Chinese billionaire Richard Liu has acknowledged a litany of problems besieging his JD.com as the e-commerce company keeps ceding ground to a once-small rival, vowing to change and address the lack of efficiency and innovation at China’s No. 3 e-commerce company by market cap.
The 49-year-old responded over the weekend to an employee’s comment posted on JD.com’s internal discussion board, where the unidentified employee highlighted issues at the company such as lackluster execution and lack of coordination among different units. Of particular concern is how JD.com isn’t implementing its low-cost strategy effectively, and not being proactive enough in offering cheaper products amid China’s weakening economic recovery. This has allowed rivals – namely billionaire Colin Huang’s PDD Holdings (formerly known as Pinduoduo) – to keep surging ahead and winning over cost-conscious shoppers with better executed discount campaigns.
“I think this brother’s words are well said, ” Liu wrote in an internal memo seen by Forbes, referring to the employee. “They touched on every pain point the company has…We must change, otherwise there is really no way out for us. ”
A JD.com spokesperson says this is a “routine exchange,” and it demonstrates management’s confidence as well as the team’s collaboration in overcoming challenges.
Liu’s warning came less than two weeks after a similar message from Alibaba cofounder Jack Ma, who called on his own e-commerce titan to improve as PDD kept growing at a blistering pace and encroaching on Alibaba’s turf. Founded more than a decade ago in Shanghai after both JD.com and Alibaba, PDD has been winning over shoppers with discounts and subsidies amid a slowing Chinese economy.
The growth at home, coupled with the aggressive expansion of its overseas shopping site Temu, has catapulted PDD’s market capitalization past that of Alibaba – effectively making a once-small rival China’s most valuable e-commerce company. Huang, who stepped down as chairman in 2021 but continues to derive his wealth from a company stake, is now China’s second-richest person with a net worth of $50.4 billion, according to Forbes’ real-time tracker.
Meanwhile, JD.com’s Liu has seen his net worth cut by half to $4.9 billion as its Hong Kong-listed shares slumped about 55% this year. The mogul recognized early on the need to shift JD.com’s strategy away from its traditional focus on expensive products like electronics and toward more value-for-money products as China’s economic recovery loses steam. But analysts say his price cuts are simply not as aggressive as others, and discount campaigns haven’t turned out well as management still hoped to control costs and avoid price wars.
There are, however, tentative signs of recovery. In the third quarter, revenues rose a better-than-expected 1.7% to $34 billion from a year ago, while net income jumped 32% to $1.1 billion. Investors will be closely watching how JD.com plans to attract more merchants to sell low-cost products next year, as value-for-money products will continue to be what shoppers look for, Jefferies analyst Thomas Chong wrote in a Dec. 3 research note.
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