When JD.com is making the most money, why is it still so harsh on merchants?

Before the 2026 '618' shopping festival even officially began, a company named Qingbei Daoyuan disappeared from JD.com.

This small company, focused on digital solutions for high schools, was founded in 2016 and sells learning tablets. According to its own claims, its team includes dozens of graduates from Peking University and Tsinghua University. Yet this very store suddenly became unsearchable on JD.com on May 26: its shop couldn’t be found, all products were taken down, and clicking on links actively promoted in livestreams returned the message, 'This item is no longer available.'

On May 27, Qingbei Daoyuan issued a statement explaining the full sequence of events: Ahead of the 618 shopping festival, a platform distributed universal consumer vouchers to shoppers. JD.com demanded that Qingbei Daoyuan either refuse voucher usage on other platforms or lower all its product prices on JD.com to match the post-voucher prices offered elsewhere, thereby creating so-called 'lowest prices online.' Qingbei Daoyuan refused. In its statement, it wrote,"We find it difficult to accept JD.com shifting the costs of achieving 'lowest prices online' and enhancing 'shopping experience' onto merchant businesses."”。

In the same statement, it added an even more striking remark: 'We fully understand that we lack equal footing with major platforms in negotiations.' As a company focused exclusively on high school learning tablets, it offers only two models priced at RMB 6,880 and RMB 7,980—far from cheap—and has collectively sold over 10,000 units on JD.com with strong customer reviews, which is already a significant achievement.

It wasn’t until May 28 that the store quietly resumed normal operations, yet JD.com never provided any explanation for what had occurred during those two days.

Faced with JD.com Retail’s record-breaking operating profit margin, this small vendor’s leverage remains negligible. Half a month earlier, JD.com released its Q1 2026 earnings report, showing JD.com Retail’s operating profit margin had surged to 5.6%, a historic high. The company held over RMB 210 billion in cash and short-term investments, and continued regular share buybacks and dividend payments. Even before delisting Qingbei Daoyuan’s products, JD.com remained financially comfortable—not at all in a cornered position.

Further into the same earnings report lies another figure: JD.com Group’s net profit attributable to shareholders dropped by more than half compared to the same period last year. While retail profitability keeps rising, the group’s overall profit is declining.Looking solely at this rapidly declining profit curve, JD.com almost appears to be running short on cash itself.。

01 Yet the shortage was never about money.

Although many people perceive e-commerce as having become increasingly tough in recent years—especially after platforms joined the food delivery wars, resulting in varying degrees of losses across the board—from JD.com Retail’s perspective alone, business has been far from bad. Even when viewed at the group level, JD.com has not fallen into any evident financial distress.

Throughout 2025, JD.com Retail generated RMB 51.4 billion in operating profit, with a 4.6% margin. This momentum carried into 2026, as Q1 retail operating profit reached RMB 14.96 billion, pushing the margin to 5.6%—another record high. In Xu Ran’s own words, JD.com Retail’s profitability 'has reached an all-time peak.'JD.com’s retail profit margin has been able to climb steadily, primarily driven by shifts in its business mix—shrinking electronics and home appliances sales offset by growth in daily necessities and advertising services—as well as economies of scale. According to the company's official financial reporting, this profit was generated through its own operational efforts.。

At the group level, net profit attributable to shareholders has thinned quarter after quarter since Q2 2025: it stood at RMB 6.2 billion that quarter, fell to RMB 5.3 billion in Q3, and plunged to a quarterly loss of RMB 2.7 billion by Q4. For the full year, net profit shrank to RMB 19.6 billion, down sharply from RMB 41.4 billion the prior year. The issue is that JD.com’s revenue didn’t decline during this period—in Q1 2026, revenue still reached RMB 315.7 billion, up 4.9% year-over-year—though growth had slowed from double digits to single digits.

Money kept flowing in, yet profits mysteriously evaporated by more than half—the gap went exactly where everyone knew it would: into new businesses, including food delivery.

In its earnings report, JD.com attributed the profit decline primarily to 'increased strategic investment in new businesses.' Just how aggressive was this spending? The food delivery–focused new business segment alone lost RMB 10.3 billion in Q1 2026. Marketing expenses also surged, hitting RMB 15.3 billion in the same quarter—a nearly 50% year-over-year increase. At the peak of this spending spree in mid-2025, quarterly marketing costs briefly doubled year-over-year.

