Pinduoduo catches up with Ali? The most anxious is JD.com

Fixed Focus One

2024-05-27 09:00Posted on the official account of Beijing Fixed Focus One

定焦(dingjiaoone)原创

Author | Jin Yufan

Edit | Wei Jia

The e-commerce circle once again staged a big drama of replacing the old king with the new king.

On May 22, Pinduoduo's market capitalization once again surpassed Alibaba, becoming the Chinese concept stock company with the highest market capitalization in the U.S. stock market. The reason is that Pinduoduo announced a good quarterly earnings report on the same day.

As of press time, Pinduoduo's market value rose to $218.8 billion, surpassing Alibaba's $196.5 billion; JD.com's market capitalization is $46.2 billion, and Pinduoduo's market capitalization is equivalent to 4.7 JD.com.

The market capitalization reflects investors' expectations, and Pinduoduo's market capitalization stands first in China's e-commerce, indicating that investors believe that this is a company worthy of being optimistic. However, to judge the market position and future development space of an e-commerce company, the data of GMV, active users, and revenue, expenses and profits are more realistic.

Comparing the financial reports of the three e-commerce giants Alibaba, JD.com and Pinduoduo in the first quarter of 2024 (of which Alibaba is in the fourth quarter of fiscal year 2024, corresponding to January-March 2024), "Fixed Focus" has drawn some conclusions:

In terms of revenue, JD.com > Ali > Pinduoduo, JD is equivalent to 3 Pinduoduo, and Ali is about equal to 2.5 Pinduoduo;

Looking at profits, Pinduoduo > Ali > JD.com, JD.com's profits are less than 40% of Ali's and 30% of Pinduoduo's;

The three no longer disclose the latest GMV and the number of active users, but based on past data and research reports, they are all Alibaba> Pinduoduo > JD.com;

Compared with the platform income of domestic e-commerce business, Ali is still the boss, Pinduoduo ranks second, and JD.com retreats to third;

In terms of cost, Ali dares to spend the most, and Jingdong can save the most; In terms of human efficiency, Pinduoduo is the most exaggerated, equivalent to 7 times that of JD.com and 3 times that of Alibaba.

Ali stabilized, and Pinduoduo was the most profitable

Looking at the total revenue first, JD.com, Alibaba, and Pinduoduo are 260 billion yuan, 221.9 billion yuan, and 86.8 billion yuan respectively. JD is about 3 Pinduoduo, and Ali is about 2.5 Pinduoduo. Compared with the year-on-year growth rate, JD.com and Ali are growing slowly because of their high base, and Pinduoduo is still ranked first.

Looking at the scale of profits, the adjusted net profits of Pinduoduo, Alibaba, and JD.com were 30.6 billion yuan, 24.4 billion yuan, and 8.9 billion yuan respectively.

This figure used to be the highest for Alibaba, and now, it is re-ranked with Pinduoduo. Pinduoduo has become the most profitable e-commerce company, with an average daily net profit of more than 300 million yuan this quarter. As an asset-heavy e-commerce platform, JD.com's profit level has been low.

When the competition of e-commerce intensifies and the number of users grows slowly, in order to grab more users and orders, "Cats and Dogs" has to restart the price war. In such a competitive environment, GMV (total transaction value) and the number of active users are more worthy of attention. Since none of the three companies publish the latest data, we found some data as a reference.

Let's start with GMV:

Alibaba's fiscal year 2022 (12 months ended March 31, 2022) generated a total GMV of 8.32 trillion;

According to the GMV growth rate disclosed by JD.com in 2021 and 2022 (an increase of 26.2% and 5.6% year-on-year, respectively), its GMV in 2021 and 2022 will be 3.29 trillion and 3.46 trillion respectively;

Pinduoduo's GMV in 2021 was 2.44 trillion;

Compared with the transaction size in 2021, Alibaba is 2.5 times that of JD.com and 3.4 times that of Pinduoduo.

According to the GMV growth rate and pattern changes of e-commerce platforms in CICC's research report, "Dingjiao" calculates that the GMV volume of the three companies in 2023 is roughly 8 trillion yuan, 3.7 trillion yuan for Pinduoduo, and 3.6 trillion yuan for JD.com.

Compared with two years ago, the gap between the three is narrowing, Ali's transaction scale still ranks first, and Pinduoduo surpasses JD.com.

Looking at the number of active users: Alibaba had 1.31 billion annual active consumers globally in fiscal 2022, of which more than 1 billion came from the Chinese market and 305 million from overseas, JD.com did not release 2022 data, but its active users were 588.3 million as of the end of the third quarter of 2022, and Pinduoduo had 881.9 million annual active buyers as of March 31, 2022.

