JD.com is once again withdrawing from the losing business of group purchases

JD.com contracted for the second time this year its offspring Jingxi Pinpin, which is buying a group of communities, closing a store in Hubei and Shandong provinces as it struggles to break into an industry dominated by Pinduoduo and Meituan.

This comes after Jingxi Pinpin withdrew from several other provinces, including Sichuan and Hebei in March. The company cut about 15% of its workforce this month, a source told JD.com.

Jingxi Pinpin launched in the form of a built-in WeChat mini-program on January 1, 2021, and peaked in March of that year when its services were available in as many as 17 provincial regions. It now operates only in Beijing and Zhengzhou, the capital of Henan Province.

The business trades under the Jingxi Business Group (JBG), which is said to be undergoing organizational change.

But Jingxi Pinpin’s early success proved to be a quick light as he suspended services in seven provinces – including Fujian, Jilin and Shanxi – between May and August 2021, according to a report by Kaiyuan Securities.

Since then, JD.com has begun to pour more resources into its instant delivery retail business, which targets “high-end consumers in high-end cities” and better reflects the company’s brand image and strengths. a source with knowledge on the subject told Caixin. Conversely, group buying in the community is more like an additional business model that targets people who prefer to buy groceries and other everyday wholesale goods at lower prices, the source said.

JD.com tested the waters by buying community groups, but found the business unsustainable, according to two company sources. JD.com has cut business in the last year, given that it was losing money in the affected regions, they said.

In May, JD.com CEO Sue Lei said in a call for profits that the company would continue to streamline new businesses, including those under JBG, to improve operational efficiency and increase cash flow.

However, Xu spoke of Jingxi Pinpin’s high performance, saying that the gross value of the platform’s goods and the number of new users have doubled as Beijing struggles with the latest wave of COVID-19, which began in late April. .

In addition to Jingxi Pinpin, JBG also operates a social e-commerce application similar to Pinduoduo, called Jingxi, which sells budget goods, and Jingxitong, which mainly provides JD.com physical stores with supply chain services.

A trader doing business in Jingxi told Caixin that the platform is laying off workers as it becomes increasingly uncompetitive in terms of both prices and logistics services.

A JBG source added that the Jingxi app could take a long time to catch up with competitors such as Pinduoduo and Meituan in attracting traffic.

Speculation comes amid news that JD.com will integrate JBG into its JD Retail retail division. The company is in the process of major restructuring after the first quarter of 2022, when it registered its slowest quarterly revenue growth since its listing in 2014.

In the three months to March, JD.com generated 217.5 billion yuan ($ 34.3 billion) in revenue from its retail business, representing 90% of total revenue, up 18% year-on-year to $ 239.7 billion. yuan, according to the company’s financial data report released in May. The quarterly net loss due to shareholders is 3 billion yuan, compared to a net profit of 3.6 billion in the same period in 2021.

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Caixinglobal.com is the English-language online news portal of the Chinese financial and business news group Caixin. Nikkei has an agreement with the company to exchange articles in English.

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