Chinese e-commerce group JD.com on Thursday (Aug 15) reported forecast beating second-quarter profits, helped by price cuts that attracted cost-sensitive consumers to its platform.
JD.com’s US-listed shares rose as much as 3.5 per cent in premarket trading.
Major Chinese vendors like JD.com and Alibaba have increased focus on discounts and lower-priced goods as Chinese shoppers have become more cautious about spending.
A stuttering post-Covid recovery in China has benefited low-cost e-commerce players such as PDD Holdings. Increased competition has triggered a price war between larger rivals as they look to attract the same pool of customers.
The retailers rely heavily on major discounting events such as China’s mid-year e-commerce sales festival which took place in June, to boost overall growth and exposure.
The so called “618“ shopping event, named after the June 18 founding date of e-commerce provider JD.com, but embraced by all platforms, gauges the market sentiment among household consumers.
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JD.com said in June its turnover and order volumes reached a new high over the festival period, which ran from the end of May to June 18 this year.
JD.com’s second-quarter profit rose 73.7 per cent to 9.36 yuan per share, excluding items, compared with estimates of 6.07 yuan, according to LSEG data.
JD.com’s general and administrative costs reduced by 9.6 per cent in the quarter.
After JD.com prioritised a “low price” strategy at the close of 2022, its share price has experienced a decline, plummeting from approximately US$60 to the current value of around US$26.
Jacob Cooke, CEO of e-commerce consultancy WPIC Marketing + Technologies, said despite economic challenges, consumers are not only motivated by price-product quality and shopping experience also contributes to driving conversions and cultivating marketplace loyalty.
“JD.com should lean into its strengths rather than engaging in a race to the bottom of excessive discounts,” he said.
The company’s total revenue rose 1.2 per cent to 291.40 billion yuan (S$53.62 billion) in the second quarter, compared with estimates of 292.89 billion yuan. REUTERS
