In the past few days, rumours have been circulating that JD is exiting its ecommerce joint ventures in Thailand and Indonesia. Yesterday (28 November), some media in China finally reported it.
According to the report, JD.co.th and JD.ID might shut in Q1 next year, and the company is actively looking for buyers of its assets.
Richard Liu, JD’s founder, was reported to have given a 3 hour speech on 20 November about JD senior executives’ deviation from the company strategy. He did something similar in 2016 and 2019, in both cases the company was facing some crisis.
Our thoughts:
- We already wrote about Central exiting the joint venture with JD earlier this year. Indeed, recent visitors to Central’s malls in Thailand would have noticed that the focus was on promoting Central app, and JD Central was nowhere to be seen;
- In fact, joint ventures are almost always tough – especially when the two parties have different agendas, ways of doing things, as well as expectations. Such differences will almost surely amplify as the venture requires continuous investment (instead of showing profits) – from 2017-2021, JD Central lost a total of THB 5.6b (US$0.16b);
- Central itself is complex to navigate – amongst the current (3rd) generation of the Chirathivat (Cheng) family, more than 30 are involved in various parts of Central Group’s businesses;
- We said in 2018 that JD and Central might not succeed as partners;
- Indonesia’s ecommerce market, which JD, Tencent and Alibaba have all vested interest with various capacities (JV, investment or subsidiary), is highly competitive. We have covered the platforms extensively in Part 1 of Blooming ecommerce in Indonesia report;
- JD’s joint venture partner, Provident Capital, is not an operator as JD is – so it is hard to sustain the relationship for a long term. Provident would have been better off if JD.ID were folded into GoJek before the GoTo (Gojek-Tokopedia) merger;
- JD’s joint venture with Central Group in Thailand also has a fintech element, manifested through Dolfin wallet and the digital financial (lending) services built on top. That said, JD itself has quit Dolfin for a number of reasons – leaving Central Group to run the wallet on its on;
- JD, being a good corporate citizen in China, is probably a bit concerned about doing fintech lending too aggressively outside China. Although whether this concern is grounded is quite debatable;
- Competitors including Shopee and Lazada have invested in logistics – Shopee particularly aggressively. While JD’s know how in logistics can translate into Southeast Asia, whether the market justifies a large integrated player, while (larger) marketplaces are also investing in fulfilment, is a question mark;
- Everyone is facing macro headwinds – Lazada has reported year on year order decline in Q3; Shopee showed flat growth in the quarter. Amid such environment, and more determined competitors, JD would need more continuous investment to stay in the game;
We can also look at this from a POP-Leadership (People, Organisation, Product – Leadership) angle.
In the leadership aspect, definitely Richard Liu’s attention span and mental space are a big factor in how fast/aggressively JD had been pushing its international business (remember Alibaba took Tokopedia away from JD’s arms?).
In people and organisation, JD has been suffering the same challenges that many Chinese fellow tech giants face expanding outside China. We have captured this issues, as well as case studies and reflections, in the book “Seeing the unseen: behind Chinese tech giants’ global venturing”.
Finally, in the product aspect, JD’s relatively premium, integrated experience might be too early for the masses, and too costly for the (listed sized) premium market in the region.
