The lack of growth, innovation and combat effectiveness is not the Jingdong that Liu Qiangdong wants
Text: Wang Huiying
Edit/Midnight
Is the 20-year-old JD the JD that Liu Qiangdong wants?
Judging from the current performance of JD.com, the answer to this question should be no.
This year, JD.com was one of the Internet giants with the most frequent internal adjustments. Since Liu Qiangdong returned to the helm, JD.com has abolished the business group level and rotated multiple group CEOs, which is complemented by changes in JD.com's business - regaining the mentality of low prices, making efforts to subsidize tens of billions of yuan, and developing live broadcast business.
Under the pressure of poor performance and hard to find growth, Liu Qiangdong carried out drastic reforms at the top of JD.com. Xu Lei, the most trusted brother, and Xin Lijun, a comrade-in-arms for more than ten years, were replaced by Liu Qiangdong and replaced by Xu Ran, who was born as CFO, as the CEO of Jingdong Group and the CEO of Jingdong Retail.
The frequent adjustment of senior executives in a short period of time is Liu Qiangdong's search for the morale of the year.
"I was not afraid of my opponents when I entered Zhongguancun in 1998, I was not afraid of my opponents when JD.com entered e-commerce in 2004, and I was not afraid of competitors every year since. In "Liu Qiangdong's Self-Statement: My Business Model", Liu Qiangdong said.
Liu Qiangdong, source Jingdong's official Weibo
This is not Liu Qiangdong talking big.
10-year-old JD.com launched a surprise attack on the day Dangdang went public in the United States, setting off a price war in the online book industry; 12-year-old JD.com competed with Suning and Gome for users, and established JD.com's market position as a winner. All of this started with Liu Qiangdong's order.
In recent years, in the face of competition in the e-commerce market and the strong growth of competitors, JD.com's aggressiveness and presence have become significantly weaker. Growth has stagnated and stock prices have fallen, revealing the crisis of JD.com falling behind.
In the face of the current situation, some employees stood up and pointed out the current problems of JD.com, with a thousand-word long article, the crux of JD.com, including "the promotion mechanism is too complex, the implementation of the low-price strategy is not comprehensive enough, and it will only follow the rhythm of friends without its own" and so on.
Liu Qiangdong did not choose to ignore the employee's blunt "advice", but said, "This brother pointed to the company's pain points", he confronted the questions raised by employees in the intranet, and emphasized that Jingdong must change, otherwise there is no way out.
Liu Qiangdong mentioned that he was mismanaged and blamed himself very much, and at the same time said that he would not lie flat, and hoped that his brothers would not lie flat.
How to lead JD back to the track of rapid development, and how to make JD regain its innovation and combat effectiveness are the core problems that Liu Qiangdong will solve next.
1. The lack of combat effectiveness and innovation may be the most anxious for Liu Qiangdong
Jingdong intranet, who is the most active? Liu Qiangdong, the founder of JD.com, must be on the list.
This is Liu Qiangdong's main channel to understand the real status quo of JD.com. On the intranet, grassroots employees can complain about their superiors and even JD.com's projects, and Liu Qiangdong has given the intranet a strong degree of freedom. As a core user of JD.com's intranet, Liu Qiangdong sometimes suddenly says one or two slots or jokes in meetings that only JD.com's grassroots employees know.
This time, a thousand-word long article from an operation employee made Liu Qiangdong reflect on the current situation of JD.com and summarize the problems existing in JD.com.
The current Jingdong life is indeed not easy. Three years ago, JD.com's market capitalization was on the same page as Pinduoduo, hovering around $50 billion. Today, the market value of Pinduoduo is the sum of the market capitalization of the four JD.coms.
Jingdong's position, the morale of employees, are no longer at the highest point, as the real helmsman of Jingdong's giant ship, Liu Qiangdong must stand up and lead Jingdong to change.
Judging from Liu Qiangdong's reply this time, Liu Qiangdong pointed out the two core problems that JD.com is currently facing - lack of combat effectiveness and innovation.
