Combining online and offline efforts helps JD.com establish overall price competitiveness, but there is limited room for JD.com to leverage its low-price strategy offline. Compared to online sales and marketing, JD.com may also need to create momentum offline.

Content/Zhong Qin

Editor/TV

Proofreader/Mangfu

The second wave of the 2024·11.11 promotion has begun, and the annual exam for e-commerce platforms is still ongoing. JD.com, which has temporarily weathered controversies involving its spokesperson Yang Li and customer dissatisfaction, is reshaping the 'top-level design' of its retail landscape.

Since rediscovering its low-price strategy at the end of 2022 and sounding the new round of price competitiveness in the e-commerce platform, JD.com's retail business performance over the past two years has been labeled as 'radical.' Even this year's Double 11, JD.com was the last platform to conclude its event, extending the promotional period to November 13 to leverage time to boost orders and create more room for growth in total sales.

The extended Double 11 campaign is just a microcosm of JD.com's intensified focus on retail. From a holistic perspective, JD.com's 'battle map' for both online and offline retail has been laid out.

For JD.com, this seems to be a necessary 'battle that must be won.' It even unveiled a new slogan during the release of its Q2 2024 financial report, which showed a net profit attributable to shareholders of 14.5 billion yuan, a year-on-year increase of 69.0%. JD.com took the opportunity to express its confidence in achieving healthy growth in profits throughout the year and its commitment to accelerating revenue growth in the second half of the year, aiming to exceed the growth rate of China's retail sales for the entire year.

Although JD.com's confidence has multiplied, the current 'battlefield situation' it faces is tricky.

On the one hand, JD.com's market capitalization has long been surpassed by the 'upstart' Pinduoduo, and under Pinduoduo's aggressive subsidies, it has lost a significant share of the 3C category, which JD.com once dominated. Meanwhile, its 'old rival' Taobao and Tmall Group are embracing an open attitude to drive growth, integrating WeChat payments to expand its user base. On the other hand, Suning.com has frequently opened 'MAX' stores, using large-scale stores to compete with JD.com's MALL, a similar home appliance retail chain. Meituan and Ele.me are also heavily investing in instant retail, competing directly with JD.com.

As JD.com intensifies its retail landscape and encounters numerous competitors, its 'top-level design' this time is particularly important. This will be a 'blueprint' that determines its future influence in the industry.

Part.1

How Far Can the 'Merchandising and Sales Culture' Go?

The 'merchandising and sales team' has become JD.com's new label in the e-commerce competition in recent years. In the short term, this strategy benefits JD.com's offensive, but in the long term, it not only fails to solve chronic issues but also gives rise to new challenges.

At its core, merchandising and sales embody the concept of 'professionalism.' Their footprint spans the globe, enabling them to trace product origins or directly connect with brand owners, oversee the entire transportation chain, and control costs. For example, they introduce the latest electronic product models worldwide, select the best products in the industry through rigorous testing, and source the freshest and highest-quality produce from their origins.

This concept is inherently connected to JD.com's early emphasis on 'authentic products,' both prioritizing quality. However, the current 'merchandising and sales culture' also embraces JD.com's pursuit of low prices, ultimately forming what CEO Xu Ran describes as a guardian of affordable yet high-quality products.

In reality, JD.com's merchandising and sales team is an 'internal drive' product of its e-commerce DNA and a 'forced' new weapon in competition with rivals.

The reason it can be called a 'new weapon' stems from last year's Double 11. At that time, JD.com's merchandising and sales team exposed the insider details of top live streamers' 'floor price agreements,' entering the fray through a verbal spat and quickly engaging in a head-to-head battle with Li Jiaqi through live streaming. Despite the somewhat hastily arranged live studio and the nervous demeanor of the usually behind-the-scenes merchandising and sales team, the timing of the Double 11 and the buzz of going head-to-head with a top live streamer made it quite a spectacle. Coupled with the sincerity of JD.com's merchandising and sales live streams, which emphasized 'no commissions, no shelf fees, no gimmicks,' it marked the team's first foray into the limelight.

Seeing the commercial value that merchandising and sales can create, JD.com began to prioritize this team, promoting them not only during major sales events like 618, the New Year sale, and Double 11 but also in daily operations. Even Liu Qiangdong has repeatedly come out to support the merchandising and sales team, drawing attention to them and increasing their salaries with real money.

