At the end of last year, Liu Qiangdong made a strong comeback, and he believes that JD.com has reached the time when it must change. In the past year, Liu Qiangdong has been constantly moving, paying close attention to the low-price strategy, and carrying out a major personnel change. However, from the perspective of the effect, the effect of JD.com's low-price strategy is not very significant, and the stock prices of Hong Kong stocks and U.S. stocks have fallen by more than half since the beginning of the year, and the total market value has evaporated by 70 billion US dollars, which is quite different from Liu Qiangdong's expectations.
Recently, a JD employee posted a long article on the intranet, and some of the company's current problems are included, such as the complex mechanism, the big promotion did not plan the rhythm and intensity in advance, did not give more support to pop merchants, and the low-price mentality was not implemented to the end.
On the evening of December 10, Liu Qiangdong reflected on the intranet: There are so many problems, of course, I mismanage them, and I blame myself very much. But in any case, I will not lie flat, and I hope that the brothers will not lie flat, now the organization is large, bloated and inefficient, and it does take time to change.
Now the rise of Pinduoduo has completely changed the pattern of domestic e-commerce, once Jingdong and ** divided the world, now Jingdong has **, Pinduoduo, and then Douyin, Xiaohongshu, Kuaishou, the situation is very embarrassing.
Why did Liu Qiangdong regard the only low-price strategy as the only one failed to work significantly this year?
Author |AkongEdited by HaoranThis article is the original article of Shangyin Society, **Please contact the background
The year of Liu Qiangdong's return
At the end of last year, Liu Qiangdong returned to JD.com, and the low-price strategy was listed as the core strategy of JD.com this year and even in the next three years.
Focusing on low prices, JD.com has made frequent moves in the past year:Tens of billions of subsidies were launched, the ecology was opened, the organization was reformed, and the live broadcast was increased, 618 returned to "how fast and good it is", and Double 11 shouted the slogan of "really cheap", trying to get rid of the "expensive" impression left by everyone before, and reshaping the user mind of "low price every day" in all categories.
In March this year, Jingdong launched a subsidy of 10 billion yuan, which comprehensively benchmarked Pinduoduo. Liu Qiangdong made it clear that he wanted to fight the best war, saying that as long as it is a category that affects the mind of the Jingdong brand, it is necessary to "resolutely fight", including 3C, home appliances, etc.
According to the data of Jiuqian Zhongtai in mid-June, among the 10 billion subsidies of JD.com, only nearly half of the 231 SKUs (minimum stock keeping units) of the same style in strong categories such as 3C digital and home appliances are cheaper than Pinduoduo's tens of billions of subsidies.
The data in August shows that although the number of comparable SKUs of JD's 10 billion subsidies and Pinduoduo after the big promotion has decreased slightly relative to the overall number of goods, it is still insufficient in terms of advantages, among the 1771 comparable SKUs, there are only about 400 advantageous goods on JD.com.
Among them, live commodities are the main competitiveness of JD.com, and among the high-priced SKUs of JD.com, computer office, mobile phone communications, and household appliances contribute to SKUs respectively. Jingdong price refers to the fact that the ** subsidy of the product in Jingdong is lower than that of Pinduoduo's 10 billion subsidy.
In other words,Jingdong's 10 billion subsidies focus on its 3C、The core advantage category of home appliances,The richness of goods will be greatly improved during the big promotion,There will be a slight decline after the big promotion。 Moreover, after the big promotion, in addition to the advantageous categories, there is still a gap between other categories and Pinduoduo.
JD.com also realized that in today's e-commerce low-price competition, it has no advantage in relying on self-operation for many years. The self-operated model involves personnel, warehousing, logistics and other links, which is more expensive, and at the same time, it is necessary to follow the brand's first-class system to avoid breaking the price and affecting the brand image.
This means that there is not much room for self-management to reduce prices, and there are many links involved in self-operation, and it is difficult to expand more categories, which hinders the improvement of the richness of goods on the platform.
