By YU Hao
JD.com unveiled 10-billion-yuan (US$1.4 billion) price cuts on Tuesday, in what is being seen as a confrontational move, aimed directly at arch-rival Pingduoduo, best known for heavily “discounted,” cheap goods.
Most important weapons
XIN Lijun, CEO of JD Retail Group said the imposition of the latest price cuts on self-operated stores and third-party merchants would just be the beginning. JD.com founder Richard Liu recently said that price was the core competion of e-commerce.
“Low prices were the most important weapons responsible for our past success, and they will be essential in the future,” Liu wrote in an internal email.
One of two immense B2C online retailers in China, JD.com plans to operate the new discount channel on a long-term basis, flooding the market with cheap items. JD.com claims to be ready to pay subsidies to merchants. The company says it will offset any losses brought by the heavily discounted prices.
Nothing (new) to see here
From the look and feel of the channel and the range of products it offers, the “new” channel is an awful lot like Pingduoduo.
The homepage of the channel features both discounted booze (Maotai) and knocked-down electronics (Apple).
Pingduoduo has had its own 10 billion yuan discount program since 2019, providing discounts on brand-name products. In November 2022, Pinduoduo reported that Q3 revenue had increased 65 percent year-on-year. Operating profit was almost five times the previous year’s.
For customers, JD is promising unbeatable prices. A comparison tool will allow users to check the prices of similar products from Pinduoduo, Taobao, Kuaishou, and Douyin. If customers can find a cheaper price on any other platform, with or without the comparison tool, JD.com will reportedly refund double the price difference.
High price of excellence
JD.com’s logistics and labor costs are substantially higher than Pingduoduo’s. A continuous discount campaign will undoubtedly impact on the company’s revenue and profit.
JD.com has worked to distinguish itself in terms of authenticity, quality and excellent logistics. The retailer has strived to become the natural online partner of high-end brands. Although a cheap campaign is unlikely to affect sales of luxury items, it could devalue JD.com’s image, hurt profit margins, and discourage partnerships.
