According to screenshots from a group chat of merchants selling on JD.com, it seems that sellers may be hit with a restrictive pricing policy that drastically cuts prices and eats into profit ahead of one of the biggest mega sales that JD.com puts on annually.
While there’s been no official notification confirming this, many merchants are anxious and upset about what this may mean for their sales and profits ahead of the huge upcoming sale.
The Controversial Group Chat Conversation
Screenshots of a conversation between merchants and a JD.com purchasing agent in a group chat have begun circulating online and have led to plenty of controversy.
The conversation is believed to have taken place on May 14th or 15th, and the controversy comes ahead of the large 6.18 sale that JD.com operates annually, beginning at the end of May, and follows the recent news that JD.com’s first-quarter profit has declined compared to last year. The “6.18” name refers to June 18th, as that’s the date when JD.com was founded.
In the screenshots, the purchasing agent lets merchants know that after May 20th, products that are selected by the company’s price comparison system will receive an extra 20% discount on top of the price. The driver of this move is likely to help JD.com lure customers away from other platforms, such as Pinduoduo and Alibaba, by offering lower prices than they can.
Specifically, the agent said, “During the big promotion, I will not notify anyone whose price is matched by the price comparison system, and we will directly match the price. After ‘5.20’, if the matched price is higher, we will directly offer an additional 20% discount on the matched price.”
As expected, many merchants voiced their displeasure about the rule, and one requested that the purchasing department confirm whether the products being compared were actually the same before changing the price, rather than just letting the system handle it all autonomously.
Merchants Are Likely Surprised By the Statements
In response, the purchasing agent said, “You don’t have to do it”, with the merchant then responding with, “I’ve never seen anyone threaten someone like that.”
Instead of dialing it back, the purchasing agent continued by saying, “With a monthly GMV of 100,000 yuan (around $14,700), and our philosophies being different, I suggest you stop doing JD.com’s self-operated business and look for opportunities on competitor platforms. We’ll go through the termination process today; remember to sign it in the backend.”
In addition to saying this to a single merchant, the agent added that “Anyone else who doesn’t want to continue or feels they can’t keep up with the price during big promotions, please mention it in the group so I don’t have to ask you one by one.”
This was a shocking statement and threat from the agent, which likely left many of the merchants confused, angry, and fearful for their future on the platform.
Merchants Need to Bear the Losses
There’s a good chance that this price matching and potential 20% discount will hit sellers and merchants harder than anyone else. Under the self-operated model that JD.com uses for direct sales, merchants are like suppliers, with the platform determining the final selling price of an item.
Also, JD.com sometimes has “gross profit protection” clauses with some merchants, which state that a certain percentage of JD.com’s gross profit is guaranteed, regardless of the sales profit of the item. As a result, if an item gets its price reduced by the comparison system, the merchant is often on the hook for the loss.
If that wasn’t bad enough, this recently exposed potential rule of a 20% price reduction on top of the price match may eat into a seller’s profit even further, possibly even eliminating it.
Customer Service is Unaware of the Notification
While this group chat seems to show that this may be happening, it’s important to note that nothing official has been released yet. In fact, a reporter contacted the company’s customer service line to verify the new rule, and customer service stated they haven’t received any notification about it.
The customer service rep also advised that sellers wait for an official notice from the purchasing and sales department. As a result, it’s possible this doesn’t take place, and the comments and apparent threats in the chat were just from a frustrated purchasing agent going too far.
Plenty of Merchant Anxiety Ahead of the 6.18 Sale
But with the 6.18 sale quickly approaching, and no official word from JD.com, many sellers are anxious and worried about whether (and when) this new rule may take place. Before any change is made, industry insiders recommend that sellers review any price adjustment clauses in their contracts and take photos or screenshots as evidence.
Whether the change is made or not, sellers may want to prepare by thinking closely about ways to decrease their costs to make the potential price matching and 20% discount hit less hard.
This advice extends beyond JD.com to sellers all over the world. If you fear price hikes, increasing costs, or other rules that eat into your profits, take time to find ways to lower costs ahead of time to help offset these changes.
If you wait too long to make adjustments, you may not make them in time and have to struggle through a period of low profits, which not every company can survive.
