Produced by Tiger Sniff Commercial Consumer Group
Author|Miao Zhengqing
Visual China
JD.com is facing a two-front battle.
It tries to compete with Pinduoduo, Douyin, and Ali for "sensitive and fickle" C-end users through "profit-making" tactics such as 59 free shipping and refund-only; On the other front, it is trying to retain and attract more merchants by reducing merchant costs and changing the push strategy, so as to compete with the above-mentioned old rivals for department stores, shoes and clothing, small household appliances, cosmetics and other categories of merchants.
This is undoubtedly an easy double-war battle, and its deep difficulty lies in: whether it is to give profits to the C-end, or to reduce the cost of merchants, it means that Jingdong needs to take out "real money" from profits. Compared with competitors such as Douyin and Pinduoduo, JD.com has no traffic advantage, and it is difficult to continue to burn money unscrupulously.
Like a cautious dancer, it dances on a single-plank bridge that is not wide, and has to take care of the audience on both sides, for fear that either side will abandon the stage.
As a result, judging from the financial report, JD.com revealed the taste of "cautious search for balance", but compared with the previous analysts' expectations for JD.com's performance, it exceeded expectations.
On May 16, JD.com announced its financial report for the first quarter of 2024. On the revenue side, JD.com increased by 7% year-on-year in the quarter to 260 billion yuan; Operating profit increased by 20.3% year-on-year.
Data source: JD.com's financial report
In JD.com's current revenue structure, JD retail, JD logistics, and new business are the three core sectors. These three businesses contribute more than 92% of JD's revenue, and JD Retail contributes 82% of the group's revenue.
The core information hidden behind the double increase is: from the perspective of "profit", it is actually JD Logistics that has contributed to the key increment; The "profit" performance of JD Retail, the base camp, has been affected by factors such as profit concessions and cost reductions.
From the perspective of revenue, JD Retail and JD Logistics both showed a year-on-year growth trend, increasing by 6.8% and 14.7% respectively in the quarter to 226.83 billion yuan and 42.13 billion yuan. Revenue from new business decreased by $19.1 billion year-on-year to $4.87 billion. The new business covers sinking market projects such as community group buying, which JD.com has previously focused on, and this part of the business itself has been in a state of contraction since 2023, and the decline in revenue in this quarter is related to the further contraction of business lines.
From the perspective of "profit" performance, in terms of operating profit, JD Retail fell 5.2% year-on-year to 9.325 billion yuan, and JD Logistics' operating profit changed from a loss of 1.123 billion yuan in the same period last year to a profit of 224 million yuan, an increase of 19.9%. The operating profit of the new business is not optimistic, it was in the red in the same period last year, and it is still in the red, and the loss is 670 million yuan.
From the operating profit margin, it can be more intuitively seen the current situation of "logistics business pulling JD Run" in this quarter: JD Retail's operating profit margin decreased by 0.5% to 4.1% year-on-year, and JD Logistics improved from an operating loss rate of 3.1% in the same period last year to an operating profit margin of 0.5%.
Let's first talk about the logic behind the improvement of JD Logistics' profitability. Since 2023, JD Logistics has begun to strengthen its attraction to external customers, and the proportion of its external customer revenue has continued to rise, and the latest quarterly data shows that the proportion of external customer revenue has approached 70%. In this process, JD Logistics continued to improve operational efficiency in the fourth quarter of 2023 and the first quarter of 2024 by optimizing the customer structure and adjusting business lines. At the same time, JD Logistics also began to focus on cross-border logistics business, such as providing supply chain logistics services to MINISO in the first quarter, and undertook the warehousing and distribution of all stores of MINISO in Australia and Malaysia.
Then, let's focus on JD Retail.
One of the core factors for the decline in JD.com's retail operating profit is that its fulfillment costs and marketing expenses are rising. In the fulfillment cost, the 59 yuan free shipping policy, free door-to-door return and exchange and other actions will be further promoted in the first quarter of 2024, which has exacerbated the cost pressure on JD.com. JD.com's overall fulfillment expenses increased by 9.3% year-on-year to RMB15.4 billion, and the ratio of fulfillment expenses to total revenue increased by 0.2% to 6.5% year-on-year. Jingdong related people revealed to Tiger Sniff that the implementation of the 59 free shipping policy is the core incentive for the year-on-year growth of this expenditure.
