BEIJING— Executives from JD.com, China’s second largest e-commerce player, said Friday the company would focus on customer acquisition, expansion into smaller cities, new investment opportunities and continuing to build its reputation for quality products and customer service in the coming year.
The firm revealed the strategy as it reported a narrower net loss for the first quarter on the back of a double-digit surge in revenue. The company said it posted a net loss for the three months ended March 31 of 710.21 million renminbi, or $114.6 million according to dollar figures supplied by the company. The year-earlier loss was more than five times that size at 3.8 billion renminbi, or $620.9 million at average exchange rates for the period.
“We have had a strong start to 2015 as our reputation for quality and service continues to drive rapid growth,” Richard Liu, founder and chief executive of JD.com, said during an earnings call. “It is an exciting time for JD.com. Chinese consumers demand high quality, authentic products and truly great customer service.”
Liu said developing offline-to-online products and services is also a key strategy as well as the expansion of JD Worldwide, a cross-border e-commerce platform launched in April that allows international brands to sell directly to Chinese consumers without having a presence in the country.
“All are key to long-term growth and will give us a powerful advantage,” Liu said.
JD Worldwide is seen as a competitor to rival Alibaba Group’s Tmall Global, a cross border platform also connecting foreign brands more easily to the China market.
On Thursday, Alibaba, which still holds the position of China’s number one e-commerce company, said that in the fiscal quarter ending March 31, its net profit was $463 million, down 49 percent from the same period last year. Revenue for the period grew 45 percent to $2.81 billion.
JD.com executives said Alibaba has not had any major impact on the company’s strategy of positioning itself among Chinese consumers as a provider of authentic products and top customer experience.
“We have been growing significantly faster than the industry and our largest competitor,” Sidney Huang, JD.com’s chief financial officer said. “Our track record provides strong evidence that our unique model is working. Our focus on customer experience and quality and service is definitely giving us a competitive edge.”
In recent months, Alibaba has come under fire from regulators in both China and the U.S. over allegations of the sale of counterfeit products on its e-commerce platforms.
JD.com said it reduced its losses thanks to a decrease in share-based compensation expenses compared to the first quarter a year earlier. The company did note that it saw an increase in amortization of intangible assets related to its partnership with Tencent.
Sales for the quarter rose 62 percent to 36.6 billion renminbi, or $5.9 billion. Gross merchandise volume, or the total value of goods sold on JD.com, increased 99 percent to 87.8 billion yuan, or $14.2 billion, compared to the same period last year. Executives said apparel and shoes were the fastest growing category, with a 230 percent increase year-on-year. Watches and handbags also showed strong growth, executives said.
Sales via mobile devices accounted for approximately 42 percent of total orders, a 329 percent increase year-on-year, the company said.
JD.com said revenue for the second quarter should come in between 43.5 billion renminbi and 44.5 billion renminbi, or $7.10 billion to $7.27 billion at current exchange rates. Those figures would mean growth of between 52 percent and 56 percent compared with the second quarter a year earlier.
Separately, JD.com said it has bought a majority stake in Chinese online leisure company Tuniu Corporation for $350 million in newly issued shares. Tuniu will gain the exclusive rights to operate the leisure travel channel for both JD’s Web site and mobile apps and will become JD.com’s partner for hotel and air tickets booking services.
Huang said Tuniu’s package tour business is a “perfect fit for leveraging JD.com’s middle class customer base.”
“Leisure travel is still an emerging trend in China,” Huang said during the earnings call, adding that the alliance between the two companies will position them to tap into the trend.
Huang said that while executives are confident that JD.com will be profitable, it is in the shareholders’ interest to continue strategic investments in the short-term. Such investments include the expansion of logistics operations, particularly in rural areas, data and financial services.
“While we are capable of making a profit at any time, as evidenced by our performance in the past two years,” Huang said, “we remain convinced that it is in the best interest of shareholders that we continue to invest opportunistically into new business lines, leveraging our scale and customer base, to have sustained growth over the next three to five years.”