Reporter: Li Huilin and He Jipai
Liu Qiangdong and JD.com have significantly expanded their holdings in Dada.
According to the announcement on September 17, JD has taken over Wal Mart's stake in Dada, and its shareholding ratio will rise to 63.2%.
By the end of March, Wal Mart held up to 9% of the shares, valued at about 216 million yuan according to the current market value.
"(Transfer of equity) This decision allows us to better focus on the strong development of China... allocate assets to other priorities." Wal Mart replied to 21CBR and said that it would maintain a cooperative relationship with Dada.
When investing in Dada, JD.com was a dominant player in the field of instant retail O2O. With the rise of platforms such as Meituan Flash Purchase, it has put a lot of pressure on JD.com, "said Zhuang Shuai, founder of Bailian Consulting, to reporters.
With the change of ownership, Liu Qiangdong's control over Dada has further increased. He has also accelerated his foot journey in the layout of instant retail and delivery.
Strengthen control
The stock rights of Dada held by Wal Mart conform to Liu Qiangdong's strategy of adding instant retail business.
Prior to this transaction, JD.com had already strengthened its control over Dada through increased equity holdings and team changes.
In 2022, JD.com will allocate $546 million in cash and some strategic resources to increase its stake in Dada, increasing its ownership to 52% and becoming the largest shareholder.
Afterwards, Kuai Jiaqi and Yang Jun from Dada's original creation team successively withdrew, and the "JD series" executives took over comprehensively.
In the key position of Chairman of the Board of Directors, JD.com has successively dispatched JD Retail CEO Xin Lijun and Group Chief Financial Officer Dan Su.
Dada has two platforms under its umbrella: Dada Express and JD Home, which were previously operated relatively independently.
At the beginning of this year, Liu Qiangdong set three must win battles for 2024, one of which is instant retail. In February, "JD Hourly Delivery" waived delivery fees for orders over 29 yuan to seize the market.
In line with this strategy, Dada has been further integrated into the group ecosystem.
In May, Dada will upgrade its instant retail brands JD Hour Delivery and JD Home Delivery to a unified "JD Instant Delivery" service, which will be launched at the core position of the JD App homepage, providing resource support in terms of traffic and exposure.
Three months later, Dada Express was renamed as "Dada Instant Delivery".
Liu Qiangdong adjusted his business, and JD Home's positioning shifted from independent development to undertaking JD's retail business, with astonishing growth rates.
In the second quarter, the year-on-year growth rate of high-frequency users and online orders on the JD.com app exceeded 100%.
This also comes at a cost. In the second quarter, due to the impact of the free delivery plan, JD's revenue from instant delivery was 912.4 million yuan, a year-on-year decrease of over 40%.
Dragged down by this, Dada's revenue fell 9.5% to 2.35 billion yuan, marking the first revenue decline in nearly 5 years.
Benchmarking Flash Purchase
According to Liu Qiangdong's idea, it is not easy for Dada to shoulder the banner of JD's instant retail.
In August, Dada changed coaches and Guo Qing became the chairman of the board of directors. He joined JD.com as a group consultant in April and was previously a member of the S-team, the highest decision-making body of Meituan.
During an internal closed meeting, Dada was asked to benchmark against Meituan flash purchases. The latter is an instant retail platform under Meituan, and it is estimated that its GTV may exceed 200 billion yuan in 2023, equivalent to 2.5 times that of JD Home.
Dada's early route was to establish an O2O platform for retail supermarkets, focusing on categories such as pharmaceuticals, 3C electronics, and supermarkets. Later, it expanded to cover all categories.
From a business perspective, the current Dada is indeed targeting the hinterland of Meituan.
The catering key customer business is the top priority this year, "said Dada's management. The demand for on-demand delivery services such as catering, beverages, and supermarkets is still growing rapidly.
In the second quarter, Dada's chain merchant business saw an overall revenue growth of nearly 50% year-on-year, with the net revenue of catering chain merchants increasing by nearly 80% and the number of new stores more than doubling year-on-year.
In the JD Quick Delivery section of the JD App, tea brands such as Luckin Coffee, Kudi, Meixue Ice City, and Novacoffee have joined to compete for users with "9.9 yuan free shipping".
Dadaisaisai undertakes the task of external expansion. In addition to taking orders from McDonald's, Ruixing and other chain stores, it also takes delivery needs from catering businesses on the Tiktok platform.
In the first half of the year, Dada's revenue increased by 50% to 2.6 billion yuan, accounting for 54% of the total revenue.
The gross profit margin of catering is relatively low, but it is a high-frequency category with high demand. Dada can use this to gain more users and increase activity, "Zhuang Shuai pointed out.
Although the instant delivery track is booming, it is difficult to make money due to high fulfillment costs. Backed by JD's business flow, Dada has been consistently losing money.
After 4 years of listing, Dada has not yet achieved annual profitability.
As of September 18th, Dada, with a revenue of billions, has a market value of 2.4 billion yuan, only one tenth of what it was when it went public. In terms of finance, JD and Wal Mart both suffered heavy losses.
Equity liquidation
Wal Mart's retreat from Dada is a trade-off based on its own situation.
Originally, the combination of global retail giants, Chinese e-commerce giants, and emerging instant retailers was a win-win scenario.
When Wal Mart joined hands with Liu Qiangdong, its strategic investment reached 50 million dollars. In 2018, Wal Mart, together with JD, invested up to 320 million dollars.
When Dada went to the US for IPO, Wal Mart, as a cornerstone investor, subscribed for US $30 million, and its shareholding increased to 10.7%, becoming the second largest shareholder of Dada.
Real gold and silver show the sincerity of cooperation. Wal Mart values the terminal distribution capability of Dada.
With the help of Dada's "warehouse picking, receiving and matching" integrated full link performance service, Wal Mart and its Sam have been able to effectively solve the pain points such as the number and complexity of SKUs and the obvious weekend peaks, so as to achieve the growth of overall performance efficiency and average picking efficiency.
For example, Sam's and Dada jointly built the front-end warehouse "Sam's Cloud Warehouse". In the first three years of launching the service, the daily average delivery order volume of a single warehouse increased by more than 10 times compared to the initial launch.
Now, the "infrastructure" of e-commerce has gradually become mature, and Wal Mart has intensively adjusted its strategy, significantly shrinking its traditional hypermarkets while heavily betting on Sam's development.
For Wal Mart, the bundling relationship with Dada and even JD is no longer necessary.
Sam accelerates his expansion in China, and Wal Mart is also anxious for money.
By the end of July, Wal Mart's global cash was $8.8 billion, down $1 billion from the beginning of the year.
After cleaning up Dada's equity investment, Wal Mart can spare some resources to invest in "Wal Mart Shopping Mall and Sam's Club" and other places, and this move is consistent with JD's clearance strategy.
Zhuang Shuai believes that Wal Mart will no longer hold shares and Dada can choose more supermarket formats.
For Yudada, its future will be more of a concern for Liu Qiangdong's team.