This article is written based on public information and is intended for information exchange only, not constituting any investment advice

As the economy gradually enters the era of stock, ineffective internal competition is no longer the solution, high-quality development is. Leaders in the trend of high-quality development will benefit the entire industrial chain.

JD.com has once again proven this point.

The recently concluded Singles' Day and the newly released third-quarter report show that JD.com, which continuously optimizes value creation for the platform, consumers, and merchants, not only ensures the stability and reliability of its supply chain but also effectively drives the digital transformation and cost reduction of upstream and downstream partners in the industrial chain after interconnection, truly practicing and enriching the connotation of high-quality economic development.

JD.com's answer is a slice of China's high-quality economic development. A broader vision of the era has already emerged beyond historical data. As summarized in "Value", "As long as an enterprise is creating value for society, its revenue and profits will eventually materialize, and society will ultimately reward it in the long run."

01

In the year of value regression, JD.com leads the industry across the board

The 2024 Singles' Day is described as the year of value regression. Coinciding with the disclosure of third-quarter reports by representative companies in e-commerce, logistics, consumer goods, and other sectors, more detailed clues were revealed to the market at the financial reporting level.

After reviewing each report, our greatest insight into this year's Singles' Day can be summarized in eight words: regaining growth, prioritizing efficiency. Among the various financial reports, JD.com's performance in prioritizing efficiency is leading the industry across the board. JD.com Group: Revenues for the third quarter amounted to RMB 260.4 billion, up 5.1% year-on-year, with GAAP net profit attributable to shareholders of RMB 11.731 billion, up 47.82% year-on-year. Another listed company under JD.com, JD Logistics, also performed remarkably in its third-quarter report: Revenues increased by 6.6% year-on-year to RMB 44.4 billion; Non-GAAP net profit attributable to shareholders amounted to RMB 2.57 billion, up 42.6% year-on-year. The consolidated gross profit margin was 11.7%, an increase of 2.5 percentage points from the same period last year. Besides steady growth, what attracted our attention most in the financial report was the profitability representing "efficiency improvement". The increase in gross profit margin is the core reason driving JD.com's profit exceeding expectations. According to our observation and research, with the continuous development of the synergistic advantages between the group and logistics, the internal and external efficiency of JD.com is continuously improving, promoting "efficiency" as JD.com's new key value logic.

Chart: JD.com Group and Business Segment Performance Data Source: JD.com Group Announcement

02

Seeking Depth Internally: Large-scale Application of Cutting-edge Technologies

This year's Singles' Day lasted longer, and the express delivery volume increased by 21.4% year-on-year, setting a new record high. For every e-commerce enterprise, this posed the biggest challenge ever. This is even more so for JD.com. Since this year marked the first combination of the "trade-in" program with Singles' Day, the sales share of home appliance categories reached 16.3%, an increase of 0.7 percentage points among the top 10 categories. JD.com disclosed that during Singles' Day, the transaction volume of 519 home appliance and furniture categories increased by 200% year-on-year. However, in the face of greater challenges, JD.com not only truly achieved "affordable and high-quality" products but also achieved significant efficiency improvements. According to data disclosed in JD.com's bulletin board, the number of shoppers during JD.com's 11.11 shopping festival increased by over 20% year-on-year, and the number of procurement and sales live orders increased by 3.8 times year-on-year. The transaction volume of over 17,000 brands increased by over 5 times year-on-year, and that of over 30,000 small and medium-sized merchants increased by over 2 times year-on-year. According to the financial reports of JD.com Group and JD Logistics, the overall gross profit margin has shown an increasing trend for several quarters, and in the more challenging year of 2024, the trend of gross profit margin improvement is even more pronounced, indicating that the operational efficiency of all links in the company's supply chain maintains comprehensive industrial leadership.

[1] Large-scale Application of Cutting-edge Technologies

By large-scale application of cutting-edge technologies, JD.com continuously strengthens its supply chain management capabilities, providing a solid guarantee for its user-centric driving strategy. In 2023, JD.com was shortlisted for the finals of the Gartner Global Supply Chain Technology Innovation Awards for the first time and won the championship in 2024. For example, integrated supply chain logistics services have always been JD.com's differentiating advantage and have become its core competitiveness after 17 years of cultivation. However, it is easier said than done. The development of such capabilities cannot be separated from long-term dual intensive investment in technology and assets, making it difficult to imitate and surpass. Taking the integrated capabilities built by JD Logistics as an example, we analyze its comparative advantages, which benefit from the following three core strengths.

