BEIJING, March 10  (TMTPOST)— China’s e-commerce behemoth JD.com, Inc  is refocusing on price war following a year that saw struggling for recovery from the Covid-19 pandemic. 

Source: Visual China

Through a sweeping reorganization and a round of heated communication across the company, JD founder Liu Qiangdong managed to reach a consensus among the staff from top to bottom, taking steps to put low pricing as the most important strategy in the coming three years for the retail business, Chinese business news media outlet LatePost reported on Thursday.

“JD’s decline in minds of brands and retail sector nowadays is basically due to the rapid growth of other channels,” Liu said with a harsh tone at an all-hands meeting of the business division at the end of last year, according to LatePost. The word low pricing was reported be mentioned dozens of times during Liu’s speech for more than three hours. Chief Executive Officer Xu Lei even stressed emergency of the strategy. "Today we are determined and everyone has agreed to lower prices. There will be quite a number of extremely challenging changes ahead, but we don’t have any way but to insist this path, and we have to go down it,” Xu was said to tell more than 6,000 employees working on procurement and sales at the meeting.  

The performance of the third quarter of 2022 may be the direct catalyst for Liu’s overhaul and new strategic focus, the report said. As of September 30, JD posted better-than-expected financial results both the top and bottom line for two quarters in a row. Its net revenue surged 11.4% year-over-year (YoY) to RMB243.5 billion (US$134.2 billion), topping the analysts’ forecast of RMB243.07 billion. Non-GAAP diluted net income per American depositary share (ADS) for the quarter was RMB6.27 (US$0.88), almost doubling a year ago and beating the expected RMB4.46. However, JD Retail, its core division, reported a 7% increase of revenue, compared with 23% of growth a year earlier and 25.2% in the same period of 2020, the first year of pandemic.  What we feel certain and make preparation for is that the worst moment is basically over, and positive news will keep coming in the future, while what we are not sure is that the speed and strength of the future recovery, JD management said at an earnings call for the quarter.

It is worth noting that JD’s recent massive discounts campaign is part of effort in pursuit for the low pricing strategy. The online retail giant launched a subsidy campaign worth 10 billion yuan (US$1.45 billion) to promote online sales last Monday. Unlike the previous promotion only for flash sales during the "6.18" or "Double 11" promotion, the banner of the RMB10 billion subsidy scheme is directly placed on JD app homepage and will be effective for a long time, turning the previous promotion mode during shopping festivals into daily sales mode. The company provides subsidies by directly lowering prices, covering 3C household appliances, beauty makeup, fresh food, life services, medical and health care, and other categories.

Earlier Thursday, JD released financial statements in the last quarter of 2022. The net revenue of RMB295.4 billion (US$142.8 billion) represents a 7.1% YoY increase, down from 23% a year ago, and fell short of the expected RMB295.51 billion. Non-GAAP diluted net income per American depository share (ADS) for the quarter beats estimates with RMB4.81 (US$0.70), compared to RMB2.21 for the same period last year. Revenue from JD Retail climbed YoY 3.6% to RMB258.925 billion, further cooling from 7.1% growth in the previous quarter.

"While 2022 posed many challenges for JD.com and China as a whole, we delivered solid operational results and surpassed 1 trillion RMB in annual revenue for the first time," Xu Lei touted the achievement for the past year. He vowed his company to “stay focused on lowering costs, increasing efficiency and constantly improving user experience”.

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