JD.com said its apparel business was “very weak” in the first quarter as its competition tried to take brands “hostage.”
But chief executive officer Richard Liu and chief financial officer Sidney Huang assured analysts on a conference call that the effect was passing, that merchants were coming back to its platform and that ultimately, businesses suffer by being on just one platform. (Huang gave financial context on the quarter, addressed analysts’ questions and translated for Liu on the call).
JD is the number-two e-commerce player in China and uses its logistics expertise, its own retail business where it buys inventory and its connection with WeChat to differentiate itself from the leader, Alibaba.
In November, Huang said certain apparel merchants withdrew from the JD platform, citing what the executive described as “coercive tactics from our competition, which, if proven true, would be illegal and clearly against the merchant’s will.”
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On Tuesday, the cfo said some of the merchants are coming back, but it will take “a few quarters to recover.”
“So in Q1, [the] apparel category continues to be very weak,” Huang said. “Our overall category is not growing and some of the female apparel category, for example, is even declining slightly.”
The executives noted that apparel was growing at more than 90 percent a year ago, but the impact would not last.
“We have experienced similar practices in the past in other categories, and we are fully confident that we will regain this category back down the road,” Huang said.
The executives added that anticompetitive moves are “hugely unpopular with the brands” and when a single channel tries to take them “as hostage,” it is ultimately not in the best interest of anyone, including the platform itself.
“We believe this is a wake-up call for the brands, recognizing that overly relying on one platform is very, very dangerous to their own long-term growth and health of the business,” Huang said. “So with that, through our interaction with the brands, we are even more confident that the current situation will be temporary and that will be reversed in the longer term.”
JD has been increasingly reaching out to Western brands, making a $397 million investment in Farfetch and hiring a fashion veteran in New York, former A|X Armani Exchange ceo Harlan Bratcher.
Despite the troubles in apparel, JD’s first-quarter net profits quadrupled to $235.5 million. Revenues for the quarter ended March 31 increased 33.1 percent to $16 billion.
Alibaba has also been growing quickly, with a 45 percent first-quarter gain in gross merchandise volume of physical goods on its Tmall marketplace, which is mostly apparel.