Economists already know that large numbers cease to be useful when they become targets. This law now applies to technology companies in China. Rival groups like Alibaba and JD.com bandy about statistics as "gross merchandise volume" which are highly subjective. As the Internet matures, numbers like these will confuse irrelevant China.
For groups ecommerce China, GMV is the data point to flaunt. Alibaba handled transactions worth 2.3 trillion yuan ($ 364 billion) last year - an impressive 81 percent of total online shopping market in the country. That put 240 billion yuan JD.com rival, according to iResearch, in the shade. However mammoth Alibaba GMV includes all confirmed less than 100,000 yuan, regardless of whether or not the transaction is complete orders. Excludes incomplete transactions JD.com more than 2,000 yuan. If a customer orders a 5,000 yuan iPhone 6 and then canceled, Alibaba will in its GMV while JD no.
The possibility of rotation. Alibaba proudly displays sales figures in real time on a giant screen during his 24 hours "Day" Singles "online shopping festival. At midnight, the company reported 57.1 billion yuan in transactions. However, this number was driven by an initiative of pre-sales, where customers could make a deposit nearly a month before, just to pay the full amount on the day of 'Singles.
The main reason investors pay attention to these numbers is that it makes it easier to compare different business models. Market main eBay-like Alibaba, Taobao - where consumers sell each other - is very different from Amazon-like JD.com business to consumer sites. JD.com also clings to products in their own warehouses and trucks, while Alibaba does not.
Ideally, investors stick to the fundamentals of the old school, like operating profit. After all, that's what actually went to investors after stripping equity and debt in the different business models. Technology companies themselves are unwilling to highlight those figures though. Alibaba GMV grew 49 percent in the last quarter, while operating profit grew only 6 percent year on year. And JD.com remains negative. That makes the numbers as GMV best of a bad bunch - but investors should be wary of being too credulous of what is basically a new way of being cheated.
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