Yahoo Finance JD Anticipates Sales Rebound After Enticing Shoppers With $1.4 Billion Worth of Deals
(Bloomberg) -- JD.com Inc. is on track to emerge from a record sales funk as a bounce-back in parts of China’s consumer economy and a $1.4 billion discounting program help revive its online commerce business, a top executive said.
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Retail chief Xin Lijun expects JD’s core e-commerce business to accelerate this quarter after the company posted its lowest-ever pace of overall revenue expansion during the January to March period. JD Retail’s sales should return to growth, he said, after declining 2.4% last quarter. All that reflects a gradual, if uneven, rebound in consumer sentiment following China’s Covid Zero years that should underpin a broader recovery in 2023’s back half.
“You will see an upward curve of growth rate when we release the results for the second quarter,” Xin, who runs the main retail and commerce operations, told Bloomberg Television this week. “We are relatively optimistic and confident in the second half of the year, overall.”
Chinese retail sales grew 12.7% in May but was down from April and less than projected. Along with disappointing data on unemployment and investment, that suggests the world’s second largest economy is struggling to regain its footing. Still, Beijing is prioritizing economic growth and once again allowing its giant private sector to expand, after a two-year clampdown that obliterated growth in sectors such as online commerce.
JD is wrestling with internal issues as well. Its chief executive — once the presumptive heir to billionaire founder Richard Liu — is departing just as the company grapples with intensifying competition from traditional rivals Alibaba Group Holding Ltd. and PDD Holdings Inc. as well as upstarts like ByteDance Ltd.
Read more: JD’s CEO Exits After a Year at the Helm as Growth Dwindles
In response, JD kicked off a a $1.4 billion discounting program in March — a costly effort to lock in consumers ahead of a broader recovery later this year. Consumers gravitate toward value for money products in a downturn, Xin said. That spending spree in turn signaled to investors that JD may be placing a market share grab before profitability, helping wipe 40% off its value since a January 2023 peak.
Xin said JD remains focused on the bottom-line over the longer term but needed to protect its turf now.
“In the long run, I think market share is necessary for the survival of every enterprise. When you don’t have market share, the profits are actually fake,” he said.
A litmus test for JD’s efforts is this month’s “6.18” bargains extravaganza, the summer online sales event often compared with Black Friday and China’s own Nov. 11 gala, when major names from Apple Inc. to Xiaomi Corp. ply shoppers with discounts.
JD saw demand rebound in select categories such as cosmetics and apparel and its final transactions tally would be “a surprise,” Xin said without elaborating.
What Bloomberg Intelligence Says
Last month’s acceleration of mainland China’s sequential gains in online retail sales from pre-Covid levels raises the likelihood that the gross merchandise value which Alibaba and JD.com derive from the 618 shopping festival, now underway, will rise above year-earlier levels. The lift to online spending from e-commerce firms’ offer of higher perks, including perks from ByteDance’s Douyin, Kuaishou and Little Red Book, could fuel stronger sales gains online than in physical stores this month.
- Catherine Lim and Trini Tan, analysts
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In the first 10 minutes of the event starting late May 31, nearly half of the small and medium-sized merchants that took part tripled volumes from the prior year. The overall turnover of men’s and women’s clothing on the platform more than doubled, JD said. Taobao and Tmall, the marketplaces of JD’s larger rival Alibaba, also shifted the focus of this year’s 6.18 to smaller vendors versus mega-brands.
JD needs a solid result to convince investors keen for signs of a Chinese consumption recovery. The company has experienced slowing growth for its signature June event over the past years. Transaction volumes growth declined to 10.3% last year, from 27% in 2019 and 33.6% in 2020 during the pandemic.
“As long as the measures to expand our market share are reasonable, we should take them to serve more consumers and gain recognition,” Xin explained. “If we do, we’d gain long-term market share.”
--With assistance from Claire Che.
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