China’s JD.com unwraps FedEx-style parcel business to bolster sales

BEIJING/SHANGHAI (Reuters) – Chinese e-commerce firm JD.com Inc said on Thursday it would add a FedEx-style parcel delivery service to its e-commerce offerings, a move which could help the firm leverage its network of warehouses and drivers to bolster flagging profits.

FILE PHOTO: An employee works at a JD.com logistic centre in Langfang, Hebei province, China November 10, 2015. REUTERS/Jason Lee/File Photo

The shift pits JD.com into greater competition with major rival Alibaba Group Holding Ltd’s Cainiao network, as well as dedicated domestic parcel delivery firms such as ZTO Express and YTO Express Group Co Ltd.

China’s second-largest e-commerce firm said the new service would allow businesses and individuals in Beijing, Shanghai and Guangzhou to send parcels to locations around China, using the firm’s app to schedule a pick-up by one of the company’s staff.

The logistics network – which would be able to deliver most packages the same or next day – has previously only been used to ship packages purchased on JD.com’s e-commerce platform or by third party companies that lease JD.com’s logistics assets.

“This marks the next step in leveraging the nationwide logistics network that JD has built over the past decade,” Zhenhui Wang, CEO of JD Logistics, said in a statement.

The firm – which prides itself on owning its logistics network and warehouses – posted a second-quarter net loss of $334.4 million, far below what analysts had expected amid rising investment costs and slowing sales.

The company’s stock is down almost 43 percent since the start of the year, hit by a wider market sell-off, China’s cooling economic growth and the brief arrest in the United States in August of its chief executive Richard Liu on suspicion of rape.

Liu, who has denied wrongdoing through his lawyers, was released in less than a day without charges and returned to China. U.S. prosecutors are weighing whether to bring charges after police turned over the findings of their investigations, according to the Hennepin County Attorney’s Office.

China’s express delivery market was worth around 976 billion yuan ($140 billion) last year, the State Post Bureau said in January, up 32 percent from 2016. Delivery firms dispatched about 40 billion parcels last year.

JD.com said it “aims to eventually make residential and business deliveries for shippers from anywhere to anywhere within mainland China in the future.”

Tencent Holdings Ltd, Walmart Inc and Alphabet Inc’s Google are investors in JD.com.

($1 = 6.9352 Chinese yuan)

Reporting by Cate Cadell in Beijing and Adam Jourdan in Shanghai; Editing by Stephen Coates and Edwina Gibbs