JD cuts free shipping threshold as it chases low-price strategy
Chinese e-commerce giant JD on Wednesday lowered its free shipping threshold by almost half in an announcement labeled an “important notice” on its official WeChat account, as the retailer makes a further push in its low-price strategy.
Why it matters: Providing faster and cheaper delivery has become a new battleground among China’s domestic e-commerce platforms, as they bid to lure users from their rivals.
- “From day one of our existence, our core competitiveness, the essence of our business, has been low prices,” said JD CEO Sandy Xu on the firm’s latest earnings call. She said JD adheres to this principle, and that cost efficiency and customer experience are at the heart of the company’s business philosophy.
- “We welcome users to compare prices across platforms before they place their orders, as JD is confident in its supply chain capabilities and the low-price and high-quality services we can provide,” Xu stated.
Details: JD cut its minimum order requirement for free shipping by nearly half from RMB 99 ($13.8) to RMB 59, its first lowering of the free shipping threshold in seven years.
- As part of the shipping policy adjustment, JD’s paid members, known as the JD Plus cohort, will now have unlimited free deliveries no matter how much they spend, compared to the previous limit of five free shipment coupons per month.
- While JD Logistics has enjoyed a reputation for efficiency for years, Alibaba-owned rival Cainiao is ramping up efforts to expand its nationwide logistics network. In July, Cainiao launched a half-day delivery service in Hangzhou, Shanghai, and six other major Chinese cities, initially in partnership with Tmall Supermarket.
- The upgraded model rolled out by Cainiao, entitled 1212, ensures delivery by 9 p.m. on the same day and by midnight the next day based on orders made by midnight and midday, respectively. The format is several hours faster than JD’s traditional 211 program, which guarantees same-day delivery for orders submitted before 11 a.m. and next-day delivery (before 3 p.m.) for orders placed before 11 p.m.
Context: JD saw its total revenue grow 7.6% to RMB 287.9 billion in the quarter that ended in June, mainly thanks to China’s second-largest shopping festival 618, which boosted multiple e-commerce platforms’ sales through month-long discounts. The company’s retail segment only gained 4.8% growth in the second quarter following negative year-on-year growth in the previous quarter, casting a cloud over China’s fragile retail recovery. Revenue for its logistics unit however has experienced continuous quarter growth of over 30% since this year.
Cheyenne Dong is a tech reporter now based in Shanghai. She covers e-commerce and retail, AI, and blockchain. Connect with her via e-mail: cheyenne.dong[a]technode.com.
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