Over 500 million users placed orders on JD 618!
After achieving impressive results in the first quarter, facing the 618 exam, JD.com once again submitted a satisfactory answer sheet.
As of 23:59 on June 18, 2024, the transaction volume and order volume of JD 618 reached a new high, with JD Live's order volume increasing by over 200% year-on-year. 83 brands with a cumulative transaction volume of over 1 billion, and sales growth of over 50% among over 150000 small and medium-sized businesses. The number of subsidized users and order volume both exceeded 150% year-on-year.
Last year on JD.com 618, JD.com proposed the "35711" dream for the next 20 years. This year, as the beginning year of JD's "35711" dream, is a brand new beginning for the entire JD.com. "Whether in the past, present, or future, providing users with the ultimate consumer experience is our eternal pursuit," said Xu Ran, CEO of JD Group.
At the end of 2022, Liu Qiangdong, founder and chairman of the board of directors of JD.com Group, gave a speech, firmly affirming the low-priced path that JD.com has always adhered to since its entrepreneurship. The official launch of a 10 billion yuan subsidy in 2023 has become a new milestone on this road, and every 618 and Double 11 event will become a test level on this road. Based on the current publicly available results, JD.com is still considered a "top performing student".
This is thanks to JD's understanding and implementation of low prices. It should be emphasized that the low prices promoted by JD.com are not just a pursuit of lowering prices. After determining the low-priced strategy, Liu Qiangdong repeatedly emphasized that JD's low-priced products are not a rough and crude approach to the entire network, but rather rely on honest management, continuously squeezing water from the supply chain, and creating the ultimate cost-effectiveness that truly suits consumers.
That is to say, JD.com hopes to maintain a balance between price and quality in this low price war, and provide consumers with high-quality products with cost-effectiveness.
In the fierce competition in the current e-commerce market, "low price" is a key factor in attracting customers and optimizing user experience, but this is only the starting point. JD's long-term goal is to significantly improve the overall user experience through multi-dimensional strategies, far exceeding a single price advantage, as a lever to leverage market growth, thereby bringing in user and order growth, and gradually forming a scale advantage.
Scale effect can make it more adept in supply chain management, warehousing and logistics, bargaining power, etc., thereby improving operational efficiency and reducing unit costs. This cost reduction is not simply transformed into exclusive profits for the enterprise, but is used to give back to users and merchants, forming a virtuous cycle.
The additional space obtained by JD through cost reduction is used to directly subsidize users, launch more promotional activities, discount coupons, and point rewards, allowing users to enjoy the ultimate low price. On the other hand, JD.com also does not forget to support businesses, reduce platform costs, provide marketing support and data insights, help businesses optimize operations, increase sales, and jointly create a healthy business ecosystem.
Starting with low prices, but not stopping here, a self reinforcing closed-loop system is formed by improving efficiency, reducing costs, and giving back to users and businesses. In this closed loop, each improvement in experience accumulates energy for the next round of growth, and each optimization of cost provides the possibility for deeper user experience improvement. In the current user centered e-commerce stock market competition, achieving a win-win situation among users, merchants, and platforms.
Low price is the starting point, user experience is the core
Over the past year, JD.com has made a series of proactive changes focusing on cost, efficiency, and experience. From organizational restructuring, to the implementation of low price strategies, and then to multiple service iterations, measures have been implemented one by one, with the goal of significantly improving various user indicators.
Among them, low price is an important "trump card" for JD's transformation.
As Liu Qiangdong emphasized, low prices have always been an important weapon for JD's success and an eternal core competitive foundation for all retailers worldwide. He once used a vivid metaphor to illustrate the relationship between price, quality, and service: low price is "1", while quality and service are the two "0s" that follow. Losing the low price advantage will render all other advantages meaningless.
After taking over as the CEO of JD.com, Xu Ran continued to deepen and implement this low price strategy. She pointed out that JD.com needs to prioritize the improvement of quality and service while maintaining low prices, to ensure that these core values can be re emphasized after the low price war.
