Who is JD.com's enemy?

After making a "Qi Nancai", there are still many questions about JD.com's low-price strategy.

The full text has a total of 4963 words and takes about 14 minutes to read

Author | Luo Lixuan, Wang Xiaoling

JD.com won hemp

Since Liu Qiangdong's internal speech in November last year, JD.com's low-price strategy has been in place for nearly a year. From tens of billions of subsidies that hurt gross profits, to emphasizing equal rights between self-operated and third-party sellers, etc., big moves have been made one after another, but the capital market has not bought them.

In the current e-commerce industry, it is very difficult to establish a low-price mentality, not to mention JD.com, which has always emphasized high-quality services. However, this year's Double 11 has just started, and JD.com suddenly reaped a major victory in low-cost mental construction.

Jingdong is still sending "Qi Difficult Wealth", and the same as those old domestic brands that sell goods in the Tianhua Xizi eyebrow pencil turmoil a few days ago, the effect is quite good, Li Jiaqi and Jingdong have contracted half of the hot search topics in the past few days.

On October 24th, Chu Sanfeng, a self-operated baking group of JD.com, said in the circle of friends that he had received a lawyer's letter from Hai's, and was complained by the brand that because the Jingdong price of a certain Hai's oven was lower than the price of Li Jiaqi's live broadcast, it violated the so-called "reserve price agreement" signed with LJQ (Li Jiaqi), and demanded huge liquidated damages.

This year, Jingdong launched Double 11 one day earlier than Taobao, so in the afternoon of the same day, Li Jiaqi asked the brand to "choose one of the two" and Jingdong received the news of Hai's brand lawyer's letter, which was on the hot search.

The cooperation agreement between Hai's and the United States ONE, that is, Li Jiaqi, was also picked up by Sina Technology. The content of the contract is in line with Chu Sanfeng's circle of friends, that is, during the subsistence insurance period, Haishi needs to ensure that Li Jiaqi's live broadcast room is the lowest price, and if it breaches the contract, the brand needs to refund five times the price difference to consumers, and compensate the United States ONE for liquidated damages of RMB 2 million, and bear all costs and losses incurred due to the refund of the price difference.

Soon, Hai's and Li Jiaqi also expressed their positions separately. Both sides said that they did not sign any reserve price agreement, and Li Jiaqi also stressed that there was no either-or choice.

Haishi then issued a statement on the official WeChat, re-sorting the ins and outs of the whole incident, and there are two key information: first, the lowest sales price of the oven during the Double 11 period was all over the network, and Jingdong procurement did not negotiate with the brand and lowered the product price without authorization; Second, the loss of the oven with the lower price should be borne by the brand, not the platform subsidy fee mentioned by JD.com.

At this point, the idea of the three parties is already very clear, because Jingdong, Taobao, and Li Jiaqi cannot have the lowest price on the whole network at the same time, so Hai's original plan was to make the price of the three-party event "pull together", and Jingdong decided to sell it at a lower price than Li Jiaqi.

However, there are also many irrationalities. First, the price of Hai's oven in Li Jiaqi's live broadcast room is 600 yuan, and Jingdong changed the price to 200 yuan, this discount is too large, it can but is not necessary. Second, the key information of whether the cost of the subsidy is borne by the platform or the brand is still contrary to each other.

However, by far the biggest beneficiary is undoubtedly JD.com. Because Jingdong has enhanced the platform's low-cost mentality through this incident. At the same time, Li Jiaqi's low-price mentality was further weakened.

On social platforms, in a vote of Jingdong and Li Jiaqi who you support, the most praised comment was, "Li Jiaqi is not allowed to reduce the price of others, and he is suspected of monopoly."

A live broadcast e-commerce industry insider believes that in fact, it doesn't matter who is right and who is wrong, what matters is that many people think that "Jingdong is cheaper than Li Jiaqi". "During this time, scolding Li Jiaqi has become a traffic password."

