Behind the "low price", Liu Qiangdong is still rolling something

Chinese entrepreneur

2024-06-19 11:37Published on the official account of Beijing "China Entrepreneur" magazine

Behind the "low price", Liu Qiangdong is still rolling something

Text: "Chinese Entrepreneur" reporter Li Yanyan

Edited by Yao Yun

Header photo by Deng Pan

"Fight! Fight! Fight! "Fight, fight! Only do the first! ”

Bright red banners fill the JD.com headquarters building in Yizhuang, Beijing. From the front desk and lobby to work areas and corridors to conference rooms and stairwells, banners and slogans like "full of chicken blood" can be found everywhere, full of motivation and anxiety.

This is not only to meet the competition - the "618" mid-year e-commerce promotion that started at the end of May this year is in full swing, but also the "618 founder" Jingdong is waving a knife inward. Since the end of 2022, such a leading Chinese e-commerce company with a reputation for high-quality products, efficient logistics and services, vowing to "return to low prices", has launched a series of highly disruptive changes in organization, personnel and business.

Photo: Li Yanyan

When China's e-commerce market entered the era of stock, the "latecomer" Pinduoduo broke out of the encirclement at low prices, and content e-commerce companies such as Douyin and Kuaishou also followed suit. As an internal employee of JD.com said, in the past year or so, everything JD.com has done is to "implement the low-price mentality".

Looking back at JD.com's strategic choice, it is not a response to the challenger's offensive, but a response to the changes in the overall trend of the retail industry and consumer psychology. The outside world is concerned about what is the low price pursued by JD.com for such a platform with a strong supply chain and self-operated foundation? Behind the "low price", as the core of strategic leadership and the helmsman of the giant ship of JD.com, what did Liu Qiangdong insist on?

This year's "618" is the 21st "618" of JD.com's home battle, and it is also the second "618" after Liu Qiangdong emphasized "low price" - this key node has become a test ground for JD.com's "low-price change". At present, the "618" mid-year promotion has begun, and the low-price war has also entered a climax. Following the performance appraisal of the first quarterly report, what kind of answer will JD deliver?

618 Big Exam: Simplifying, Emphasizing "Low Price"

iPhone over 4000 minus 650, clothing over 1200 minus 100, fresh food over 199 minus 100, buy expensive can be refunded with one click...... This year's Jingdong "618", the price reduction came simply and crudely. According to Jingdong, while ensuring spot sales, the company will also simultaneously launch various 10 billion subsidy day activities, such as "9.9 free shipping day", "super live broadcast day", and even "2 yuan free shipping".

After an internal ranking battle, JD.com finally set the theme of this year's "618" as "cheap and good". Of course, cheap comes first. At 8 p.m. on May 31, this promotion will be fully launched. On the whole, after the withdrawal of the pre-sale mechanism that has been implemented for nearly 10 years, improving user experience, streamlining gameplay, shortening the promotion time, and improving service quality have become the main directions of the current mainstream e-commerce platform "618" gameplay.

"618" is the home of JD.com. Twenty-one years ago, this promotion model was planned and launched by JD.com, and then followed by various companies, and the carnival of China's e-commerce market was set off. "618" is also a breakthrough ground for the outside world to gain insight into the trend of mass consumption and the growth of each platform itself. This year, this promotion has chosen to "simplify the complex" from the form to the content. According to the official statement, it aims to create the simplest, most affordable and most worry-free Jingdong "618" for consumers.

It is understood that Jingdong announced at this year's "618" kick-off meeting that the promotion has been comprehensively increased around products, prices and services, and the investment is the largest in the industry. "This may be the purest e-commerce shopping festival in recent years, and the core is intuitive price reduction." Some industry insiders have described it. The reason for this is that behind the heavy investment in the "618" promotion, Jingdong's "low price" strategy plays an important supporting role.

At the end of 2022, Liu Qiangdong gave a three-hour internal speech, listing "low price" as the most important strategy of JD Retail in the next three years. At that time, in the face of the situation that JD Retail's Q3 revenue growth rate in Q3 in 2022 was only 7%, Liu Qiangdong determined that JD should return to the core of the business strategy of "cost, efficiency, and experience", and emphasized that it would regain low-cost weapons.

He also reflected: JD should serve multi-level consumers, considering both the rich and ordinary people.