"We say every day that the customer comes first, but we think about ourselves everywhere in our work! We often say that we only do the first in battle, but we defend everywhere, and never think about how to take the initiative! Many people talk about innovation every day, but every day they plagiarize and follow others. ”
In the past year, JD.com has been a year of low prices in an all-round way, and it has also been a year of frequent organizational structure and personnel adjustments. Within this year, the organizational structure of JD Retail will be adjusted to cancel the business group system and change to the business division system, and the business divisions under the original business group that manage many commodity categories will be split into many procurement and sales combat units according to specific categories.
Xu Ran has successively taken over the baton as CEO of JD Group and CEO of JD Retail, shouldering the heavy responsibility of leading JD.com's charge. You must know that it is not common to pick up the positions of CEO of Jingdong Group and CEO of Jingdong Retail on one side of Jingdong, and the last executive to take over these two CEO positions at the same time was Liu Qiangdong himself.
Xu Ran, picture source: Jingdong WeChat public account
Behind the strategic shift, personnel and business adjustment, an obvious change is that in this round of e-commerce price war, JD has changed from an attacker to a defender.
Looking back on the past 20 years, under the leadership of Liu Qiangdong, several important nodes of JD.com have revolved around price wars.
The two price wars not only allowed JD to grab the books, major appliances and other markets, but also made Liu Qiangdong and JD become the "price killers" of the Internet.
But now, whether it is emphasizing the low-price mentality or shouting out tens of billions of subsidies, it is a last resort action of JD.com in order to keep the basic market under the fierce competition of e-commerce. JD.com has become a passive defender.
In essence, the current JD.com is in a dilemma of "going to attack, or to make profits". Attacking, cheaper than the opponent, means investing real money, and defending, it means keeping profits.
Judging from today's situation, the effect of JD.com's low-price strategy is indeed not obvious enough, and it cannot become a powerful weapon when fighting with competitors. This is also a key point pointed out by JD.com's internal employees in a thousand-word long article.
Looking back at the combat effectiveness of JD in the early days, it is in stark contrast to today, when JD was not only good at attacking, but also pressing on opponents step by step.
Source: JD.com's official Weibo
When Jingdong was fighting against Gome and Suning, Yan Xiaobing, who was in charge of the home appliance business department at that time, dared to speak openly, provoke his opponents, and predict the market pattern; when Jingdong grabbed the dangdang market, Liu Qiangdong shouted, "The price of each book should be 20 percent cheaper than that of competitors" and "the book department is not allowed to make a profit."
From actively provoking a war to passive defense, Jingdong now seems to be brave enough, how to restore and enhance Jingdong's combat effectiveness, it depends on what follow-up measures Liu Qiangdong has.
In addition to combat effectiveness, Liu Qiangdong also pointed out the problem of JD.com's lack of innovation.
In the past, JD created JD Logistics, JD self-operated, and built high walls that emphasized quality. Today's tens of billions of subsidies are the characteristics of Pinduoduo's genes, and the newly opened business procurement and sales live broadcast room is also the business that Ali and Douyin have been operating for many years, and JD.com seems to have been following.
"Why do we have to follow our friends and not plan our rhythm and intensity in advance? We have to consult with friends to determine our rhythm and intensity? Always follow the strategy? When can we catch up?" wrote a JD.com employee.
Following means passive, but Liu Qiangdong did not give an answer to how JD should innovate in the current e-commerce red sea.
This is also a challenge for Xu Ran, CEO of JD.com at this stage. The new CEO, who is known for his gentleness, low profile and rationality, is not a risk-appetite manager, as he has been an audit partner at PricewaterhouseCoopers for many years. In many public reports, Xu Ran's strength is not to develop and innovate, but to reduce costs, increase efficiency and efficient collaboration on the basis of existing ones.
In the end, it may still be necessary for Liu Qiangdong to lead the charge, cooperate with Xu Ran, and change Jingdong together. Because winning again is important to JD.com.
2. The mechanism is complex and slow, which Liu Qiangdong must help Jingdong change
At the end of last year, Liu Qiangdong rarely appeared at an internal meeting of JD.com, and fiercely shouted that "low price is the most important weapon for JD.com's success in the past, and it will be the only basic weapon in the future." ”
Many people think that the familiar "Dong Ge" is back. In fact, although Liu Qiangdong retired from the background five years ago, he has been at the heart of JD.com and has never left.
