JD.com Rolls out $1.45 Billion Subsidy Scheme

Image Source : China Visual

BEIJING, March 7 (TMTPOST) —— Chinese online retail giant JD.com launched a subsidy campaign worth 10 billion yuan ($1.45 billion) to promote online sales on Monday.

The company, known for its fast delivery and high-quality products, began to focus on selling products with lower prices.

Different from the previous promotion only for flash sales during the "6.18" or "Double 11" promotion, the banner of the $1.45 Billion subsidy scheme is directly placed on the App homepage and will be effective for a long time, turning the previous promotion mode during shopping festivals into daily sales mode. The company provides subsidies by directly lowering prices, covering 3C household appliances, beauty makeup, fresh food, life services, medical and health care, and other categories.

The subsidy scheme is a marketing model pioneered by China's leading social commerce company Pinduoduo, which was first launched in June 2019. In 2019, the annual marketing expense rate of Pinduoduo exceeded 90%, the annual GMV also exceeded trillion yuan for the first time, and the active users reached 585 million, with a year-on-year growth of 40%. E-commerce platforms such as Alibaba, JD.com, and Suning Tesco have followed suit Since then.

JD.com is seen as a higher-priced platform among similar e-commerce platforms. After Liu Qiangdong stressed the importance of a low-price strategy in an internal meeting in November 2022, JD.com took promotional measures such as price reduction and targeted coupons for liquor products during the "Double 11" promotion in 2022, making the prices lower than that in manufacturers' direct sale stores. As a result, Chinese Baijiu brands such as Luzhou Laojiao and Wuliangye Yibin decided to suspend their cooperation with JD.com.

JD has taken frequent moves to build a platform rich in products and low in prices in 2023. The company opened the entrance channel for individual merchants starting on January 1, 2023. It only takes mobile phone numbers and an ID card for individual merchants and natural persons to register on JD.com. The company also offers a 90-day "free trial operation" policy for these merchants. The policy will benefit most new merchants opening corporate stores from April 1.

According to industry insiders, JD's approach of lowering the entry threshold not only enriches categories but also helps solve the problem of low supply. Based on data provided by JD.com, JD Retail has achieved a year-on-year growth of more than 20% in the number of third-party merchants for seven consecutive quarters by the end of the third quarter of 2022.

JD.com also launched a compensation campaign on February 21. If consumers buy goods marked with a sign of compensation and the actual price of the order is higher than the same type of goods on another platform, they can apply for compensation for the order with the doubled actual price of a certain product.

According to Huatai Securities, JD.com's GMV may reach 3.62 trillion yuan ($522 billion) in 2022, a year-on-year growth of 9.8%. Pinduoduo, with a 35 percent growth rate and 3.3 trillion yuan ($476 billion) of GMV, became third place in the industry.

China's e-commerce platforms have entered the fierce competition since 2022. To cope with upcoming challenges, Alibaba chose to focus on content e-commerce. In 2022, Taobao Live broadcast made great efforts to recruit live streamers and change the traffic distribution mechanism to make content more interesting. Its CEO Zhang Yong stressed at the fourth quarter earnings conference that in the future, the market position of Tmall and Taobao will be further strengthened by increasing diversified consumption content to strengthen user engagement and improve the cost performance of products.