The price war on e-commerce platforms has officially entered a watershed.
Taotian and Tiktok successively weakened the concept of "absolute low price". The former changed the distribution system of "five-star price power" back to GMV distribution, and the latter reported that they planned to adjust their business objectives to GMV based.
As a mainstream e-commerce platform, JD.com has a strong presence in this round of price competition, and there is currently no indication in the market whether it will weaken its low price strategy.
21st Century Business Herald reporters learned from insiders close to JD.com that JD.com has no intention of obtaining unsustainable low price advantages through "internal competition" subsidies or squeezing brand merchants. Instead, it will invest in overall improvement of user experience through "faster, better, and more cost-effective" methods, and in improving the efficiency of the supply chain to consolidate its differentiated competitive advantage.
On the evening of August 15th, JD.com released its Q2 2024 financial report, which provides some evidence.
According to the financial report, JD.com achieved a revenue of 291.4 billion yuan in the second quarter, a year-on-year increase of 1.2%; The net profit attributable to the parent company was 14.5 billion yuan, a year-on-year increase of 69.0%, significantly exceeding market expectations.
It is worth noting that based on the continuous investment in user experience over the past year, JD's user shopping frequency continues to maintain double-digit growth, while the number of new merchants has increased by 46% year-on-year.
21st Century Business Herald reporters learned from JD's earnings conference call with US stock investors that JD's management stated that there is no contradiction between business growth and profits. JD will continue to make targeted investments around improving its long-term supply chain capabilities and enhancing user experience, thereby bringing about continuous improvement in user experience and market position, and generating long-term sustainable profits. We are confident in achieving our long-term high single digit profit margin target
Low price does not conflict with quality and service
In recent years, JD.com has resumed its low price strategy, and the market was once concerned about whether this would affect profits. In the fiscal year 2023, JD's net profit attributable to shareholders increased by 65.46%. At that time, JD explained that it was mainly due to an increase in interest income and a decrease in losses related to equity investments; In the first half of 2024, its net profit attributable to the parent company continued to maintain a growth rate of 69%.
This to some extent reflects JD's low price proposition, mainly seeking space to reduce costs from the supply chain rather than simply providing subsidies.
Taking the annual "low price node" as an example, JD.com launched the "lowest price in six months" activity during the 618 shopping festival this year, with over 500 million users placing orders on JD.com. At the same time, the interests of merchants were not sacrificed as a result.
According to statistics, during this year's 618 shopping festival, there were over 150000 small and medium-sized merchants on JD.com, with sales growth exceeding 50%. Zhang Hui, a new farmer returning home to start a business in Yantai, Shandong, said that the volume of Yantai cherry express delivery services she operates has increased by nearly 100% year-on-year. Wang Zhengtian, Deputy General Manager of Henan Simite Food Co., Ltd., which specializes in producing traditional Chinese Siyuan instant noodles, stated that the transaction volume of Siyuan at JD Supermarket during the 618 shopping festival this year increased by 126% year-on-year, and the number of transaction users increased by 178%.
According to 21st Century Business Herald reporters, there is a "35 cent theory" within JD.com, which means that if JD.com has the opportunity to earn one yuan, it will only take 70 cents and leave 30 cents for its partners. Of the 70 cents taken, 35 cents will be left for employees as benefits and incentives, and the remaining 35 cents will be left for the future development of the company.
The relevant person in charge of JD.com revealed that the low price advocated by JD.com is not a "fake low price" obtained by passing off inferior products as good, being short of weight, or cheating and playing tricks; Instead, we work together with brands and businesses to reduce costs and increase efficiency throughout the entire supply chain process, including research and development, procurement, transactions, fulfillment, and after-sales service. We pass on the money saved from improving supply chain efficiency to consumers, achieving high-quality and sustainable low prices.
In terms of user service, in the first half of this year, JD.com continued to optimize services such as free shipping, free home returns and exchanges, home delivery, and late claims, driving double-digit growth in active users and shopping frequency.
It is reported that the coverage rate of JD's free home return and exchange service has exceeded 90% for third-party merchants after the self operated service has basically been fully covered. Since third-party merchants labeled it as "free home return and exchange", consumer satisfaction with after-sales service has reached 93.5%, and the reverse freight dispute rate has decreased by 56%.
JD has also launched personalized protection services for different products, such as "24-hour fresh milk", "28 day no feeling return" for health products, "sticky pot compensation" for cookware, etc., to reduce consumer doubts and enhance consumer purchasing confidence through full chain protection.
In addition, during the reporting period, JD.com strengthened its platform's proactive intervention capabilities, utilizing large models to perceive and identify users' service needs or issues in advance, intervening in a timely, accurate, rapid, and efficient manner, while improving users' after-sales service experience and effectively reducing merchants' costs.