Especially in the matter of "low price", Liu Qiangdong, who was born in procurement and sales, is simple and direct.
In the 90s of the last century, Liu Qiangdong set up a counter in Zhongguancun and was more proficient in the way of procurement and marketing. Others sell video compression systems, the purchase price is more than 10,000 yuan and sells for 50,000 yuan, and a set earns 30,000 or 40,000 yuan, Liu Qiangdong sells 18888 at a clear price, and also trains users to use it. Word of mouth from customers, there was a long queue in front of his counter, and in the fourth month of his business, he was too busy to start recruiting employees.
If you use one sentence to describe a good purchase and sales, it is to buy and sell good goods that users need at low prices. This is exactly in line with the focus of Jingdong this year - to regain the mentality of low prices and exert tens of billions of subsidies.
It's just that the current Jingdong ignores one point, and the current e-commerce platform should be simple and direct to make low prices, rather than cumbersome.
As mentioned in the thousand-word advice of JD employees, JD has encountered some practical problems on the way to achieve low prices: the promotion mechanism is complex, the implementation of the low-price strategy is not comprehensive enough, and only a single explosive product is used to make a low price......
Over a period of one year, these complex promotion mechanisms have indeed affected the effectiveness of JD.com's low-price strategy.
In the third quarter of 2023, JD.com's retail business revenue was 212.06 billion yuan, basically the same as 211.92 billion yuan in the same period last year. According to the financial report, JD.com's merchandise revenue in the third quarter was 195.304 billion yuan, down 0.9% year-on-year, of which the revenue of electronic products and household appliances was flat, while daily necessities were 2.3% year-on-year decline in the third quarter due to the diversion of online sales after the resumption of offline channels.
Behind the difficulty of growth, consumers do not feel the obvious low price of JD.com. On social media, comments such as "JD is more expensive than other places" and "JD is not the lowest price at all".
It is worth mentioning that third-party merchants play an important role in JD.com's low-price strategy. JD.com vigorously introduces third-party merchants to further open up the traffic equality between third-party merchants and self-operated merchants, as long as the price and sales are advantageous, the third-party merchants' products with small profits and quick sales can also be ranked before the self-operated products, so as to stimulate merchants to launch more low-priced products.
Although the total number of JD.com's third-party merchants in the second quarter of this year more than doubled year-on-year, there are still problems in the process of building a third-party merchant ecosystem. The above-mentioned employees said on the intranet that the platform ecology has not given more support to POP merchants, and the low-price mentality also needs to be implemented by everyone.
In fact, Liu Qiangdong is well aware of JD.com's situation. In response to the admonition, Liu Qiangdong mentioned that "the organization is now large, bloated and inefficient, and it does take time to change." ”
At an internal meeting at the end of last year, Liu Qiangdong criticized retail executives by name for deviating from the business strategy of "cost, efficiency, and experience", and also announced with an iron fist that he would eliminate 10% of executives above the vice president level.
In this regard, JD.com's organizational adjustments are frequent. In addition to the elimination of ineffective executives, the streamlining of management levels is also a core task.
In April, JD Retail started a new round of organizational structure reform, the original business group was changed to a business division, and each business unit under the overall management of the original business group was split into specific business units according to subdivided categories, giving the category leader greater rights in business decision-making, management, and personnel appointment and dismissal. Delegating power to the front line and giving autonomy to each combat unit that has the most timely contact with the market is considered to be the most important change JD.com has made in the past five years in the face of an ever-changing market.
Liu Qiangdong is leading JD.com to return to simplicity, and only simpler can it be more flexible and faster to respond to market competition.
For such a mature and large-scale Internet company that has been developing for 20 years, it is not easy to simplify the complex, which to some extent means overthrowing the past self. But JD.com, which is increasingly lacking presence in the market, must do so.
3, Liu Qiangdong perceives danger, Jingdong must not "lie down"
It is rare for the founder to speak out on the company's intranet, unless he is really in a hurry, which is the case with Liu Qiangdong.
