Liu Qiangdong walked into an eventful autumn

Giants Battle Double 11 Feature:

On Singles' Day in 2023, Ali, JD.com, Pinduoduo, Douyin, Kuaishou, Xiaohongshu..., almost all e-commerce giants in China have joined the ranks of low-price competition. Such a fight is a scene that has never been seen in China's Internet rivers and lakes. All-weather technology will present the facets of multiple companies in this battlefield, observe and predict the development and direction of the industry.

Author | Cao Anxun, Liu Baodan

Edit | Zhang Xiaoling

As the head of one of China's e-commerce giants, Liu Qiangdong has encountered another hurdle this autumn.

After returning to China at the end of last year, Liu Qiangdong rarely appeared in public, but he began a series of stormy reforms internally. For most of the year, these actions seem to have had little effect, and investors are not buying it.

On October 23, JD.com's U.S. stock price fell to $24 per share, the lowest in nearly four years. Over a long period of time, since 2023, JD.com's U.S. stock price has fallen by more than 50%, and it has fallen by more than 70% compared with its high in February 2021 ($104.06 per share).

JD.com's market value is also far behind other large manufacturers. As of 10 o'clock Eastern time on October 25, JD.com's market value was $38.8 billion, less than one-third of Pinduoduo. Along with it, Liu Qiangdong and Zhang Zetian have fallen to 66th in the Hurun Report, while Huang Zheng of Pinduoduo has risen to No. 3 at a rapid pace, and Liu Qiangdong and his wife are only worth a fraction of Huang Zheng.

A counterattack is imminent. On the first "Double 11" after the return, Liu Qiangdong frequently rectified his soldiers and horses, sacrificed "low-priced" weapons, started early on October 23, and launched the "Double 11" gameplay with large discounts; In the Jingdong building, banners of price battles such as "youth does not leave, Jingdong 11.11 low price does not close" are also hung up, and the blood is boiling.

As one of the two giants of domestic e-commerce, Liu Qiangdong tried to regain its glory in the increasingly fierce e-commerce rivers and lakes, but what he encountered was a countercurrent of consumption downgrading, and Pinduoduo, Douyin and others took advantage of the momentum to seize JD.com's e-commerce share. However, JD.com's supply chain and express logistics advantages are still there, and investors do not need to be too pessimistic.

After weathering the storm of events in Mingzhou, Liu Qiangdong, who has returned to JD.com for nearly a year, urgently needs a hearty victory to boost stock prices and performance, and restore its former glory.

Pressure

The upcoming "Double 11" is the first "Double 11" after Liu Qiangdong's return to JD.com.

Unexpectedly, the first to explode the hot search was the saliva dispute between Jingdong and Li Jiaqi and Hai's Oven. The price of the Hai's oven on the Jingdong page is even lower than the price of Li Jiaqi's live broadcast room, which triggered the "Rashomon" of the three parties.

Behind this incident is Liu Qiangdong and JD.com's eagerness and ambition to create a "low-price" mentality, which is also the core of JD.com's Double 11, and it is also the strongest weapon to reorganize JD.com after Liu Qiangdong's return.

Specifically, during this year's Double 11, Jingdong will provide cross-store benefits of 50 yuan for every 299 yuan, and 20 yuan subsidies can be superimposed, and the number of goods participating in tens of billions of subsidies will also reach twice that of the 618 period. On October 23, it will be sold directly at 8 p.m.

Xin Lijun, CEO of JD Retail, said at the JD Retail Ecological Partner Conference: "This year, JD 11.11 will continue to consolidate the low-price mentality, by providing 2 billion subsidies, global traffic support, and improving merchant experience... The money saved through extreme supply chain efficiency is passed on to consumers and business friends."

JD.com's mood to revive its performance can be described as very urgent. In fact, this October can be said to be an eventful autumn for Liu Qiangdong and JD.com.

In mid-October, a rumor that a businessman surnamed Liu was suspected of breaking the law and being arrested, triggered a decline in JD.com's stock price, which JD.com denied and reported to the public security organs, but the stock price fell endlessly.

As of ten o'clock on October 25, Eastern time, JD.com's share price fell to $24.64 per share, with a total market value of $38.773 billion, less than one-third of Pinduoduo ($144.239 billion), less than one-fifth of Ali ($206.952 billion), and 11% of Tencent ($346.843 billion).

This also directly affects Liu Qiangdong's worth. Jingdong's financial report shows that as of the end of February 2023, Liu Qiangdong held 12.7% of the equity of Jingdong Group, and with the decline in JD.com's stock price, in the recently disclosed 2023 Hurun Report, the value of Liu Qiangdong and Zhang Zetian shrank to 60 billion yuan, down 43% year-on-year and 36 places lower than last year.

Zhang Xinmaang, a market analyst at Guotai Junan Research Institute, said that the ostensible reason for the sharp fall in JD.com's stock price was rumors, but in fact, among the three giants of e-commerce, JD.com was obviously the fastest behind, Pinduoduo's market share increased sharply, and its stock price performance was also the strongest.