This year's 618, a popular slipper product is a representative of JD's ultimate cost-effectiveness. According to personnel from the Jingxi Business Department, this slipper comes with a free shipping fee of 3.99 yuan, and its monthly sales remain stable at 2-3 million units. In the first four hours of the 618 promotion, sales have already exceeded 50000 units.
The reason why this slipper has become a star product is not only because of its affordable price, but also because of its ultimate cost-effectiveness.
"Many low-priced slippers on the market choose a more flexible foaming process to reduce costs, resulting in more internal bubbles and easy collapse." According to the above salesperson, although this slipper has a lightweight appearance, it actually has a high density. This is because a special chemical component with a higher cost than EVA material itself is added during the foaming process, ensuring the durability and solidity of the slippers.
Is there any profit margin for merchants at such a low price?
The person introduced that after careful calculation, each pair of slippers uses 120 grams of EVA material. Based on a cost of 15000 yuan per ton, the bare cost of each pair of slippers is about 1.8 yuan. With packaging and logistics, the total cost is controlled at around 3.8 yuan. Therefore, the pricing is 3.99 yuan, which not only ensures a meager profit but also leaves room for daily sales. During major promotions, prices can be flexibly adjusted.
"We have provided a product with quality comparable to slippers priced at around ten yuan, almost at cost price. Whether as a hook product to attract customers or to promote repeat purchases, it has performed well," the person said.
Compared to low-priced white label products, the pricing power of branded products is reflected in the strategic bulk order underwriting model.
Generally speaking, the larger the scale of most products, the stronger their cost control ability. By placing large orders, JD.com can negotiate more favorable purchasing conditions with suppliers, thereby transmitting these cost advantages to consumers, enabling them to purchase higher configurations or products that exceed expectations at lower prices. At the same time, large-scale orders give manufacturers certainty in their production plans, which is beneficial for them to optimize production processes and reduce costs.
Lenovo is a major supplier of JD's strategic bulk sales. In April of this year, the two sides signed a new three-year strategic agreement, with a target sales revenue of 120 billion yuan, covering Lenovo's product sales on JD for the next three years.
A groundbreaking and highly successful case of the underwriting model is the "Savior" series of game books created in collaboration with Lenovo. At first, the laptop market had not yet fully separated the concept of "gaming laptops". The JD sales team found through research that there is a specific user group in this market who purchases laptops mainly for the purpose of smoothly running large-scale games.
"We proactively proposed to Lenovo to collaborate on the development of the game series, which is the origin of the 'Savior' series." JD.com Sales introduced that this series is specifically designed for gamers and design professionals, and with its high-performance graphics card configuration and support for large games, it quickly became a popular choice in the market.
With the deepening of cooperation, the above-mentioned procurement and sales also noticed that the notebook market priced at 3000 to 4000 yuan is expanding, especially targeting the lower tier market and user groups seeking cost-effectiveness. To this end, JD.com has partnered with Lenovo to launch the exclusive exclusive exclusive sales product of the "Xiaoxin" series.
According to the JD sales introduction, since the launch of Lenovo Xiaoxin 14 in May last year, the original plan was to sell 250000 units per year. Now, this target sales have exceeded expectations, including sales performance during the 618 period. The total sales of Xiaoxin 14 exceed 300000 units, with a lifecycle slightly exceeding one year, and the total sales amount approaching 1.1 billion yuan.
The cost advantage brought by scaling is significant, especially in the process of cooperation between brands such as JD.com and Lenovo. Economies of scale mean that when the procurement volume reaches a certain level, the average cost per unit of goods will decrease, thanks to more efficient supply chain management and the certainty of production planning.
Besides low prices, another dimension of user experience lies in service. "Service" used to be the main consumer mentality of JD.com, and this also applies to the current implementation of low price strategies.