Specifically, JD's low price logic is to enhance user experience, increase the number of users, bring greater economies of scale, and squeeze out more space from the supply chain to subsidize upstream and downstream, thereby achieving cost reduction and efficiency improvement throughout the entire chain, and achieving a win-win situation for users, merchants, and the platform.
Value merchant support
As an important part of JD platform to expand supply, enrich products, and retain users, merchants have continued to increase their efforts to cultivate a merchant ecosystem in the first half of the year.
Since the launch of the "Spring Morning Plan" at the beginning of last year, JD.com has continuously launched a series of cost reduction and efficiency improvement measures for opening stores for all types of merchants, including individuals, individual businesses, and enterprises.
In the first half of this year, the "Chunxiao Plan" was upgraded twice, with a total of 32 merchant support measures launched before and after, helping merchants improve operational efficiency and sales growth.
In March of this year, JD.com launched a series of AI tools through the "Spring Morning Plan" to provide free services for merchants of all categories, including joining, graphic and text production, video generation, customer service, live streaming, etc., helping merchants save 50% of operating costs.
In June of this year, JD's "Spring Morning Plan" was upgraded again, mainly focusing on three aspects: content marketing assistance, business tool efficiency improvement, and new business growth assistance. It launched 12 new support measures, including 5000 quota traffic coupons for new business live streaming incentives, "Jingdian Point" launching AI hot spot copywriting, and the launch of a free version of the official intelligent customer service robot.
Financial report data shows that in the second quarter, the number of new merchants added to JD.com increased by 46% compared to the previous quarter.
In addition, many e-commerce platforms have turned their attention to industrial belt merchants in recent years, and JD.com is no exception.
In the first half of the year, JD.com continued to delve into the source of industrial belts and search for distinctive and good products. In May of this year, new merchants from the Sichuan tea industry belt joined JD.com. Their store orders increased nearly fourfold compared to May in June, and their store fan base grew by over 20000.
The person in charge of the JD Retail Platform Ecology Department stated that JD aims to provide high-quality business environment and growth space for merchants. Through the "Spring Dawn Plan", JD hopes to help more high-quality merchants achieve efficient operation and sustainable growth, while also bringing consumers more low-priced and high-quality product choices.
The concept of "open ecology" has been repeatedly mentioned and continuously put into practice by JD.com in the past few years. Since the beginning of last year, JD.com has achieved continuous results in the open ecology by launching the "Chunxiao Plan". Its core is to recruit more third-party merchants to join, enhance JD's product richness, broaden its price range, and meet the growing diversified needs of consumers.
Maintain investment in the supply chain
JD's self operated management and logistics system are its differentiated advantages.
In the first half of this year, JD Logistics' performance significantly exceeded market expectations.
In the first half of 2024, JD Logistics' total revenue was 86.3 billion yuan, a year-on-year increase of 11%. Among them, revenue from external customers was 59.9 billion yuan, a year-on-year increase of 11.2%, accounting for about 70% of the total revenue. After adjustment, the net profit was 3.12 billion yuan, a year-on-year increase of 2631.2%. As of the first half of this year, JD Logistics has been profitable for five consecutive quarters.
As of the second quarter, JD's supply chain infrastructure assets amounted to 156 billion yuan, a year-on-year increase of 11%. JD Logistics has nearly 100 bonded warehouses, direct mail warehouses, and overseas warehouses worldwide, with a total management area of nearly 1 million square meters.
Since its comprehensive transition to technology in 2017, as of the second quarter of this year, JD has invested nearly 130 billion yuan in research and development. On the basis of self operated product SKUs exceeding 10 million, JD's inventory turnover days in the second quarter continued to remain below 30 days.
In addition, JD.com is also continuously promoting the landing and application of digital technologies such as cloud computing, big data, and AI in physical industry scenarios. JD Yanxi Digital Person 3.0 platform has achieved a leap from a single product to intelligent platformization. The platform has launched more than 100 personalized roles and over 50 industry-specific attribute scenarios, covering 90% of common inquiries with zero configuration. The accuracy of product recommendation responses has exceeded 90%.
With the help of JD AIGC content generation platform, 140000 third-party merchants can easily generate product images, operation and marketing copy, product short videos and other content materials required for store operation, and the efficiency of merchant content production has been improved by more than 90%.
On August 16th, JD.com also announced an increase of billions of traffic to provide merchants with more traffic support. JD's digital marketing service platform "Jingzhuntong" will also provide comprehensive service support measures for merchants through intelligent, simple, and efficient marketing tools, helping merchants seize growth opportunities and achieve full cycle operational efficiency improvement.
On August 16th, JD Group's Hong Kong stock price rose 8.91% to close at HKD 108.2 per share; At 22:48 Beijing time, JD's US stock rose more than 5%.