Content/Zhong Qin

Editor/TV

Proofreader/Mang Fu

The second wave of the 2024·11.11 Grand Promotion has begun, and the annual exam for e-commerce platforms is still ongoing. JD.com, which has temporarily survived the controversy over its spokesperson Yang Li and the "backstabbing" of users, is reshaping the "top-level design" of its retail landscape.

Since reviving the low-price strategy at the end of 2022, signaling a new round of competition based on price competitiveness among e-commerce platforms, JD.com's retail business has been aggressive over the past two years. Even this year's Double 11, JD.com was the last platform to conclude, extending the campaign to November 13, leveraging time to drive orders and create more room for growth in total sales.

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

In JD.com's view, this seems to be a "must-win battle" in urgent need. It even announced a new slogan amid the release of its second-quarter 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 advantage of the momentum to express its confidence in achieving healthy profit growth throughout the year. It will continue to focus on accelerating revenue growth in the second half of the year, striving to exceed the growth rate of China's retail sales for the full year.

While its own confidence has increased, the "battlefield situation" facing JD.com is rather tricky at present.

On the one hand, JD.com's market value has long been surpassed by the "upstart" Pinduoduo, and under the strong attack of Pinduoduo's hundred-billion subsidy program, it has lost a significant share of the 3C category, which JD.com once "dominated". Its "long-time rival" Taobao and Tmall Group are also changing their growth trajectory with an open attitude, integrating with WeChat Pay to expand their user base. On the other hand, Suning.com has frequently opened "MAX" stores, using large-scale stores to accelerate its strategy against JD.com's home appliance mall, JD MALL. Meanwhile, Meituan and Ele.me are heavily investing in instant retail, competing with JD.com on the same stage.

As JD.com intensifies its retail presence and faces numerous competitors, its "top-level design" this time is particularly important. It will be a "blueprint" for future industry discourse power.

Part.1

How far can the 'procurement and sales culture' go?

The 'procurement and sales team' has become JD.com's new label in e-commerce competitions in recent years. In the short term, this strategy is beneficial for JD.com's offensive, but in the long run, it not only fails to solve "chronic issues" but also gives rise to more new challenges.

At its core, procurement and sales involve the concept of 'professionalism.' They operate globally, capable of tracing product origins or directly connecting with brand owners, managing the entire transportation chain, and controlling costs. For example, they are responsible for the first launch of the latest electronic product models, selecting the best-quality products in the industry through rigorous testing, and sourcing the freshest and highest-quality produce from their origins.

This concept is essentially an extension of JD.com's early emphasis on 'genuine products,' both of which prioritize quality. However, the current 'procurement and sales culture' also embodies JD.com's pursuit of low prices, ultimately forming what CEO Xu Ran described as the guardian of affordable and high-quality products.

In reality, JD.com's procurement and sales team is an 'internal driver' of its e-commerce DNA and a new weapon forced upon it by competition.

The reason it can be called a "new weapon" starts with last year's Double 11. At that time, JD.com's procurement and sales team exposed the inside story of top live streamers' "floor price agreements," entering the fray through verbal sparring and subsequently launching live streams to "go head-to-head" with Li Jiaqi within a short period. Although the live stream setup was somewhat haphazard, and the procurement and sales team, which had long operated behind the scenes, appeared nervous on camera, the stunt of going up against top live streamers during the Double 11 period garnered significant attention. Coupled with the sincerity of JD.com's procurement and sales live streams, which emphasized "no commission, no shelf fees, no gimmicks," it marked the team's first foray into the limelight.

Seeming to recognize the commercial value that procurement and sales could create, JD.com began to prioritize the procurement and sales team. Not only were they promoted during major sales events like 618, the New Year's shopping festival, and Double 11, but they were also active in daily operations. Even Liu Qiangdong has repeatedly come out to support the procurement and sales team, garnering attention for them and increasing their salaries with real money.

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

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

From the perspective of popularity, e-commerce platforms, especially comprehensive shelf e-commerce platforms, have not had a new story in a long time. Annual sales events have become less stimulating to 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 attract consumers' attention and drive orders.

Therefore, the procurement and sales team, with their professional attributes and frequent activities, has become JD.com's best traffic entry point.

From a pricing perspective, at the end of 2022, Liu Qiangdong returned with the mantra that "low prices are JD.com's only fundamental weapon," making pricing power the company's primary strategy. The procurement 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 preconditions, JD.com's procurement and sales team has attracted the first batch of users, who then generate higher sales volumes and more sales data. This allows JD.com to predict product sales trends and gain more negotiating power, further driving down prices.

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

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

Given the lack of category awareness, JD.com's procurement 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 procurement and sales team gained popularity, their internal importance has also increased. JD.com recently announced plans to hire an additional 10,000 procurement and sales staff. Such a large-scale expansion is bound to impact the company's overall human resource costs, internal organizational structure, and other aspects. JD.com must first balance its internal ecosystem before engaging in external competition. How to balance the organizational structure of the procurement and sales team is also a "must-answer" question for JD.com.

Part.2

Consolidating price advantages offline and diving into niche markets

Compared to differentiating online through procurement and sales, JD.com's offline retail layout is more "conformist," focusing on the hottest offline sectors today while still adhering to its low-price strategy.