On February 22 this year, JD.com launched a "free doorstep return and exchange" service, which allows for free doorstep returns and exchanges regardless of size, weight, and quantity. At the same time, it is actively promoting the service among third-party merchants and is expected to cover over 90% of them within the next year. JD has further lowered the threshold for free shipping, and except for remote areas, orders over 59 yuan can enjoy free shipping services.
Even some products priced as low as one yuan can enjoy free shipping services. As a promotional zone, JD's 9.9 free shipping channel covers various daily necessities with prices not exceeding 9.9, deeply tapping into the widespread demand of users for low-priced and cost-effective products.
"Whether it's high-end or low-end users, the demand for low prices has always existed." The person in charge of JD's 9.9 free shipping related business stated that the products on the 9.9 free shipping channel should not only be compared on site, but also be the lowest on the entire network.
The head of JD Ecological Services told Interface News that the number of merchants participating in JD 618 through the JD 9.9 free shipping channel in the 9.9 free shipping zone for over a million products has increased by more than 10 times year-on-year. Among them, over 75% of users come from third tier and below cities, and nearly 10000 come from industrial belts such as Yiwu, Guangzhou, and Quanzhou.
From this, it can be seen that the prosperous ecosystem of merchants not only enriches JD's product quantity, but also drives an increase in the number of active users and shopping frequency. Whether it's daily small item promotions or brand bulk sales, JD.com always regards "ultimate cost-effectiveness" as its core strategy, running through the sales strategy of various products, and constantly increasing its service level, attempting to attract as many users as possible in the existing market.
A benign ecological loop
E-commerce has entered a year of low prices, and small and medium-sized businesses have become the core of "price power". In order to achieve richer low-priced supply, JD.com is making efforts to create a prosperous ecosystem of third-party merchants.
The jewelry company where Yang Liu works is a type of small and medium-sized business that JD.com hopes to expand. This company is located in Panyu Jewelry Town. Previously, it was a production-oriented manufacturer targeting the enterprise side. In June last year, it officially launched its e-commerce journey through JD's "Spring Dawn Plan" investment promotion, mainly selling gold and silver jewelry, including gold rings, necklaces, bracelets, etc. According to her, after four months of joining, the company achieved self-sufficiency in profit and loss, and its size was gradually increasing.
The "Spring Dawn Plan" is an official support plan launched by JD.com at the beginning of last year, in order to further reduce business operating costs and improve business efficiency. It includes support policies such as "zero yuan trial operation", "new store gift package", "new merchant double traffic incentive", and provides store operation services to merchants through a series of free AI tools.
According to the person in charge of JD's Ecological Services Department, based on the interim results, the number of third-party merchants on JD.com increased by 188% year-on-year in 2023, and the number of new merchants added within a year increased by 4.3 times year-on-year. In particular, the number of merchants in the categories of fashion, home appliances, and supermarkets has achieved rapid growth, with the highest number of merchants entering Guangdong, Fujian, Jiangxi, Jiangsu, Henan and other regions. In March of this year, the number of effective stores for third-party merchants on JD.com has exceeded one million, and the number of SKUs for third-party merchants has also increased by more than twice compared to the beginning of last year.
Yang Liu told Interface News that the platform will provide price guidance to merchants through a massive database, helping to improve the transaction rate of buyers. The merchant adjusted the product prices based on the price guidance provided by the backend, and after practice, it was found that sales have indeed increased. "This is a positive feedback for us," he said
Since the implementation of JD's low price strategy for over a year, Yang Liu believes it is relatively reasonable. She believes that the platform's "billion yuan subsidy" policy is a win-win situation for both merchants and consumers, as merchants can gain more traffic and conversion through it.
Under the AIGC craze brought about by the big model, JD.com has also taken this fast train and focused on launching the "AI Omni Service Package". Through a series of free AI tools, it provides store operation services for merchants, helping them achieve significant cost reduction and exponential efficiency improvement.
