It’s been a bit of a rollercoaster ride for JD.Com Inc(ADR) (NASDAQ:JD) shareholders over the past couple of months. While shares have still posted very respectable gains on a YTD basis, they are approximately 20% off the 52-week high they hit in August.
The euphoria surrounding Chinese e-commerce technology companies has lessened somewhat but is still very much alive.
With JD, the key is to ignore the noise in the market. Those who focus on the company’s long-term strategy will see that JD is making progress in executing on its plan. And thus, investors with their eye on the future, won’t be tempted to sell prematurely.
JD’s New Lux Platform
The launch of Toplife—JD’s high-end global shopping platform—was just announced earlier this month. It’s a product that segments consumers that are more affluent by offering a comprehensive array of brands on a dedicated sales platform. It is also a savvy move that targets customers willing to pay higher prices.
Not only do higher-value goods mean a bigger cut for JD and good news for topline enhancement, but it also paves the way for attracting new advertising partners on the platform. We know from experience that it’s no longer just about eyeballs. Scale is important but the engagement and the specificity of the user group is more interesting to advertisers who are concerned about conversion.
With wealth increasing in China, many are seeking a premium, differentiated experience. That’s exactly what JD is doing—giving that tier of customers exactly what they want in an ecosystem that makes it easy. The online stores, customer service (24-hour, of course), delivery and tech knowledge will all leverage JD’s deep retail experience.
Traction is already evident as well. This is no pipe dream. Well-known brands like La Perla, Emporio Armani and Trussardi are on board, marking a fine start to the venture. It allows brands to focus on conveying their value and story to customers while JD helps with interface and logistics.
JD Launches into Southeast Asia
In another move to cement its hold in the 600 million strong market of Southeast Asia, JD has made a strong statement by partnering with Thailand’s largest retail conglomerate, Central Group. It’s an incredibly smart move given just how powerful an enterprise that Central Group is in Thailand.
Not only is the family well-connected, which is a compelling asset to have in your back pocket, but Central is a dominant force in retail and manufacturing in the region. With Central’s shopping mall network and familiarity with the region, it is a first-in-class partner for JD to continue to continue expanding into Southeast Asia.
Along with Provident Capital, the plan is to fund investments of up to $500 million to create two joint ventures that will operate in ecommerce and fintech services, areas that are ripe for disruption. Provident is JD’s strategic partner for the Indonesian e-commerce business line as well.
The Bottom Line on JD
JD is clearly executing methodically on its long-term ambitions that stretch beyond the already massive Chinese consumer market. With the winner-take-all effects at play as observed in other tech giants, it behooves JD to be in early.
Although, I would argue that JD is, in fact, right on time. They didn’t make a hasty rush in on their own. They established a key relationship that will pay major dividends in the future. And perhaps not too distant future at that.
Given what JD is accomplishing towards a longer term end, it would be silly to sell out early just do to some fluctuations in share price. Stick to the line.
As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.