Change happens quickly. In order to implement low prices, this year, Jingdong continued to "move" from many aspects such as platform structure, organization and personnel, and incentive mechanism. First of all, in March 2023, Jingdong launched the "10 billion subsidy" with unprecedented strength, and then launched sales activities such as "9 pieces of 9 free shipping" and "Jingdong seckill", and also focused on supporting the "no pit fees, no talent commissions, it is cheaper" Jingdong procurement and sales live broadcast.

"In the past, when I cooperated with other platforms, I was just a simple supplier, and when I communicated with Jingxi's self-operated procurement and sales, we would talk about the specific supply model, and they would ask me a lot of cost questions, which was very professional." Qingxu (pseudonym) said to "Chinese Entrepreneur". Jingxi is a special shopping brand owned by JD.com.

Qingxu is the person in charge of a daily chemical company in Hebei, and compared with the major well-known brands, the potential energy of his company and brand popularity is not strong, which is a "white card". However, this "white label" has also long been at the head of daily chemical products on Douyin and Kuaishou platforms, with a daily production capacity of 100,000 bottles of laundry detergent, and a supplier of Jingdong's "Jingxi self-operated" brand.

At the beginning of this year, when he first contacted Jingxi self-operation, Qingxu also had concerns: "First, if you do something with such a low customer unit price, will it have an impact on the Jingdong platform, and second, if it does not meet user expectations, will it produce customer returns." But Jingxi self-operated told me that (low price) is the strategic direction of the platform, and JD will definitely do it. Later results showed that there were not as many customer returns and after-sales problems as Qingxu imagined.

"The most concerned thing about the business is whether there is a list, Jingxi self-operated said, you just need to minimize the cost, we do the best sales." Qingxu said that in his impression, the sales volume is also gradually jumping, from more than a dozen orders at the end of February, dozens of orders, to more than 1,000 orders at the end of March, and now the number of customer orders is stable at five or six thousand orders per day, "In April, with the support of Jingxi's self-management, we also launched new products."

JD.com's procurement and sales have become the main force in the practice of JD.com's "low price" strategy. During last year's "Double 11", Jingdong's live broadcast was "out of the circle", and the total number of viewers exceeded 380 million. This year, JD.com's "618" is off to a good start, and the number of live broadcast orders for JD.com's procurement and sales has increased by 300% compared with the 4-hour start of JD.com's 11.11 in 2023, and hundreds of millions of subsidies have been taken away from JD.com, and the number of shopping users in 1 hour on the 9.9 free shipping channel has exceeded 100 times year-on-year.

In Liu Qiangdong's video speech at the internal meeting that has been circulated recently, he has repeatedly mentioned the importance of JD.com's procurement and sales performance and emphasized incentives. Following the announcement of a salary increase for JD procurement and sales at the end of last year, on the eve of this year's "618", JD procurement and sales raised salaries again. Jingdong Group announced that since July 1 this year, through a year and a half, the annual fixed salary of JD.com's procurement and sales has been increased from 16 to 20 salaries, and there is no cap on performance incentives.

Build an ecosystem, and POP merchants continue to expand

At the beginning of last year, an uncle in high heels became popular. In the online video, the 40-year-old uncle combed his big back, wore a goatee, and wore a pair of black-framed glasses, sometimes running the street, sometimes walking gracefully on the treadmill. This "Uncle Wu in high heels" will not only try on high heels in the short video and live broadcast room, but also share the "foot feeling" of wearing high heels with fans.

Uncle Wu's real name is Wu Nan, and he lives in Chengdu, Sichuan, which is known as the "capital of women's shoes in China". As early as more than ten years ago, after graduating from science and engineering, he saw the potential of the female consumer market and entered the fashion women's shoes industry. With the popularity of the video of wearing high heels, he has gained more than 5 million fans on the whole network, most of whom are working women who love beauty and have high comfort requirements for high heels, and his brand store revenue exceeds 10 million.

The implementation of the low-price strategy not only relies on JD's self-operated business, but more importantly, the platform provides users with richer categories and commodities from the supply side - which requires JD to make efforts in third-party business and introduce more merchants. To this end, JD.com launched the "Chunxiao Plan" at the beginning of last year, starting from lowering the threshold for merchants to enter, reducing the cost of opening stores, providing traffic support, optimizing operational efficiency, etc., so that more merchants can "0 yuan" to settle in JD and achieve rapid growth.

