By LI Biao
Since late last year, JD.com's prices have been low and keep getting lower. Previously aloof from the bargain-hunting frenzy, JD.com has thrust itself directly into the heart of the fray, taking in such expert price cutters as Taobao and Pinduoduo.
While JD.com's latest financial report exceeded market expectations, it fell short of its two formidable rivals. The low-price strategy hasn't delivered the much-anticipated growth for JD.com, with performance in the first half of this year even worse than in pre-pandemic days.
Aggression has limits
The crux of this predicament lies in the disconnect between the low-price strategy and its execution. JD.com's primary development target is third and fourth-tier markets, and the key approach is low prices and a wide variety of goods.
Merchants on JD.com fall into two categories: quality (self-operated stores) and bargains (third-party Platform Open Plan (POP) merchants).
The low-price strategy predominantly focuses on POP merchants. In the second quarter of this year, JD.com's POP merchants increased more than five-fold. However, aggressive merchant recruitment may have limitations. More almost always means worse. Quality is tough to maintain. And JD.com's image has always been founded on service quality.
Different priorities
In contrast, Pinduoduo and Taobao, both emphasizing low prices, employ differing approaches. Pinduoduo prioritizes price first and foremost. Taobao centers on volume.
JD.com lacks such commitment. Founder Richard Liu has said he will deliver competitively priced products with the same service and product quality standards. In essence, JD.com's low-price strategy prioritizes value for money, a subjective metric that varies from person to person.
Presently, JD.com is making it very easy for merchants to climb aboard. It offers customer coupons in its strength, and electronics to support weak lines like daily essentials.
Despite the disappointing low-price strategy, Liu is sticking with it.
Bottom line
A survey of Chinese consumers in May found that roughly half will switch platforms for lower prices amid consumption cutbacks. In their eyes, products on Pinduoduo and Douyin cost half as much as on other platforms.
It seems that JD.com will continue to prioritize quality. Balancing low prices while maintaining standards may position JD.com for a robust future. On the other hand, it's a difficult line to tread, and failure may be fatal.
