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Gritty Tweaks Prepare a China E-tailer for U.S. IPO

Stocks in this article: AMZN WMT

JD said it planned to offer American depository receipts on the Nasdaq or New York Stock Exchange sometime in 2014. The prospectus did not estimate a price range.

Behind JD's popularity and flashy Web site is a huge, gritty logistics operation. Goods are shipped to 460 cities around the country from warehouses in 34 hub cities. Next-day deliveries are made possible by an army of 18,000 couriers, mainly young men riding electric bikes or three-wheelers.

The delivery scheme gets around city rules against the commercial use of sidewalks. Sidewalk spots serve as customer pick-up sites in areas where couriers are restricted, such as college campuses. Sometimes couriers for JD, Tmall and other shopping Web sites pile boxes together on a sidewalk and let customers search out orders.

JD recently started a non-bank credit service for product suppliers that avoids the Chinese government's strict financial controls. A company that has sold goods on the JD portal for several months can get a no-collateral, 90-day loan for a 10% annual interest rate plus fees, Chinese media reported last fall.

The government is also letting JD provide special tax receipts, called "fapiao," for certain goods sold in the city of Beijing. Customers including companies and government entities can use these receipts to apply for tax deductions.

In another tweak, in December JD was one of 11 non-telecom companies, including Alibaba, that won government permission to sell telecom services such as mobile phone calling minutes. Services will be purchased wholesale from firms such as China Mobile and resold to consumers through Web sites.

JD has tweaked its identity more than once. The original Web site domain was the retailer's first name. That later became Jingdong Mall, then simply Jingdong in Chinese and JD in English.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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