JD founder Liu Qiangdong's internal response is filled with self blame for JD's existing problems and determination to reform.
"The organization is now huge, bloated, and inefficient, and it does take time to change." On December 9th, Liu Qiangdong posted on the intranet, stating that JD's foundation is still strong, and we believe we will definitely get out of the trough.
On that day, JD employees discussed in a thousand word article on the internal network the actual problems JD currently faces in its business, such as "complex promotion mechanisms", "incomplete implementation of low price strategies", and "cannot only use a single explosive product for low prices". In the article, suggestions were also expressed for the linkage between JD departments at present.
With these questions in mind, First Financial reporters interviewed multiple merchants who have been cooperating with JD.com for a long time. What are the actual problems encountered in frontline business? Are there any issues raised by internal network employees? Perhaps some answers can be obtained from them.
The "JD promotion" in the eyes of merchants: often difficult to understand
In the questions summarized by employees about JD, promotion mechanism is one of the key words.
Regarding this, Liu Qiangdong mentioned on the intranet that, "We prioritize customers every day, but in our work, we always put ourselves at the center of our thinking! We often say that we only prioritize in battles, but we always defend ourselves and never think about how to take the initiative! Many people talk about innovation every day, but they just plagiarize and follow others every day. When so many problems arise, of course, it is my poor management that I am very self blaming, but no matter what, I will not lie flat, and I hope my brothers will not lie flat."
This has also resonated with many JD merchants.
Sports brand merchant Wang Yu (pseudonym) told First Financial, "The promotion mechanism is complex, which may be relative to the internal and commercial aspects of JD.com. From the perspective of consumers, the perception is not obvious because coupons and other items are automatically collected and stacked. As merchants, our confusion is that platform coupons (including full discounts) and merchant coupons (including full discounts) are not mutually exclusive when there are many, which increases the difficulty of merchant configuration."
In addition, Wang Yu also has a deep understanding of the "big promotion activity planning problem" on the platform. "There are few big promotion activities on the JD platform, and merchants have a more obvious perception of this. Event planning is waiting for the pace of friends, and there are fewer proactive planning situations. Merchants are relatively passive."
Food merchant Li Ming (pseudonym) told First Financial that, "In terms of low prices, I have observed that many POP (third-party) merchants sell products that are more expensive than on other platforms. In addition, from a personal experience perspective, JD's low price strategy direction is not a problem, but it is under the premise of protecting JD's interests. When implementing the low price strategy, merchants do not offer discounts in terms of deductions and other aspects. Selling low prices reduces the profits of suppliers and brand merchants, and may even result in losses."
Regarding the promotion mechanism, Li Ming believes that there have been improvements. "The promotion mechanism used to be quite complex, and we often couldn't figure it out," he said
Another senior businessman, Wang Jie, told First Financial that according to his observation, although many of the products involved in the "billion yuan subsidy" on multiple platforms are daily hot selling products, more are tail products in the "long tail effect". "When the subsidized products you browse for a long time are not products with high demand and high willingness to purchase, the low price mentality is no longer enough, and you are too lazy to compare prices. Personally, I believe that the low price mentality is not differentiated buying expensive and losing, but rather whether the subsidized products you provide are the ultimate cost-effectiveness that consumers truly need. Otherwise, it is an outlet. Everyone knows it is out of season, not really subsidized."
Before and after Double 11 in 2022, Liu Qiangdong criticized internally that JD.com was losing its low price advantage. After implementing its low price strategy this year, JD.com has made adjustments to its discount strategy and other aspects. On November 22nd last year, Liu Qiangdong issued a letter to JD employees requesting adjustments to the remuneration of employees and executives. This is the first time in the past few years that JD.com has proposed a comprehensive salary reduction for executives.
From Liu Qiangdong's recent response, it can be seen that JD, which has changed for a year, still has many areas that need to be adjusted.