If JD.com wants to lower its price, it must open up the ecology and release the vitality of third-party sellers. POP merchants (i.e., platform open plan, that is, third-party merchants) can not only bring consumers a richer supply of goods, better meet the diversified needs of consumers, but also be self-financing, which can bring JD.com an excellent low-price competitive advantage.
According to Jiuqian's data, in March this year, POP products accounted for more than 60% of JD.com's 10 billion subsidized goods, but from the perspective of sales, self-operated sales are still much larger than POP (self-operated 75% vs POP 25%).
75% of the turnover of JD's 10 billion subsidy comes from JD's high-priced goods, while JD's self-operated products account for 88%, which means that from the perspective of actual transactions, the platform bears more subsidy costs at the beginning.
This is not sustainable, and JD.com wants to pull more businesses in to do tens of billions of subsidies. In January this year, JD.com announced the "Chunxiao Plan", which fully opened up POP and self-operated, put self-operated and POP third-party merchants back on the same starting line, and treated equally from organizational structure to traffic tilt and related support policies.
The impetus for the program to attract POP merchants to participate in the "10 billion subsidy" comes from JD.com's commission rebates. The deduction points of POP merchants selected for the "10 billion subsidy" channel will be automatically reduced to 06% (in the past, the deduction point for different categories was 3%-8%), which diluted JD.com's commission income in disguise.
Liu Qiangdong directly pointed out that "whoever can achieve low prices will give a certain amount of traffic inclination." "Nowadays, in the same product of JD.com, the more obvious the advantage, the higher the search and ** traffic, and the richer the rights and interests such as event participation qualifications. The same is true for Pinduoduo's algorithm.
The live broadcast tied to the low price is also a key part of JD.com's low-price war. On the eve of 618 this year, Luo Yonghao entered Jingdong Live Broadcast, and repeatedly put on the shelves of "low price" and "explosive price" in the live broadcast room$9".
Jingdong also created a "really cheap live broadcast night" on the eve of Double 11, and the star anchors were divided into "really cheap team" and "cabbage price team" to compete and bargain for consumers.
When it comes to Double 11, Jingdong Live requires the exclusive price of the product to be the live broadcast room, and at the same time, it must meet the lowest price on the whole network after benchmarking the official Pinduoduo black label store and Douyin.
Behind the low-price strategy is the change of the entire operation concept of JD Retail, which affects the whole body, especially the cooperation of the organization.
The biggest change is naturally on the eve of 618, Xu Ran took over from Xu Lei as the CEO of Jingdong Group. After the end of Double 11, Xu Ran also served as the CEO of JD Retail. Previously, JD.com was the only one who served as the CEO of both the group and retail, Liu Qiangdong himself.
The move is to strengthen synergies between the core retail business and other segments. Xu Ran is also the best person who can better implement Liu Qiangdong's low-price strategy. She is the person who is most familiar with the overall situation of JD financially, and when Liu Qiangdong is preparing to fight, someone is needed to ensure JD's health bottom line.
JD Retail's organizational structure has also undergone three major adjustments. One was at the end of November last year, the presidents of Jingdong Retail's various business groups were replaced, and Liu Qiangdong raised his "own people" to a higher position, and the six major business groups after the adjustment were full of Liu Qiangdong's "cronies".
In April, the original business groups of JD Retail were changed to business divisions, and each business division was split into specific business units according to subdivided categories. These business units will achieve equal rights for self-operated and third-party merchants, and will be managed by a unified category leader. This will make it more convenient for self-operated and POP to be fully connected.
In May, the original life service division of JD Retail was cancelled, and a new innovative retail department was established, which was independent of JD Retail. It includes the Seven Fresh Business Department and the Front Warehouse Business Department, as well as the newly established Technology R&D Department and the **Chain Operation Department. This time, the aim is to change the previous "division by category" to "division by scenario".
