01

The Tug-of-War for Low Prices

Gunshots and artillery booms fill the air as JD.com wages a defensive battle.

In the winter of 2022, JD.com reignited its low-price signal, continuously transmitting it to hundreds of thousands of JD.com employees through group emails and meetings. By the first half of 2023, Liu Qiangdong pulled the trigger on low prices, and the billion-yuan subsidy responded with a counterattack.

JD.com has made a bold move. Daring to compare prices across the entire network, JD.com's revenue exceeded 1 trillion yuan for the first time in 2023, with net profit attributable to shareholders doubling year-on-year, and the number of third-party merchants on the platform more than doubling year-on-year.

However, this does not mean that there are no objections to low prices within JD.com. "The dilemma between quality and low prices has plagued a handful of mid-to-senior executives who are reluctant to change."

Liu Qiangdong, who speaks with authority, is sometimes provoked. During an internal meeting on the billion-yuan subsidy, Liu Qiangdong slammed his hand on the table and shouted, "Do you know the real spending power of the people? Do you know that at least 400 million people in China have never tasted kiwi fruit?"

Low prices are a must for JD.com, and Liu Qiangdong is serious about it.

Twenty years ago, JD.com relied on low internet prices to defeat once-dominant large supermarkets like Suning and GOME. Today, two decades later, JD.com and some internet giants have swapped roles, with the latter beginning to encircle and suppress JD.com in the same manner.

By this year's 618 shopping festival, JD.com's focus was no longer on whether to offer low prices but on how to do it well. More specifically, it was about how to smoothly integrate and connect low prices with JD.com's consistent advantage—quality.

Perhaps this can be seen as a case of "good things come to those who wait." In fact, in the first half of 2024, JD.com was both cautious and resolute in its search for a smoother path to implement low prices.

There's a small aside here. At the 2024 618 kick-off press conference on May 28, JD.com unveiled the theme slogan "Good and Cheap." At that time, "good" came before "cheap."

But on the day of the 618 media meeting, JD.com changed its propaganda line to "Cheap and Good."

This small detail conveys a certain tension within JD.com regarding the logical relationship between low prices and quality.

02

Jingxi Finally Embraces JD.com's Characteristics

But the tug-of-war does not represent hesitation or indecision.

On May 30, 2024, the Jingxi brand was upgraded, transforming into Jingxi Self-operated.

Although Jingxi has consistently focused on low prices, its business model has undergone a fundamental change. Unlike the previous platform-based approach, Jingxi's self-operated model adopts a full management model. Under this model, Jingxi takes on everything except production, including product sales, operations, delivery, and after-sales service.

The benefit of this approach is that Jingxi Self-operated can source factories directly from production origins, saving on the costs and profits of middlemen; then, relying on JD.com's strong sales volume, it can reduce costs to the lowest prices across the network.

Through full management model, Jingxi Self-operated has demonstrated its strategic stance and clarified the relationship between quality and price.

Firstly, this is a strategic declaration to take low prices to the extreme. The relaunch of Jingxi itself is the biggest boost to the low-price strategy. Measures like the billion-yuan subsidy and 9.9 yuan free shipping are more tactical, while Jingxi Self-operated resembles a bet on business and strategy.

Secondly, Jingxi Self-operated facilitates a smooth connection between quality and low prices, achieving a positive synergy.

Unlike other platforms, Jingxi Self-operated requires not only the lowest prices across the network but also quality products. For JD.com, "price and quality are equally important, and we resolutely reject a large number of low-quality, low-priced products."

This is not just a slogan.

Before relaunching Jingxi Self-operated, JD.com conducted a significant survey. They purchased 1,000 different types of low-priced, best-selling products from other platforms and found that 80% of them had issues with false advertising, short weights, shoddy goods, and serious quality and safety concerns.

