JD.com Inc. Surpasses Expectations with 1.7% Revenue Growth
JD.com Inc. has reported a stronger-than-expected 1.7% increase in quarterly revenue, driven by heavy promotional spending that boosted online transactions amid fierce competition in the e-commerce industry. The company’s revenue for the September quarter totaled 247.7 billion yuan ($34.2 billion), surpassing the average analyst estimate of 246.6 billion yuan, while net income rose 33% to 7.9 billion yuan. As a result, its shares rose 4.5% in pre-market trading in New York.
Challenging Competition from Rivals
Based in Beijing, JD.com Inc. has initiated a price war to gain market share from competitors including Alibaba Group Holding Ltd. and PDD Holdings Inc., particularly as consumers cut back amid economic uncertainty. The company has shifted its focus to offering consumers a wider range of price points and product categories, moving away from its traditional emphasis on higher-priced items like smartphones to target more budget-conscious post-pandemic shoppers.
Uncertain Market Impact
It remains to be seen whether JD.com’s strategic shift will have the desired effect, particularly as the company and its main rival, Alibaba, likely experienced only single-digit percentage growth during the recent annual Singles’ Day shopping festival. This falls short of the performance of newer operators such as ByteDance and Kuaishou Technology.
Cost Challenges and Economic Headwinds
JD.com Inc. likely faced higher operating costs, driven by increases in fee subsidies for merchants and advertising spending, which have contributed to the doubling of third-party sellers on its platform. However, the company’s commitment to keeping product prices affordable through a subsidy program raises concerns about persistent cost increases through the fourth quarter.
Challenges in the Chinese Market
JD.com Inc. has contended with a slowdown in Chinese consumption, compounded by challenges in the property market and rising youth unemployment. Deflationary pressures in the country have also sparked worries about its growth trajectory, contributing to a more than 50% drop in JD.com’s stock price this year.
Struggles amid Regulatory Changes
The company’s performance reflects a departure from the double-digit expansion seen in previous years, signaling the impact of Beijing’s regulatory crackdown on online commerce and other internet sectors. Although JD.com Inc. largely avoided the worst effects of the crackdown, it remains a challenge to regain momentum after enduring years of severe Covid Zero restrictions in the world’s second-largest economy.
©2023 Bloomberg L.P.
