News that Chinese e-commerce giant JD.com‘s international business operations will undergo major adjustments has recently spread within the company. According to a report by Wall Street Technology Insight on October 27, certain business units in Europe and Southeast Asia will be most affected by the changes. It is highly probable that the firm’s Europe divisions will be cancelled, while those in Southeast Asia will shrink. In the most extreme case, services in both Thailand and Indonesia will be abolished.
The reason for this contraction is the low overall profitability of JD.com‘s international business efforts. According to a financial report released by the firm in late August, revenue in the second quarter only increased by 5.4%. CEO Xu Lei stated bluntly that the company faced its biggest challenge since listing.
JD.com‘s international business can be divided into two parts: one is for selling overseas goods through JD Mall to Chinese users, and the other is providing services for overseas markets. In the past two years, JD.com has extensively recruited talent with international retail and logistics backgrounds from online retailer Amazon, Sinotrans, one of the largest logistics companies in China, Maersk, and Huawei’s global sales department.
In January of this year, JD.com‘s European business officially commenced, while Ochama, a retailer owned by JD International, officially opened in the Netherlands. Ochama adopts a fully automated stocking warehouse and customers can choose to pick up the goods or enjoy delivery service.
Ochama’s products cover fresh food, household appliances, makeup, fashion, and more. Its fresh ingredients are rich in Chinese characteristics, arousing the shopping enthusiasm of many Chinese expatriates and overseas students living in the Netherlands.
Ochama’s preferential policy is very simple. Starting in October, the retailer offers 10% discounts to consumers through directly lowering the price of its products. Since August, Ochama has opened nearly 100 pickup sites in Rotterdam, Amsterdam, The Hague, Paris and other cities. Overseas warehouses are located in the UK, Germany, the United States, Australia, Poland, the Netherlands, and more.
In Southeast Asia, JD.com‘s competitive advantage based on labor costs has been erased by Lazada, a subsidiary of Alibaba. The layout of JD.com in Southeast Asia began in 2015. JD.ID, a cross-border e-commerce platform jointly established by JD.com and local enterprises, was launched in Indonesia. In 2018, JD.com participated in round-C investment for Tiki, a Vietnamese e-commerce platform, and increased its holdings in 2019, becoming the largest shareholder of the company. In September 2018, JD.com and Thai retail group Central Group established JD Central, an e-commerce joint venture.
JD.com has established warehousing and logistics systems with controllable costs in Indonesia and Thailand. However, Lazada also set up overseas warehouses in Thailand that are as efficient as JD Logistics.
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The Chinese market is also full of consumer complaints. Take JD International’s global buyer project, which was launched in January 2022, as an example. JD.com‘s buyers are aimed at customers who need products from other countries, and they position themselves as a bridge connecting sellers with Chinese consumers. JD.com will provide sellers with benefits such as more traffic and identification services. However, on October 20, insiders revealed that due to the frequent sale of fake goods, the project has been suspended, and the specific recovery time is yet to be determined.
JD.com has become one of China’s major sales channels, but in overseas markets, it is difficult to squeeze in quickly as a latecomer.