After two years of price wars, JD.com is making more profit

Author | Wang Xiaojun

Editor | Zhou Zhiyu

The price war in e-commerce saw a division last year. Alibaba temporarily withdrew, Douyin emphasized GMV, and among the leading players, only JD.com remained steadfast.

Investors have also questioned JD.com's profitability, believing that its low-price strategy negatively impacts its profits.

JD.com countered the market's doubts with a financial report. On the evening of March 6, JD.com released its 2024 financial report, showing that it achieved the fastest revenue growth in the past three years in the fourth quarter of last year, with a year-on-year increase of 13.4%, reaching 347 billion yuan. Its net profit data also exceeded market expectations, with operating profit under Non-GAAP standards at 10.5 billion yuan, a year-on-year increase of 34.6%.

This performance received a positive response from the capital market. After the financial report was released, JD.com's U.S. stock pre-market surged over 10%.

JD Group CEO Xu Ran also expressed a more optimistic outlook for 2025. She believes that the core of the performance rebound in the fourth quarter of last year lies in the overall recovery of the consumer market, while through cost control and optimization of operational efficiency, JD.com's market share is expanding, with multiple sectors showing healthy growth momentum.

The national subsidy policy has helped JD.com achieve better-than-expected growth in the fourth quarter to some extent; however, JD.com still needs to lay out its new growth curve. Especially since the beginning of this year, many major companies have almost all developed their own large models, and new AI players are also vying for a share. In comparison, JD.com has not made much noise in this wave of AI.

In addition, in the past month, JD.com has launched a grand food delivery battle to enter the local lifestyle market. This has also been interpreted by investors as JD.com wanting to tell a new story outside of its e-commerce business. However, this story has only just begun.

As investors increasingly assess company business based on "AI content," JD.com still has tough battles to fight in the e-commerce and food delivery arenas. Such multi-front operations may also hinder JD.com's pace.

After reaching a performance inflection point, can Liu Qiangdong lead JD.com to continue to exert effort and catch up with its former benchmark, Amazon? Liu Qiangdong still needs to demonstrate greater reform determination.

Better Than Expected

In the fourth quarter of 2024, combined with national subsidies and shopping festivals, JD.com's performance for this quarter became the best of the year.

Data shows that the revenue for the fourth quarter was 347 billion yuan, a year-on-year increase of 13.4%; operating profit was 8.5 billion yuan, a year-on-year increase of 319.3%, with an operating profit margin of 2.4%; and the net profit attributable to shareholders was 9.9 billion yuan, a year-on-year increase of 190.8%, with a net profit margin of 2.8%.

From the perspective of various businesses, the largest segment, JD Retail, had a revenue of 307.1 billion yuan this quarter, a year-on-year increase of 14.7%, further expanding from a year-on-year growth of 4.8% in the third quarter of last year.

This also validates JD CEO Xu Ran's view during the third quarter earnings call, "The effect of national subsidies in the third quarter had not been fully released." It now appears that the effect of national subsidies, combined with the impact of shopping festivals in the fourth quarter, was rapidly released, leading to significant growth in JD Retail's business This can also be seen in the growth of specific businesses under retail. In the fourth quarter, JD.com's revenue from electronic products and home appliances was RMB 174.1 billion, leading all revenue growth at 15.8%, and these categories are the core categories of national subsidies.

Another steadily growing business closely tied to retail is JD Logistics, which generated revenue of RMB 52.1 billion in that quarter, with a growth rate of 10.4%.

However, similar to previous periods, JD.com's performance in new businesses is not optimistic.

In this quarter, JD.com's new business revenue decreased to RMB 4.7 billion, a year-on-year decline of 31.0%. This indicates that compared to the aggressive expansion of Alibaba and Pinduoduo, JD.com appears overly cautious in new business ventures. For the entire year of 2024, JD.com's new business revenue accounted for only 1.66%, with losses nearing RMB 3 billion, and many areas are in a contraction state.

The strong performance in the fourth quarter directly drove the excellent performance for the entire year.