The problem of false low prices has persisted for a long time, causing harm to consumers. For example, a user in Chongqing purchased underwear only to find stains indicating it had been worn before, and when the user applied for a return, they were asked to cut off the stained part and film a video for review. A user in Shaanxi purchased a 500-gram bag of pistachios, only to find that the desiccant weighed 191 grams and the packaging box weighed 72 grams. Still, another user bought a dress online and found more than a dozen long hairs stuck to it.

Even more absurd, someone spent over 20,000 yuan on six air conditioners and received a thermos flask instead...

The race to low prices has inadvertently compromised product quality. After witnessing these issues firsthand, Jingxi Self-operated found its own differentiated positioning.

Jingxi Self-operated has become a flagship project for JD.com in every sense of the word. In the words of insiders at JD.com, "Jingxi Self-operated is highly valued internally, with top-level executives personally guiding it and having great confidence in this model."

However, challenges also arise. Jingxi Self-operated focuses on white-label industrial belt factories as its product sources, and selecting quality products from this mixed bag is a significant challenge.

Regarding white-label products, JD.com responded to Wendo Business: The first challenge for procurement and sales is understanding these users in the lower-tier markets and clarifying their needs. The second challenge is to have a broad understanding of the cost of raw materials for products to identify where prices are inflated and then squeeze out the excess.

To make up for this knowledge, it is necessary to frequently and intensively visit source factories. Wendo Business learned that one JD.com automotive supplies procurement and sales representative "visited hundreds of suppliers within a month."

Success or failure hinges on this role, and the importance of "procurement and sales" is greatly amplified, with workload alone being a massive undertaking.

Currently, within Jingxi Self-operated's team of over 200 people, the procurement/sourcing/quality control communication team, which makes up more than two-thirds of the total, is responsible for large-scale procurement. As Jingxi Self-operated expands, the procurement and sales team is bound to grow accordingly.

During this year's 618 shopping festival, Jingxi Self-operated's order volume increased by 260% month-on-month, with categories like food and sunscreen seeing growth exceeding 400%.

From the official website, Jingxi Self-operated's official store currently has nearly 60 million followers. Most products in the store are priced below 10 yuan, ranging from cleaning supplies, workshop accessories, to food and fresh produce.

According to JD.com, Jingxi Self-operated's primary evaluation indicator at present is helping JD.com acquire more new users in the lower-tier markets and their retention rates.

Looking ahead, Jingxi Self-operated, with its ambitious goals, clearly aims for more.

03

Procurement and Sales Power the Low-Price Strategy

It's not just the billion-yuan subsidy and Jingxi Self-operated; Liu Qiangdong is playing a big game with low prices.

Since the end of 2023, JD.com's procurement and sales team has been elevated to a higher position with significant salary increases. These raises are continuous, with no upper limit.

Previously, JD.com announced that, starting from January 1, 2024, the annual fixed salaries of frontline business personnel such as procurement and sales would increase by nearly 100%. Meanwhile, the bonus investment for procurement and sales in 2023 increased by 72% year-on-year, with 16 business groups receiving bonuses exceeding 20 times their monthly salary, and the top-performing group receiving bonuses exceeding 50 times their monthly salary.

On May 27, JD.com announced again that, starting from July 1, 2024, over a period of one and a half years, the annual fixed salary of procurement and sales would be increased from 16 months to 20 months, with performance incentives having no upper limit!

During the mid-year sale, procurement and sales became the absolute protagonists of the entire 618 kick-off meeting. JD.com carefully designed labels for procurement and sales, such as "busy" and "stubborn," and introduced one heartwarming procurement and sales story after another. Midway through the kick-off meeting, JD.com organized a "real or fake procurement and salesperson" activity that lasted over an hour...

JD.com's emphasis on procurement and sales is evident. As the bridge between manufacturers and users, their importance is self-evident, especially for Jingxi Self-operated.

For JD.com's previously promoted branded products, procurement and sales selected the best from good products. But for Jingxi, which focuses on white-label products, procurement and sales select quality products from a heap of low-priced items. The former is like icing on the cake, while the latter is like a lifeline, indispensable.

