Liu Qiangdong's obsessed "tens of billions of subsidies" is still suitable for today's JD.com

A frontal price war after more than three years is late.

During the 618 in 2019, the national shopping festival pioneered by JD.com, the addition of Pinduoduo made the e-commerce battle originally dominated by JD.com and Taobao more intense. In this tense game, the newly entered Pinduoduo launched a 10 billion subsidy program for consumers for the first time, which not only consolidated its position in small and medium-sized cities, but also effectively extended to first- and second-tier cities.

According to Pinduoduo's 2019 financial report, thanks to tens of billions of subsidies, Pinduoduo has frequently hit a record high in the number of new monthly active buyers on the platform in the following quarters, greatly reversing the unfavorable situation in which the growth rate fell to the lowest point and losses continued to expand.

In order to curb the sudden rise of Pinduoduo, Ali chose the pixel-level copy of tens of billions of subsidies, at that time the industry also reported that Liu Qiangdong took a back seat, in the face of Ali and Pinduoduo's subsidy offensive, JD.com's response strategy was somewhat cold-eyed.

However, in 2023, when Liu Qiangdong returned to the public eye, after JD Retail took "low prices" as the theme, JD.com officially launched a fierce price counterattack war against Pinduoduo.

Recently, a number of media including 36Kr reported that JD.com will launch the "10 billion subsidy" channel in early March (March 8) against the standard Pinduoduo, which will cover all categories of the Jingdong platform, and self-operated and third-party merchants will participate in it, and if users find that the price of JD.com's 10 billion subsidized goods is higher than that of the Internet, they can get double compensation.

It is reported that Jingdong's "tens of billions of subsidies" project is approved by Xin Lijun, CEO of Jingdong Retail, and there is no upper limit at the budget level, and the current Jingdong tens of billions of subsidies project has entered the sprint stage. Pinplay asked JD.com for confirmation on the above news, and the official said that there were "untruths and misunderstandings", and whether and how to do tens of billions of subsidies were being discussed internally.

Liu Qiangdong's 10 billion subsidy complex

The essence of the 10 billion subsidy is a price war in commercial competition, and it is also an important strategy throughout the history of domestic Internet retail development.

Looking back at the 20 years since JD.com transformed into retail e-commerce in 2004, several blitzkrieg battles won by Liu Qiangdong led JD.com at several important nodes are basically thanks to "low prices".

JD.com's first price war was won against Newegg, a retail e-commerce company in the United States. In 2005, JD.com, which had just transformed into e-commerce, first followed the example of Newegg, which at that time was 1.5 times the size of JD.com. In 2006, JD.com maintained its website day and night, biting the pricing of Newegg's goods, it was this almost bottomless way to lose money, coupled with the long decision-making chain of foreign companies in China, the number one responsible changes frequently and other factors, JD.com quickly won the initiative of this competition.

Tasting the sweetness of price wars, JD.com launched a larger price war raid in 2010 to Dangdang.com, which ranked first in B2C e-commerce companies at that time.

This price war happened around the time of the online market, and this old e-commerce company, which started from the book business, began to expand to categories such as mother and baby and 3C. Liu Qiangdong chose to spare no effort to launch the book business at this time, and reluctantly seized the low price of Dangdang.com, so that the strong soldiers and cadres originally sent by the other party to develop new businesses withdrew to the base camp.

Although in the book business, JD.com, which has been entangled with Dangdang.com for a long time, did not achieve an instant victory, but used its own small team to fight the main force of competitors, which is like the Cao army burning Yuan Jun's grain and grass in the Battle of Guandu, not only made Dangdang.com miss the best opportunity to transform full-category retail e-commerce, but also allowed JD.com to achieve longer-term commercial competition results.

After fighting with Newegg and Dangdang.com, Liu Qiangdong led JD.com to launch a larger low-price competition, which is the famous "8.15 price war" in the history of Chinese e-commerce.

This price war marks the first time that domestic e-commerce platforms have stepped out of the Internet circle and launched a positive challenge to offline retail giants.

In fact, the underlying logic of the 8·15 price war provoked by Liu Qiangdong is very similar to the competition between JD.com and Dangdang, Liu Qiangdong originally hoped to circle the price war in the 3C category of major appliances, but also Suning's core business, but Suning did not want to be led by JD.com, but expanded the boundary of the price war to 3C all categories, the two parties while shouting in the air on social media, while constantly adjusting the idea of price reduction online and offline. But I didn't expect that most of the dividends of this price war were eaten by Gome, who killed halfway.

On the surface, Jingdong did not take advantage of anything in this 8·15 price war, but because of the successive fermentation of "first increase and then reduce prices", "improper competition", "many reduced goods are not in stock" and other public opinions, but Liu Qiangdong undoubtedly left the impression that Jingdong values low prices in the public's consumer mind, and leverages the overall profit of the industry.