Six Highly Synergistic Networks: JD Logistics has established six highly synergistic networks, including the warehousing network, integrated transportation network, last-mile delivery network, bulk goods network, cold chain logistics network, and cross-border logistics network, serving almost all regions, towns, and populations in China.

Infrastructure with Global Coverage: Over 40 Asia I distribution centers, over 1,600 warehouses nationwide, over 2,000 cloud warehouse ecological platform partner warehouses, with a total warehousing area exceeding 32 million square meters. Additionally, there are hundreds of sorting centers, nearly 20,000 distribution stations and outlets. Globally, there are nearly 100 bonded warehouses, direct mail warehouses, and overseas warehouses, with a total management area of nearly 1 million square meters, and the overseas supply chain network covers major countries and regions worldwide.

Innovation in Supply Chain Technology: Based on underlying technologies such as AI large models, 5G, cloud computing, and the Internet of Things, JD Logistics continuously expands its trinity supply chain technology advantages in software, hardware, and system integration.

Taking the cutting-edge AI large model as an example, JD Logistics has implemented large model applications in dozens of business scenarios and is one of the first companies in the industry to do so. In September this year, JD Logistics released logistics unmanned vehicle technology equipped with a perceptual large model and announced the large-scale deployment of the sixth-generation intelligent delivery vehicle with L4-level autonomous driving capabilities.

With the support of supply chain capabilities, JD.com's bulletin board data shows that the quarterly active user count and purchase frequency of JD.com Group have maintained double-digit growth for three consecutive quarters. [2] Putting Theories into Practice Practice is the sole criterion for testing truth. JD.com's large-scale deployment of cutting-edge technologies has become a killer app for the company to cover services across all industries and regions. Relying on JD Logistics' integrated supply chain capabilities and decoupling its long-accumulated solutions, products, and capabilities, JD.com can meet the needs of small and medium-sized customers in different industries in a more flexible, callable, and combinable manner. Currently, popular industry solutions cover six major industries: fast-moving consumer goods, apparel, home appliances and furniture, 3C, automobiles, and fresh produce.

Chart: JD Logistics mainly focuses on six major industries: fast-moving consumer goods, apparel, home appliances and furniture, 3C, automobiles, and fresh produce From JD.com's Singles' Day performance across industries, we can see highlights in different industries:

Furniture and Home Appliances: The transaction volume of 519 home appliance and furniture categories increased by 200% year-on-year, and JD.com's share in this category further increased.

Electronics and Technology: The transaction volume of AI learning machines increased by over 10 times year-on-year. The transaction volumes of AI computers, AI mobile phones, AI keyboards and mice, AI speakers all increased by over 100% year-on-year, and the transaction volume of AI smart glasses increased by 200% year-on-year.

Daily Necessities: JD Supermarket launched assorted packs combining different branded products, including over 20,000 items such as mother and baby products, household cleaning supplies, cooking oil, seasonings, and snacks. The overall transaction volume of JD Supermarket's assorted packs increased by over 50% year-on-year.

Textiles and Apparel: The transaction volumes of down jackets, outdoor jackets, thermal underwear, cashmere sweaters, and children's snow boots all increased by over 100% year-on-year; the transaction volumes of slim boots, loafers, and cotton boots increased by over 2 times; over 300 brands of hats, scarves, and other warm accessories doubled their transaction volumes.

Healthcare: Among categories such as chronic disease medications, nutritional supplements, and medical devices, the transaction volumes of multiple products targeting the elderly population increased by 140% year-on-year.

Automotive Services: The sales volume of JD.com's electric vehicle charging piles increased by 95% year-on-year, and the order volume for JD Service+ charging pile installation increased by 110% year-on-year.

This Singles' Day, JD.com's service network is more comprehensive and denser, serving not only as an e-commerce link between urban, county, and rural areas but also as a bridge for the smooth flow of goods at home and abroad.

During this affordable and high-quality JD.com 11.11, consumers in over 90% of county and rural areas nationwide traded in their old products for new ones through JD.com.

Consumers can also enjoy high-quality products from around the world without leaving their homes. JD.com International continuously introduces various imported foods, such as Starbucks' original imported coffee beans and Zehe coffee, both of which increased by over 20 times year-on-year. Oreo-flavored ice cream and Wall's overseas version ice cream increased by over 2 times year-on-year.

Overseas consumers can also start enjoying the convenience brought by JD.com. For example, JD.com's European omnichannel retail brand ochama provides door-to-door delivery services in 24 European countries. During this Singles' Day, small household appliances from China were highly favored, with sales increasing by 200% year-on-year.