JD executives have also expressed in conference calls over the past year that many businesses need to be adjusted. JD Group CEO Xu Ran once stated that there is still a lot of room for improvement in JD's platform operation rules and traffic distribution algorithm mechanisms. The prosperity of the entire ecosystem requires time accumulation, and JD will gradually adjust the traffic distribution mechanism and rules.
JD Transformation Initiated
Although the above-mentioned merchants believe that there are still many areas for improvement in JD's platform operation, they can also perceive JD's determination to reform.
Regarding providing more support for POP merchants and offering lower prices, Wang Yu said, "I have no opinion. In fact, I have already provided support before."
Regarding JD's low price policy, Wang Yu said that as a merchant, he has a deep feeling on this year's Double 11. Taking a popular product in the store as an example, Wang Yu said that during the Double 11 shopping festival, the price offered by JD.com to PLUS members reached a historical low, even lower than the price of a top anchor's live broadcast room. Wang Yu said, "Mainly, JD.com is making up for it. If the 618 platform hopes for more bleeding from merchants, during the Double 11 shopping festival, the platform is willing to invest together. In fact, the platform also realizes that relying solely on merchants is not enough, so in all competitions this year, billions of subsidies are very important."
Another keyboard and mouse merchant, Chen Liang (pseudonym), just joined the JD POP platform this year and said that the support provided by the platform is quite good. "This year's Double 11, JD POP and Pinduoduo have a lower base due to being new businesses and the platform has provided subsidies, resulting in an increase in Double 11 performance, while other platforms' Double 11 revenue is in a downward trend."
Some merchants have been deeply cultivating on other platforms for many years but have not joined JD.com. A toy category merchant told First Financial that the reason for not joining JD.com for a long time is due to traffic. For the toy category, JD's traffic is relatively lower compared to other platforms. However, with JD's resource tilt towards POP merchants, he is considering joining JD.
Based on feedback from merchants, JD.com has made improvements in its operations. In his response to his employees, Liu Qiangdong said, "The organization is now huge, bloated, and inefficient. It does take time to change. JD's foundation is still strong, and we believe we will definitely get out of the trough. Every person and company will go through several peaks and valleys to achieve greatness."
From this year's adjustment on JD.com, it is evident that they have realized the problems caused by bloated architecture, and actively introduced third-party merchants to make businesses in the ecosystem more diversified.
In terms of architecture, at the beginning of this year, JD.com split the original 3C home appliance business group into two and reorganized the computer digital, communication, and home appliance business groups into home appliance and computer communication business groups. At the same time, JD Logistics has adjusted its organization to establish four major business units and cancelled seven regional companies. At the same time, JD.com made multiple executive personnel adjustments during the year,
On January 4th, JD.com released the "Spring Dawn Plan" for various businesses, including 12 support policies such as providing fast entry channels for natural persons, "0 yuan trial operation", and 2100 yuan "new store gift package", to increase support for businesses and attract third-party businesses to settle in. In the second quarter, the year-on-year growth rate of JD's new merchants reached 417%. In the third quarter, JD.com upgraded 20 measures to support merchants again, and stated that the overall number of merchants in the third quarter maintained a three digit year-on-year growth.
During the third quarter financial report conference call, JD CFO Shan Su stated that the growth of users purchasing POP products has been higher than the overall market growth in the past two quarters. At present, the progress of opening up the platform is in line with the company's expectations, and more active merchants and more POP transaction users can be seen.
In terms of low prices, JD.com lowered the threshold for free shipping of self operated products on August 23. In the recent Double 11 promotion, JD.com still focused on a "low price strategy". During the Double 11 period, the number of viewers in JD's sales live broadcast room exceeded 380 million, which also drove sales of over 60 brands to exceed 1 billion yuan. The transaction volume of nearly 20000 brands increased by more than three times year-on-year, and the transaction volume of new merchants increased by more than five times month on month.
On the other hand, JD.com is also testing new businesses. In July, JD.com established an innovative retail department, integrating businesses such as Qixian Supermarket and Pinpin into independent business units. Home appliance retail veteran Yan Xiaobing returns to JD.com and is responsible for JD's innovative retail business, reporting to Xu Ran.
