Shares in Chinese e-commerce giant JD.com (NASDAQ:JD) rose on the hope that big salary increases will help it compete with fast-moving Pinduoduo (NASDAQ:PDD), which runs the Temu shopping service.
JD.com will nearly double the salaries of some frontline staff and increase retail salaries by about 20%. The news came in a note on the company’s WeChat channel.
JD stock rose 3% overnight. It opened in New York at $28.62, a market capitalization of over $44 billion.
Don’t Lie Flat
Founder Richard Liu took personal blame for JD’s troubles, saying on an internal message board that there is “no way out” of the company’s problems.
JD.com made its reputation during the last decade with speedy delivery. It used 500 delivery bases and robots to fulfill some orders in 30 minutes and get merchandise to remote villages overnight.
Since the 2020 tech crackdown, however, attention has shifted to procurement and online merchandising. Temu, which has even become popular in the U.S., has proven adept at both. JD’s move comes amid plans to add express delivery to North America and Europe.
JD.com lost half its value in 2023, and the company had to deny rumors that Liu’s family moved to the U.S. The salary hikes come with a demand from management not to “lie flat” or just go through the motions at work. “The organization is big, bloated, and inefficient, and it does take time to change,” Liu wrote.
JD.com has nearly doubled its sales since 2019, but profits have not always kept pace. The company reported operating income of $1.27 billion on revenue of $33.9 billion during the September quarter, 85% of that coming from the company’s retail business. However, growth was negligible, and general merchandise revenues declined by 2.3%.
JD Stock: What Happens Next?
The salary hikes and demands on employees are consistent with government policies aimed at returning to growth. How employees respond is an open question. They could deploy their imaginations inside the business or engage in destructive office politics.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