According to the head of the retail technology department in Jingdian, the most direct pain point for merchants is that the cost of shooting a small product image in a studio often ranges from 50 to a few hundred yuan. Calculated based on the average of 100 yuan per image, the cost is efficient and low, and it is also limited by the scene.
When the merchant's shooting and post-processing team is replaced with the AI generation capability of Jingdian AIGC, it takes about 20-30 seconds for an image to be uploaded and finally produced. However, in traditional photography of product images, it may take more than ten days to complete from scheduling shooting time, sending samples, shooting, and post-processing. In terms of efficiency, AIGC is a geometric level improvement. Merchants can almost complete product scene diagrams at zero cost, reducing costs by over 95% compared to the past.
Cost reduction and efficiency enhancement are the core capabilities that AIGC empowers businesses, while also revitalizing the entire third-party ecosystem to attract more merchants to settle in, enrich the inventory, and ultimately bring more, better, and lower priced products to users.
According to the person in charge of Jingdian, as of the 618 period, the number of business users on the Jingdian AIGC platform has exceeded 100000, which is equivalent to more than 100000 businesses hiring a free super digital employee. A Jingdian point is equivalent to a product photographer+designer+copywriter+new media marketing personnel.
Since the May promotion, over 40000 merchants have used Jingdian to create product images and copy content for the 618 event. The Light Product Scene Image function helped businesses produce over 2 million product images using AI during the early stages of the promotion.
Taking a tool merchant on JD.com as an example, it used to take about 2 weeks to complete the production of a single SKU with a set of graphic materials, including mailing, setting (selling salmon sashimi knives, so we also need to purchase high-end salmon and other materials to match the shooting tools), filming, copywriting planning, and design art.
Now, with the image generation ability of Beijing Diandian AIGC, uploading a salmon scene image can generate a product scene image with a texture comparable to that of a studio shot, with a salmon background.
By leveraging the selling point image capability of Jingdian AI, AI automatically generates selling point texts with high click through rates and conversion rates for consumers. One person can complete the production of a single SKU and a set of graphic materials. A set of graphic and textual materials for a single SKU has been increased from 2 weeks to minutes, and the cost has been reduced from thousands of yuan per SKU to almost zero yuan.
The person in charge of Jingdian describes the difference between the two as a martial arts master - for example, a person who has practiced martial arts secrets for 30 years and finally becomes a martial arts master, serving some major sects, but always this one person. But for AI, it may only take a short time to learn a bunch of martial arts secrets, and then replicate one hundred or one thousand martial arts masters, scattering these people into various small sects.
In his view, situations like this have broken through the business principle of "rarity is precious", allowing small and medium-sized businesses to also use skilled designers that are only available in large enterprises. This will be beneficial for their future business efficiency and profits.
At this year's JD 618 launch event, Xu Ran spoke, saying, "JD has turned the industry's widely believed 'impossible triangle' of products, prices, and services into a possibility. This is not based on advanced theories, but on our continuous investment and grinding in the supply chain. This is also JD's differentiated competitive advantage that sets it apart from other platforms that rely solely on traffic operations."
In her view, improving user experience is the strongest endogenous driving force for JD's growth, and the supply chain is the most solid foundation.
As of the end of the first quarter, JD's supply chain infrastructure assets reached 154.1 billion yuan, a year-on-year increase of 12%. With the help of digital, intelligent, and large-scale supply chain infrastructure, JD's self operated goods with over 10 million SKUs have reduced inventory turnover days to the best historical level of 29 days, continuing to maintain global leadership.
A solid supply chain not only supports JD's own healthy growth, but also helps a large number of brands and businesses achieve healthy and high-quality growth, providing users with more diverse goods, ultimately building a sustainable development ecosystem centered on user experience and promoting mutual benefits between itself, users, and businesses.
(Yang Liu is a pseudonym in the text)