First loss in years and reduced demand for JD.com

JD.com, Alibaba’s main rival in China, has plunged into the red last year – for the first time since 2018. The e-commerce giant had to invest heavily to keep up with new competitors, while consumers sat back.

Feeling the pressure

The Chinese e-commerce platform ended 2021 with a loss for the first time since 2018, recording a net loss of 3.6 billion yuan (half a billion euros) compared with a net profit of 49.4 billion yuan (7 billion euros) in 2020. This is due to significant investments in new activities: the operating loss of the new business segment more than doubled last year.

JD.com faces increasing competition from new platforms and has to innovate vigorously to keep up. For example, it launched Jingxi in 2019 to reach smaller cities and cope with rising star Pinduoduo, a popular app for group purchases. JD.com also invested heavily in property management, overseas expansion and new technology initiatives.

Competition from live streaming platforms is also increasing, although JD.com says it focuses on consumers making planned purchases and relies less on impulse buying. This means the platform is used less by the many Chinese who get seduced into buying through videos. However, the company is open to collaborations: JD’s major logistics arm, JD Logistics, already provides deliveries for some live streaming platforms.

Chinese scale back

Full-year sales rose 27.6 % to 951.6 billion yuan (137 billion euros) but slowed during the fourth quarter to a 23 % sales increase compared to a year earlier. It was the weakest sales growth in six quarters, due to weaker consumer demand. Both physical and online retail slowed down, JD.com’s president Lei Xu admitted to Kr Asia. Xu still expects “relatively conservative” consumption throughout the first half of this year.

“We still achieved healthy user growth in the fourth quarter and met our full-year growth targets”, the CEO stressed. The company gained more than 20 % in customers last year and now has 569.7 million active users. 

JD also entered into new partnerships in the fourth quarter: Dior joined forces with an e-commerce player for the first time, while Emporio Armani and Michael Kors, among others, opened their own online stores via JD. In January, JD.com also announced a strategic partnership with Shopify, making it the first partnership for Shopify in China.