JD.com restructures in advance of IPO

JD.com Inc, China's second-largest e-commerce company, will be split into four different business units, a move that not only paves the way for its upcoming initial public offering in the United States but also will give the businesses room to grow.

The Beijing-based company, which filed in late January for the IPO to raise $1.5 billion, confirmed on Wednesday that JD will be divided into two groups, a subsidiary and a business division.

The restructuring will allow the company to have an e-commerce group, a finance group, a subsidiary - paipai.com - and an overseas business division, according to a statement from JD.

Liu Qiangdong, founder of the e-commerce player, will head JD as its chief executive officer after the reorganization.

JD didn't reveal the intention of the restructuring. But with an IPO just around the corner, analysts said that a well-organized business structure will allow it to tell a better story to investors on Wall Street.

"US investors are very interested in riding the wave of the rapidly growing e-commerce market in China. The reorganization can certainly help JD in attracting the attention of investors, especially since e-commerce king Alibaba has opted to go public in the US as well," said Lin Wenbin, an analyst with IT consultancy Analysys International.

Wang Xiaofeng, an analyst with US-based consultancy Forrester Research Inc, agreed with Lin, who said impressing investors at the IPO was certainly part of the plan when it announced the restructure before going public.

But Wang said that cannot be JD's sole intention. "JD has built up its empire from business-to-customer e-commerce. It is high time that JD expanded into other sectors and enriched its portfolio to take its business to the next level," she said.

According to JD's filing to the US Securities and Exchange Commission, the company's goal is to "become the largest e-commerce company in China", despite the fact that there is a sizable gap between JD and the current e-commerce No 1, Alibaba Group Holding Ltd.

By setting up a finance group, JD can empower its expansion into Internet finance, and the overseas division can help it tap into other markets to reach its goal of becoming a global company, Wang said.

As a matter of fact, Liu, the founder and CEO, told a media briefing at the end of 2013 that his company had mapped out its 2014 plan and identified five priorities: technology, finance, online-to-offline, internationalization and expansion to third- and fourth-tier cities in China.

JD is apparently moving quickly into finance and internationalization by setting up two business groups to support their development. Xu Xinquan, a former senior executive of China's Huawei Technologies Ltd, the world's No 2 telecommunications equipment maker, said on his microblog on Monday that he has joined JD to head its overseas business.

As for the plan of building paipai.com - one of the e-commerce platforms that JD acquired from Tencent Holdings Ltd based on the pair's strategic partnership agreement inked last month - into a subsidiary, the Beijing-based company didn't reveal any specific details.

In an internal e-mail that was leaked Tuesday, Kate Kui, JD.com's senior vice-president, said paipai.com is expected to deviate from its current business model and set up a new strategy. Some analysts said the website might remain a customer-to-customer site because JD's core e-commerce function is business-to customer. But others said the subsidiary may focus on mobile e-commerce, which is a weak link for JD at the moment.

JD's rival, Alibaba, has been restructured several times since it was founded in 1999. Its latest restructuring, which came in January 2013, split the group into 25 different divisions to help its brands respond more rapidly to competitive threats.