With JD.com CEO Xu Lei Stepping Down, Founder Still at the Helm | TiPost Focus

Image source: Visual China 

On Thursday afternoon, following the release of unaudited first-quarter financial results, JD.com announced that its current CEO Xu Lei will step down in June. 

Xu Lei, 49, who is the same age as JD.com’s founder and inaugural CEO Liu Qiangdong, has been the CEO for just one year. According to the announcement,  Xu Lei will leave the CEO office due to personal reasons.

Xu Lei will be succeeded by JD.com CFO Xu Ran as the new CEO of JD.com, and former CFO of JD Logistics, Shan Su, will be promoted to CFO of JD.com.

To ensure a smooth transition by June, Xu Lei will immediately begin the handover process.

JD.com stated that after the handover, Xu Lei will continue to be invovled in management and projects related to JD.com’s strategy, organization, and business as the first chairman of the JD.com Advisory Council.

Xu Lei’s Performance  

Xu Lei became the CEO of JD.com on April 7, 2022, succeeding Liu Qiangdong.

Based on the annual financial reports of JD.com from 2018 to 2022, it can be seen that when Xu Lei took office, JD.com had entered a slow growth phase. The year-on-year growth rate of total operating revenue reached its lowest point in 2022. There was no longer double-digit growth and it reported only 9.95% growth in 2022.

2021 was an important turning point for JD Group. While the total revenue increased by 27.59%, the operating profit and loss amounted to a loss of 2.58 billion yuan, a year-on-year decrease of 105.08%, making it the only year with a negative figure in the past four years. The loss attributable to the parent company was 3.56 billion yuan, a year-on-year decrease of 107.21%.

The first thing Xu Lei did after taking office was to figure out how to get out of the growth dilemma.

The first step was to streamline the business. In the first quarter of 2022, Xu Lei said in a conference call that some short-term commercial development, which was not performing well, would be shut down or merged. “We will continue to focus on our business in the future, and there may be similar actions.”

In the retail field, Xu Lei first shrank “Jingxi Pinpin,” which was personally led by Liu Qiangdong. In June 2022, Jingxi Pinpin closed most of its stores, reducing from more than 20 provinces to four regions, including Beijing, Shandong, Henan, and Hubei. Now, it is only operating in Beijing and Langfang, Hebei. Eighty percent of the business was stopped, and the proportion of layoffs exceeded 20%.

After the Jingxi Business Group was disbanded, some of it was merged into the retail business, and the WeChat entry for “Jingxi” was changed back to “JD.com.”

Secondly, following Jingxi’s example, JD’s international business was greatly adjusted, and Southeast Asian e-commerce business was continuously shrunk. Indonesian and Thai e-commerce websites were closed, and the business focus was shifted to cross-border supply chain infrastructure. This was only two years after Liu Qiangdong shouted out “the second half of the game is the opportunity to go from China to the world.”

The third step was mergers and acquisitions, which brought in new growth businesses. In 2022, JD acquired Deppon Express, the “LTL leader,” for 89.076 billion yuan and merged with Dada.

The fourth step was to adjust the organizational units. JD Retail and Logistics underwent unit organizational changes, and the business groups were cancelled and replaced with business departments. The hierarchy was streamlined, and business units closer to the market were given greater decision-making power.

In the most severe period of the pandemic, Xu Lei led JD to adjust its business architecture, emphasizing a focus on core business and supply chain capabilities, and adopting strict cost control measures.

After this series of moves, JD’s cost reduction effect was significant.

In the first quarter of 2023, JD.com’s revenue cost was 206.9 billion yuan, an increase of only 0.4% year-on-year; the fulfillment cost was 15.4 billion yuan, a decrease of 0.7% year-on-year; the marketing cost was 8 billion yuan, a decrease of 8.0% year-on-year; the research and development expenses were 4.2 billion yuan, a decrease of 4.5% compared to the previous year; and the general and administrative expenses were 2.5 billion yuan, the same as the same period last year. The sales cost increased by only 0.35% year-on-year.

