rising disposable income and increasing urbanization. Total retail sales grew from RMB6.2 trillion in 2008 to RMB9.8 trillion （US$1.6 trillion） in 2012, according to Euromonitor International, representing a compound annual growth rate, or CAGR, of 12.2%. However, China's large size and population and differences in consumer behavior and purchasing power across the country have presented significant challenges for retailers to scale up and expand nationwide. As a result, China's retail industry is highly fragmented, with the top 20 retailers in aggregate only accounting for approximately 10% of the total market share in 2012, as compared with approximately 40% in the United States, according to Euromonitor International. The fragmented offline retail market in China presents an opportunity for online retailers.
According to iResearch, China's online retail market size measured by transaction volume was RMB1.3 trillion in 2012 and is expected to reach RMB3.6 trillion （US$588 billion） in 2016, representing a CAGR of 28.9%, a growth rate significantly faster than that of the offline retail market.
Online direct sales and online marketplace are the two major online retail business models in China. Under the online direct sales business model, a company procures and manages its own inventories, sells products directly to consumers online, and provides delivery and after-sales services. Under the online marketplace business model, a company operates an intermediary platform that facilitates transactions between merchants and consumers. Some online marketplaces are operated by companies that also have their own online direct sales business. China's online retail market was originally dominated by online marketplaces, but companies operating under the online direct sales model with carefully managed procurement and fulfillment services as well as wide product selection have also been successful in the past several years, particularly as customers increasingly value product authenticity and better service.
With the shortage of quality storage space and the limited availability of reasonably priced last-mile delivery options, fulfillment remains a challenge for online retail companies attempting to reach more consumers on a nationwide scale while maintaining the quality and efficiency of customer service.
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