Consumers Tighten Belts, E-commerce Sales Slump

Jakarta, CNBC Indonesia - Warning signals are sounding for China’s e-commerce industry. Online retail giant JD.com has just reported its first quarterly revenue decline in more than a decade. This fact serves as clear evidence of the current decline in purchasing power and sluggish consumer spending in China. In the second quarter, JD.com’s total revenue slumped 2.9 per cent to 346.4 billion yuan (approximately Rp916 trillion). The sluggish sales of electronic products and home appliances, which have long been the backbone of JD.com’s business, were the main culprit behind the company’s performance plunge. This situation underscores the severe challenges facing Chinese authorities in reviving the public’s appetite for spending. Job uncertainty and economic anxiety stemming from China’s protracted property sector crisis have made consumers increasingly tight-fisted. The pressure on the e-commerce sector feels even more ironic given that the second quarter encompasses the annual ‘618’ shopping festival, one of China’s largest discount events commemorating JD.com’s anniversary. In an effort to boost sluggish sales, JD.com even extended the duration of this year’s 618 festival compared to the previous year. Various brands and retailers were deployed to pamper consumers with massive discounts and aggressive promotions. However, the lure of huge discounts proved insufficient to offset the depth of the market demand decline. JD.com CEO Sandy Xu acknowledged that revenue from the electronics and home appliance sectors was pressured by a high comparison base from last year and a spike in raw material prices. Nevertheless, the company remains optimistic that performance will recover in the second half. ‘Looking to the second half, although the continued rise in consumer electronics prices may still pressure consumer demand, we remain optimistic that this category will grow,’ said Sandy Xu. In response to the pressured sales performance, JD.com shares listed on the US stock exchange fell 3.5 per cent 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.