JD.com Quietly Exits Australia as Losses Widen
Chinese e-commerce giant JD.com has closed its office in Australia less than 15 months after opening with ambitious expansion plans, part of a company-wide response to widening losses.
The Beijing-based company sells Australian food, dairy products, vitamins and cosmetics to millions of Chinese consumers. It confirmed on Wednesday it had quietly closed its Melbourne office, which had opened with great fanfare and the backing of the Victorian government in February last year.
A spokesperson for JD.com, which reports quarterly financial results on Friday, said: “We are integrating the Australia office into the business in China. Australia’s importance doesn’t change, and the business is going well.”
JD.com said there would be no change to its service and partnerships with Australian and New Zealand exporters, which would now be managed by JD.com staff in China. The head of its Australian operations, Patrick Nestrel, has departed. "We continue to build strong partnerships with brands in a range of categories — including wine, health supplements, baby and maternal, food and beverage, cosmetics and others,” the spokesperson said.
However, analysts said the retreat was the latest evidence that the arrival of foreign e-commerce giants such as Amazon, Alibaba and JD.com, were not as big a threat to Australian retailers as previously expected.
While JD.com only employed a handful of staff in Melbourne, it said last year it wanted to invest in a distribution network, including warehouses, in Australia.
“They are clearly going through some challenging times at the moment. Growth in e-commerce is slowing so they are under pressure to start making money," Mark Tanner, the managing director of Shanghai-based marketing firm China Skinny, said.
“Their business model is much less profitable than Alibaba as they handle the end-to-end experience for the customer including customer care through to warehousing and delivery into the China operations.”
JD.com, which has partnerships with the Australian Trade and Investment Commission, Australia Post, a2 Milk and Treasury Wine Estates, has had a tough year after its founder and chief executive, Chinese billionaire Richard Liu, was accused of raping a student in the US. The student filed a lawsuit last month, seeking more than $50,000 in damages. JD.com was also criticized in China after lowering the salaries of its couriers, which were considered the backbone of the company.
Despite this, JD.com's shares have risen 35% so far this year after hitting a record low in January. The company reports first-quarter financial results on Friday against the backdrop of an escalation in trade tensions between China and the US. JD.com is reportedly cutting staff numbers by as much as 50% across the company.
"The Australian division has been relatively quiet ... and they obviously see it as non-essential," Mr Tanner said.
Chinese rival Alibaba also opened an office in Australia in 2017. Alibaba, which has higher margins because the onus is on brands to pay for the warehousing and delivery of products rather than the company, is believed to have no plans to scale back its operations in Australia. Alibaba says Australia is its fourth top country globally selling products into China.
This story was originally published in The Australian Financial Review.
Contact editor Yang Ge (firstname.lastname@example.org)
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