Since 2007, Liu Qiangdong has developed two major strategies for Jingdong: one is category expansion and the other is self-built logistics.
As of 2019, Jingdong has invested more than 18 billion RMB in logistics, built more than 800 warehouses, has more than 180,000 logistics employees, logistics network has basically achieved 100% coverage of the mainland administrative regions and counties, self-operated delivery service covers 99% of the country’s population, more than 90% of self-operated orders can be delivered within 24 hours.
People, it is easy to move from slow to fast, but difficult to move from fast to slow. The investment in logistics has built a strong barrier for Jingdong that is almost impossible to copy. To what extent is user stickiness strong? The number of annual purchases by ten-year old users increased from 4.4 times in 2009 to 31.5 times in 2018.
The secret of Jingdong
In fact, many people are quite curious, first of all, Jingdong has been carrying out asset-heavy investment, burned a lot of money, although also financed a lot, but compared to the investment, or a big difference, where did he get the money?
Secondly, without thinking, we can subconsciously clear, Ali is bigger than Jingdong, then why is reflected in the earnings report, Jingdong’s revenue than Ali?
So now, the director took everyone to pick this little secret of Jingdong, this problem is not clear, you will never understand Jingdong.
We know that Jingdong platform, although there are many third-party generation sales, but more or self-operated mainly, in the third quarter of 2020, for example, the entire Jingdong revenue 174.214 billion, of which self-operated contributed 151.4 billion, said he all rely on self-operated, are not too much.
One of Jack Ma’s most headache rivals, China’s second e-commerce, Jingdong, what is so great about it?
Self-support, in fact, is the goods from the upstream into over, the goods even if Jingdong, but Ali is not so, Ali is just a platform, sellers in the above sell things, on the receipt of an advertising fee.
Suppose Jingdong sells a cell phone, the income of this phone will be counted as revenue, but Ali platform out of a cell phone, only commission will be counted as revenue. The essence of the two, is different.
In yesterday’s article on Jingdong logistics, we talked about how Jingdong’s inventory turnover days are very low, basically half lower than traditional retail, and, with the help of artificial intelligence, big data, etc., this data is also on a downward trend.
One of Jack Ma’s most headache rival, China’s second in e-commerce, Jingdong, what is so great about it?
For example, in 2019, Jingdong inventory turnover days 35.8 days, let’s say in layman’s terms, suppose Jingdong from the upstream into a cell phone, about 36 days to sell, then when Jingdong to pay upstream? Usually is to get the goods 60 days later, hey, we found the mystery?
Ma one of the most headache rivals, China’s second e-commerce, Jingdong, what is so great?
You buy a cell phone, is directly to the money to Jingdong, but Jingdong is not you give money to the upstream, but to drag a 20, 30 days to the money to the upstream, the actual middle he did not spend a penny, the money is paid by you, he can earn a difference in price at the same time can also hold the money for dozens of days. Look at the chart above, people’s cash flow cycle, actually has been negative ！！！！
So, as long as Jingdong is bigger, the richer he is; the faster the inventory turnover, the richer he is.
Jingdong has a combined loss of 25.1 billion yuan in net profit attributable to the mother of eight years from 2011-2019, but he has a cumulative free cash flow inflow of 52.5 billion yuan, so what about the loss?
Healthy to the extreme cash flow supports Jingdong’s ability to maintain expansion despite continued losses, expand to a certain size, compress costs through economies of scale, and then come back to profitability.
Retail Infrastructure
Liu Qiangdong once wrote an article called “The Fourth Retail Revolution is Coming”. This article is very long, but if you can read it with patience, you can find many strategic ideas of Jingdong.
At the beginning of the article, it is mentioned that although new technologies are constantly impacting various industries, the essence of the retail industry is unchanged, which is: cost, efficiency and experience. Seizing this point, we can clearly see the future opportunities of the industry.
China’s retail industry in recent decades, in fact, is also around these three points of retail infrastructure upgrades, the beginning of the department stores, such as Shanghai Bailian, Chongqing Department Store to the later set of food, drink and fun in one shopping mall; from the traditional hypermarkets such as Yonghui supermarket, Wal-Mart to the current e-commerce, and then to Yonghui mini, Rosen, community group buying + to home.
