JD.com's "first snow" came a little late
Employees complained on the intranet, and the boss took the opportunity to reply, which triggered collective reflection.
On December 9, Liu Qiangdong, the founder of JD.com, replied to a post by a JD.com employee on the intranet. The core of the content of the post involves various problems exposed by JD.com since the implementation of the "low price" strategy. "Low price" is a strategy that Liu Qiangdong made the decision and personally deployed, throughout the year, aiming to reverse the current predicament encountered by JD e-commerce. Liu Qiangdong's reply can be condensed into about five words: people are in the car, hands are a little shaky, the responsibility lies with me, don't lie flat, we can do it.
According to the past rules, if Liu Qiangdong is in trouble at the end of the year, there is a high probability that there will be a series of major actions involving business and personnel. In fact, this year has been in turmoil. On May 11, before 618, Xu Lei stepped down as chairman of Jingdong Group and announced his retirement; on November 15, Jingdong released its third quarter financial report, and announced that Xin Lijun, CEO of Jingdong Retail Group, had another appointment, led by Xu Ran, CEO of Jingdong Group.
There is no doubt that Liu Qiangdong has been directing behind the scenes for many years, and he urgently needs an opportunity to speak out and explain the reasons for a series of changes this year. At the same time, it also needs an opportunity to make drastic adjustments and lay the groundwork emotionally in the future. After all, if the leader has made an edict against himself, can the "brothers" still get out of the way?
Similar to Ma Yun's earlier internal response to Pinduoduo's market value exceeding Ali's, JD.com's business format is also unusually extensive, and the more difficult problem than Ali is that most of JD's business has the "infrastructure" attribute of heavy assets, and under the premise that the general environment forces enterprises to shrink their balance sheets, heavy assets with long cycles, high investment and slow returns are prone to the problems of "excessive infrastructure" and "ineffective infrastructure".
Market capitalization is a reflection of some kind of reality.
JD.com's U.S. stock market value has continued to fall this year, mostly attributing it to the vague "stall" is not accurate, stall is a symptom, and the core driver is that JD.com's series of adjustments since last year have been less than expected. This sentiment is similar to, "with a special drug, the condition does not improve", so the market has a strong bearish sentiment.
The screenshot comes from the Oriental Fortune APP, and the market capitalization of JD.com's U.S. stock market has continued to decline in the past year
The core reason why the "low price" strategy is less than expected is that JD.com's cost and advantages in services do not fit the current consumer market's demand for "quality-price ratio". When people need better service and better quality, even if JD Xinma is reined, it can also reap the scale of profits. But once the market pursues cost performance, in a single price dimension, JD is not dominant.
In the words of an industry insider, JD.com is "driving a Rolls-Royce to make low prices".
All the blame is on the "low price"?
"I miss Jingdong around 2009, when we were self-employed, we didn't need to operate, as long as we entered the warehouse, it was very simple to make the plate bigger. A brand merchant said that later the platform fell on Tmall's way, so the merchant began to pay, and then he had to talk about the way to play, and the difficulty and cost of operation were rising.
"Now it is particularly difficult for Jingdong to do is that the deduction point is high, and the price comparison is required, which compresses our gross profit space, how to advertise without gross profit? ”
The core problem mentioned by the above-mentioned merchants is that in the process of JD.com's transformation from self-operated to a platform, there is a lack of traffic and a field for long-term operation of merchants. Changing JD.com's weaker business field is not an overnight thing, just like building a self-operated system, the most urgent thing is to improve the supply and demand of the traffic market.
Lowering the entry threshold for third-party merchants, enhancing platform attributes, and realizing equal rights between POP merchants and self-operated merchants are the core means of JD.com's low price adjustment this year. In order to attract third-party merchants to settle in, JD.com also launched the "Chunxiao Plan" to continuously lower the threshold and provide traffic support. However, the traffic in Jingdong station is not abundant, and the support that can be given is relatively fast, which is trivial.
Platform advertising and marketing reflect the business activity of the merchant, and the commission income reflects the business results. According to JD.com's financial report for the third quarter of 2023, under the reform strategy of increasing platform attributes, JD.com's non-commodity revenue mainly includes advertising and commissions, with revenue of 16.8 billion yuan in the third quarter, a year-on-year increase of 12.8%, accounting for 7.9% of JD.com's retail revenue. JD.com's self-operated commodity revenue still dominates.
On the road to low prices, JD.com has given POP merchants a large enough degree of openness to develop incremental platform revenues. However, judging from the growth rate of JD's service revenue in recent quarters, it has slowed down after reaching its peak in the third quarter of last year. This shows that JD.com's series of changes and support for POP merchants this year have not continuously mobilized the business activity of merchants on the platform.
