JD.com’s Popularity and the Rise of Temu

JD.com Inc is a Chinese e-commerce company which operates two segments: the JD retail segment and the new businesses segment. The JD retail segment which comprises of online retail, online marketplace and marketing services. From electronics to home appliances and other general merchandise, third-party merchants can sell their products via the company’s online platform. On its website channels, JD.com also provides marketing and display advertising services to third-party merchants, suppliers and other business partners. The second segment, the new businesses segment, includes logistics services offered to third parties, overseas business, technology initiatives, and asset management services to logistics property investors and sale of development properties. JD Logistics provides third parties with a wide range of supply chain solutions including warehousing, transportation, delivery and after-sales service.

2023 challenges

The billionaire founder of the Chinese online shopping giant has recently called for a change at his company, after he recognised his own “mismanagement” of JD.com. The chairman of JD.com, Richard Liu, told employees that the Beijing-based firm is dealing with serious issues and unless they fix them they “will have no way out.”

Liu’s comments echoed those of his rival Jack Ma, who weeks earlier had called for change at Alibaba, as the amazing performance of their competitor PDD (PDD) created concerns.

Temu’s success poses a threat to JD.com

PDD is shaking up China’s big tech firms as is the group behind Chinese online shopping giant Pinduoduo and fast-growing US-based retail upstart Temu. PDD saw its market value skyrocket to $188 billion after reporting a doubling in revenue year-over-year, and it isn’t even as close at its all-time high recorded in early 2021. On the other hand, top names such as Alibaba are losing ground in recent times.

Last month, Ma congratulated PDD’s stock rally after an employee comment in an internal Alibaba forum. Ma’s post called his employees to share “more constructive comments and suggestions” as it is also a big competitor of JD.com, which has been the second biggest e-commerce firm in China behind Alibaba. Both JD.com and Alibaba have seen their firms come under threat by PDD’s amazing sales and profits in recent months.

PDD’s stock has hit the roof, increasing by 75% this year, and surpassing Alibaba in market capitalisation for the first time last month. JD.com came third. In the meantime, shares of JD.com and Alibaba have dropped 54% and 19% in 2023, respectively.

Colin Huang, PDD’s founder has also entered the rich and famous lists, and he was the fastest riser in Hurun Research Institute’s annual ranking of China’s wealthiest people. Huang is now the country’s third richest person, with a projected net worth of $37.2 billion. The Hurun institute has estimated that his wealth has increased 59%, due to Pinduoduo’s domestic growth and Temu’s success in the United States.

Temu’s success has dominated more than 40 markets beyond China, and the firm has made $21.8 billion in revenue from the first three quarters of 2023. With an aggressive marketing campaign, Temu has challenged Chinese giants, but the platform has caught the attention of the US authorities as the U.S.-China Economic and Security Review Commission under Congress published a report on the “challenges” posed by Chinese fast fashion platforms, such as Temu. These challenges include “exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety, and use of forced labour; and violations of intellectual property rights.”

Issues faced by JD.com

In JD.com’s internal forum, Liu responded to a comment from an employee who criticised the company’s various issues including the way it runs promotions and the inability to support its merchants who sell on the platform. Chinese news outlet LatePost reported the comments after a person close to JD.com confirmed the remarks.

The remarks were confirmed to CNN by someone who was close to JD.com and who requested to remain anonymous. Liu said: “It can be said that every one of the company’s pain points is a real problem and must be changed.” He added: “Of course, so many problems are caused by my mismanagement; I very much blame myself.” He asked his employees to “not lie flat,” a Chinese slang term for rejecting a demanding work culture in favour of enjoying a simple life. He also wrote: “The organisation is big, bloated, and inefficient, and it does take time to change” but he said that the company’s foundation remained rock-solid. Liu acknowledged the employee, whom he referred to as a “brother,” for their comment. He called for a change and said: “I believe we will get out of the bottom. People and companies will go through several peaks and valleys to achieve greatness. Let’s work together to change!” Following the reports, a JD.com spokesperson said “this is a routine exchange, and it demonstrates our management’s confidence, as well as the entire team’s collaboration, in addressing problems and overcoming challenges.”

Demand for value-for-money products

JD has strived to meet challenges and respond to competition as consumers are demanding value-for-money products, which is not one of the giant’s strong selling points. JD’s stock weakened recently after the news that it was being removed from the Nasdaq 100 Index.

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Esta información no debe considerarse asesoramiento o recomendación sobre inversiones, sino una comunicación de marketing. IronFX no se hace responsable de datos o información de terceros en esta comunicación, ya sea por referencia o enlace.

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