E-commerce giant JD.com has released its results for the second quarter of 2022. As China’s consumer market stands poised to to become the world’s largest in scale, JD.com’s focus on supply chain and technology, as well as its emphasis on user experience and sustainability have well-prepared the company for long-term growth.
Second quarter financial results
The second quarter saw JD.com make a 5.4 percent increase in its net revenue year-over-year in Chinese yuan terms, reaching $40 billion. The company, who in 2020 changed their strategic positioning from an e-commerce business to a supply chain-based technology and service company, grew its net service revenues to $6.2 billion. Income from operations experienced strong growth as well, increasing by 93 percent from $43 million to $600 million, and the operating margin before unallocated items grew from 2.6 percent to 3.4 when compared with the second quarter of 2021.
Although factors such as continued Covid-19 disruptions and global economic uncertainty have made for a challenging period, JD.com has continued to surpass expectations. JD Retail has experienced healthy user growth, adding over 10 million annual active users in the second quarter alone and increasing by 9.2 percent to over 580 million year-over-year. Additionally, JD.com’s premium membership program JD PLUS achieved a record 30 million members, and the average spending of its members reached eight times more than non-PLUS members.
JD.com has also been hard at work building out its omni-channel capabilities, a move that has proven to provide the business with forward momentum. Intra-city retail business for the company saw triple-digit year-over-year growth for its gross merchandise value in the second quarter of 2022, and according to JD.com CFO Sandy Xu it is seen as a new model for businesses and services that will provide a “win-win-win” scenario for brand merchants, offline merchants and e-commerce companies.
ESG factors
In the second quarter JD.com released its second annual ESG report, identifying the company’s 2021 efforts in developing green supply chains, supporting the real economy and promoting high-quality consumption and social efficiency. Improving on its first report, this year’s findings included the disclosure of climate-related information using standards set by the Task Force on Climate-related Financial Disclosures (TCFD), an organization created by the Financial Stability board in 2015 to improve reporting on climate-related financial information.
The company, founded by Liu Qiangdong in 2003, has worked to implement green supply chain initiatives long before it began issuing its ESG reports. 2022 marked the five year anniversary of JD.com’s “Green Stream Initiative,” a program for implementing sustainable packaging efforts within JD Logistics, the logistical arm of the company.
In honor of this anniversary in the second quarter of this year JD Logistics developed and launched the “Delivered with Original Package” (DWOP) certification, a proprietary standard for green packaging. Partnering with a number of leading brands and manufacturers, by 2030 over 80 percent of the packages for products sold via JD.com e-commerce channels will be compliant with the DWOP certification.
The official certification standard created this year marks the end of multiple years of testing efforts, during which time JD Logistics collaborated with both upstream and downstream partners to promote the environmentally friendly DWOP model. Over 10,000 SKUs have been shipped directly from the factory in their original packaging, and to date the company has found the effort to reduce disposable package use by over 10 billion pieces.
JD Retail
The second quarter for JD.com holds its annual 618 Grand Promotion, a weeks-long sales event that has become one of the biggest shopping holidays in China. This year, the company’s omni-channel supermarket JD Super worked with over 27,000 brands and 34,000 offline stores to provide its customers with one-hour delivery in almost 400 cities across China.
Omni-channel efforts were also seen in JD.com’s fashion and lifestyle business, streamlining branding for the category to become “The J Shop.” Concurrent with the launch of an online channel on the JD.com app, the company also launched offline pilot stories in cities across China including Xi’an, Shenzhen, Chengdu, Yinchuan and Beijing.
JD.com reported that during the promotional period over 30,000 stores it has partnered with saw a year-over-year transaction volume increase of over 500 percent. Some of the biggest names in retail who chose to partner with JD.com including Walmart, China Resource Vanguard and Yonghui achieved even greater results with a combined increase in transaction volume of over 660 percent when compared with the 2021 618 sales event.
Another notable highlight from the second quarter was The J Shop’s partnerships with a number of luxury fashion brands. Celine, a fashion brand under the LVMH branding, launched a flagship store on the JD.com platform, as well as the French brands Maison Margiela and Maison Kitsuné, Canadian high-end outerwear and sportswear brand Moose Knuckles, and Italian streetwear brand GCDS. Beauty brands such as La Mer, Armani, Jo Malone London, Shiseido, and MAC Cosmetics also opened flagship stores, as well as the British premium jewelry box brand Wolf and the Italian heritage umbrella brand Pasotti. The additions of these international brands to JD.com showcase the growing hunger of the Chinese market for high quality products.
JD Health and Logistics
JD Health and JD Logistics, JD.com’s two subsidiaries that are also publicly listed on the Hong Kong Stock Exchange, also made advances in the second quarter of 2022.
In June, JD Health launched three new online consultation services on its app: Expert Consulting, Instant Consultation, and Nighttime Consultation. These three upgrades to its medical services were put in place to further address the growing and diverse medical needs of its users. The Expert Consulting service works with leading physicians from top-tier hospitals in China, while the Nighttime Consultation service connects users with on-duty doctors for access to consultation services overnight. The Instant Consultation service utilizes in-house and external physicians to give users standardized medical consultation services.
June was also the month JD Health released its “Enterprise Health Strategy” which opened up a wide range of customized health management and medical services to corporate clients. The services are both online and offline, and cover programs that manage issues such as corporate emergency rescue, employee weight, and employee mental health.
Working with Hebei Cangzhou Central Hospital, JD Health built one of the first internet hospitals in the Hebei province to be officially connected with a social health insurance system. This connection allows users to utilize social insurance payment for healthcare services such as online consultation services, prescription purchases and home delivered services.
JD Logistics launched two new smart industrial parks, known as “Asia No.1s”, in the cities of Yiwu and Wenzhou in the Zhejiang Province during the second quarter. Together with the existing Asia No.1 smart industrial park in Hangzhou, the three parks cover the entire Zhejiang province and allow the rate of same or next-day delivery orders for online retail within the province to roughly 95 percent. They also extend the service to the previously unavailable areas of the Yangtze River Delta region.
By the end of the second quarter, JD Logistics had over 1,400 warehouses in operation, and an aggregate gross floor area of approximately 26 million square meters.
