Walmart's exit raises questions about JD.com's future
By Casey Hall and Sophie Yu
SHANGHAI/Beijing, Aug 23 (Reuters) -E-commerce retailer JD.com needs to convince investors of its relevance amid a stagnant Chinese e-commerce market, aggressive price war and now, the departure of Walmart, its biggest shareholder.
Walmart WMT.N announced this week a full exit from the Beijing-based e-commerce platform, selling off its $3.74 billion stake, which triggered a 10% slump in its share price and raised questions about JD.com's 9618.HK ability to withstand the changed landscape.
A decade ago founder Richard Liu persuaded investors the company could take on Alibaba 9988.HK, its bigger rival with his own business model, raising $1.8 billion, in what was then the biggest IPO by a Chinese firm in the U.S.
In 2014, Alibaba was a dominant force in China's fledgling e-commerce market with nearly 80% market share.
Operating in the shadow of Alibaba, which largely relies on ad revenues and fees from vendors earned from facilitating sales, JD.com had a different but appealing approach.
Its business model, which involves direct selling to shoppers and heavy investment in supply chains and logistics, allowed the firm to nearly double its market share from 14% a decade ago to 27% in 2023.
JD's early strategy of selling directly to consumers and delivering products via its own extensive logistics network helped engender trust in consumers who were - at the time - new to online shopping, encouraging them to spend significant sums on branded electronics and household appliances, and guaranteed fast delivery people valued.
"Loyal users still prefer to shop on JD.com; reason one is its delivery is fast, and reason two is quality on this platform is more guaranteed," said Liu Xingliang, an internet business analyst at DCCI Data Center.
However, JD.com's bloated cost structure and logistics that served it well are now a drag against its peers.
"Given its higher-end positioning, JD is less likely to deliver strong growth amid the current consumption weakness in China and its lack of diversification away from China vs peers like PDD," said Morningstar analyst Chelsey Tam.
In contrast, the Alibaba Group has a workforce of around 200,000, and PDD Holdings PDD.O - which has seen its market cap explode to five times that of JD.com's $40 billion - has a comparatively tiny team of just 17,400 employees.
Its overhead costs have also pressured profitability. By the end of 2023, its workforce reached 517,000, including 355,000 delivery personnel.
Its operating margin was 4% in the second quarter, well below Alibaba's 15% and PDD's 26%.
JD.com did not respond to a request for comment.
STRATEGY TWEAKS
To confront slowing Chinese e-commerce growth, JD.com has enlisted third-party merchants to increase its offerings in price competitive products and private label products, Tam said.
It has also responded to competition from Alibaba's Taobao and PDD's Pinduoduo by further optimising its supply chain and logistics and leveraging economies of scale to attract shoppers with low prices without sacrificing quality.
On an earnings call last week when JD.com delivered a forecast-beating quarterly profit, CEO Sandy Xu reiterated that the low-price strategy was key to its growth.
However, some have doubts over how much supply chain optimisations can drive further revenue growth.
"JD.com's stated strategy is to work with the manufacturers on low-cost versions of premium value goods, which sounds great, but I'm sceptical this will be the biggest driver of growth in the short term," said tech analyst Rui Ma.
JD.com's limited exposure to markets outside of China, with about 2% of revenue from its international businesses versus Alibaba's approximately 10%, and its inability to tap into international markets for growth as effectively as its rivals, have been highlighted as strategic weaknesses.
Earlier this year, JD.com abandoned a bid to buy struggling British electronics retailer Currys CURY.L. At the time, analysts said it could be a shortcut to the international expansion that Alibaba and PDD have invested years of time and billions of dollars in building.
Davy Huang, business development director at e-commerce consultancy Azoya, said expansion overseas was a good idea but warned it should avoid the race-to-the-bottom price war currently gripping cross-border e-commerce from China.
"The current cross-border export environment is quite toxic, focused on low price competition, heavy advertisement, subsidies on orders and profiteering from sellers," he said.
"I don't doubt their capabilities, but...the priority should be China now, to defend their position."
