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JD.ID denies rumors it will stop operations in Indonesian market
Despite reports of JD Global's plans to pull the plug on its Southeast Asian operations have swirled for some time, JD.ID, its Indonesian counterpart, has denied the rumors
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espite reports of JD Global's plans to pull the plug on its Southeast Asian operations have swirled for some time, JD.ID, its Indonesian counterpart, has denied the rumors.
“Up until today, there has never been any talks regarding this [dissolution] issue in JD.ID’s management. … For us, everything is still on track, so there’s no reason to confirm [those] rumors,” a JD.ID spokesperson told The Jakarta Post on Wednesday.
That was until Chinese media reported the story recently, giving the news a more valid basis.
According to Sina, a Chinese online media company that first reported the news, not only would JD exit Indonesia, it was also planning to get out of the Thailand market with the decision to be carried out in the first quarter of next year.
JD Global, also known as Jingdong and JD.ID, is currently looking for investors to take over the shares of the e-commerce joint ventures in both countries as, despite its large investment, the company’s profits are still lacking. Sina reported that this might be the most important reason for the adjustment.
In order to reduce costs and increase efficiency, JD has been shrinking its businesses in sinking markets, as can be seen with Jingxi, a JD.com subsidiary, which has closed its business in numerous provinces in China, namely Fujian, Gansu, Guizhou, Jilin, Ningxia, Qinghai and Shanxi since June this year.
In a conference call, JD.com chief executive Xu Lei said that the second quarter of 2022 had been the most challenging quarter since Jingdong went public.
Read also: China's JD.com promotes Lei Xu to CEO as founder Liu steps back
"The worst moment is basically over," Xu said after Jingdong posted an 11.4 percent rise in third-quarter revenue, as reported by Reuters.
JD.com announced a net income of US$838 million in the third quarter of this year, which is a healthy-looking figure considering it only posted $910 million year-to-date (ytd).
The numbers may be due to Jingdong’s decision to undergo cost reductions and operational optimization in the first quarter.
With that in mind, JD’s operations in Thailand and Indonesia could be hanging in the balance as JD.com may consider moving out of Southeast Asia as the next step in increasing efficiency, but at the same time, it may have second thoughts given the company’s healthier financial conditions.
Citing Sina, Indonesia is a strategic market due to its stable environment and broad market space, but Jingdong insisted on an asset-heavy model of going overseas by acquiring land to build warehouses and logistic systems, which has burned money.
Read also: JD.id to build more warehouses across Indonesia
“Over the years, JD Global’s overall investment [in Thailand and Indonesia] must have exceeded 10 billion [yuan, US$1.41 billion],” an unnamed source told Xinhua news agency.
“It is estimated that 700 million to 800 million yuan was burned last year,” the source added, despite warehouses and logistics in Thailand and Indonesia being basically complete, emphasizing that the Southeast Asian investments were highly expensive and potentially questionable from a business point of view.
A JD.ID spokesperson said the company was currently focusing on its Super8 campaign, a monthly electronic sale it started in August this year in a bid to attract more traction toward the platform.