Behind this change in logic lies JD.com's emphasis on the supply chain, particularly at the upstream end.

Liu Qiangdong has said more than once that the core of retail lies in the supply chain and logistics. However, for a long time, JD.com's logistics supply chain focused more on speed and quality, such as how to deliver branded products to users faster and better. But for Jingxi and white-label product belts, the core demand has changed: it's about leveraging supply chain advantages to achieve the lowest possible product prices.

In this regard, JD.com admits that it needs to return to its core competency—supply chain capabilities, using self-operated procurement and sales to select and control products.

Despite seeming like a disjointed series of moves, JD.com has addressed several key issues on the path to low prices:

Firstly, personnel. Elevating the status of procurement and sales and offering them high salaries incentivizes them to source quality products from white-label industrial belts.

Secondly, business/strategy. Relaunching Jingxi as JD.com's biggest lever for its low-price strategy makes JD.com's low prices a reality.

Thirdly, supply chain capabilities. Relying on self-operated full management model, JD.com fully unleashes its long-accumulated logistics and supply chain capabilities, pursuing a low-price model unlike any other platform.

From an industry perspective, Taobao's "Taobao Factory" shares some similarities with Jingxi in terms of mode. Both focus on white-label factories in industrial belts, but the difference lies in Jingxi's heavier model, where it handles everything except production itself.

Starting from agricultural products, Pinduoduo delves into industrial belts, connecting supply and demand, and achieving purely low prices, but at the cost of varying product quality.

It's worth mentioning that the full management model is not Jingxi's innovation. Earlier, Temu, the overseas e-commerce platform under Pinduoduo, gained prominence overseas through full management model, price comparison across the network, and integrated logistics.

It's undeniable that whether it's the billion-yuan subsidy or full management model, JD.com's low prices are genuine followers. But with self-operation, everything changes dramatically.

Self-operation not only reinforces JD.com's user perception of "quality products" but also distinguishes it from generic low prices. Low prices with conscience and quality—this is JD.com's current answer.

04

Kings Collide, Decisive Battle Upstream

From copying the billion-yuan subsidy to offering nine-yuan shipping through logistics; from elevating the status of procurement and sales to leveraging supply chain advantages, to relaunching Jingxi Self-operated, JD.com's low-price strategy has gradually evolved into a differentiated path from following others to independent innovation.

JD.com's low-price strategy is maturing. However, this process didn't take too long; in just two years, JD.com's low-price battle has barely begun.

In these two years, Liu Qiangdong has transformed JD.com from blindly chasing competitors to a self-driven innovation with JD.com's unique characteristics. Relying on its procurement and sales force, self-operated model, and comprehensive supply chain advantages, JD.com has initially carved out a distinctive low-price path.

This low-price model, which is more inclined towards JD.com's characteristics, is a relatively perfect solution at present.

However, JD.com's advantages have not yet been fully leveraged. Or, JD.com's low-price battle has just begun.

With 620,000 employees, JD.com boasts the industry's largest customer service team, an unparalleled self-operated logistics system, and a seasoned procurement and sales force that has delved into source factories for years... These key nodes in the supply chain, directly facing users, brand owners, and source factories, are crucial weapons in the low-price battle.

In the two years since Liu Qiangdong's return, he has led JD.com to make changes and respond: from initially offering users billion-yuan subsidies alone to promoting the procurement and sales team closer to the upstream end of products, and then to relying on the full self-operated model and comprehensive supply chain to reduce costs, JD.com has continuously sought feedback, results, and answers from upstream in the supply chain.

Echoing the saying that "the big money is overseas" for home appliance manufacturers, JD.com's low prices are rooted at the source, perhaps upstream in industrial belts.

In 2024, Taotian will no longer focus on low prices, while Liu Qiangdong, leading 620,000 JD employees, has finally made low prices a distinctive feature.

JD has set its sights on Pinduoduo. The decisive moment has finally arrived.