The difference between JD.com and Pinduoduo in the retail track has been directly reflected in the performance.

In the first half of the year, JD.com recorded revenue of 530.887 billion yuan, a year-on-year increase of 4.65%, but the growth rate slowed down, down 6.34 percentage points from the same period last year, while Pinduoduo's revenue growth rate in the first half of the year was as high as 62.79%. According to the financial report, in the past four quarters, JD.com's retail revenue growth rate lagged behind Pinduoduo, with a difference of 45-59 percentage points.

The second quarter of this year is the first quarter after JD.com deepened tens of billions of subsidies, investors were still looking forward to its performance, but in the end growth was weak; After the release of JD.com's second quarterly report, the stock price began to fall again.

The market's concerns are also reflected in the ratings. Recently, Macquarie downgraded the ADR ratings of JD.com Hong Kong stocks and JD.com Group US stocks to neutral; Morgan Stanley downgraded JD.com's ADR rating to a flat match. On the eve of the release of JD.com's third quarterly report, many securities firms such as Huatai, China Merchants, and CSC also expect JD.com's performance to come under pressure.

As the original number one of the first e-commerce kings, JD.com's position in the e-commerce rivers and lakes has gradually been challenged by all parties, Tmall, Pinduoduo, Douyin and even head anchors are forming a siege against JD.com with advantages such as low prices. And Liu Qiangdong has already begun to fight back.

counterattack

In fact, Liu Qiangdong has long felt the crisis of the market, after returning to JD.com in November last year, he led a series of personnel and organizational adjustments, JD.com Group CEO Xu Lei, JD.com Group Vice President Gao Liqiang, etc. have resigned and retired this year, leaving JD.com, and the former CFO Xu Ran was promoted to CEO of JD.com, responsible for the daily operation and coordinated development of the group's businesses, reporting to Liu Qiangdong.

Another big change is that JD.com is starting to emphasize "low prices" in merchandise sales. "Low prices are the only basic weapon," he said at an internal conference late last year. Since then, JD.com's marketing and mental competition has shifted from prioritizing high-quality service and genuine products to emphasizing low prices.

Since the beginning of this year, JD.com has launched many new measures around low prices, such as tens of billions of subsidies, 9.9 free shipping channels, and lowering the threshold for self-operated free shipping. The upcoming "Double 11" is a key moment for JD.com to prepare for a big job and shape consumers' "low price" mentality.

However, after Pinduoduo implemented tens of billions of subsidies for three years and stirred up e-commerce rivers and lakes with low price advantages, Taobao and Jingdong also launched tens of billions of subsidies to face the battle, and the price war intensified in the e-commerce rivers and lakes. As a latecomer to tens of billions of subsidies, JD.com's huge investment to join the price war at this time is an unknown gamble.

Morgan Stanley said in the research report that in the existing economic environment, if JD.com cannot successfully implement the low-price strategy, then JD.com's structural position in China's e-commerce market will be affected.

Industrial Securities expects that due to the need for a certain amount of time to digest the organizational structure adjustment within JD.com, and the impact of the revenue acceleration caused by the acquisition of Deppon in the third quarter of last year will disappear, the company's revenue growth may continue to be under pressure in stages. However, in the long run, we are optimistic about the improvement of organizational efficiency brought about by JD.com's organizational structure adjustment and the elasticity of revenue growth brought about by the change of commodity structure.

However, some insiders believe that unlike other e-commerce platforms, JD.com should emphasize its own advantages rather than blindly playing the low-price card.

For a long time, JD.com has been a symbol of China's middle-class consumption. It is famous for its high-priced 3C and electronic products, and has also accumulated a reputation for high-quality services.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, believes that the price war is ultimately the ability to control costs. JD.com's low prices are rooted in supply chain and logistics, that is, lower supply chain operating costs and higher operational efficiency. The cost advantage of Pinduoduo is reflected in operational efficiency, and the cost of sales for merchants on the platform is lower.

Therefore, what JD.com needs to do is to amplify its own supply chain and service advantages, rather than become another Pinduoduo.

In the past 20 years, in China's e-commerce rivers and lakes, JD.com and Liu Qiangdong have always played the role of attackers, he snatched users from Suning, Dangdang, and Gome, and gradually established JD.com's market position as a winner.

This time, Liu Qiangdong is more like a defender. In addition to peaking user growth and increasing competitors, the tone of consumption downgrade has made JD.com's "middle-class consumption" model face growth difficulties, and sinking the market is a path that it is not good at.

But Liu still has passion and ambition. Four months ago, JD.com put forward the "35711" target for the next 20 years, including achieving 3 companies with revenue of more than one trillion yuan and net profit of more than 70 billion yuan, and five companies entering the world's top 500.

For JD.com and Liu, this autumn is particularly important. China's Internet and e-commerce rivers and lakes should be colorful and diversified, not only need low-priced platforms such as Pinduoduo, but also need the light of the middle class like Jingdong, after all, people's hopes and yearning for a better life will always exist.