After the Huaxizi eyebrow pencil incident, Li Jiaqi's low-cost personality began to be eroded. This time, after Jingdong's trouble, Li Jiaqi issued a three-year offer to all girls through several Double 11 consecutive years, and the "lowest price on the whole network" was also dissolved on social platforms. From his original "I want to sell the cheapest", in the comment area to "no one is allowed to be cheaper than me", and then interpreted by netizens as "I want to sell the most expensive".

And JD.com successfully labeled "cheaper than Li Jiaqi". Subsequently, Jingdong Live played the title of "Low Price Li Jiaqi Live Broadcast Room", and "Jingdong Procurement After watching Li Jiaqi's live broadcast, another 1500 yuan" was on the hot search. In addition to the live broadcast room, various categories of "the same model in Li Jiaqi's live broadcast room" products are also on the shelves.

However, the truth that the industry friend thinks is not important is still important to the people who eat melons, and under several hot topics on Weibo, some people have asked, who will bear the cost?

For JD.com, this issue is also quite important, which is related to whether this operation can be replicated in the future.

Success that is difficult to replicate

Although Jingdong and Li Jiaqi have gradually become the focus of the incident, a friend who does e-commerce said that she pays more attention to Hai's thoughts: home appliances are one of the earliest categories to be e-commerce, why Hai's failed to control prices this time, and why did he openly send a lawyer's letter to turn against JD.com.

Zhang Ke, who is currently working in the brand operation and used to work at JD.com, analyzed several possibilities for this dispute to us.

One is that the brand is responsible for the JD and Tmall channels are different employees, each of whom has their own KPIs, and there is a problem in organizing the pallet. The second situation is that the company's performance target this year may be to take Li Jiaqi as the core, "because even if the reserve price is given to JD.com, it may still not be as good as the sales volume of Li Jiaqi's channel in the end."

But the most likely third situation is that the boss and employees are clear about the price comparison, and have formed a tacit understanding with the platform, giving Tmall and Jingdong different models of products in advance the promotional price, and the procurement and marketing of each platform. But when Li Jiaqi's price is really online, JD.com's internal price comparison system will be directly copied to bosses at all levels, and JD.com's procurement can only follow the price immediately.

"Brands may think they have negotiated it, but if they do, they can only say that they haven't done JD.com," Zhang said. At a time when Jingdong's price control is getting tighter and tighter, Li Jiaqi's live broadcast room is the standard they will be the first to align.

Moreover, these price-breaking costs are likely to be borne by the brand in the end. Although JD said that the price reduction of JD's self-operated Double 11 promotion was completed by JD out of its own pocket. However, the treaty signed between the brand and JD.com is not so simple, and the platform has many ways to ensure its own revenue.

At the beginning of each year, self-operated merchants will sign a "gross guarantee" with the platform to ensure the gross profit income of the platform. According to 36kr, if the gross profit earned by the platform from the brand transaction is not enough to the agreed amount, these funding gaps will be deducted from the merchant's payment. Secondly, there are many ways for the platform to allow the brand to continue to spend money, such as sales expenses, drainage fees, and fixed fees, etc., and "gross profit will come back".

If the brand does not follow this plan, then the subsequent business in JD.com will also be affected. For example, Roborock also had an unpleasant quarrel with JD.com last year because of price control issues, and this year it will not be self-operated, but will start to be a POP (third-party) FCS store.

In fact, this kind of price control method is available on all platforms, but this year, under the influence of the intensity of competition at low prices, Jingdong has gone to extremes.

However, the special feature of Li Jiaqi is that the platform cannot be copied in the first place, and it is quite difficult to even copy another Li Jiaqi. The logic of the overhead live broadcast room is to obtain the maximum exposure of the brand and the sales of products in a certain period of time at the cost of breaking the price/no profit.

In other words, only the ultimate traffic can achieve the ultimate price. And this extreme is formed by the concerted efforts of major platforms in the past, regardless of the cost, to promote live broadcasts, infill traffic, and play low prices. Under the premise that profit is everything today, everyone will no longer pay such a high cost to create gods.