For the full year of 2024, JD.com's revenue was RMB 1,158.8 billion, a year-on-year increase of 6.8%; operating profit was RMB 38.7 billion, a year-on-year increase of 48.8%, with an operating profit margin of 3.3%; the net profit attributable to shareholders was RMB 41.4 billion, a year-on-year increase of 71.1%, with a net profit margin of 3.6%.

On the expenditure side, JD.com saw an increase in several expenses this quarter. Among them, fulfillment expenses increased by 16.4% to RMB 20.1 billion; the largest increase was in marketing expenses, which grew by 28.4% year-on-year to RMB 16.8 billion. This shows that the growth in JD.com's revenue in the fourth quarter also benefited from marketing efforts.

In contrast, research and development expenses changed little, increasing only by 1.0% to RMB 2.2 billion, and the proportion of total revenue decreased. This level of R&D spending is not particularly high among major companies. For the full year of 2024, this level remained flat compared to the previous year, accounting for 1.5% of revenue.

The limited proportion of investment in R&D also indicates that JD.com is still taking a conservative approach in seeking new growth curves in the short term.

On other fronts, as of December 31, 2024, JD.com had cash and cash equivalents of RMB 11.57 million.

New Battlefield

This year, JD.com's significant new story has finally been unveiled, but it is not AI, which is commonly chosen by internet companies.

JD.com is entering the food delivery market, extending its capabilities in logistics and instant retail.

Food delivery, as a high-frequency and essential consumption, has extremely high requirements for fulfillment capabilities. Relying on 1.3 million active couriers from Dada and JD.com's self-operated logistics network, JD.com has achieved a dual-mode delivery of "merchant self-delivery + Dada instant delivery," with a fulfillment capability of 30 minutes in first- and second-tier cities.

From the outset, JD.com has also played the expected role of a disruptor in the industry. First, it offered merchants "0 commission" (for merchants joining before May 2025), directly challenging Meituan and Ele.me's commission rate model of 6%-8%. Subsequently, JD.com announced that starting from March 2025, it would pay five social insurances and one housing fund for full-time couriers These two regulations have initially garnered some goodwill and have already stimulated changes among industry enterprises. JD.com announced that it would pay five social insurance and housing fund contributions for full-time delivery riders, and Meituan quickly followed suit by announcing that it would also provide social insurance for its riders.

In terms of food delivery positioning, JD.com has chosen "quality dine-in merchants," targeting consumers' demands for food safety and upgraded experiences, creating differentiated competition with Meituan and Ele.me. This move not only reinforces JD.com's brand perception of "genuine product guarantee" but also helps avoid vicious competition in the low-price market.

Xu Ran also provided an explanation for entering the food delivery business during the earnings call. She stated that JD.com's entry into food delivery needs to be considered holistically from the perspective of enhancing service experience. From the consumer scenario, instant retail is a natural extension of core retail, and food delivery is one of the high-frequency businesses within instant retail, which can enrich the scenarios of instant retail and strengthen user stickiness and activity.

However, JD.com's food delivery business has just begun, and the market's expectations for JD.com to use food delivery as a new growth point seem limited. According to analysis from Zheshang Securities, JD.com's entry into food delivery is unlikely to shake Meituan's core logistics and merchant barriers, and may aim to provide additional traffic channels for instant retail.

Jonathan Pines, Chief Portfolio Manager for Asian Equities at Federated Hermes, also stated, "They may be worried about their core business, so they are seeking growth. This is a negative development, and I believe the market has a negative attitude towards it."

This is understandable, as food delivery has always been a challenging business and is not easy to sustain. The food delivery wars from years ago are still fresh in memory, and Douyin has a massive traffic base but has struggled to make significant inroads in the food delivery business, which means JD.com will require more investment to succeed.

Currently, JD.com's food delivery faces dual challenges of fulfillment costs and user habits.

Tests show that JD.com's delivery fees are generally 3-5 yuan higher than Meituan's, and its delivery efficiency is currently lagging. Although Dada's rider scale has reached 1.3 million, compared to Meituan's 5 million riders, insufficient order density makes it difficult to dilute costs, and after subsidies decline, order volumes can quickly drop.