Without exception, it is the technological progress that leads to the upgrading of retail infrastructure, constantly changing the “cost, efficiency and experience” of value creation and value acquisition. And this retail infrastructure, to put it plainly, is the upgrade of information, goods and capital flow efficiency.
For example, Wal-Mart’s retail link is an important milestone in information flow. In the 1990s, Wal-Mart established a retail data sharing platform (retail link) with tens of thousands of suppliers, sharing sales, inventory, store data, etc. with cooperative suppliers to help them optimize a series of activities such as production, distribution, pricing and promotion of goods. This signifies that retail data is no longer the exclusive asset of one company, but a public resource that can be shared and utilized by all.
The flow of goods, logistics is one of the representatives, logistics is also moving from own to public, such as the launch of Amazon FBA, you know, originally the U.S. logistics industry pattern has been very stable, CR3 has been more than 90%, however, in recent years the emergence of Amazon, with their own e-commerce advantage, raw bite a large piece of market share, at present, this value has been approaching 15%, the future is still in a continuous The trend is on the rise.
As for the flow of funds, the current Jingdong Finance, Ant Group, is doing such a thing, using their own big data advantages to give small and medium-sized businessmen who could not get a loan in the bank to financial support.
So, we see that all the moves of Jingdong are in preparation for these three directions.
In June 2016, Walmart took a 5% stake in Jingdong, and then announced the “Three Passes” strategy, which is to share users, stores and inventory. Assuming that users place orders on the Jingdong platform, the goods can actually be picked up and delivered from the nearest Walmart stores, making Walmart a hypermarket and an offline warehouse of Jingdong; and Jingdong Home can help Walmart realize door-to-door service.
Based on such information flow sharing, Jingdong has acquired shares in Yonghui Supermarket, BBK, and a series of physical retailers. Even in 2019, Jingdong put forward the “Competition in Things” plan, that is, after users place orders online, Jingdong will match the orders to the nearest brand terminal stores, and then the outlets will deliver them. In fact, that is, after the information flow is shared, the major terminal retailers have become Jingdong’s “front warehouse”.
One of Jack Ma’s most painful rivals, China’s second largest e-commerce company, Jingdong, what is so great about it?
As for the commodity flow, as we mentioned in yesterday’s article, Jingdong Logistics has been open to the public since 2016, and as of 2019, external orders have accounted for 40% of the entire Jingdong Logistics revenue, and in the second quarter of 2019, Jingdong Logistics finally ended its 12-year-long investment and achieved break-even for the first time.
At present, the number of warehouses and storage area of Jingdong Logistics is much higher than that of SF, only the national layout of collection outlets and transit yards is much less than that of SF, so the overall delivery time and price are a little lower, but, as Jingdong further opens up to the outside world and is independently listed for financing, it is not difficult to imagine that its future outlets and transit will gradually increase. It is expected to repeat the script of Amazon in the United States, and Shunfeng dichotomy.
And, what is particularly interesting is that, similar to Shunfeng’s special offer business to enter the sinking market, Jingdong Logistics is also engaged in the sinking market, but different from Shunfeng’s approach is that Jingdong has a brand new brand – the mass mail, and take the same three through a similar franchise model.
Then we look at the Jingdong number of science and technology? For sure, many students with Alipay will feel that Jingdong Finance is very ribbed, that is of course, because Jingdong Finance is not for you to use, they are to B-based, in addition, based on Jingdong’s mature logistics system, the future, Jingdong Finance is expected to run very far in the supply chain finance segment.
One of Jack Ma’s most headache rivals, China’s second e-commerce, Jingdong, what is so great about it?
At the end
The Value Firm” has said in the article of the American group before that the first half of the Internet is similar to building a city to attract investment and collect taxes, then the second half should be to build roads, construct infrastructure and improve the “livability” of the city.
The road is now basically repaired, and the mature supply chain system makes the company have a strong barrier that other platforms cannot reach.
To big health for example, why Jingdong health can do first, Ali health and Pingan good doctor can not, it is thanks to the company’s high supply chain barriers. Similar to Jingdong, in urban delivery, Meituan has a strong barrier, so the main focus of urban delivery Meituan medicine is here, and now, their revenue has achieved the first O2O.
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