Since then, JD Retail, which has tens of thousands of employees, has only three management levels, from the most basic procurement and sales employees to the CEO of JD Retail.
The low-price strategy has paid off in the past year
Let's take a look at JD.com's achievements this year. According to JD.com's Q3 financial report, JD.com seems to have withstood the pressure, with group revenue of 247.7 billion yuan, a year-on-year increase of 17%。Under the vigorous implementation of low prices, the operating profit margin of Jingdong Retail has not declined, 52% was basically the same as the same period last year.
The number of new merchants on JD.com increased by 20% month-on-month and more than triple-digit year-on-year, reaching a record high in both activity and dynamic sales rate, and also completed the goal of recruiting "one million merchants" at the beginning of the year ahead of schedule.
The service revenue (advertising + logistics) brought by these merchants is the key to the barely positive growth of JD's revenue, and the growth rate of JD in Q3 has reached 127%。
But this set of data, which looks good, does not stand up to scrutiny.
First of all, these all-time high numbers of new merchants only bring in 3% of advertising fees and commissions, which have not yet translated well into revenue. JD.com said that there is no rush to monetize during the establishment of the ecosystem, and it will take time to increase the number of merchants and convert them into orders, GMV and revenue.
Secondly, in the first three quarters of this year, JD.com's commodity revenue fell by 09%, failing to outperform the total online retail sales in the country from January to September 11 year-on-year6% growth.
Thirdly, since the comprehensive low-price strategy, JD.com's user data has only increased in the early stage of subsidies and big promotions, and the growth rate of DAU (daily active users) in most other months is lackluster, and even user stickiness has decreased year-on-year.
At present, DAU and length of stay have replaced GMV as the most watched indicators in Taotian. This means that the platform no longer pursues the greed for perfection in scale, but turns to the in-depth exploration and operation of existing users, and shifts from focusing on consumption behavior to focusing on the opening frequency and stay time of users.
According to the data released by the Goldman Sachs Research Report, JD.com's DAU in 2023 will lag far behind ** and Pinduoduo, ** about 400 million, and JD.com will be about 1-200 million.
Finally, from the perspective of market capitalization, as of December 18, JD.com's market value was around $40 billion, and Pinduoduo's market value has risen to $197 billion, surpassing Alibaba's $189.7 billion, becoming the largest Chinese concept stock in the United States. At this time, the market value of Pinduoduo is equivalent to 4 and a half JD.com.
With Ali's steady performance in the front, Pinduoduo's strong counterattack in the back, and Douyin, Xiaohongshu, and Kuaishou catching up, leaving JD.com's living space more and more cramped.
And the low-price strategy inevitably brought *** Many users began to complain about the speed of fulfillment and after-sales service.
The high cost of JD Logistics has dissuaded many POP merchants who are not rich in cash. Based on this, Liu Qiangdong no longer requires merchants to use JD Logistics, "If they want to use J&T or Tongda Express, let them use it." ”
Although the first has been beaten, other logistics compared with JD Logistics, timeliness and service are greatly reduced. Consumers who are Xi to the speed of Jingdong suddenly "go from luxury to thrift", of course, it is difficult to accept.
Why didn't the low-price strategy work?
Let's talk about tens of billions of subsidies first. As we all know, the 10 billion subsidy was first proposed by Pinduoduo, in order to reverse everyone's impression that Pinduoduo is all fakes and bargains, and subsidize well-known brands such as Apple mobile phones.
Jingdong wants to use low-cost products to attract traffic, breaking the impression that everyone thinks that Jingdong is expensive, which is equivalent to driving a luxury car to set up a stall.
Everyone thinks that Jingdong is not formed overnight, but Jingdong's decades-long quality strategy has been shaped step by step.
