Consumers Tighten Belts, E-commerce Sales Slump

Jakarta, CNBC Indonesia - Alarm bells are ringing for China’s e-commerce industry. Online retail giant JD.com has just reported its first quarterly revenue decline in more than ten years.

This fact is clear evidence of declining purchasing power and sluggish consumer spending in China at present. In the second quarter (Q2), JD.com’s total revenue slumped 2.9% to 346.4 billion yuan (approximately Rp916 trillion). Weak sales of electronic products and household appliances, which have long been the backbone of JD.com’s business, were the main culprit behind the company’s deteriorating performance.

This situation underscores the formidable challenges facing Chinese authorities in reviving consumer spending appetite. Job uncertainty and economic anxiety stemming from China’s protracted property sector crisis have made consumers increasingly reluctant to open their wallets.

Even Massive Discount Festivals Could Not Help

The pressure on the e-commerce sector feels all the more ironic given that Q2 is the period of the annual “618” shopping festival, one of China’s largest discount events commemorating JD.com’s anniversary.

In an effort to boost flagging sales, JD.com even extended the duration of this year’s 618 festival compared to the previous year. Various brands and retailers were mobilised to pamper consumers with aggressive discounts and massive promotions. However, the lure of hefty discounts proved insufficient to offset the depth of the decline in market demand.

JD.com CEO Sandy Xu acknowledged that revenue from the electronics and home appliances sector was pressured by a high comparison base from last year as well as rising raw material prices. Nevertheless, the company remains optimistic that performance will recover in the second half.

“Looking to the second half, although continued price increases in consumer electronics may still weigh on consumer demand, we remain optimistic that this category will grow,” said Sandy Xu.

Responding to the pressured sales performance, JD.com shares listed on the US stock exchange fell 3.5% in GMT trading.

Amid the decline in daily turnover, JD.com still recorded an increase in net profit to 7.1 billion yuan, up from 6.2 billion yuan in the same period last year. Meanwhile, non-GAAP net profit was recorded at 8.9 billion yuan.