According to the founder and CEO of e-commerce giant JD.com, Liu Qiangdong, subsidiary JD Logistics faces a persistent financing dilemma, and ending base salaries for delivery staff while increasing commission rates are among the steps the company is using to deal with the problem.
"As one of the e-commerce frontrunners, JD's move to build its own logistics system has created a better user experience. But a heavy financial burden came along with the benefits," Li Chengdong, an independent industry analyst, told the Global Times on Monday.
"If JD Logistics could realize a profit on its own, it would be a huge financial relief for JD.com," he said.
It's reasonable for JD Logistics to lower its personnel expenses to deal with its financial dilemma, since most of other logistics firms don't have insurance support for employees at all, Li noted.
"The 2018 annual loss of JD Logistics surpassed 2.3 billion yuan ($343 million). It was the company's 12th year of losses, and we only had enough money left to make up for operating losses for two more years if we didn't act," Liu Qiangdong said in a letter to the company's delivery staff on Monday.
He said that insufficient operating income and high internal costs put JD Logistics into a financing dilemma.
Besides cancelling base salaries, JD Logistics also raised the commission that staffs make for each delivery to motivate them to take new orders and raise the company's income, the letter noted. "The previous structure didn't motivate outstanding employees," JD Logistics said on its account on the Weibo platform.
"The policy has been tried in the southern China branch for about half a year, and a lot of the delivery employees' incomes have increased as a result. The best performer earned more than 80,000 yuan per month," Liu said.