At the beginning of the launch of JD.com's 10 billion subsidy, some service providers said: "Brands are more rational to look at JD.com's 10 billion subsidy." In the short term, merchants feel that it is feasible to give it a try, and take a step at a time, but in the long run, merchants hope that it will be a larger traffic entrance, which can bring some added value to brand management, but if the cost cannot be held, whether to invest again must be adjusted. ”
Since the launch of Jingdong's 10 billion subsidy, merchant self-compensation is the majority, which is the purpose of many merchants for the purpose of drainage. According to JD.com's third-quarter financial report, in the third quarter ended September 30, JD.com's pre-tax profit reached 10.802 billion yuan, a year-on-year increase of 40.1%, and the profit was not affected by subsidies. Previously, Xu Lei also responded at the performance meeting that the impact of tens of billions of subsidies on profit margins is very low, and the company is confident that it will control this impact.
This, in turn, shows that JD.com's official subsidies are under control. Pinduoduo's tens of billions of subsidies continue to occupy a strong mind, and if JD.com needs brand self-compensation to promote tens of billions of subsidies, the enthusiasm for brand participation will inevitably be greatly reduced.
The real low price comes from the mechanism - if the operating cost of the merchant on the platform is reduced and the efficiency is increased, then the platform can also provide more cost-effective products to the market. In fact, "cost" is an unavoidable problem for Jingdong's merchant operations, which is the fundamental reason why tens of billions of subsidies cannot be sustained.
A multi-platform brand told Photon Planet: "In terms of platform deductions, Tmall and Douyin are both deducted 5 points, Pinduoduo does not deduct points if it is not active, and tens of billions of subsidies are deducted 3 points." In contrast, the commission of JD's self-operated merchants is as high as 27%, of which warehousing and logistics account for 20 points, and for POP merchants, even if they do not enter the warehouse, their commission ratio is higher than that of other major platforms, which is 7%. ”
It should be pointed out that in order to stimulate merchants to operate actively, a small part of the above-mentioned 7% deduction points can be used as a VAM, and if the merchant completes the VAM, then a part of the deduction points can be returned, which is about 1%. In other words, after the successful VAM, JD.com's deduction point is about 6%, which is still higher than that of other platforms.
"If you give 20% of the storage fee to the warehouse, you will feel the awesomeness of JD.com, and if you don't give the 20% storage fee to self-match, you will feel that JD's is more expensive. ”
For third-party merchants, warehousing faces high costs, while non-warehousing does not have service advantages, and it is difficult to compete with self-operated products on the same platform. For a long time, the biggest doubt about JD's low-price reform is that the "low price" is incompatible with the service system established by JD in the past, and this is also the case.
The low price is not enough, so do you make up for the live broadcast?
"I heard that some anchors shouted 'the lowest price on the whole network'. Jingdong is the largest retailer in the country, why do you say (your own price) is the lowest on the whole network in front of Jingdong?"At the end of this year's Double 11, Xin Lijun, the former CEO of JD Retail, is a live broadcast platform for JD.com's procurement and sales, and uses JD's ability as a retailer to push low prices.
Small and medium-sized businesses are the key players in today's e-commerce low-price market, and Xin Lijun takes the advantage of "the country's largest retailer" as a low-price platform, which is like a paradox. The biggest obstacle to JD.com's low-price reform lies in its role as a retailer - self-operation. Self-operation is better than quality control, but shorter than price, and it does not have strong integration capabilities like the platform model in terms of traffic.
In order to chase traffic, JD.com did a lot of things around "low prices" in the first half of the year, which was simply summarized as accelerating platformization. However, the platform lacks traffic, especially content infrastructure, so in the second half of the year, it focused on live broadcasting, and during the Double 11 period, it tried to build users' minds with "live broadcasting" without intermediate links.
For this reason, at the end of October, the "low-price Rashomon" incident involving Jingdong, Li Jiaqi's live broadcast room, and Hai's Electric broke out. Affected by the incident, the live broadcast traffic on the site improved slightly. A few days ago, a service provider that participated in Jingdong live broadcast told Photon Planet, "It was difficult to break 100,000 traffic in a single live broadcast earlier, and after the low-price agreement incident, the traffic can easily reach the order of 100,000, but the cumulative number of views is still very different from that of Doukuai." ”
The results show that the "agreement low price" incident provoked by Jingdong has played a triple effect, one is to rub Li Jiaqi's popularity, and the "low price" is implanted in the mind of Jingdong Live, the second is to weaken the influence of the head anchors of other platforms, and the third is to harden Hai's Electric, and also put on an iron-fisted posture to suppliers.
