Chinese online retailer JD.com is laying off workers to cut costs as it blames COVID-19-related lockdowns for limiting its operations and sales.
The Beijing-based retailer is laying off up to 4,000 employees, with its community group-buying units among the segments of the firm facing the sharpest cuts, according to reports on Chinese social media that quote company staff. Community group buying had been seen as a key driver of growth and a means of tapping sales in smaller cities, SUPChina reported.
Revenue at JD.com grew 18 percent in the first quarter to CNY 239.7 billion (USD 35.3 billion, EUR 33.5 billion), but the company posted a net loss of CNY 3 billion (USD 450 million, EUR 420 million), having made a net profit of CNY 3.6 billion (USD 540 million, EUR 504 million) in the same period a year ago.
On 18 May, JD.com announced the launch of its Fresh Supermarket, which will feature fresh products from overseas including the United Kingdom, Germany, France, and the United States. In a press release, the company said it is seeking brands interested in being sold via China’s online channels for the first time.
As part of the announcement, JD Worldwide said it had reached an agreement with Iceland Foods Ltd to “jointly explore a more efficient and innovative cross-border e-commerce cooperation model.” Iceland Foods is a British supermarket chain specializing in frozen foods.
“The goal is to offer customers the quality consumption experience of shopping around overseas well-known supermarkets without leaving home and buying all imported fresh food in one stop,” a JD Worldwide spokesperson said in the release. “Relying on JD’s advanced capabilities, JD Worldwide shares efficient and comprehensive integrated supply chain solutions with global fresh food brands. Cross-border fresh products have stricter requirements for supply chain and logistics technology due to their short shelf-life and high loss rate. With JD’s nearly 80 bonded and overseas warehouses across the world and logistics services reaching over 220 countries and regions, the Fresh Supermarket on JD Worldwide is able to achieve direct sourcing from places of origin to guarantee product quality, and deliver the products from other countries to China’s bonded warehouses, then to consumers with full cold chain delivery.”
JD.com is a major seller of imported seafood, which it values for its high margins. Caixin reported the firm’s parcel deliveries fell 11.9 percent year-over-year in April 2022 due to restrictions put in place by China’s government to contain the spread of a COVID-19 outbreak. The 7.48 billion parcels delivered by JD.com in April domestically in China represent a drop of 1.06 billion from its March figure, according to China’s national postal service authority.
Logistical troubles have hurt the performance of online commerce overall in China, as a result of transportation and logistical caused by a series of harsh lockdowns that have forced logistics and warehouse staff to stay at home. Six weeks into a lockdown of Shanghai, the city’s authorities announced in mid-May that there had been no community spread of the virus in any of the city’s 16 districts, raising hopes of an easing of restrictions. However, restrictions are now being tightened in Beijing.
After years of strong growth China’s online commerce sector has gone through a difficult stretch over the past 12 months, as uncertainty over new government regulations scared away investors, leading to a drop in the prices of publicly-listed firms and a curtailment of investment by the firms. In response, the Chinese government has in recent weeks sought to allay fears of further regulatory actions.
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