E-commerce competition is becoming increasingly fierce
In addition to Liu Qiangdong, Jack Ma has previously responded to employee feedback on the intranet, revealing that after the peak of internet platform traffic, e-commerce competition has become increasingly fierce.
On November 29th, as Pinduoduo's market value surpassed Alibaba's, Jack Ma stated on Alibaba's intranet that, Please provide constructive opinions and suggestions, especially innovative ideas. I believe that everyone at Alibaba is watching and listening today. I firmly believe that Alibaba will change, and that Alibaba will change. All great companies are born in winter. The era of AI e-commerce has just begun, and it is both an opportunity and a challenge for everyone. Congratulations to PDD on their decisions, execution, and efforts over the past few years. Everyone has done well, but those who can reform for tomorrow and the future are willing to Only organizations that pay any price or sacrifice are respected and return to our mission and vision
From the financial report performance, Pinduoduo's revenue growth rate is faster than that of Alibaba and JD.com. According to Pinduoduo's third quarter financial report, its revenue for the quarter was 68.8404 billion yuan, a year-on-year increase of 94%. Alibaba's revenue in the third quarter was 224.8 billion yuan, a year-on-year increase of 9%. In the third quarter of 2023, JD Group's revenue was 247.7 billion yuan, an increase of 1.7% year-on-year.
In March of this year, Alibaba announced the launch of a new governance structure of "1+6+N". The Alibaba Group established six major groups, including Alibaba Cloud Intelligence, Taobao and Tmall, Local Life, International Digital Business, Cainiao and Da Wen Yu, and several smaller business companies. In addition, Alibaba has recently established an Infrastructure Committee to focus on coordinating the planning and construction of the group's underlying technological infrastructure.
Unlike the major adjustments made by Alibaba and JD.com, Pinduoduo has been actively implementing its low price strategy in the past year, and has reflected this strategy in its overseas business.
Pinduoduo Chairman Chen Lei stated in the third quarter financial report that "this year is a year of consumer boost and intensified competition in the e-commerce industry. We will maintain strategic composure, accumulate experience through rapid product iteration and user feedback cycles, and achieve sustainable and high-quality growth." Pinduoduo's cross-border e-commerce platform Temu has swept overseas markets at low prices through a fully managed model in the past year, Triggering multiple platforms to follow up on the full hosting mode.
From the stock price perspective, JD's stock price is currently at a low point. As of the time of publication, the market value of JD.com is 41.6 billion US dollars, and Pinduoduo is 184.6 billion US dollars, about 4.4 times that of JD.com.
For the outlook for 2024, JD.com predicted in its third quarter financial report that the impact of proactive business optimization and adjustment this year will weaken next year. At the same time, with the gradual recovery of the economy and consumption, as well as JD's series of optimization and adjustments in algorithms and systems this year, the company's core advantage based on the supply chain will be fully utilized, and the positive impact of this year's adjustments will also be gradually released, JD.com expects to achieve high-quality business growth next year.
Pan Helin, Co Director of the Digital Economy and Financial Innovation Research Center at the International Business School of Zhejiang University, said that in his view, JD's model is not a problem. The current difficulties have both internal and external factors. The internal factors are JD's bloated institutions, while the external factors are the current trend of consumers pursuing high cost-effectiveness. He believes that JD's return and exchange system and efficient logistics system are still advantages. In the future, JD's pursuit of change can be achieved through technology and other means to reduce costs, reduce institutional redundancy, and improve operational efficiency. On the other hand, it is to develop traffic entry points.
As a business owner with over 10 years of experience, Wang Yu believes that competition on e-commerce platforms will become more intense in the future, and platform polarization has become a trend. "This trend can be seen from the war reports of many brands. For example, some FMCG brands have tied Tiktok with Tmall and JD as the main positions, and some even put secondary e-commerce platforms such as Vipshop into the war reports, highlighting the status quo of all-round layout and blooming everywhere in the context of low price competition. Some e-commerce platforms with low price mentality have also begun to be valued."