03

Providing Warmth Externally: Consistent High-quality Service

JD.com's high-quality service has always been well-regarded and represents the industry's highest service standard. For example, its subsidiary JD Express provides door-to-door delivery services to all, and its high timeliness and extensive coverage have always been significant advantages. JD Logistics has also been pursuing higher standards on the path of high-quality service. In the past year alone, JD Logistics has set new standards for the industry, including on-demand pick-up and delivery, guaranteed compensation for late evening air shipments, and three major guaranteed compensations. Unsurprisingly, in the National Postal Bureau's satisfaction survey on express delivery services for the first two quarters of 2024, JD Express once again ranked in the first tier with high scores, and its service satisfaction continued to lead the industry.

Chart: "Announcement on the Survey Results of Express Delivery Service Satisfaction and Time-limit Delivery Rate in the Second Quarter of 2024 by the State Post Bureau"

[1] High-quality Service is the Most User-friendly Platform for Merchants and Users

For perishable fresh produce, the difference brought by high-quality logistics services is like night and day. During this Singles' Day, with interconnection and interoperability, JD Logistics accessed the Taobao and Tmall platforms, providing customers with more comprehensive services. Cai Hua, the head of Suzhou Fengyun Hairy Crab Co., Ltd., said that as an e-commerce company specializing in fresh produce, they have specific requirements for logistics timeliness. In the past, they always chose JD Logistics on other platforms because of its timeliness, good service, and cost-effectiveness. For example, to ensure survival rates, Fengyun Hairy Crabs require low-temperature transportation. Cai Hua trusts JD Express, stating that through cold chain transportation and air transportation, hairy crabs can be delivered fresh and quickly to every household, solving the difficulties in hairy crab transportation and increasing sales. On October 15th this year, after JD Logistics fully accessed Taobao and Tmall, Cai Hua added JD Express as the express delivery service provider for Taobao the next day after hearing the news. Regarding the switch, Cai Hua said, "We will definitely choose JD Express for cooperation because of its higher cost-effectiveness." Now that the crab season has reached its peak, Cai Hua sends nearly 10,000 orders of hairy crabs daily through JD Express on Taobao, Douyin, and Kuaishou. During the recently concluded 11.11 period, JD Express also launched a promotional campaign of "land transportation price for air shipping" for merchant customers on Taobao and Douyin, helping major merchants enjoy better services during the peak logistics season.

For users, the high-quality services provided by the JD.com platform are moving towards higher quality and broader coverage. During this JD.com 11.11, around 340,000 couriers were on the move across the country. They were not only parcel deliverers but also conveyors of warmth and kindness, delivering JD.com's high-quality services to thousands of households. During Singles' Day, JD Logistics continuously expanded the service scope of "express delivery to the countryside" and one-stop services of "delivery, installation, disassembly, and collection" for bulk goods.

Nearly 300 remote townships, including Resuo Township in Jiangzi County, Tibet, Pilale Township in Akto County, Xinjiang, and Yangmei Yi, Miao, and Hui Ethnic Township in Liupanshui, Guizhou, have been included in JD Logistics' self-owned delivery range. Consumers here can not only enjoy door-to-door delivery services by JD couriers but also send agricultural products out through JD Express.

Nearly 200 remote townships, including Turpan Huoyan Town, Xinjiang, Tuoba Township and Tingka Township in Ganzi, Sichuan, Paiyang Township in Qiandongnan, Guizhou, and Baijia Township, Zhenping County, Ankang, Shaanxi, can enjoy JD Logistics' one-stop worry-free service of "delivery, installation, disassembly, and collection" for bulk home appliances and furniture and participate in activities such as "trade-in".

Not only domestically but also globally, JD Logistics' global networking plan was comprehensively upgraded during this Singles' Day. It is expected that consumers in nearly 80 countries worldwide will receive JD Express packages from China this year. In Q3 2024, the company opened new warehouses in Malaysia and the United States, continuously enhancing its overseas warehousing network and service capabilities in the global layout to better serve Chinese outbound brand customers and overseas local customers.",

According to Choice data, in 2023, the nationwide express delivery industry handled 132 billion packages. Based on an estimated 30% market share of Taobao-related businesses, the corresponding express delivery volume is close to 50 billion packages. At an average price of around 2.3 yuan per package for the "Tongda" series, the opening up of Taobao alone will bring over 100 billion yuan in incremental market value to JD Logistics. After interconnection, for e-commerce enterprises with comprehensive competitiveness, it is a path to raising the ceiling. As the Book of Rites states, "When hundreds of boats compete on the river, those who row hard come out on top; when thousands of sails compete, those who bravely advance win.