This Double 11, merchandising and sales continued to go head-to-head with Li Jiaqi, offering discounts on top of matching his prices, vowing to solidify their price competitiveness.

At this point, the ammunition for JD.com's merchandising and sales weapon is clear: popularity and low prices.

From a popularity perspective, e-commerce platforms, especially comprehensive ones, haven't had a new story in a long time. Annual sales events have become less stimulating for consumers, a trend evident since e-commerce platforms stopped disclosing transaction volumes. At this point, both JD.com and Taobao need to introduce new concepts to capture consumers' attention and drive orders.

Therefore, the merchandising and sales team, with their professional attributes and frequent 'lively' activities, has become JD.com's best traffic entrance.

From a pricing perspective, Liu Qiangdong returned at the end of 2022 with the message that 'low price is JD.com's only fundamental weapon,' making pricing a top strategic priority for the company. The merchandising and sales team, with their ability to trace product origins and negotiate prices, is the best 'cavalry' for implementing this low-price strategy.

More importantly, popularity and low prices have formed a positive feedback loop. With popularity and low prices as prerequisites, JD.com's merchandising and sales team attracts the first batch of users, who then generate higher sales volumes and more sales data. This allows for better sales forecasting and more negotiating power, leading to even lower prices.

However, there is another side to the coin: JD.com's merchandising and sales team also faces tough nuts to crack and new challenges.

Firstly, although JD.com is a full-category e-commerce platform, its user demographics make it difficult to gain a say in women's wear, which is a category with robust supply and demand. As a platform, JD.com must address the 'challenge' of its lack of competitiveness in apparel. JD.com is aware of this issue and has started to increase investment in women's wear. This Double 11, it allocated one billion yuan in subsidies to cultivate consumers' habit of buying women's wear on JD.com.

With a lack of category awareness, JD.com's merchandising and sales team must first cultivate shopping habits before leveraging their strengths. Compared to the platform's more mature categories, this will be a protracted battle.

Secondly, since JD.com's merchandising and sales team gained prominence, their internal importance has also increased. JD.com recently announced plans to hire 10,000 more merchandising and sales personnel. Such a large-scale expansion is bound to impact the company's overall human resource costs, internal organizational structure, and more. JD.com must first balance its internal ecosystem to excel externally. Balancing the organizational structure of the merchandising and sales team is also a 'must-answer' question for JD.com.

Part.2

Consolidating Price Advantages Offline and Delving into Specialized Formats

Compared to differentiating itself online through 'merchandising and sales,' JD.com's offline retail layout is more 'conformist,' focusing on the hottest offline sectors but continuing its low-price strategy.

JD.com has ventured into both discount and outlet formats, both synonymous with 'low prices' in the retail industry and vastly different from conventional supermarket and hypermarket business logic.

Starting with discount supermarkets, JD.com opened its first full-category discount supermarket, Huaguan Discount Supermarket, at the end of June this year. The first store (Changyang Store) is located in Fangshan, Beijing. Unlike 'soft discounts' that sell near-expiration products (e.g., HotMaxx), Huaguan Discount Supermarket offers 'hard discounts' by squeezing water from the supply chain and reducing operating costs to create more room for end prices. The supply chain still relies on JD.com's merchandising and sales team and its years of logistics infrastructure. On the operations side, Huaguan Discount Supermarket continues the characteristics of 'hard discounts' with an extremely streamlined 'cardboard display' method, reducing shelf and labor costs.

During its opening, Huaguan Discount Supermarket sold Thai golden pillow durians for 19.9 yuan per jin. In comparison, Pupu Supermarket, an online fresh food platform, sold the same product for over 30 yuan per jin. Additionally, to attract more consumers, Huaguan Discount Supermarket ran promotional activities on Douyin, offering coupons.

From the perspective of JD.com's retail landscape, it has the foundational capabilities for 'hard discounts.' According to JD.com, the store will serve as a template for further exploring discount supermarkets.

However, it's worth noting that granting price concessions through the supply chain is only the first step in 'hard discounts.' The ultimate competition in this format lies in private label capabilities. Competitors in the same format, like Sam's Club and Aldi, ultimately profit from private labels and enhance consumer loyalty through product differentiation. Even Hema has been vigorously developing its private labels in recent years, frequently launching hit products.