In February last year, JD.com became the first to launch food delivery services, and starting in April, it poured in 'hundreds of billions in subsidies' and began paying social insurance and housing fund contributions for its delivery riders, personally igniting the 'food delivery war' that has shaken China’s entire internet sector. This one-two punch initially generated significant momentum, but as Taobao Flash Delivery entered the fray and Meituan ramped up its counteroffensive, the required investment intensity kept escalating, and JD.com’s early momentum gradually showed signs of fatigue.

According to JPMorgan’s estimates at the end of 2025, Meituan and Taobao Flash Delivery together held about 90% of the food delivery market share, with JD.com accounting for roughly 8%, and the remainder split among other players. Currently, as the food delivery battle has clearly cooled and regulatory scrutiny continues to intensify, the scramble for market share is nearing its end.For JD.com, which previously held only a minimal share in instant retail, capturing 8% of the market isn’t a failure—but the cost of competing at this intensity has been undeniably high.。

After burning cash relentlessly, JD.com’s group operating profit in Q1 2026 shrank to just RMB 3.8 billion from RMB 10.5 billion a year earlier, and its operating margin dropped from 3.5% to 1.2%. Even using JD.com’s preferred metric—which excludes one-time items—operating profit still plunged from RMB 11.7 billion a year ago to RMB 5.6 billion this quarter, slashed by nearly half.

Moreover, since the subsidy war began, JD.com’s stock price has trended downward amid volatility, closing at USD 28.83 on May 29, 2026—more than 20% below its near-USD 37 high over the past year, falling into its lowest range of the year and shrinking its total market capitalization to under USD 39 billion. Despite this, the company still returned over USD 4 billion to shareholders in 2025 through buybacks and dividends combined.

Cash flow-wise, JD.com doesn’t look too bad. In Q1 2026, net cash flow from operating activities dwindled to just RMB 555 million, significantly diluted by new businesses. Free cash flow for the quarter was negative RMB 64.81 billion; however, e-commerce typically faces tight cash flow in Q1, and this figure still marked a substantial improvement from the negative RMB 216 billion recorded in the same period a year earlier. Looking at the full trailing twelve months through Q1, JD.com still generated over RMB 20 billion in positive free cash flow.

Putting these together, JD.com has indeed suffered some losses, but they are not fatal; moreover, it actively chose to enter the food delivery battle.For a company that firmly holds the initiative in its own hands, whether or how it reaches out to merchants going forward is entirely its own business decision.What remains is an unasked question: when it pushes 'lowest price online' to the extreme, every penny saved never appears out of thin air—someone always has to bear the cost.

So, who ultimately ends up footing this bill?

02 Are small merchants bearing the cost?

JD.com Retail has clearly been generating increasing profits through higher-margin businesses, so why do controversies involving small and medium-sized merchants keep surfacing?

Since Richard Liu returned, JD.com has revived its low-price strategy, and competition with other major platforms intensifies dramatically during major promotional periods. There are many contextual factors behind this strategic choice, which we won’t elaborate on here.

On the ground, this strategy has become a constantly running price-comparison machine: procurement and category teams pull daily price-comparison rankings, publish them internally, allocate more traffic exposure to whoever offers lower prices, and directly tie these results to employee performance evaluations. During major sales events like June 18 and Singles’ Day, procurement teams outright demand that merchants offer the 'lowest price online.'

Qingbei Daoyuan used a term in its statement:called 'cost shifting.'It is a third-party seller on JD.com, required to lower its prices to the lowest online level and prohibited from allowing consumers to use coupons elsewhere—either covering the price difference themselves or abandoning other sales channels.Refuse, and the consequence is delisting or traffic throttling.。

For brands and manufacturers supplying JD.com's 'self-operated' business, there is an even more opaque 'gross margin protection' mechanism. According to a former JD.com employee who spoke to Jiupai News, the platform signs 'gross margin protection' clauses with suppliers, locking in a fixed gross margin percentage for itself while extending payment terms. During major promotions, any discounts offered or price-matching losses are offset by forcing suppliers to lower their wholesale prices or pay the difference directly. If the final transaction price falls below the supplier’s cost, the supplier not only earns nothing but must also pay out of pocket. How extensively and deeply this mechanism is applied remains difficult for outsiders to verify.