Despite this, the conversion efficiency of JD.com's live broadcast still needs to be improved. Some participating service providers mentioned, "Under the same conditions, the average conversion value of Douyin is about 5%, and Tmall fluctuates slightly more between 2%-5%, and if it is a store broadcast, reasonably control the stream, and maintain an average of about 8%." "The conversion rate of JD Live is lower than that of e-commerce platforms such as Doukuai and short video and live broadcast platforms, and it is also lower than that of Tmall.
The reason for the low short-term conversion is the user's mentality, and there are also the factors that JD Live has set assessment requirements for service providers, resulting in business development being a mere formality.
In order to achieve the synergistic effect of short video + live broadcast, the platform requires service providers to complete various tasks, otherwise they cannot meet the requirements of streaming. It is understood that the assessment requirements include the number of videos and pictures released every month, and the maintenance of the live broadcast room without dropping the level. Some service providers mentioned that the long account period of the cooperation further reduced their momentum.
In fact, not only JD.com, but most of the leading companies are highly dependent on various assessments to achieve the target effect, but JD.com seems to spill over the assessment and form a wide range of rules.
Perhaps seeing that it still takes time to build its own live broadcast system, JD has also set its sights on the outside. In previous years, it has relied on Kuaishou, and this year JD.com is also seeking in-depth cooperation with Douyin. A person familiar with the matter mentioned that in the middle of the year, JD invited a leader from Douyin Live to guide the work and provide experience, but the leader only said that this is not good, that is not good, and did not provide too much valuable information, which made many JD employees complain in private, "If I know, what else do you want to do".
Despite the difficulties, it still did not stop JD.com from moving closer to Douyin. A few days ago, a service provider said that JD.com recently sought to bring goods to JD.com's new department store on Douyin, and is contacting a number of service providers for this purpose.
Whether it's a hundred supplements or live broadcasts, it seems that the problem of low traffic in Jingdong has not been changed structurally.
According to the "2023 Double 11 Insight Report" released by Questmobile, a third-party organization, during the Double 11 period, JD.com's daily active users lagged behind Taobao and Pinduoduo. Among the three platforms of cats and dogs, sinking users are the only ones that exist more as an "incremental market" for JD.com, and now there is no obvious effect in terms of user volume.
On December 9, the employee mentioned the complex problem of the promotion mechanism, and continued to subtract around the big promotion in Taotian, and the pressure came to JD.com's side. Even if you don't do a big promotion, brand marketing is still there, how to undertake the investment in brand marketing when the content infrastructure is weak and the traffic riverbed is not abundant, will continue to test JD's managers.
The cause of the success of the past is hindering its path to the future
JD.com's business ecology once relied on the composite model of logistics to store and transport, e-commerce service income, and finance and supply chain capital operation, and established a strong service brand mentality and higher profit margins. Therefore, for a long time, JD's core means of obtaining traffic is actually relying on services.
On June 18 this year, a short drama was broadcast on the screen of the 20-year old friends meeting of JD.com's headquarters, including the story of honest management in the early days and doing logistics under pressure. The skit tries to show people that service is the key to JD's success in the past two decades. Better service causes JD.com's cost to be higher than that of other platforms, and it is not until the efficiency and reach margin effect are improved that the cost difference can be finally smoothed out.
In the past 20 years, JD.com's "heavy asset" investment is a "double-edged sword", the benefit is high-quality service and performance ability, and it can achieve both fame and fortune of brands and profits in the extremely involuted standard product categories (3C home appliances, FMCG, health care products). The disadvantage is that heavy asset investment will objectively cause additional rigid costs when goods circulate, and once the consumer market is price sensitive, it will be very passive, such as the cost of third-party merchants operating in Jingdong is higher than that of other platforms.
Perhaps it was external pressure that made JD lose patience, so it would ignore its own advantages and swim against the current.
Although Jingdong Baibu and the live broadcast of procurement and sales are both in the form of low prices, the purpose is not the low price itself, but the traffic behind it. There are thousands of paths to traffic, low price is one, content is one, service and reputation are also one. From 2020 to 2023, it is the home of JD.com, and people have seen the performance and service capabilities brought about by heavy asset investment.
The consumer market is changing, and this year, JD.com provoked a low-price narrative, hoping to solve the problem of traffic sources once and for all with low prices. The e-commerce sector opens up POP, traffic equality, and even procurement and sales live broadcasts, using low prices as a stick.
Wang Xingfan is not a wine cellar of thinking, he once wrote a sentence many years ago: Judgment is a higher level of intelligence, and some topics have already been lost when you start to do it seriously, because you have neglected the more important ones for it. For Liu Qiangdong and JD.com, they really need to think about the effectiveness of the topic of "JD.com makes low prices", and whether they can devote their energy to other fields that are more suitable for themselves.
After all, opportunity costs are also costs.
Written by Wu Xianzhi He Furong
Editor|Wang Pan