JD.com has ventured into discount retail and outlet stores, both synonymous with "low prices" in the retail industry and distinct from conventional supermarket and hypermarket formats.

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. Huaguan Discount Supermarket belongs to "hard discount," differing from "soft discount" stores that sell near-expiration products (e.g., HotMaxx). It mainly squeezes water out of the supply chain and reduces operating costs to create more room for end prices. On the supply chain side, it still relies on JD.com's procurement and sales capabilities and years of logistics layout. On the operational side, Huaguan Discount Supermarket continues the characteristics of "hard discount" stores, featuring an extremely streamlined "cardboard display" approach to reduce shelf and labor costs.

During its opening period, Huaguan Discount Supermarket sold Thai golden pillow durians for 19.9 yuan per catty. In comparison, Freshgogo, a fresh food e-commerce platform, sold the same product for over 30 yuan per catty. Additionally, to attract more customers, Huaguan Discount Supermarket ran promotional activities on Douyin, distributing coupons during its opening period.

From the perspective of JD.com's retail landscape, it has the foundational capabilities to operate "hard discount" stores. According to JD.com, the company will use this store as a template to further explore discount supermarkets in the future.

However, it is worth noting that offering price concessions through the supply chain is only the first step in "hard discount" retail. The ultimate competition in this sector lies in the ability to develop private label brands. Competitors in the same sector, such as Sam's Club and ALDI, ultimately profit from their private label brands and enhance consumer loyalty through product differentiation. Even Hema has been vigorously developing its private label brands in recent years, frequently launching hit products.

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

In contrast, JD.com does not yet have an advantage in developing private label brands, indicating that in the "hard discount" supermarket sector, it needs to reveal more of its hand to maintain a long-term presence in this market.

In addition to discount supermarkets, JD.com has also rushed into the outlet sector this year, which focuses on "soft discount" and mainly competes on brand recruitment capabilities, leveraging more influential brands as leverage 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 of the brands in JD.com Outlet are apparel, beauty products, bags, etc., rather than electronics, which are JD.com's strength. This reflects JD.com's offline focus on expanding product categories and cultivating consumer habits of purchasing apparel products on JD.com through low prices.

Outlets are a proven business model, but in recent years, with the impact of diversified channels, the popularity and buzz around this sector have waned. This means that when JD.com launches its outlet sector, it primarily faces the challenge of an overall weakening market trend. Even with the "JD.com" name as a backstop, it is difficult to stir up waves in a short period.

Media reports indicate that on September 30, there was relatively low foot traffic at JD.com Outlet. During visits in the morning and evening on a weekday, with each visit lasting over half an hour, there were only a few dozen visible customers.

In reality, a combination of online and offline efforts is indeed beneficial for JD.com to establish overall price competitiveness. However, whether it's discount supermarkets or outlets, JD.com has limited room to leverage its low-price weapon offline. Compared to the online activities of procurement and sales, perhaps JD.com also needs to generate momentum offline.

Part.3

The synergistic value of the infrastructure 'rear guard'

When discussing new stories for online and offline retail, it is essential not to overlook the support of JD.com's "reserve forces" in the background.

Just as Alipay is crucial to Alibaba, complementing online payment infrastructure and assisting Hema's digital payments offline, connecting the retail landscape through payment processes.

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

Online, logistics is the final step in the product selection and listing process for the procurement and sales team. In this process, JD.com, which controls logistics infrastructure, can maximize supply chain autonomy. Whether it's warehousing or delivery, it can be completed at the lowest cost and fastest speed.

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

Offline, JD.com's Huaguan Discount Supermarket operates under the "JD.com Self-Operated" model, with procurement, sales, and distribution chains similar to those online, enabling the maximum mobilization of supply chain potential.

A more crucial aspect is instant retail, which has been 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 delivery platforms offer instant retail with an average delivery time of around 40 minutes, while e-commerce platforms like Taobao and Douyin have delivery times of over an hour. For example, Taobao's Uniqlo Hourly Delivery takes 2-3 hours.

Based on its same-city delivery capabilities, JD.com has significantly reduced delivery times, with the official claim being as short as 9 minutes. It is currently the platform that maximizes timeliness among e-commerce entrants. Leveraging its timeliness advantage, JD.com can enhance user stickiness, making its backend strengths the best "gold standard" for frontend sales.

More importantly, the advantages in the delivery process have uncovered potential growth opportunities for JD.com. In addition to electronics and apparel categories already integrated into JD.com Instant Delivery, the service has also penetrated the catering industry, attracting chain brands such as Burger King, Honey Snow City, and Luckin Coffee.

By focusing on the "high-frequency rigid demand" of catering to cultivate consumer awareness, JD.com can capture a larger share of the instant retail landscape in the future.

Moreover, coinciding with this year's Double 11, JD.com and Taobao "broke down walls" as JD.com Logistics integrated with the Taobao platform, providing commercial space for the logistics segment and driving more revenue.

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

This may be the most suitable niche for JD.com in the retail industry. Although it is not yet known whether JD.com's growth rate will exceed the overall market, it is certain that with new and old competitors surrounding it, time is running out for JD.com.