However, this did not fundamentally alleviate JD.com’s trend of slowing revenue growth. In the first quarter of 2023, JD.com’s revenue was 2.34 billion yuan, with a year-on-year growth rate of only 1.38%.

JD.com’s Next Step?

Before joining JD.com, Xu Lei worked at Lenovo. “All of my professional training was completed during my two and a half years at Lenovo,” he said.

In 2007, Xu Lei became JD.com’s “external consultant” in the capacity of a market consultant, recommended by investor Xu Xin.

In 2009, Xu Lei officially joined JD.com and was responsible for market promotion of JD.com Mall.

In 2011, JD.com went public in the United States and tried to form a more systematic management mechanism internally, recruiting a large number of professional managers and building a CXO system.

That year, Xu Lei left JD.com to become the CMO of Yougou.com. Two years later, he returned to JD.com as head of the marketing department. Later, Xu Lei embarked on the path of “number two” within JD.com.

In 2017, Xu Lei was promoted to CMO of JD.com Group. In 2018, at the mid-year strategy meeting of JD.com, Xu Lei was appointed as the CMO of JD.com Group and the first rotating CEO of JD.com Mall, reporting to Liu Qiangdong. Until the upgrade of JD.com Mall, Xu Lei officially became the CEO of JD.com Retail Group.

In 2018, JD.com was in an “awkward moment” with unsatisfactory revenue and active users, and Liu Qiangdong was also embroiled in a public opinion storm.

It can be said that one of Xu Lei’s important tasks upon taking office was to stabilize the overall situation during this “crisis.” At the end of 2018, more than 20 high-level executives of JD.com Retail held a meeting to complete the division of JD.com Mall’s front-end, middle-end, and back-end organizational structure. The three major business groups at the time were changed from reporting to Liu Qiangdong to reporting to Xu Lei.

Internally, Xu Lei is evaluated as someone who has helped JD.com build a large marketing system, a mobile product development system, and a platform operation system that manages the entire user lifecycle. He has cultivated multiple excellent teams that dare to fight hard battles and overcome difficulties, and has made outstanding contributions to the construction and shaping of the JD.com brand and the strategic transformation to mobile.

In 2019, with the departure of CXO system managers, JD.com officially entered the “Xu Lei era.” At JD.com, Xu Lei designed the JD.com 618 promotion, launched the e-commerce membership service JD Plus, the super brand day strategic marketing project, and the third-party e-commerce solution “Kepler.”

In September 2021, Xu Lei became the CEO of JD.com Group; in April 2022, he became the Executive Director and CEO of JD.com Group.

During the severe moment of the pandemic, he reached the highest point of his career at JD.com, leading and stabilizing the company’s performance. It is undeniable that after a series of business streamlining and internal organizational level reduction, JD.com achieved a decrease in costs and an increase in efficiency.

However, for JD.com, defending alone is not enough when facing the attacks of Pinduoduo and Douyin.

From 2020 to 2022, Pinduoduo’s revenue increased from 59.492 billion yuan to 1305.58 billion yuan, with growth rates of 97.37%, 57.92%, and 38.97%, respectively. The GMV of Douyin e-commerce increased from 500 billion yuan in 2020 to over 1.5 trillion yuan in 2022, three times that of 2020.

They are not only developing in incremental markets but also taking away market share in the stock e-commerce market. After crossing the special moment, JD.com has reached the next crossroads.

At the end of 2022, with Liu Qiangdong’s harsh criticism of some senior executives, “people who use PPT and empty words to deceive themselves are fraudsters.” After hiding behind the scenes for a long time, Liu Qiangdong returned to the public eye once again.

At the JD.com management training meeting, Liu Qiangdong clearly stated that JD.com must adhere to the principle and values of customer-first and experience-first, adhere to the core management philosophy of “cost, efficiency, product, price, and service,” especially emphasizing the need to adhere to the core weapon of low prices in retail. He also demanded an acceleration of the pace of organizational renewal, and a comprehensive implementation of a management system that adapts to the management philosophy.

Perhaps Xu Ran, who comes from a CFO background, is more in line with JD.com’s current pace than Xu Lei, who comes from a marketing background.