JD.com's core categories are home appliances and electronic products, which are characterized by high customer unit prices. Moreover, Jingdong is mainly self-operated, and the same product is 5%-20% more expensive than pop stores, but the corresponding quality, logistics, and service are also more guaranteed, focusing on **insensitive people.
For a long time, Jingdong's self-operated procurement and sales have a strong right to speak, and they will use the advantages of traffic pits and marketing tools to obtain more first-class suppliers' sources of goods and market budgets.
JD.com's self-operated and pop are competitive relationships, and the rapid development of self-operated businesses will naturally cause a squeeze on third-party merchants.
Self-management is JD.com's "pro-son", and if JD.com wants to become a pop business, it is bound to cut its own flesh.
Amazon has always preferred self-operated merchants in terms of traffic mechanism and after-sales processing. However, under the guidance of low prices, Jingdong has put the two on the same starting line.
In order to catch up with and surpass self-operated stores and achieve small profits but quick turnover, POP merchants may flee goods and mess up prices. In order to maintain sales, the self-employed also had to "sacrifice their lives to accompany them" and join the ** involution.
The brand tonality and the best system are under threat, and the merchants are certainly not happy. At JD.com, brands are looking for premiums, not sales. If you only pursue sales and traffic, it is better to find a big anchor.
What's even more embarrassing is that even if JD.com sacrifices some of its own interests, the enthusiasm of POP merchants to continue to participate is not "very strong". The effect of tens of billions of subsidies is not very good, and sometimes the subsidy part needs to be borne by businesses.
This makes JD.com's pop merchants only a few hundred thousand, while the number of ** and Pinduoduo are in the millions.
In fact, as early as 2013, Liu Qiangdong realized that the future business dispute must be a battle of platforms, behind which is a battle of value, who can bring the best user experience to customers, so as to create more value for customers, who will have the last laugh.
"All the businesses we invest in today will be open to the public and will become one platform after another," he declaredFinally form a huge network of platforms!”
At that time, JD.com also vigorously developed the third-party seller platform business, and it is expected that by 2016, the third-party seller open platform business will account for half of the entire JD.com e-commerce business.
At that time, in the face of competition between JD's self-operated and POP merchants, Liu Qiangdong also said that JD did not make any balance internally, and emphasized the fair competition mechanism internally.
Jingdong has also put all sellers on one page in the product display interface before, regardless of self-operated or third-party, everyone has equal opportunities to display, so that customers can choose, and the final competition is whose service is good, **low.
JD.com's open ecosystem didn't work ten years ago, and it's hard now. Mainly because JD itself is a closed architecture and lacks open genes.
"Creating JD" talked about the three most important strategic decisions in the history of JD.com, both of which were Liu Qiangdong's aversion to the risk of being controlled. In 2004, he decided to switch from a first-class business to an e-commerce business, because he panicked that manufacturers would change to a first-class business, and e-commerce was directly to c, and the goods could be found at the counter in other Zhongguancun, and would not be choked by the manufacturer. In 2007, he decided to build his own warehouse because there was a risk of payment collection in third-party logistics, and his logistics brother was more assured.
Amazon Bezos has known since 2002 that it wants to open up the system and build the organization and IT architecture into an API. However, JD.com has long pursued integration and has not opened up to the outside world to a high degree.
In the end, when the efficiency of friends and businessmen increased, and the industry entered the first department and ecological warfare, Jingdong found that its planned economic efficiency could not keep up with the market economy.
As for the live broadcast that bears a heavy responsibility in the low-price strategy, when ** and Pinduoduo began to engage in content to drive DAU, JD.com's attitude towards content was much more ambiguous. Liu Qiangdong said that live broadcasts, short **, etc. are all outlets, and we can't ignore the outlets, nor can we keep chasing the outlets, otherwise it will be difficult to do business for a long time.
This somewhat reflects JD.com's ambivalence: live broadcast can indeed solve the traffic problem and help the transaction of some categories;But Jingdong is too unfamiliar with the live broadcast ecology and gameplay, although Luo Yonghao has been brought in, but a few months have passed, and the Jingdong live broadcast room that made a friend has been snubbed.