Hema's NB stores, which also focus on 'hard discount' low prices, use private labels as their ultimate 'trump card' and are accelerating store openings and franchising to expand their influence.

In contrast, JD.com temporarily lacks the advantage of developing private labels, indicating that in the 'hard discount' supermarket format, it needs to reveal more cards to maintain a long-term presence at the table.

Apart from discount supermarkets, JD.com has also quickly entered the outlet format, which focuses on 'soft discounts' and mainly competes on brand recruitment capabilities, leveraging more influential brands to tap into the low-price market.

Recently, the first JD.com Outlet opened in Wuxi, Jiangsu, requiring customers to bind their JD.com membership upon entry. Most brands in the JD.com Outlet are apparel, beauty products, and bags, rather than JD.com's strong suit of electronics. This reveals JD.com's offline focus on category expansion, aiming to cultivate consumer habits of purchasing apparel products on JD.com through low prices.

The outlet format has proven to be a viable business model, but its popularity has waned in recent years due to the impact of diversified channels. This means that when JD.com launches its outlet format, it primarily faces the challenge of a weakening overall market trend. Even with the 'JD.com' brand endorsement, it is difficult to make waves in a short period.

According to media reports visiting the store on September 30, the JD.com Outlet had low foot traffic. On a weekday, visits in the morning and evening, each lasting over half an hour, revealed only a handful of visible visitors.

Indeed, combining online and offline efforts does help JD.com establish overall price competitiveness. However, whether in discount supermarkets or outlets, JD.com has limited room to leverage its low-price strategy offline. Compared to the 'lively' merchandising and sales activities online, JD.com may also need to create momentum offline.

Part.3

Infrastructure 'Rear Guard' Leverages Synergistic Value

When telling new stories online and offline, it's crucial not to overlook the support of JD.com's 'reserve forces' in the rear.

Just as Alipay supports Alibaba, enhancing online payment infrastructure and assisting Hema in digital payments, seamlessly connecting the retail landscape through payment processes.

For JD.com, logistics is undoubtedly that 'needle.'

Online, logistics is the final step in the merchandising and sales team's process of selecting and shelving products. With control over logistics infrastructure, JD.com can maximize supply chain initiative, ensuring both warehousing and delivery are completed at the lowest cost and fastest speed.

Online sales data will also continue to feed back into JD.com's backend resource and transportation allocations, optimizing the supply chain, enhancing logistics efficiency, and forming a positive feedback loop.

Offline, JD.com's Huaguan Discount Supermarket operates in a 'JD.com self-operated' model, with merchandising, sales, and delivery chains similar to those online, maximizing supply chain potential.

An even more crucial aspect is instant retail, which is JD.com's focus this year. In the first half of this year, JD.com Hourly Delivery was upgraded to JD.com Instant Delivery, where consumers place orders online and JD.com handles offline delivery. Currently, Meituan and Ele.me's average delivery time for instant retail is around 40 minutes, while e-commerce platforms like Taobao and Douyin have delivery times exceeding one hour, with Taobao's Uniqlo Hourly Delivery taking 2-3 hours.

Leveraging its same-city delivery capabilities, JD.com significantly reduces delivery times, with the official claim of a minimum of 9 minutes. Among currently active e-commerce players, JD.com excels in leveraging timeliness. This advantage enhances user stickiness, making its backend strength a 'golden signboard' for frontend sales.

More importantly, the delivery process uncovers JD.com's potential growth opportunities. Besides electronics and apparel, which are already integrated into JD.com Instant Delivery, the service has also penetrated the catering industry, attracting chain brands like Burger King, Heytea, and Luckin Coffee.

Using the 'high-frequency and rigid demand' of catering to cultivate consumer awareness, JD.com stands to gain a larger share of the instant retail landscape in the future.

Furthermore, coinciding with this year's Double 11, JD.com and Taobao 'tore down walls' as JD.com Logistics integrated with the Taobao platform, providing commercial space for logistics and driving additional revenue.

It can be said that in designing its retail landscape, JD.com's logistics has always been its backbone. By combining online and offline efforts with logistics, JD.com can maximize its synergistic value.

This may be the most suitable ecological niche for JD.com in the retail industry. While it remains uncertain whether JD.com's growth rate will exceed the overall market, it is certain that with new and old rivals circling, time is running out for JD.com.