Compared to the veterans with more than ten years of experience, Xu Ran joined JD.com in July 2018 and has held positions such as the financial head of JD Retail Group and JD Group CFO. He has been working at JD.com for no more than five years.

Before joining JD.com, Xu Ran graduated from Peking University with a double bachelor’s degree in science and economics. Prior to that, she was an audit partner at PwC Zhongtian, a special general partnership, and worked for nearly 20 years at PwC’s Beijing and San Francisco offices, focusing on the TMT industry and the US capital market.

After joining JD.com, Xu Ran led the completion of the mergers and acquisitions of listed companies such as Dada, Deppon, and China Logistics Property, as well as the business restructuring of JD Technology. In terms of financing transactions, she led the secondary listing of JD Group in Hong Kong, the spin-off listing of JD Health, JD Logistics, and JD Warehousing Facilities’ public REITs, and the primary market financing of JD Industry and JD Manufacturing and Development.

However, she had no experience in frontline retail business before.

After a round of expansion, top e-commerce players such as JD.com and Alibaba are all undergoing major organizational adjustments in an attempt to make the organization more flexible and efficient, to cope with the fierce market environment, and to make more capital attempts, transforming from a heavy ship leading countless small boats to flexible small boats with multiple heads moving forward together.

As Alibaba Group Chairman and CEO Zhang Yong put it, “Mature one, list one.”

With a financial background, Xu Ran may be able to continue to take JD.com’s cost reduction and efficiency enhancement to the extreme, while also engaging in more capital operations.

Regarding his retirement, Xu Lei responded in his circle of friends, “Thank you, please bless me, and bless everyone,” and attached the work “It’s My Life” by the rock band Bon Jovi. The most important lyrics in this song are “I’m walking my own path.”

During more than ten years at JD.com, Xu Lei and JD.com have gone through important periods such as the escalation of China-US trade frictions, Internet industry regulation, and the three years of the epidemic. Before retiring, JD Retail was undergoing the largest organizational restructuring in five years.

At the management meeting on April 9th, JD Retail established the latest framework for organizational restructuring, which mainly includes: canceling the business group system and changing to the business unit system. The former business group leaders will serve as business unit leaders; the various business units under the former business group will be divided into specific operating units according to subdivided categories, giving category leaders more decision-making autonomy, including personnel appointments and removals. In addition, within the split operating units, there will no longer be a distinction between POP and self-operated, and both will be fully interconnected, managed by a unified category leader, further realizing traffic “equal rights.”

After the adjustment, the heads of the five business groups under JD Retail, including home appliances and furnishings, 3C digital, hypermarkets, lifestyle services, and fashion, will be unified as division heads and report to JD Retail CEO, Xing LiJun. Prior to this, JD Technology and JD Logistics were also brewing a new round of organizational changes. This is one of the important changes within JD after Liu Qiangdong proposed a reduction in executive salaries.

Similar to when Xu Lei took over as CEO, JD once again included the statement in the announcement of Xu Ran’s appointment that “in the future, Mr. Liu Qiangdong will mainly focus on long-term strategic design and major strategic decision-making and deployment, young leadership talent cultivation, rural revitalization, and other aspects.”

At the Davos Forum in early 2018, Liu Qiangdong stated that he believed he would not retire before the age of 65.

At this time when JD is undergoing major reforms, after Xu Lei retires, the heavy burden will fall on the new group CEO, Xu Ran. Xu Ran not only needs to complete the transition from CFO to group CEO, but more importantly, he needs to lead JD in exploring new growth forms.

When Xu Lei took over from Liu Qiangdong, JD stated that it had formed a Strategic Execution Committee (SEC) composed of business segment and functional system leaders, and a Strategic Decision Committee (SDC) composed of dozens of front-line business department leaders in the group, to manage decision-making for daily affairs of the company.

When Xu Ran took over from Xu Lei, JD emphasized that JD Group has formed a well-structured and orderly management team. At the same time, after more than four years of operation, the SEC and SDC have formed a good collective decision-making and rapid response mechanism.

JD CEOs may change, but Liu Qiangdong remains. Just as the “Jingxi” platform, which was contracted, was restarted in another form earlier this year.

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