Taking the provision of social insurance for riders as an example, in the long run, resonating with the zeitgeist requires significant costs, and JD.com's food delivery scale is currently too small to cover these costs.

Additionally, many merchants have indicated that the number of orders they receive from JD.com is still in the single digits daily. Users are currently only aware that JD.com has a food delivery service and are comparing prices with other platforms, without having developed the habit of ordering food delivery from JD.com. These habits need to be cultivated through subsidies and other means.

If JD.com can cultivate a stable user base for food delivery through subsidies and quality service, its logistics and supply chain capabilities may be transformed into advantages for instant retail; conversely, if it only relies on subsidy-driven short-term growth, it may repeat the mistakes of Baidu Waimai and Didi Waimai.

Imagination

In recent years, JD.com has been labeled as the one among many large companies that "lacks imagination." Its stock price has also declined after reaching a peak in 2021. Although it has rebounded somewhat over the past year, it is still halved compared to its peak.

New players like Pinduoduo have posed challenges to its core business (3C digital and home appliances), and beyond e-commerce, it also lacks new stories In 2024, Douyin's e-commerce GMV is approximately 3.5 trillion yuan, with a year-on-year growth rate exceeding 30%, making it the third in the industry. According to third-party estimates, JD.com's GMV in 2024 is about 3 trillion yuan, which has actually dropped to fourth place in the industry.

Moreover, in terms of international business, Pinduoduo has topped download charts in multiple global markets with Temu, Alibaba is deeply cultivating Southeast Asia through Lazada, while JD.com's overseas business has consistently failed to break through.

This also means that JD.com needs to continue to fight fiercely in the e-commerce battle after the national subsidies retreat, and thus needs to provide the market with a stable growth expectation.

Additionally, in the current hottest AI wave, JD.com's presence is also not strong.

Alibaba's Tongyi Qianwen large model has iterated to Qwen2.5-Max, with cloud-related revenue growing by triple digits, and it has expanded market share through pricing strategies, moving from a relatively marginal internal business to a central position, and today it released the QwQ-32B inference model; Pinduoduo has also formed a large model team for e-commerce recommendations, using AI to optimize low-priced product recommendations and supply chains; Byte's Doubao, although recently overshadowed by Deepseek, was once the most used AI application.

In comparison, JD.com, in this wave, lacks disruptive products and external output capabilities, mainly applying its technology to merchant content generation (such as assisting 140,000 merchants in producing materials through its AIGC platform) and internal operational optimization.

For instance, its Yansai large model, launched a year ago, is mainly used in digital human live streaming, content production, and marketing customer acquisition, and is still in the early stages of application.

In terms of market performance, the Hang Seng Tech Index has risen 35.82% this year, with companies including Alibaba and Xiaomi Group seeing cumulative increases of over 59%, while JD.com has only risen 31.62% in the Hong Kong stock market.

During the earnings call, an analyst asked whether JD.com has already deployed or plans to deploy large models in its business, and what its strategy is regarding AI.

Xu Ran listed numerous applications of JD.com in AI, stating that AI penetration has been achieved in areas such as internal operations, consumer search, merchant operations, and supply chains.

However, compared to companies like Alibaba, such an answer is not very compelling.

The good news is that JD.com is also making more attempts. Before the earnings report was released, JD.com launched the JD YOUNG internship program, focusing on 10,000 positions in cutting-edge fields such as large models, search advertising, operations optimization, big data, and embodied intelligence. However, in the short term, it is still difficult to compete with relatively mature AI products in the market.

JD.com's current "mid-life crisis" also reflects a shift in the competitive logic of Chinese tech giants, from scale expansion to technology-driven growth, from single-point breakthroughs to ecological warfare. For JD.com, a question to answer in the future is: besides "speed" and "genuine products," what will be JD.com's core label in the next decade?

In the short term, it seems difficult for food delivery to become JD.com's "second curve," but its differentiated attempts at guiding instant retail and quality positioning still provide room for trial and error in subsequent strategic adjustments. The key to breaking the deadlock may lie in whether it can break free from past path dependence and reconstruct growth logic with a more open ecological mindset