Recently, JD.com or JingDong has been making headlines in the international scene. This could be partly because of the arrest of its CEO and founder Richard Liu or Liu Qiangdong last August 2018. However, the latest news about JingDong is a breath of fresh air amidst the controversies. The company’s shares dramatically surged after it uploaded online its earning during the fourth quarter. JingDong’s revenue surged 22 percent annually reflecting $19.6 million and pounding estimates by $210 million.
It is worth noting that over the years, the annual growth of JingDong in terms of gross merchandise volume has been slowing down steadily. In the past couple of quarters, the growth of the company’s active user acquisition fell. According to its previous report, its yearly active customer accounts are at 305.5 million at the end of 2018. This indicates a huge drop from its 313.8 million active users at the end of June 2018.
JigDong has nonetheless shown some progress in enticing more big names to be in their platform in the fourth quarter. For instance, in October 2018, JingDong allied with the Xinyu Group, China’s largest global watch retailer. This lead to the debut of several stores for luxury brands like Certina, Rado, and Hamilton. In addition, Sulwhasoo, the top luxury beauty brand in Korea and DKNY, also forged alliances with JingDong and opened stores within the company.
So far, JD is stabilizing and its profitability is slowly improving. In December 2018, the company debuted a $1 billion buyback plan. Its equivalents and cash propelled by investments increased by 33 percent annually to $5 billion despite its cash flow stay in the negative region.
Earlier today, JingDong disclosed that it sold its luxury platform TopLife to Farfetch. According to reports, the sale amounted to $50 million. Farfetch will now incorporate TopLife to its business in China. The transition will be supervised by Farfetch’s managing director in China, Judy Liu. This tactical move is most likely one of the significant moves to combat the difficult economic landscape JingDong is currently experiencing in China.
The latest deal will provide Farfetch Level 1 entry to the app of JingDong. On the other hand, JD will have access to its partner’s network of more than a thousand luxury brand and store partners. This impressive shift in the business direction of JingDong happens at a very opportune time. it can be recalled that in the past months, several luxury groups like Kering and Hermes have shown resilience to the decelerating economic condition. This indicates a strong demand for the luxury brand from Chinese consumers.
The extended alliance of JingDong with Farfetch will boost the company’s operation in China and offer its customers a wide array of brands that would usually take years before a fresh player could get noticed in the demanding and highly competitive luxury fashion industry. JD.com’s primary competitor, Alibaba has recently entered into the luxury business. Aside from setting up its very own special platform for luxury brands called Luxury pavilion, has also formed a partnership with net=a-Porter last October 2018.
This recent shift in JingDong’s focus is because of the vision of its CEO Richard Liu. After he was arrested in August 2018 in Minneapolis because of alleged sexual misconduct and was released the next day, said that he will take JingDong to new heights by going to a new direction. Liu, who also goes by his Chinese name Liu Qiangdong founded a retail store in 1998 and closed it after six years to transform it into an online store.
JingDong has also formed a partnership with Walmart and Tencent. Lately, the Chinese online retailer concentrates on delivery and has made several drone models to transport the packages to its clients located in rural areas.