According to the official announcement from the joint ventures, China’s major e-commerce platform JD.com will officially close in Thailand and Indonesia next month.
JD.com’s departure from the two Southeast Asian countries has been expected for months through moves to record losses and lay off employees. Tech In Asia said that last month the e-commerce company also closed its JDL Express Indonesia internal transportation branch, which includes 11 warehouses, 250 drop-off points and more than 3,000 delivery drivers.
JD.com entered both Southeast Asian markets through a joint venture with financial firm Provident Capital in Indonesia in 2015 to establish JD.id and real estate company Central Group in Thailand in 2017 to established JD Central.
The South China Morning Post, citing sources, said JD.com’s expansion plans in these two markets have cost the company more than 10 billion yuan (~$1.39 billion) over the past eight years.
Late last year, JD.com was reported to be looking for potential investors to buy their shares in two joint ventures as the company was looking to shift its focus to the Chinese market after noticing negative developments. losses piled up in both the Indonesian and Thai markets.
Over the past few years, e-commerce has emerged as one of the biggest growth drivers of the digital economy in Southeast Asia, according to a report from Google, Temasek and Bain&Co. The growth potential has attracted a large number of new players, making the competition in the e-commerce sector even more heated.
In Indonesia, e-commerce platform JD.id is constantly lagging behind. According to data.ai, the JD.id exchange has struggled to reach 1 million active users, far behind competitors such as Shopee (31 million users), Tokopedia (17 million users). and Lazada (8 million users).
JD.com’s joint ventures in Indonesia have attempted to develop an online-to-offline model (a business model in which the company attracts potential customers from online online channels to offline physical stores). by building stores (grocery stores, supermarkets, etc.), including an unmanned store called JD.id X.
According to a company employee, JD.id’s slow sales growth is due to a variety of factors, including an ineffective COVID-19 campaign and an inappropriate approach to the local market. fit. As a result, the company had to lay off nearly 200 employees and stop hiring.
In Thailand, the JD Central joint venture also faced the same problem when it was unable to achieve a large enough active user base. Here, two main competitors, Shopee and Lazada, are dominating. Thai media reported that local partner Central Group even withdrew some executives from the joint venture in mid-2022 because JD Central could not improve performance.
Pawoot Pongvitayapanu, an e-commerce expert in Thailand, said the closure of JD Central was no surprise. “Thailand’s e-commerce is a tough market. We’ve seen Japan’s Rakuten and South Korea’s 11Street leave the market and now JD Central,” he said.
He explained, JD Central operates on a joint venture model and JD.com may find it not worth the investment as they will have to spend more money and time in the current challenging economic environment.
“JD.com has uniqueness in authentic products, plus fast delivery, and outstanding performance for the first few years. But Lazada and Shopee then caught up with it very quickly with the implementation of LazMall and ShopeeMall,” added Pawoot.
With the departure of JD Central in Thailand, Pawoot expressed concern about the market becoming less competitive and monopolistic, as there are only two key players left in the market, Shoppe and Lazada, and businesses. This is the time to prepare to make a profit. Last year, Lazada increased the commission fee from 1% to 2%.
JD.com was founded in China by founder Richard Liu (Liu Qiang Dong) in 1998 and was listed on the US NASDAQ stock exchange. This business currently has many subsidiaries in the fields of e-commerce, logistics, healthcare, real estate, internet finance, cloud computing, and smart technology.
JD.com’s push to pull out of its losing Southeast Asian ventures comes as executives seek to restructure core retail and bring the e-commerce platform back into the mainstream. basic factors, like low price with quality service.