Since the battle against Suning Guomei on August 15, 2012, JD.com has not taken the initiative to provoke a large-scale price war for a long time, but ten years later, when Liu Qiangdong returned to the front, the No. 1 manager of JD.com decided to start a price war again.

At the internal management meeting at the end of 2022, Liu Qiangdong publicly criticized many executives for using PPT to fool themselves into the proliferation of formalism, and emphasized that "low price is the most important weapon for our success in the past, and the only basic weapon in the future." Don't think that you have the pricing power and don't pay attention to our low-price advantage at all, so that sooner or later you will become the second Suning."

Is JD still suitable for a price war today?

It is undeniable that commodity prices have always been one of the core elements that determine consumer purchasing behavior, and low prices are also the most efficient means of competition in the retail industry, so in the early stage of the development of PC Internet and mobile Internet, due to the low traffic price (customer acquisition cost), large space for new user growth, and retail e-commerce consumers' shopping mentality is still in the stage of cultivation, large-scale price war is almost invincible.

However, when the entire mobile Internet has entered the stock era of slowing growth, large-scale price wars have become a business competition strategy with polar ROI and poor probability effect.

More important than price is the platform ecology.

As a head retail platform, Jingdong has formed a more balanced "self-operated + third-party seller" hybrid model in the past two decades of development, of which self-operated GMV accounts for more than half, the essence of the self-operated model is retailers, gross profit mainly comes from the difference in commodity purchase and sales, Jingdong's current self-operated scale on the one hand is its large-scale procurement for many years to reduce the cost of purchases, on the other hand, it continues to optimize 3C product standards, and on this basis to expand the platform SKU category, through daily necessities, clothing, High gross margin products such as beauty have boosted overall gross margins, while revenues from third-party sellers in advertising, store rent, commissions, etc., have also helped increase gross margins.

So in essence, the sellers of the Jingdong platform are more brand owners, and their more important task is to ensure the quality, word-of-mouth, and consumer evaluation of the goods to JD.com compared to providing low-priced goods to C-end users.

As a platform that started as a social e-commerce company, Pinduoduo has another set of operating logic.

As an essential e-commerce platform, Pinduoduo's core business is actually online marketing services, which sell services to merchants in different ways according to the number of impressions, display time, clicks, and transaction results, and at the same time as a third-party platform in the transaction to extract a certain commission, although Pinduoduo also has self-operated business, but more based on supplementing the market can not meet the needs of consumers C2M reverse customized goods, does not occupy the majority of the platform business.

Therefore, the entry threshold for third-party sellers on the Pinduoduo platform is low, and most of them are supply-oriented channel providers and OEM manufacturers.

The difference in platform ecology between JD.com and Pinduoduo will largely determine the effect of the strategy of tens of billions of subsidies. For Pinduoduo, the beneficiaries of tens of billions of subsidies are mostly middlemen, and the main indicator of platform traffic tilt is low price, so the channel providers who occupy the entrance of Pinduoduo's traffic have the confidence and advantage to negotiate prices with manufacturers.

For JD.com, how to find a new balance between self-operated and third-party merchants in tens of billions of subsidies remains to be explored, and once the commodity price on the JD.com platform is significantly lower than that of other channels, the binding force of the brand on JD.com sellers is much higher than that of Pinduoduo sellers. This can be seen during the Double 11 period in 2022, including Luzhou Hometown, Wuliangye and other brand parties tentatively cooperated with JD.com on pricing issues.

In this regard, JD.com also seems to be interested in adjusting its own platform model, of which encouraging "individual merchants to open stores" and significantly reducing the entry threshold is a weather vane, it is reported that the occupancy rate of JD.com's individual merchants has recently peaked, which may add a boost to JD.com's upcoming tens of billions of subsidies.

But there is another big problem in front of JD.com's tens of billions of subsidies - user experience.

To know that the most valuable advantage of JD.com in the minds of consumers is still its supply chain and logistics system, since 2007 began to build its own logistics and invest heavily in the upstream and downstream supply chain, JD.com has indeed created a premier distribution and after-sales service reputation in the mass consumption side, and many consumers who value delivery time and online shopping experience have also become sticky users of the JD.com platform.

However, the use of JD.com's own logistics and supply chain services means higher operating costs for third-party sellers. At the internal management meeting, Liu Qiangdong also repeatedly stressed the need to achieve healthy competition between self-operated and third-party merchants, saying that third-party merchants should be allowed to choose other logistics services, and there is no need to force the use of JD Logistics.

Relaxing logistics and distribution options can greatly promote the price reduction of goods, but how to achieve the same as Pinduoduo's tens of billions of subsidies while ensuring that users have the shopping experience of JD.com is a greater challenge and test for JD.com's tens of billions of subsidies.