How many times to go to the live broadcast room and what price to use in the live broadcast room can be decided on a single time, which matches the current sales rhythm of the brand. The platform is a long-term business position, and if the price is broken on the whole platform and all time during the big promotion period, then no brand can stand it.

Therefore, the brand can accept a single price break in Li Jiaqi's live broadcast room, and even the live broadcast rooms of big anchors such as Wei Ya, Xiao Yang, and Big Wolf Dog Couple (of course, there will be problems if it is broken too often), and it will not disrupt the brand's pricing system in theory.

The logic here is just that Li Jiaqi's traffic is the largest, and since the brand has to break the price to promote, then breaking the price here is theoretically the biggest benefit.

If JD.com requires the brand to implement the same price on the platform, but it can't sell the sales in Li Jiaqi's live broadcast room, even if it doesn't need to make compensation for violating the reserve price agreement, it will almost certainly lose money, which is the core reason why Hai's is anxious.

The whole network is low-priced, not as simple as you think

At the root of it, judging from the information disclosed by both parties, although Haishi did not inform Jingdong in advance, he still believes that there should be a tacit understanding between the two sides on the price. After all, since the era of price control in offline channels such as Jingdong and Gome Suning, this has been a very mature operation.

The same is true of the lowest price on the whole network in the past two years, and everyone knows that this is a double-edged sword. If the platform really pursues the lowest price on the whole network, it may not be beneficial to the competition and itself.

So, how can you tell if a "lowest price" is good for consumers or makes the price higher? As a common means of competition in the retail industry, and often questioned by monopolies, the key is whether this behavior promotes competition or kills competition.

The Economic Observer has summarized the positive and negative effects of this behavior, and the positive impact is that the "lowest price" reduces the cost of choice for consumers, and can also help large platforms retain customers, preventing them from spending on smaller platforms that are cheaper in a few categories.

The downside is that the "lowest price" may be achieved in a situation where the merchant is pressurized, which can happen when the majority of the seller's sales come from the same platform. This will enter the category of anti-unfair competition: merchants are oppressed, platform stores bully customers, and competitors will be turned away by such blockades, suppressing market competition.

At the same time, companies may also form a conspiracy to raise prices to the detriment of consumer welfare. This is also the worst situation in the public's imagination now - it is Li Jiaqi who makes the price unable to come down. But in reality, this kind of collusion is very precarious, because as long as any one company quietly lowers the price, it can make excess profits.

A case in contrast to today is the Apple e-book case. At that time, Amazon adopted a "wholesale + low price" model, wholesale a large number of books from publishing houses, and sold them at $9.9 per copy. In order to compete with the launch of iBook, Apple thought of a new "agency + low price" model, that is, Apple only charges 30% of the agency fee and does not interfere with the pricing of the publishing house, but the publishing house must give Apple the same low price as other platforms.

The publisher first accepted Amazon's large wholesale fees and agreed to price cuts; But if you want to sell Apple at the same low price and pay the agency fee, you will definitely lose money. In fact, this is forcing publishers to choose between the two models of Amazon and Apple, and publishers have chosen the option of losing less: protecting prices and returning to Apple's agency model.

Amazon was furious and reported Apple and the publisher, and in the end, the Supreme Court found Apple and the publisher to have colluded and imposed a $450 million fine.

Like Apple, no matter how JD views low prices, it is actually forcing brands to make a choice, whether to choose Li Jiaqi's price-breaking + mass shipment model, or to give everyone the same price treatment.

Brands have always been the most sensitive to price, and a brand that can last for decades or even hundreds of years must retain profits in order to continue to develop and expand. Therefore, the brand essentially pursues the price control of the whole network, rather than the low price of the whole network. If a brand loses control over its price, the damage is immeasurable.

An example is the recent Estee Lauder, in the past few years, it was too dependent on travel retail (duty-free) channel shipments, during the epidemic, dealers pressed a lot of goods, which eventually led to them having to reduce prices and sell inventory, so that Estee Lauder's price system has a big problem, sales have remained at 10% for four consecutive quarters, and this year's Q3 net profit fell by 73% year-on-year.

