By YU Hao
Chinese e-commerce giant JD.com’s strategy to cut costs and raise efficiency seems to be paying off. In Q4 last year, JD.com’s revenue grew 7.1 percent year on year to 295 billion yuan (US$42 billion), much slower growth than before, but with a 3-billion-yuan net profit. In Q4 2021, JD.com made a net loss of 400 million yuan.
While the numbers appear to be good enough in themselves, JD.com stock tumbled on the news with shares down more than 10 percent on both HKEX and Nasdaq. The entire Hang Seng index fell more than 5 percent last week, the biggest weekly fall for several months since October last year.
JD.com’s profit is being out down to a scaling back of its group-buying and international businesses, a situation forced on the company during lockdowns last year. But what upset investors most was JD.com’s “weak” growth in terms of gross merchandise volume (GMV). Growth was only 5.6 percent in 2022, compared with more than a quarter in 2021.
The earnings report didn’t reveal the number of JD.com’s active users, further alarming a jittery market, but growth is sure to have slowed down based on previous reports.
With such unimpressive growth, JD.com’s latest campaign of discounts and bargains has raised even more eyebrows than usual. CEO XU Lei has said, JD.com will offer consumers 10 billion yuan in price cuts on all kinds of products. JD.com plans on flooding the market with cheap items, and offsetting any losses to merchants brought by the heavy discounts.
JD is promising unbeatable prices, with a comparison tool to help shoppers to check prices at Pinduoduo, Taobao, Kuaishou, and Douyin. If a cheaper price can be found on any other platform, with or without the comparison tool, JD.com will reportedly refund twice the price difference.
JD.com has worked hard to set itself apart from other online retailers in terms of authenticity, quality and logistics. The platform paints itself as the natural online partner of high-end brands. Although this bargain-basement campaign is unlikely to affect sales of luxury items directly, it could devalue JD.com’s image, hurt profit margins, and discourage partnerships.
XU Ran, CFO of JD.com, said not all discounts affect gross margin and the company’s expenditure would remain unchanged. Marketing budgets from “traditional” shopping events – June 18, or Singles Day – have been poached to feed the discount campaign.