In terms of marketing expenses, JD.com's related expenses increased by 15.6% year-on-year to RMB9.3 billion during the quarter, and the ratio of marketing expenses to total revenue increased by 0.3% to 3.6% year-on-year. The core factor that caused this increase in expenses was that JD.com launched a number of promotional activities, including the sponsorship of the Spring Festival Gala and other projects, in the first quarter, and tried to attract traffic through activities.
Judging from the sales situation of the Jingdong platform, profit concessions and marketing promotion have indeed boosted product sales.
During the quarter, JD.com's revenue from "3C" goods and daily necessities increased year-on-year, with the former increasing by 5.3% year-on-year to 123.21 billion yuan, and the latter increasing by 8.6% year-on-year to 85.29 billion yuan. Some relevant people revealed to Tiger Sniff that the growth rate of daily necessities is the fastest quarterly since 2023.
In terms of inventory turnover days, in the first quarter of 2023, JD.com's related data was 32.4 days, while in the first quarter of 2024, this data dropped to 29 days.
Data source: JD.com's financial report
Based on this quarter's financial report, we can actually imagine what JD will look like in the next six months: with a high probability, it will continue to benefit C-end users and reduce costs for merchants, in order to retain more consumers and attract more merchants. Previously, in the JD earnings call, JD executives said that they were not in a hurry to conduct a profit assessment of pop's performance at this stage, and hoped to expand supply and increase GMV by making profits. Judging from the financial data, the "actual" sales force of the Jingdong platform may continue to be optimized, but under the effect of multiple factors such as profit concession and marketing, the "profit" performance of Jingdong may not appear "explosive performance", it is more likely to enter a new period like a few years ago: or a small profit, or a small expansion loss, or a stable and small increase state.
Next, there are two more challenges that JD may face.
From the perspective of commodity revenue structure, 3C products currently contribute more than 47% of JD.com's revenue. As we all know, 3C products are actually the lifeblood of JD.com: as the "golden package" in express delivery, it also plays the core of the logistics business's "hematopoietic engine".
But a problem that cannot be ignored is that from the second half of 2023 to the present, the category of small household appliances on Pinduoduo and Douyin is expanding. These platforms are increasing their investment in 3C categories, and a large number of 3C stores and 3C broadcasters have begun to receive traffic support. Jingdong did not announce 3C products, small household appliances, large appliances and other specific product data,But from the general analysis attitude in the industry,In small household appliances,Jingdong is encountering"Sharing war。
The good news is that in the category of large appliances with higher customer unit prices, JD.com's basic market is still relatively stable. However, the difficulty in this link is that major brands do not want to "plant grass drainage and sales performance for a long time to separate into different worlds". This is also why Jingdong is making efforts in the live broadcast room, and even let the founder Liu Qiangdong appear in the live broadcast room as a digital person and start bringing goods. One unknown is that JD.com's series of adjustments on the traffic side can really completely hold the "3C country", in fact, it needs to be tested.
Another key challenge is whether the series of concessions and cost reduction cards played by JD.com are really "in place".
Throughout 2023, Jingdong is strengthening the "low-price mentality", which has almost become the number one project in Jingdong, for a big ship like JD.com, after a year of active adjustment, the effect has begun to gradually appear, but there is still a long way to go. Judging from the state of the entire e-commerce market, Pinduoduo's low-price mentality advantage is still obvious, and Ali is also continuing to make efforts in low-price mentality. At present, these concessions may not be enough for JD.com to achieve a "milestone victory" in the competition for users and merchants. However, observing the information given by JD's current financial report, JD's "money pocket" may not be unfathomable, and JD still needs to continue to work the road of "low-price mentality".
It has only been more than 30 days since 618. Within JD.com, 618 has almost become a key battle in 2024 to "hold the mountains and rivers". From the current financial report, it can be seen that JD.com's changes in the past few quarters have been effective, but is it enough for JD.com to win a big victory in 618? Perhaps, Jingdong still needs to come up with more mastery at the bottom of the box.
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