China’s strict Covid-19 lockdowns have severely impacted the country’s e-commerce through disrupted logistics and dampened demand.
On May 17, JD.com, a leading supply chain-based technology and service provider, announced its unaudited financial results for March 31, 2022.
The company reported a net loss to ordinary shareholders for the first quarter of 2022 was 3 billion yuan (0.5 billion dollars), compared to a net income of 3.6 billion yuan for the same period last year.
The cost of revenues increased by 18.5%. Fulfillment expenses, including procurement, warehousing, delivery, customer service, and payment processing, increased by 12.2%. Doubling that number to 24.4% are increased marketing expenses.
JD’s CEO Lei Xu said the first two years of the pandemic had positive effects on many Chinese e-commerce retailers as buyer behavior shifted to online purchases. However, the lengthy and strict lockdowns in many areas have started to bite all online businesses and their counterparts. In addition, Xu said the pandemic had affected consumers’ incomes, so confidence and overall consumption are sluggish.
In addition to weakening consumption, tightening Covid control measures has caused significant supply disruptions with transport and logistics under pressure.
JD is well known for its efficient national distribution and delivery system but is struggling to arrange delivery, increasing cancellation rates as customers bailed from purchases.
Xu said [quote], “In April, the order cancellation rate was significantly higher than last year due to logistics disruptions. The situation improved this month but was still higher than a year earlier.” [end quote]
China’s tech ecosystem faces significant challenges at this time. Yet Beijing shows no sign of departing from its zero-COVID stance and continues to crack down on complaints about enforcement tactics used to implement the policy.