In the past two months, most of the live broadcast views have remained at about 200,000, and only occasionally when Luo Yonghao is in charge, can it exceed 5 million. As a comparison, in the past month, most of the viewers in the ** live broadcast room of making friends have remained between 3 million and 4 million;The corresponding Douyin live broadcast room has an average daily ** of about 2 million.
Luo Yonghao's broadcast on JD.com is very different from the demonstration effect brought by Douyin, and it is difficult to attract new anchors, MCN institutions and businesses to enter the game. Due to the small volume of JD live broadcast, the head anchors and star anchors will not use JD as the most important live broadcast platform, and the path of using the head anchor to drain traffic and complete user precipitation will be broken.
JD.com's "Impossible Triangle".
More than 10 years ago, Liu Qiangdong said: "Low price will be the strategy we have always adhered to, and no matter how big JD is in the future, it will bring the most affordable ** to users." At that time, JD.com's slogan was: Carry out low prices to the end.
At that time, when Xu Xin decided to invest in Liu Qiangdong, he also saw three aspects: Jingdong's goods were **;It is 10%-20% cheaper than offlineThe customer viscosity is high, and more than 50% of them repeat the purchase 2-3 times within 6 months. She believes that Liu Qiangdong has grasped the core of retailers and appreciates JD.com's "first-class low price, service" strategy.
JD.com has always followed the Walmart model, focusing on selling goods, relying on efficiency and sales to improve profits. JD.com's large-scale infrastructure investment is a reflection of efficiency by reducing the number of logistics handling, and reducing inventory turnover days through dynamic price adjustment systems and automatic **. It can be said that JD.com's first-chain advantage is the key to turning losses into profits.
But why hasn't JD.com's ** chain been able to maintain low prices?
This has to mention that in 2015, when the platform began to enter the profit harvesting period, its performance on the consumer side was due to the high efficiency of the first chain and the shortage of goods in short supply, which eventually generated huge excess profits, rather than the small profits and quick turnovers originally envisaged.
JD.com has carried out a brand upgrade, and slogan has changed from "how fast and good to save" to "only for quality life".
In order to reinforce that JD is a quality-oriented platform, JD.com requires all settled brands to pay attention to quality, and a large number of small and medium-sized businesses have been dismissed.
In order to improve the user experience, JD.com has continuously strengthened logistics and after-sales service, which has also brought higher fulfillment costs.
Although in recent years, JD.com's self-operated ** has been higher than other platforms for a long time, and even higher than the POP merchants on the platform, it still maintains a very high sales rate, thanks to logistics and after-sales service.
Despite the attacks of Douyin and Pinduoduo, JD.com was able to temporarily stabilize the situation without large-scale routs and user migrations, which is the moat that played a role.
JD.com's core problem at the moment is that it has lost its pricing power.
When Wang Xiaosong was in charge of Jingdong's 3C business department, it was the era when smartphones were blooming and soaring, and he and Yu Chengdong, Lei Jun, Luo Yonghao and other bigwigs in the mobile phone circle, eating and chatting was the norm, which would affect the pricing of new products to a certain extent, and even affect the fate of a product.
No one dared to ignore his advice. His confidence comes from channel influence, and 3C and home appliances are JD.com's strong position.
But now, from the war of words between Hai's, Li Jiaqi and JD.com during the Double 11 period, we can get a glimpse of JD.com's pricing power: JD.com not only put down its shelves and argued with an MCN agency for pricing power, but brand owners also appeared to deviate from Germany.
The necessary condition for the platform to obtain the right to set prices at low prices is to maintain a fast enough growth rate to dilute the marginal cost of merchants. The reason why Li Jiaqi's live broadcast room can get the lowest price is that the high popularity of the live broadcast room dilutes the fixed costs of merchants and lowers the pricing threshold for maximizing benefits.
