Ali JD, dragged into the new inner roll

Image source: Visual China

Recently, Chinese e-commerce giants have refocused on the core element of the competition for consumers: price.

On February 26, Jingdong App released the 11.6.2 upgrade version, and the changelog mentioned: "Jingdong 3.8 section, tens of billions of subsidies online". This information also confirms the news that has previously attracted widespread attention in the industry that JD.com is about to launch the "tens of billions of subsidies" channel.

Coincidentally, according to media reports, Alibaba recently officially identified Taobao's five major strategies for 2023, namely live streaming, private domain, content, local retail and price power. It is reported that price power will be paid more attention to this year.

When the shopping patterns of major platforms tend to be homogenized, fierce competition around the price of the same or similar goods is inevitable. Jingdong used the "tens of billions of subsidies" to launch an impact this time, which is widely believed by the outside world to be intended to benchmark Pinduoduo. In the face of Pinduoduo's strong growth momentum, Alibaba and JD.com interpreted the importance of price in different ways, driven by both performance pressure and its drivers.

If you don't advance, you will retreat

On February 23, Alibaba announced that Alibaba's third-quarter revenue for the fiscal quarter ended December 2022 was 247.76 billion yuan, a year-on-year increase of 2%. According to the report, China's commercial segments, which include Taobao, Tmall, Taote, Hema and other retail businesses, achieved revenue of 169.986 billion yuan, down 1% year-on-year. Among them, the customer management revenue of Taobao and Tmall fell from more than 100 billion yuan last year to tens of billions of yuan, with a growth rate of only -9%. Taobao and Tmall's online physical goods recorded single-digit declines in GMV (gross merchandise transactions) year-on-year.

Although the impact of the epidemic on supply chain and logistics has not completely dissipated in the second half of 2022, the above results are not a positive signal for Alibaba's basic market, represented by China's commercial division.

In the Ali conference call after the earnings report: relying on subsidies can not continue to gain market share, the combination of cloud computing and AI is in a critical period, Alibaba's chairman and CEO Daniel Zhang also responded to the recent topic of "price war". Daniel Zhang acknowledges that price is king, but he also said, "No company can achieve the purpose of changing the situation through its own continuous price subsidies, and the ultimate change is through technological innovation and innovation of business mechanisms." ”

Dismantling it, Alibaba's five major strategies this year, namely live streaming, private domain, content, local retail, and price power, respectively benchmarked the top platforms in their respective fields: Douyin, WeChat, Xiaohongshu, Meituan and Pinduoduo. As for the specific implementation strategy, it is not yet known what actions Ali will take.

Daniel Zhang also emphasized that it will "improve the cost performance of goods", which seems to send a signal that Ali will move from the positioning of "consumption upgrade" to a more friendly price landing smoothly. Ali did not rashly participate in the "price war", on the one hand, there is a balance of profit growth, on the other hand, there may also be a fear of market reaction.

Compared with Ali's wait-and-see, JD.com's approach is more inclined to face the battle head-on. It is reported that the "10 billion subsidy" channel launched this time is different from the deeper-hidden entrances during the limited-time promotion period such as "6·18" and Double 11, and will have a first-level entrance in the Jingdong App.

For Pinduoduo, whose revenue and net profit have exceeded expectations in the quarter of 2022, Jingdong has not yet made a move, and has been cut.

The market is worried that the use of real money to attack the tens of billions of subsidies may affect the gross profit level of JD.com in the short term; Pinduoduo's market share will also be affected by the industry's involvement. Citigroup released a report that investors may overreact to the above news, and most of the subsidies paid will be shared with brands, suppliers and merchants, so it may not be fully reflected in JD.com's earnings report, and still give JD.com a "buy" rating on US stocks.

JD.com, which has always focused on quality and service, has now returned to the low-price strategy, perhaps following the "guarding low-price mentality" proposed by Liu Qiangdong at the end of 2022. In November last year, some media reported that Liu Qiangdong pointed out in an internal email that low price was the most important weapon for JD.com's success in the past, and the only basic weapon in the future.

Ten years forward, in August 2012, Liu Qiangdong launched a price sniper against offline retail giants Suning and Gome on the home appliance track. This price war was huge, but it ended hastily, and at that time it also triggered regulatory intervention.

At that time, some media reported that JD.com unilaterally announced a truce. On the morning of August 17, 2012, Liu Qiangdong reposted a relevant report on Weibo: "This is a misreading, and the price war will never end the day."