One approach publicly coerces small third-party sellers into compliance; the other quietly forces self-operated suppliers to absorb losses. The tactics differ, but the outcome is identical:The cost of maintaining 'lowest online prices' is gradually shifted onto merchants’ accounts. Qingbei Daoyuan, delisted for two days, is merely the latest link in this chain.。

In May 2024, Beijing Daily reported that 10 publishers in Beijing and 46 in Shanghai had jointly issued statements collectively opposing JD.com’s demand during the 618 shopping festival that all book categories be sold at 20%–30% of their original prices under a 'price guarantee' policy. They preferred to skip the promotion altogether rather than foot the bill for these discounts. From books to study tablets, over a span of two years, businesses of all sizes—both 'self-operated' and third-party—have been squeezed by the same 'lowest online price' logic, sharing one common trait:They have virtually no room to negotiate against the platform’s traffic dominance and rule-setting power.。

According to JD.com’s official stance, it has never acknowledged allegations of squeezing merchants. JD.com maintains that requiring merchants to set prices on its platform no higher than elsewhere is meant to 'ensure price competitiveness on high-volume platforms,' enabling most consumers to access fair pricing. It argues that proactive price comparisons 'essentially build a price protection barrier for consumers.'

At the same time, JD.com explicitly stated that it does not restrict merchants from operating on other platforms, asserting that accusations of enforcing 'either-or' exclusivity misapply the term. It claims such criticism both distorts JD.com’s legitimate pricing strategies and exploits legal labels to generate negative publicity.

Yet whether these explanations hold water is no longer just a private dispute between platform and merchants. As early as March 2026, three Beijing municipal departments jointly summoned 12 platforms, including JD.com, officially citing practices such as 'using technical means to monitor prices, requiring merchants to sell at the lowest online price, and stripping merchants of pricing autonomy.'

On April 10, one month later, the 'Rules on Pricing Conduct by Internet Platforms,' jointly formulated by the National Development and Reform Commission, the State Administration for Market Regulation, and the Cyberspace Administration of China, officially came into effect. Article 5 clearly states:Platforms must not compel or indirectly compel merchants to lower prices, nor require merchants to set prices on their platform no higher than those on other channels (commonly known as the 'lowest price online')., nor may they force merchants to enable automatic price-matching systems; furthermore, they cannot resort to tactics such as restricting traffic, delisting products, or deducting deposits to pressure merchants into compliance.

This series of regulatory actions has essentially drawn clear red lines directly addressing the controversies that have arisen from platform competition in recent years.

These rules and regulatory talks may not immediately change much, but the direction is clear. For a long time in the past, JD.com itself was effectively the rulemaker on its own platform: it decided pricing, allocated traffic, and delisted sellers at will, leaving merchants with no choice but to accept its terms. Now, higher-level rules are stepping in to rein in platforms, signaling that the era of unrestrained, cash-burning competition is drawing to a close.

03Conclusion

After all, low prices have never been free—they’ve simply shifted who pays the bill.

JD.com could drive down prices thanks to its logistics efficiency and economies of scale, absorbing those costs itself—that’s where its real strength lies. Yet in recent years, an increasing share of the cost of these low prices has been shifted away from JD.com and onto the ledgers of small and medium-sized merchants—onto shops like Qingbei Daoyuan, which don’t even get an explanation.

This is precisely the aspect of JD.com that deserves serious scrutiny.When maintaining the 'lowest price online' increasingly relies on squeezing the smallest partners rather than improving internal efficiency, its competitive moat may not be as deep as its record-breaking profit margins suggest.Rather than celebrating another record-high profit margin, investors should pay closer attention to what JD.com can still rely on to keep pushing prices down—and how many merchants remain willing to stay in this game.

The real vulnerability of this model lies in the fact that how long it can last no longer depends on JD.com itself, but rather on how long merchants can hold out and how long regulators continue to allow it. If regulation continues tightening along its current trajectory and protections for small and medium-sized merchants are further strengthened, the bleeding may no longer be confined to food delivery alone. $JD.com (JD.US)$$JD-SW (09618.HK)$

Disclaimer: This article is intended solely for learning and communication purposes and does not constitute investment advice.

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