In his reply to employees, Liu Qiangdong bluntly said, "Any person and any company will go through several peaks and valleys to achieve greatness." In any case, I will not lie flat, and I hope that my brothers will not lie down. ”
The current Jingdong is at the bottom of what Liu Qiangdong said.
In the third quarter of 2023, JD.com's revenue was 247.698 billion yuan, a year-on-year increase of 1.7%, and its net profit was 7.936 billion yuan, a year-on-year increase of 31.67%. JD.com's management has spent a lot of time talking about the company's record profits, trying to make the market ignore the plight of JD.com's revenue growth that has almost stagnated.
But the opponents are growing. In the same period, Pinduoduo's revenue was 68.84 billion yuan, an increase of 94% over the same period last year, and Alibaba's revenue was 224.790 billion yuan, a year-on-year increase of 9%. Alibaba's Taotian Group's revenue in the third quarter of 2023 was 97.654 billion yuan, an increase of 4% from 93.735 billion yuan in the same period last year.
Growth has stagnated, reflecting the capital market, and JD.com has also reached a more dangerous time.
In terms of market capitalization, as of press time, JD.com's market value is $41.289 billion, down 60% from the high point at the beginning of this year, and in the long run, it is more than 75% lower than the highest stock price of JD.com Group since its listing on the Hong Kong stock market in 2020.
In comparison, Alibaba's market capitalization is $184.667 billion, and Pinduoduo's market capitalization is $194.518 billion, and the gap between JD.com and these two e-commerce giants is obvious. Not long ago, when Pinduoduo's market value surpassed Alibaba's, JD.com was almost unmentioned.
Liu Qiangdong once said that it takes ten years to succeed, and it only takes one day to fail. An entrepreneur leads an enterprise, that is, he has been walking a tightrope, and the larger the enterprise, the thinner the tightrope.
If no changes are made, the tightrope under Jingdong's feet will become thinner and thinner, and there is even a possibility of collapse. This is also the reason why Liu Qiangdong and Jingdong must not lie flat.
In the past year, whether it is organizational change or business adjustment, JD is changing, but not fast enough. Whether it is speeding up or attacking, it is not an easy task for JD.com.
To make matters worse, the question of where JD.com's new growth will come from is also a problem. This year, JD.com has made two major efforts, one is instant retail, and the other is JD.com's live broadcast room.
According to the third quarter financial report, Dada's total revenue was 2.867 billion yuan, a year-on-year increase of 20.46%, and the company expects Dada's revenue in the fourth quarter to be between 30-3.3 billion yuan, a year-on-year increase of 12%-23%. JD.com's instant retail growth rate is considerable, and the group's determination to invest is also very large, but there are many competitors in this market, and it is not easy for JD to grab the cake.
The same problem is true for the live streaming business. The market competition is fierce, the opponent layout is deeper, JD.com has frequently extended olive branches to the head anchors this year, and it will take time for the live broadcast business to become a "climate".
Source: Jingdong Supermarket procurement and sales live broadcast room
It is worth noting that with the changes in the domestic e-commerce environment, several major e-commerce platforms have set their sights on the broader e-commerce market overseas, Ali has AliExpress, Pinduoduo has Temu, and ByteDance has TikTok shop, but Jingdong has almost no presence in the overseas e-commerce market.
This is precisely a very imaginative business. In early December, one of the reasons for Pinduoduo's market value skyrocketing was the growth of its cross-border e-commerce platform Temu.
From this point of view, if JD also finds an imaginative incremental business, it is possible to strengthen the tightrope of JD and boost JD's morale.
This still points to the core question facing JD.com - where does growth and innovation come from?
On May 19, 2020, the fifth veteran employee day of Jingdong Group, Liu Qiangdong sent an internal letter to his brothers. He summarized the development process of JD.com into three stages: before 2014 - the original intention of teenagers, from 2014 to 2018 - the troubles of adolescence, and after 2019 - who is JD.com as an adult?
Now, standing at a new node, Liu Qiangdong has to answer what the 20-year-old Jingdong wants to become, in any case, the current appearance should not be the Jingdong that Liu Qiangdong expects.
(The header image of this article comes from JD.com's official Weibo.) ）