Growth should be a necessary condition for low prices. However, JD.com's current customer acquisition speed is slowing down, and it is easy to backfire in theory if it wants to rely on low prices and subsidies to boost growth.
JD.com is obviously unwilling to give up low prices and quality.
Liu Qiangdong once proposed a user experience formula:
He believes that for middle and high consumer groups, products and services are more important;For low-spending groups, ** is more important. The "> two greater than signs in the formula means that he wants to greatly exceed the customer's expectations, which is to achieve a result that is much greater than 1, ** needs to be low enough.
Xu Ran pointed out that Jingdong will not sacrifice profit margins to participate in competition, and the low price that consumers need is not an absolute low price, but needs the support of quality and service.
This is actually challenging the "impossible triangle" of the e-commerce industry, and it is difficult to achieve high-quality products at the same time, low price, and complete word-of-mouth services.
Summary
Michael Porter, an American scholar known as the "father of competitive strategy", put forward three effective competitive strategies in his classic masterpiece "Competitive Strategy".Cost leadership, differentiation, focus.
Jingdong originally hoped to reduce the cost of logistics and ** chain, but after earning high profits, it engaged in quality e-commerce differentiation, and wanted to get more profits from brands and services, which is equivalent to giving up the previous cost leadership advantage.
On the other hand, what did Intel, Nvidia, and Microsoft do after making high profits?They also invest huge sums of money in research and development to lead the global industry standard. If the industry standard is controlled, there will be higher pricing power and industrial chain control, and then feedback to R&D, thus forming a positive cycle.
As a barometer of the macro economy, the retail industry will cite different retail models in different macro cycles.
In the downward economic cycle, it is manifested as a downgrade in consumption, and users will choose low prices and sacrifice some services. When the economy recovers, consumer confidence will rise, and users will enjoy some services at parity. When consuming upgrades, users will accept high premiums and choose good services.
Around 2014, with the rapid development of the domestic economy, residents' consumer confidence has risen unprecedentedly, and consumption has gradually become a major driving force for the economy.
Projected on the e-commerce industry, JD.com, which focuses on quality and high-quality services, has eaten more dividends of the times: the revenue growth rate not only outperformed the company by a large margin, but also was much higher than that of Alibaba, and its market share was also rising.
Under this stimulus, the entire retail industry has copied JD.com's homework and increased the layout of high-end, such as Tmall, which was the rise at that time.
Nowadays, the trend of consumption has changed. In the past three years of the epidemic, the consumption behavior of high-income groups and low-income groups has not changed, but the consumption Xi of middle-income people has a significant downward trend in the short term, and this part of the population happens to be the main group of social consumption.
It is becoming more and more difficult to make money, and people are beginning to pay more attention to cost performance, no longer easily accept the premium brought by the brand, and no longer pay so much attention to logistics speed and service.
JD.com's vaunted advantages can no longer meet the needs of the vast majority of people. Liu Qiangdong reflected in last year's internal meeting: JD.com should serve multi-level consumers, considering both rich and ordinary people.
Another meaning of this sentence is: not only to satisfy the most sensitive users, but also to retain high-net-worth individuals.
But the reality is that no business entity can make money for everyone, only for those who are interested in it.
References:
1, Pan Ran, "Liu Qiangdong's Second "Second Entrepreneurship"".
2, Zhu Sima Ji "Jingdong, against Jingdong".
3, Liang Ning, "Liang Ning's Interpretation of Oriental Selection: Behind the Explosion, is the Desire to Live".
4. Science and technology said "How did JD lose its pricing power?".》
5, in the appearance of "low price" Jingdong, into the fog".
6. LatePost "Liu Qiangdong Found 20 Growth Rules for JD.com".
7, the new berry "Jingdong's Ministers".
8, the alphabet list "How many friends can I make before I can bring fire to Jingdong Live?".》