JD.com's "Spring Dawn Project" provides merchants with store operation services through a series of free AI tools. Source: Screenshot of the official website

"Uncle Wu Flagship Store in High Heels" is a representative of POP (third-party) merchants introduced on the occasion of the implementation of JD.com's "Chunxiao Plan". In May this year, the new generation of fashion footwear brand "Uncle Wu in High Heels" also brought a full range of products to JD Live, and its brand founder Wu Nan also became a signatory of JD Live.

"After (our brand) settled in JD.com, the most obvious perception was the decline in the return rate." Wu Nan said. In his impression, the return rate of his own brand's fashion women's shoes on JD.com is much lower than that of other platforms. "That's where JD.com comes in." Wu Nan said. The return rate is directly related to the cost of the merchant and the tonality and quality control of the platform.

Last month in Chengdu, Uncle Wu brand and JD.com did a live broadcast of the compilation store of the Chengdu women's shoe industry belt, "One hour, the homepage is recommended, and the exposure is quite large." Moreover, the live broadcast is done in our exhibition hall, which also has a good publicity effect on the brand. Wu Nan said, "The support of traffic is the most important thing for merchants, and what we can feedback is to provide better products and services to meet consumers." ”

"Uncle Wu in High Heels" is the in-depth cooperation object of the "Chunxiao Project". It is understood that the "Chunxiao Plan" has continuously upgraded its measures this year, focusing on providing store operation services for merchants through a series of free AI tools, maximizing the help of merchants to save operating costs, and driving the growth of the number of users and orders of merchants.

Wu Nan said: "We hope to use another two years to be able to achieve the industry's TOP20 in the category of shoes or fashion women's shoes. With the entry of third-party merchants such as "Uncle Wu in High Heels", JD.com's clothing and footwear brands and new product camps have been further expanded.

The person in charge of the Platform Rules and Strategy Department of JD's Retail Ecological Service Department revealed that in March this year, the number of effective stores of JD's third-party merchants had exceeded 1 million, and the number of commodity SKUs of third-party merchants had more than doubled compared with the beginning of last year. In 2023, the number of third-party merchants on JD.com will increase by 188% year-on-year, especially the number of merchants in the categories of big fashion, home appliances and large supermarkets has achieved rapid growth.

A question that has attracted much attention from merchants is, in the context of the "Chunxiao Plan", how does the JD platform ensure the fairness of the distribution of information, traffic and other resources for self-operated and POP merchants? How to solve the trust problem?

"First of all, whether it is a self-operated or a third-party merchant, JD.com has always adopted the principle of equal treatment in terms of rules, processes, system tools and traffic distribution." The above-mentioned Jingdong person explained,Jingdong attaches great importance to maintaining the support and trust of merchants on the platform,"Chunxiao Plan"The launch of the "Chunxiao Plan" has brought users a large number of ultra-low-priced goods,But it is not on the premise of harming the interests of merchants,On the contrary, it has made multi-dimensional concessions。

The person also said that the biggest benefit of POP merchant expansion for JD.com is the enrichment of goods and the improvement of the supply chain, which can better meet the needs of consumers. Finally, POP merchants and self-operated suppliers enjoy the same services on JD.com, and they all strive for the favor of more consumers through products, prices, and services, so as to jointly build an open, prosperous, and efficient ecosystem.

"A healthy and sustainable competitive environment among merchants is something we are very concerned about and strive to create." said the aforementioned person.

It's not just a "low price"

This year, Jingdong "618" put forward the slogan of "cheap and good", which is the manifestation of the low price trend that Jingdong insists on. For the old e-commerce companies that have been based on their own business and pursued quality services in the past, the pursuit of low prices seems to be contradictory, and the transformation has become an insurmountable mountain - in addition to coping with the increasing external competition, JD.com also has to subvert its original growth path and be reborn.

This is not only a problem for JD.com. Nowadays, domestic e-commerce can hardly hide the anxiety of growth, and the interests of platforms, merchants, and users are seeking a balance in anxiety. In the past year or so, mainstream e-commerce platforms have been "rolling low prices", and some platforms have even launched a radical policy of "refund only", which has been denounced by merchants. Behind the scenes, the market logic of the low-price strategy has indeed changed. So how to find a balance between the interests of users, merchants and platforms?

