Alibaba Group Holding is widening its lead over its e-commerce rivals, using events like the JD.com-initiated 618 sales festival to make its presence felt.
The 618 festival, now held over the first 18 days of June, began as JD.com’s answer to the Alibaba-championed Singles’ Day sales campaign, which takes place every November.
Previously, Alibaba did not campaign hard during the June event, China’s second-largest online shopping extravaganza. But this year it greatly increased the number of new items on sale, to 1.5 million, while offering steep discounts on many of those products.
“We are serious this year,” an Alibaba sales representative said. “We will beat JD.com both in pricing and discount items.”
China’s e-tail king has not disclosed its 618 results, but industry observers say Alibaba logged sales close to those of JD.com, which rang up a record 201.5 billion yuan ($29.3 billion) in sales, up 26% from last year.
Despite the strong showing, JD.com’s earnings outlook remains clouded, and the company still reels from a sex scandal that last year engulfed its top official. It also faces an uphill battle with newcomers, including Pinduoduo, China’s third-largest online retailer.
Pinduoduo has been cutting into JD.com’s share by offering the latest iPhones for 1,000 yuan less than JD.com and selling 39-inch TVs for 9.9 yuan on limited-time offers.
In the fiscal year through December, JD.com suffered a net loss of 2.4 billion yuan as Pinduoduo eroded its market share and as user account growth slowed. Pinduoduo also posted a net loss, of 10.2 billion yuan, due to a heavy investment load and merchandise discounts.
That leaves Alibaba as China’s lone e-commerce company operating in the black. In the fiscal year through March, Alibaba booked a record net profit of 87.6 billion yuan, helped by the intensifying price war between the Nos. 2 and 3 e-tailers.
Meanwhile, management turmoil has worsened JD.com’s predicament. Founder and CEO Richard Liu Qiangdong was arrested over rape allegations in the U.S. last August. The case was later dropped.
Liu, a charismatic entrepreneur, has developed JD.com into one of China’s leading private companies. Liu’s wife, Zhang Zetian, used to be a well-known internet celebrity.
Liu’s arrest greatly impacted the company’s business and sent the share price tumbling.
It also prompted the company to shift to a collective leadership system, one that will struggle to replicate Liu’s charisma.
There is another problem: The top executives are having difficulty agreeing on strategies. Amid the confusion, three have left the company. JD.com has not given any clear reasons for their departures, saying that the three have resigned for family reasons.
With an executive and managerial exodus in full swing, a source close to JD.com said talented employees are fleeing due to anxiety about the company’s future.―Nikkei Asian Review