In the past decade, China's e-commerce industry and retail landscape have undergone earth-shaking changes. Suning and Gome, which once stood at the top of the retail mountain, are each mired in a debt crisis and a tight capital chain, and their status is no longer the same. Perhaps the defeat of his old rival Suning will bring a sense of crisis. Liu Qiangdong has been keenly aware that JD.com is losing its price advantage.

After opening up the sinking market, Pinduoduo used the "tens of billions of subsidies" to select big-name products with high unit prices such as iPhones, attracting some groups with specific needs and price sensitivity. In contrast, although JD.com has won a group of loyal users due to providing high-quality services, the advantages of logistics and other services will be weakened in the face of obvious price gaps in the future.

Previously, Daniel Zhang set Ali's keyword for 2023 as "enter". For Ali and JD.com, how to face the offensive of Pinduoduo will be an option of not advancing or retreating.

The purpose of burning money is different

There is no shortage of such questions in the industry: Why did JD.com kill a thousand enemies and self-damage eight hundred? Perhaps behind the low price, one of the goals Liu Qiangdong wants to achieve is to let users return to JD.com itself.

In recent years, activities such as the Double 11 Shopping Festival, which was detonated by Ali and participated by JD.com, are diluting their presence among consumers who shop online.

In Alibaba's earnings call for the first quarter of 2022, Daniel Zhang said: "Consumer minds are Alibaba's most valuable asset, which means that users will come back without spending money." ”

In 2022, the overall downturn in the e-commerce industry, Pinduoduo has a trend of rising against the trend. According to QuestMobile, from February 2022 to January 2023, the average number of monthly daily active users of Pinduoduo App has steadily exceeded that of HandTao. The huge number of users has forced Taobao to put the DAU growth target in a more important position.

Through social fission and tens of billions of subsidies, Pinduoduo is expanding its wings from the sinking market to users in first- and second-tier cities. Take price as a bridge to establish user stickiness to the platform from the stickiness of users to the brand.

Under the pressure of market share erosion, the shift in user spending habits is a longer-term crisis for e-commerce giants such as Ali and JD.com. Whether it is Taote, which Ali has high hopes for, or Jingxi, where Liu Qiangdong once admitted defeat, they cannot use an affiliated platform that specializes in low-priced customer groups to leverage a broader market space, so it has become an urgent need for users to return to the main platform to revitalize stock.

In the past, it was to burn money to buy increments, now it is to burn money to buy stocks.

Return to the business of "people"

As early as 2018, Liu Qiangdong and Huang Zheng, the founder of Pinduoduo, had a confrontation. Liu Qiangdong said in an interview with the media, "When the price of a commodity is cheap to a certain extent, it is actually not good for consumers, and there will never be a pie in the sky." ”

Huang Zheng responded that Pinduoduo and JD.com are in different fields, and there is still a lot of market space. In addition to being different from JD.com, Huang Zheng has also said that the models of Pinduoduo and e-commerce platforms such as Taobao and Vipshop are also different. "Pinduoduo is the logic of people, understand people through grouping, recommend things through people, and later transition to machine recommendations."

If you want to ask what is the same and different e-commerce "price war" that may be set off in 2023 and ten years ago, the key words are "people": the same lies in the establishment of users' minds and the competition for volume; The most significant difference is that three years after the pandemic, consumer habits may have changed permanently.

The upcoming "3.8" promotion will be the first shopping festival since the adjustment of epidemic prevention and control policies at the end of 2022. Jingdong's choice to launch tens of billions of subsidies at this time is a better opportunity to test the waters, and there is an opportunity to iteratively optimize in the future "June 18" shopping festival, which is expected to recover the consumption tide in a two-way way.

This time is also a good opportunity for Ali and Pinduoduo to observe the reaction of consumers and the market. Giants must revisit consumer trends, think about how to connect merchants and consumers more effectively, and grow themselves.

Since its inception, Ali and JD.com have a history of more than 20 years, have experienced the great changes that China's Internet industry has undergone, and now they are moving towards another new change, in addition to Pinduoduo, Meituan, Douyin and other new e-commerce challengers have joined.

According to the 2022 China Mobile Internet Annual Report released by QuestMobile, the scale of mobile Internet users in China has exceeded the 1.2 billion mark, and users in third-tier cities and below account for 60.6%, exceeding the 60% mark. The huge space of the sinking market provides the possibility and inclusiveness of healthy competition, and the "price war" in the new era may further stimulate the vitality of platform enterprises to grow upward in the post-epidemic period, so that consumers and many small and medium-sized businesses and entrepreneurs can benefit together. Perhaps the best state is to return to what Jack Ma said was the original intention of Alibaba: there is no difficult business in the world.

Editor: Angel Yang