JD.com's share price has lost 70% of its value since 2021 https://reut.rs/3XfMhZW
Reporting by Casey Hall in Shanghai and Sophie Yu in Beiing; Editing by Miyoung Kim and Jacqueline Wong
අදාළ වත්කම්
නවතම පුවත්
වියාචනය: XM Group සමාගම් ක්රියාත්මක කිරීම පමණක් වන සේවා සපයන අතර වෙබ් අඩවියේ හෝ වෙබ් අඩවිය හරහා ලබා ගත හැකි අන්තර්ගතය බැලීමට සහ/හෝ භාවිත කිරීමට පුද්ගලයෙකුට ඉඩ සලසමින් අපගේ මාර්ගගත වෙළඳ පහසුකම වෙත ප්රවේශය ලබා දෙන අතර වෙනස් කිරීමට හෝ පුළුල් කිරීමට අදහස් නොකරයි. එවැනි ප්රවේශය සහ භාවිතය සෑම විටම (i) නියමයන් සහ කොන්දේසි, (ii) අවදානම් අනතුරු ඇඟවීම් සහ (iii) සම්පූර්ණ වියාචනයට යටත් වේ. එබැවින් එවැනි අන්තර්ගතයක් සාමාන්ය තොරතුරුවලට වඩා වැඩි යමක් සපයා නොමැත. විශේෂයෙන්ම, අපගේ මාර්ගගත වෙළඳ පහසුකමේ අන්තර්ගතය පෙළඹවීමක් හෝ මූල්ය වෙළඳපොළවල කිසිදු ගනුදෙනුවක් සිදු කිරීමට ඉදිරිපත් කිරීමක් නොවන බව කරුණාවෙන් සලකන්න. ඕනෑම මූල්ය වෙළඳපොළක වෙළඳාම් කිරීම ඔබේ ප්රාග්ධනයට සැලකිය යුතු අවදානමක් එක් කරයි.
අපගේ මාර්ගගත වෙළඳ පහසුකමේ ප්රකාශිත සියලු කරුණු අධ්යාපනික/තොරතුරුමය අරමුණු සඳහා පමණක් අදහස් කෙරෙන අතර මූල්ය, ආයෝජන බදු හෝ වෙළඳ උපදෙස් සහ නිර්දේශයන්; හෝ අපගේ වෙළඳ මිල පිළිබඳ වාර්තාවක්; හෝ ඕනෑම මූල්ය උපකරණයක ඉදිරිපත් කිරීමක් හෝ ඒ සඳහා පෙළඹවීමක්; හෝ විශේෂ ඉල්ලීමකින් තොරව ඔබ වෙත ලබා දෙන ලද මූල්ය ප්රවර්ධනයන් ලෙස නොසැලකිය යුතුය.
ඕනෑම තෙවන පාර්ශවීය අන්තර්ගතයක් මෙන්ම XM විසින් සකසන ලද අන්තර්ගතය එනම් අදහස්, පුවත්, පර්යේෂණ, විශ්ලේෂණ, මිල ගණන් සහ වෙනත් තොරතුරු හෝ මෙම වෙබ් අඩවියේ අන්තර්ගත තෙවන පාර්ශවීය වෙබ් අඩවි සඳහා සබැඳි සාමාන්ය වෙළඳපොළ විවරණයක් ලෙස "පවතින පරිදි" සපයා ඇති අතර එහි ආයෝජන උපදෙස් ඇතුළත් නොවේ. ඕනෑම අන්තර්ගතයක් ආයෝජන පර්යේෂණයක් ලෙස අර්ථ දක්වා ඇති ප්රමාණයට, ආයෝජන පර්යේෂණයේ ස්වාධීනත්වය ප්රවර්ධනය කිරීමට නිර්මාණය කර ඇති නෛතික අවශ්යතාවලට අනුකූලව අන්තර්ගතය සකසා නොමැති බවත් එලෙස අරමුණු කර නොමැති බවත් ඔබ සලකා පිළිගත යුතු අතර එබැවින් එය අදාළ නීති සහ රෙගුලාසි යටතේ අලෙවිකරණ සන්නිවේදනයක් ලෙස සලකනු ලැබේ. ඉහත සඳහන් තොරතුරු සලකා මෙතනින් ප්රවේශ විය හැකි, ස්වාධීන නොවන ආයෝජන පර්යේෂණ සහ අවදානම් අනතුරු ඇඟවීම පිළිබඳ අපගේ දැනුම්දීම ඔබ කියවා තේරුම් ගෙන ඇති බව සහතික කර ගන්න.