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 get a near-term report card in the next few weeks based on the ongoing 618 shopping festival that’s due to wrap up in mid-June. “With a high comp base in 2Q24 as well as intense competition into 6.18, we need more evidence to prove that JD’s business has turned around, although the company left its full-year guidance unchanged,” Morgan Stanley equity analyst Eddy Wang and a team said in a May 17 report. The firm has an equal-weight rating on JD.com and a price target of $28 a share. That’s below the stock’s $30.21 close on Thursday. UBS analysts still think JD.com shares can go to $40, according to a note on May 28 that rates the stock a buy. “On a clean base, general merchandise, especially the supermarket category, should be the key driver for 2024, following JD’s business optimisation,” UBS analyst Kenneth Fong and a team wrote. While JD has yet to significantly expand into e-commerce overseas, Alibaba has ramped up spending on its international business. Last week, the company’s AliExpress cross-border e-commerce platform announced it signed David Beckham for its biggest global brand ambassador partnership to date. “We expect Alibaba’s share price to stay range-bound in the next 3-6 months as its financials still face uncertainties at the early stage of the investment cycle,” JPMorgan China Internet Analyst Alex Yao said in a May 15 report. He rates the stock overweight, with a $100 price target. That’s nearly 26% above where shares closed Thursday. “Improving domestic ecommerce market share should lead to better monetization eventually,” Yao said. “Taobao/Tmall’s GMV grew double digits YoY in March Q, suggesting its market share loss has become very mild vs. nation wide online physical goods GMV growth of 11.6% in the quarter.” The company that’s really eaten up market share is not publicly traded, however. TikTok parent ByteDance operates a similar version of the app in China called Douyin, which has become a sales portal for brands and influencers, primarily through livestreaming. Douyin is expected to attain a gross GMV market share of 19% in China this year, more than that of JD.com, Alibaba’s Taobao or Tmall on an individual basis, according to Goldman Sachs’ analysis. The investment firm expects Douyin to match PDD’s market share of 21% next year, and surpass it by reaching 22% in 2026. Tencent’s WeChat Video Account platform is expected to retain about 2% to 3% of GMV market share through 2026, the Goldman analysis said. Another growing e-commerce play is Hong Kong-listed Kuaishou . The video streaming platform last month reported e-commerce GMV grew by 28.2% year-on-year in the first quarter to 288.1 billion yuan ($40,55 billion). “We remain positive on [Kuaishou’s] ads & ecommerce monetization and earnings growth, and forecast total revenue +9.5% YoY in 2Q24E,” Sophie Huang, analyst at CMB International, said in a May 23 note. The firm forecasts Kuaishou’s e-commerce GMV revenue will grow by 25% this year, although livestreaming revenue — which has accounted for about a third of total revenue — is expected to drop due to a high base. CMB International has a price target of 97 Hong Kong dollars ($12.41) on Kuaishou shares, or about 70% above Friday’s levels. — CNBC’s Michael Bloom contributed to this report.