Talking about the "involution" of the industry, especially the phenomenon of "low prices" on e-commerce platforms, Qingxu was very annoyed.

In his impression, there are many enterprises in Hebei that do daily chemicals, and the daily chemical market is not good this year, and the traffic performance of the platform is not very good. "A while ago, an Internet celebrity in Kuaishou approached me to talk about a promotional cooperation, we didn't want to do it, and if we did, it would mean cutting corners and reducing quality."

Holding hands with Jingdong's "Jingxi Self-operated" made him feel at ease. "The products we produce now are set to be what they are, and the whole process is very standardized. There are also some mid-to-high-end products, we don't have the confidence to do it, Jingdong's procurement and marketing will encourage us to try, give us channels, in this way, it also breaks the user's impression of the low price of our products, we can also do good things, and we will not smash the product into our hands. Qingxu said.

After the cooperation of several platforms, Qingxu feels that Jingdong can protect merchants to the greatest extent and will not let malicious low prices go. "As long as I do what you ask within the requirements of the platform, you will protect me to the greatest extent."

The low price advocated by Jingdong is not a "fake low price" obtained by shoddy, lacking two pounds, and stealing and cheating; Instead, it relies on honest management, and works with brands and merchants to reduce costs and increase efficiency in the whole process of the supply chain such as R&D, procurement, trading, fulfillment, and after-sales, and through the ultimate supply chain efficiency, the saved money is passed on to consumers, so as to achieve high-quality, sustainable development of "real low price".

JD.com's low prices are not based on the premise of sacrificing the experience of partners, and not at the cost of squeezing the interests of partners, but relying on scale effect and technology-driven continuous innovation in the supply chain to achieve low prices.

"For example, JD.com has invested in the construction of store star ratings, service stars, and price star systems to support high-quality and affordable products, so that these products can automatically get more free traffic and be seen by more consumers. With more free traffic, merchants have the ability to offer more competitive prices. The head of the platform rules and strategy department of the JD Retail Ecological Service Department said.

In short, increase efficiency and reduce costs, rather than simply "rolling" prices. Behind it is the ultimate efficiency advantage created by JD.com's years of deep cultivation of the supply chain. Since 2017, Jingdong Group has fully transformed to technology, and the company has invested nearly 130 billion yuan in technology research and development, and reduced costs and increased efficiency through technology. JD.com reduced inventory turnover days to an all-time best of 29 days in the first quarter.

Photo: Li Yanyan

At the end of all JD.com's changes, it all points to user experience. This is also the root of Liu Qiangdong's "dead knock" low price. He once said that user experience is the starting point and end point of JD's work, enriching goods, optimizing prices, and improving services are the core of user experience, and it is also the starting point of JD. "As long as our user experience is good, I firmly believe that I can outperform all competitors!" This year, JD.com continues to increase its focus on user experience.

For JD.com, 2023 is a "year of adjustment", and 2024 is a "year of implementation". It remains to be seen how JD.com will find a balance between its huge system and revenue, and between fundamental breakthroughs and sustainable growth. At present, with the performance results of the low-price strategy, the market's concern that "low-price subsidies will lead to a decline in corporate profitability" has not appeared.

In Q1 this year, JD.com exceeded market expectations in many core indicators such as GMV, revenue, profit, and number of users. The revenue was 260 billion yuan, a year-on-year increase of 7.0%, the operating profit was 7.7 billion yuan, a year-on-year increase of 20.3%, and the GMV growth rate exceeded the growth rate of 11.6% of the network agency. Among them, the number of quarterly active users has maintained double-digit year-on-year growth for two consecutive quarters. It is understood that the cumulative number of users of the 10 billion subsidized channel has exceeded 100 million.

After struggling for several quarters, JD.com is finally back on the track of steady growth. On May 28, Jingdong "618" kick-off meeting, talking about this year's "618" growth target, Jingdong Group CEO Xu Ran said that Jingdong will help more than 150,000 small and medium-sized businesses to increase sales by more than 50%, so that the number of merchants with sales of more than one million yuan increased by more than 100%, and help more than 80 brands sell more than 1 billion yuan.

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