Therefore, there is a tacit understanding between the platform and the brand for the low price of the whole network. Pinduoduo is willing to bleed subsidies (which have also gradually decreased in the past two years), Li Jiaqi has limited-time promotions, and the brand organizes special pallets, which also promotes the overall sales of the platform on the premise of boosting performance.

In the case of a decline in the overall market, if JD.com's methods are fierce enough, it is possible to end this round of games. Of course, they may want to disrupt the pattern and rise again.

However, JD ignores a substantive issue, that is, JD.com's attractiveness to the brand determines whether it can fully control the market.

Zhang Ke complained, "Now in addition to 3C and major appliances, who is still the main JD.com?" "For brands that mainly target young people and female consumers, they are more willing to invest in Douyin, Tmall, and even Xiaohongshu, which is determined by the main demographic.

may also see this trend, after the head anchors of Douyin, Big and Little Yang, also came out to broadcast live and accused Li Jiaqi of monopoly, Simba, the head anchor of Kuaishou, who often fired guns on the platform, came out to speak to Li Jiaqi live: "Without Li Jiaqi, you still can't get this goods, and you still can't get this price." ”

The compromise route doesn't work

Regaining the advantage of low prices is a common exam question for the two old e-commerce platforms, Ali and JD.com. However, in the past year, the answer given by JD.com is not that it can find the optimal solution.

The 10 billion subsidy of Pinduoduo has not brought satisfactory growth while hurting its own profit margins. China Merchants Securities had predicted that JD.com's 10 billion subsidy plan would reduce its EBITDA margin from 3.2% to 2.4%.

In the first half of this year, JD.com achieved a revenue growth rate of 4.66%, while Ali's growth rate was 8%, Pinduoduo's growth rate was 62.79%, and the social retail market was 8.2%.

A month before Double 11, a number of institutions downgraded JD.com's rating. Among them, Macquarie downgraded JD.com's Hong Kong stock rating to neutral, and Morgan Stanley downgraded JD.com's ADR rating to equal. This also triggered another round of diving in JD.com's stock price recently.

In the last round of consumption upgrading industry cycle, JD.com can be said to be the biggest winner, with self-management and logistics speed as the core, and has established a reputation for high-quality services. But this also makes the products of JD.com's entire platform more standard, and the tonality is more service-oriented than cost-effective.

Initially, even JD.com itself did not have a consistent idea of how to establish a low-price advantage. According to a late LatePost report, some of JD.com's core executives believe that the main station should face Douyin and Kuaishou, some regard Meituan as the first competitor, and some think that sniping Pinduoduo is the most important, and even Liu Qiangdong is thinking about it.

JD.com's low-price strategy can be said to be a dilemma. Judging from the information released this year, JD.com has chosen a compromise route of differentiated low prices and services.

Yesterday, Jingdong's "low price Li Jiaqi live broadcast room"

In the report of "Financial Story", JD insiders said, "It is not to completely give up JD's quality and service advantages, and to tear up low prices with friends without a bottom line." Rather, as long as the lowest price level is leveled with the opponent, but we rely on better reputation and better service, we are confident that users will choose us. ”

There's nothing wrong with this strategy on its own. In Liu Qiangdong's summary, the numerator is the product plus the service, the denominator is the price, and the division of the two must be greater than or equal to the user's expectations.

JD.com's growth in the first half of this year was less than expected, and it can only be said that consumers' determination to save money exceeded JD.com's expectations at the beginning of the year.

At present, JD.com has no new low-price strategy announced to the public, as this year, is it feasible to strengthen the low-price mentality and promote transactions in the whole big work at each big promotion point? It also depends on the final results of this Double 11.

The 11.11 record does determine a brand's full-year performance, and in 2021, JD.com's GMV during 11.11 accounted for 36% of the whole year (neither Tmall nor JD.com had public data last year). But this also puts forward extremely high requirements for JD.com's traffic operation capabilities, after all, "Qi is hard to find".