Culture clash puts joint venture at risk
A difference in culture and working styles is causing a rift between Central Group and Chinese internet giant JD.com regarding their e-marketplace joint venture JD Central, according to a source familiar with the two companies.
Rumours have been swirling about a breakup, fuelled by the departure of executives tied to Central Group.
Rvisra Chirathivat, former JD Central chief marketing officer, who worked for the platform since it was established in 2017, stepped down in October 2020.
Chodok Bhicharnchitr, former JD Central chief merchandising officer, also resigned. Both have ties to Central Group.
Ms Rvisra’s successor, Korlarp Suwacharangkul, also stepped down in December last year.
JD Central is led by China-born Vincent Yang.
The source, who requested ano- nymity, said the two companies have a five-year agreement for cooperation on JD Central that is drawing to an end this year.
There is an ongoing discussion between the two companies about a separation because of a difference in culture and work styles, said the source.
Central does not want to invest in mass marketing, advertising or subsidies to attract customers, unlike Lazada and Shopee, the source said. Lazada is the Southeast Asian e-commerce arm of China’s Alibaba, and Shopee is the e-commerce arm of Singapore-headquartered internet company Sea.
In 2018, JD Central ramped up its campaign by promoting its platform as a channel for authentic products, and it became the second-biggest player in terms of revenue with 458 million baht that year.
But since 2019, JD Central has been overtaken by Shopee in the No.2 position.
JD Central booked revenue of 1.2 billion baht in 2019, 3.4 billion baht in 2020, and 7.4 billion baht in 2021, while facing losses of 1.3 billion baht, 1.3 billion baht and 1.9 billion baht, respectively, according to Creden Data, a data analytics provider.
In 2021, Shopee’s intense marketing campaigns resulted in 13.3 billion baht in revenue, coming close to Lazada, the market leader, which had 14.6 billion baht.
“JD.com would like to become more aggressive to compete with Lazada. This leads to the prospect of a separation of the two firms which want to invest in their own journey,” the source said.
Wisan Sirikul, corporate marketing director of JD Central, told the Bangkok Post that there were still ongoing projects between JD.com and Central in the third quarter of this year. The projects include the soft launch of “Instant Joy” on-demand delivery through a collaboration with Tops Supermarket.
He said he is aware of the JD Central churn rate, but said it was normal in e-commerce where customers are being hunted by other platforms.
“In developed countries, it takes 15 years before e-commerce operators can attain profitability,” Mr Wisan said. “The economic strife is now pushing these operators to be more cautious about their spending as well as pursuing cost savings and job cuts for their non-core business so as to see profitability.”
He said that Thai e-commerce is an intensely competitive market, and each player has its own unique proposition.
“At JD Central, we are strong in the electronic device category which means it has high average spending per user,” he said.
Suthikorn Kingkaew, a digital economy pundit, said Central can walk away from the joint venture as it has its own online channel on which to conduct business.
Central Group has acquired department stores abroad that have physical assets and serve as tourist destinations, he said. This differs from an e-commerce platform that burns cash to attract customers.
He added that Central Group tends to capitalise on the digital channel using its omnichannel strategy and is not interested in the “money burning” game of e-commerce wars.