Author | Dong Jie
Edit | Qiao Qian
After a year of "fighting" with low prices, China's e-commerce giants seem to be gradually winning back the trust of users and ushering in a slow recovery cycle.
In the past Q1, Alibaba once again achieved double-digit growth in GMV after two years, and the growth rate of customer management revenue (advertising fees and commissions from merchants) also hit a new high in three quarters. JD.com is not far behind, exceeding market expectations in many core indicators such as GMV, revenue, profit, and number of users.
More importantly, the GMV growth rate of the two giants in Q1 exceeded the growth rate of 11.6% of the network society, and after struggling for many quarters, they both got out of the quagmire. JD.com's share price has also rebounded 40% in the past month, outpacing the 27% increase in the Hang Seng Tech Index over the same period.
At this time last year, Xu Lei, who had worked at JD.com for 12 years, announced his retirement plan, and CFO Xu Ran succeeded him as the new CEO. In his parting speech, Xu Lei thanked and appreciated Xu Ran, saying that "in 2018, JD Retail was able to get out of the darkest moment through adjustment, which is inseparable from Sandy", and emphasized that JD will pay more attention to the health and quality of its business in the future.
Now a year has passed, Xu Ran has perfectly implemented Liu Qiangdong's low-price strategy. In the past Q1, JD.com achieved revenue of 260 billion yuan, a year-on-year increase of 7.0%, and operating profit reached 7.7 billion yuan, a year-on-year increase of 20.3%.
In a year when low-price subsidies were rampant, JD Retail's operating profit fell far less sharply than the company's guidance (down 16 percent) and actually fell only about 5 percent, which helped JD preserve profits.
Core retail is out of the quagmire
Last year's Q1 before Xu Lei's retirement was a quarter in which JD Retail was in a quagmire.
At that time, the haze of the epidemic had not completely dissipated, and the revenue of 3C electronics, which was lagging behind, and the daily necessities, which were affected by the high base of the epidemic, fell into a slump in the current quarter, with revenue growth rates falling by 2% and 8.7% respectively. Over the past year, JD.com has rebounded in these two major revenue segments.
In the first quarter, the revenue of 3C electronics rebounded from 117 billion yuan to 123 billion yuan, with a growth rate of 5.3%, which was almost the same as the social zero data. After the launch of the 10 billion subsidy, JD.com's price spread compared with its peers in the advantageous electrified categories was narrowed and regained a certain market share.
A JD insider revealed that so far in the second quarter, the growth rate of 3C has continued to rise and exceeded the growth of social zero. Recently, Jingdong has also signed hundreds of billions of annual orders with Xiaomi, Lenovo and OPPO, "proving that the internal confidence is very sufficient".
The daily revenue rose from 78.5 billion yuan to 85.3 billion yuan, with a growth rate of 8.6%, a new high in the past two years, and continued to recover sharply on the basis of the growth rate of 0.2% in Q4 last year.
The rebound of the daily 100 categories,To a large extent, it is due to the fact that in August last year,Jingdong's free shipping threshold for self-operated goods (non-PLUS members lowered from 99 yuan to 59 yuan)Lowered,Xu Ran had revealed at the previous financial report meeting,This measure has allowed the supermarket order volume to resume growth,And the shopping frequency is significantly higher than the growth of ARPU value,This trend has continued for 2 quarters。
Today, this free shipping service is not limited to self-operated goods, by the end of the first quarter, Jingdong 9 percent of the third-party goods have also achieved a maximum of 59 yuan free shipping new regulations, and home appliances, kitchenware, health care products and other 13 categories of all goods are 0 yuan free shipping.
At the beginning of the initiative, many people worried that this would greatly weaken the growth of logistics-related service revenue, but the actual situation proved that the increase in shopping frequency not only did not weaken, but also pushed up the growth of logistics revenue in disguise.
In the first quarter, JD.com's logistics and other service revenue reached 32.3 billion yuan, with a growth rate of 13.5%, exceeding the 6.6% growth rate of commodity revenue and the 7% growth rate of the group's revenue growth, but the growth rate of fulfillment expenses was only 9.3%. The "scissors difference" between income and expenses also directly promoted JD Logistics to turn losses into profits, from a loss of 1.12 billion yuan in the first quarter of last year to a profit of 220 million, and the operating profit margin also returned from -3.1% to 0.5%.
Regarding the progress of the pop ecology that the outside world is concerned about, Xu Ran also revealed that as of the end of the first quarter, the number of active merchants of JD POP has exceeded one million, and the number of orders and users of the three parties has increased significantly. But she also admits that compared to its competitors, JD.com's supply of third-party goods is still at a disadvantage, and "in the next few quarters, it is still the stage of expanding its scale", but she believes that "it is only a matter of time before the number of 3P orders and GMV surpasses that of self-operated goods".
What's the secret to keeping your profits?
An important reason why Xu Ran was promoted to the new CEO of JD.com is her financial background. After JD.com's "low price" strategy, what Liu Qiangdong wants is not bottomless subsidies and investment, but to spend every penny on the blade.
In the past year, JD.com's profit performance has exceeded market expectations almost every quarter, at least in this regard, Xu Ran has completed its mission well. How did JD.com achieve a rebound in revenue and users, but profits did not fall but rose, and we can get a glimpse of it through this quarter's financial report.
On the eve of the earnings report, JD.com's guidance for the retail business was that operating profit could fall by 16%, but the actual decline was only about 5% (from 9.8 billion in the same period last year to 9.3 billion). While revenue and expenses were broadly in line with expectations, the main difference was gross profit that was approximately $1.8 billion higher than expected, resulting in a year-over-year increase in gross margin of approximately 0.5%.
This may be that JD.com is deliberately controlling the discount rate of self-operated products and the categories they cover, or optimizing the structure of some products in the first quarter - such as giving more traffic to high-margin products, and the rebound in the growth rate of daily necessities in the current quarter seems to prove this problem.
On the other hand, JD.com pinned more subsidies for users on pop merchants, at the cost of sluggish advertising service revenue and commission income. The performance of JD.com's platform advertising services revenue remained subdued in the quarter, with a growth rate of only 1.2%. A number of brokerages told 36Kr that advertising revenue has actually improved in this quarter, but the growth rate of commission income is still declining, and the magnitude is roughly the same as that of Q4 last year, which is in double digits.
Previously, a number of POP merchants who participated in the "10 billion subsidy" said that their motivation to participate in the "10 billion subsidy" came more from JD.com's commission rebate - the deduction point of POP merchants selected for the "10 billion subsidy" channel will automatically drop to 0.6% (in the past, the deduction point for different categories was 3%-8%), which diluted JD's commission income in disguise.
Attracting third-party merchants, optimizing the product structure, and better implementing the low-price strategy have been the core issues of JD.com in the past year, but the number of new merchants that have hit a record high has not yet brought a significant increase in revenue to JD.com.
At the financial report meeting, JD's management also emphasized again that it will take time to increase the number of 3P merchants and convert them into 3P orders, GMV and revenue growth, "The internal short-term will not take the monetization rate as a core goal, JD's 3P and other platforms are still in different stages, and the rush to realize the ecosystem during the establishment period is not good for the platform." ”
A mid-level JD.com manager commented on Xu Ran's performance in the past year, saying, "She may be the most suitable candidate for CEO at the moment, and the drastic organizational adjustment and turbulent external environment have made JD.com need a stable manager to team up with Liu Qiangdong to lead the group forward." This steadiness is not only managerial, but also financially and performanceally. ”