If this momentum continues, the comparison results of the number of active users and GMV are the same, both of which are Ali first, Pinduoduo second, and JD third.

Comprehensive analysis, Alibaba's GMV and number of active users are still the leader; Pinduoduo's profit scale has come to the top; JD.com has the highest revenue, but its profits, GMV, and number of active users are all inferior to its rivals.

Focus on e-commerce: Ali Taotian is picking up, and JD.com's growth rate is returning

A simple comparison of the overall financial data of Alibaba, JD.com, and Pinduoduo cannot objectively reflect their e-commerce businesses.

On the one hand, it is because the business that generates revenue is different. Pinduoduo only has one track for e-commerce, mainly Pinduoduo main station and cross-border e-commerce Temu. In addition to e-commerce, Ali and Jingdong also have a larger territory, Ali has Taotian, Cloud Intelligence, Ali International, Cainiao, Local Life, Dawen Entertainment and a total of seven other sectors; JD.com's revenue is made up of retail, logistics and other services.

"Fixed focus" mapping

On the other hand, Alibaba and Pinduoduo are platform-based e-commerce, mainly based on e-commerce service platform revenue. A small part of Ali is self-operated, including Tmall Supermarket, Sun Art, Freshippo, and Ali Health. Pinduoduo is mainly e-commerce and grocery shopping, and the proportion of self-operation is the smallest. JD.com, on the other hand, is a retail model that makes the difference, with self-operated e-commerce as the mainstay, and the GMV formed by self-operated e-commerce sales is counted as revenue, which is why its overall revenue is the highest.

Comparing the platform revenues (including advertising and commission income) of the three domestic e-commerce businesses is more revealing.

Pinduoduo still did not separately announce Temu's revenue this quarter, but only disclosed advertising revenue of 42.5 billion yuan; Commission (i.e., trading services) revenue was 44.4 billion yuan, a year-on-year increase of 327%. Because Pinduoduo included Temu's income in commission income, Wang Jie, an investor who pays attention to Temu, judged that the three-fold year-on-year growth rate of commissions was mainly driven by the increase in Temu's income.

Hua Chuang Securities judged in a research report in May this year that in Q1 this year, Temu and Duoduo contributed a total of 32.3 billion yuan in commission income. Based on this estimate, the revenue of Pinduoduo's main station (including advertising and commission income) is about 54.6 billion yuan.

In horizontal comparison, in this quarter, Taotian CMR's customer management revenue (commission and advertising revenue) revenue was 63.6 billion yuan; JD.com's commission and advertising business revenue (i.e., platform and advertising service revenue) was 19.3 billion yuan.

Based on this calculation, looking at e-commerce alone, Ali is still the boss; The revenue gap between Pinduoduo and Ali platforms has been further narrowed, and its main station revenue has approached 86% of Taotian's customer management revenue; JD.com's platform has the smallest revenue volume.

In terms of growth, the main station of Pinduoduo surpassed Ali Taotian and Jingdong Mall.

Pinduoduo's advertising revenue, which reflects the growth of the main site, grew by 56% year-on-year in the quarter.

Adjusted EBITA by Alibaba Segment / Alibaba earnings report

Taotian's customer management revenue grew by only 5%, which was related to the platform's lower adjusted EBITA for Alibaba divisions

In the end, Taotian's adjusted EBITA profit (earnings before interest, taxes, depreciation and amortization) fell to 38.5 billion yuan, down 1% year-on-year.

However, compared with the previous quarter, Taotian's customer management revenue has accelerated significantly, and in addition, Taotian's GMV (excluding unpaid orders) and order volume have achieved double-digit growth, indicating that Taotian's business is coming out of the downturn.

The year-on-year growth rate of JD's commission and advertising business revenue was only 1%, which was a recovery from the decline of 4% in the previous quarter, but it also shows that JD.com's 3P (third-party) merchant ecology has not yet reached the harvest period. Since last year, JD.com has introduced more 3P merchants, waived commissions for new merchants, and reduced commissions for some categories, hoping to boost the GMV and advertising revenue growth of 3P.

Overall, the platform revenue performance of the three domestic e-commerce businesses is that the main station of Pinduoduo is growing the fastest, Ali Taotian is picking up, and JD.com's growth rate is returning.

JD.com is the most effective way to save money, and Pinduoduo is the most efficient

In the past year, Alibaba, JD.com, and Pinduoduo have been inextricably fought, advertising and subsidies have flown together, and the company has been crazy about reducing costs and increasing efficiency.

Judging from the cost of excluding equity incentives, Alibaba, JD.com and Pinduoduo are consistent with spending appropriately externally and desperately saving internally.

The external expenditure of e-commerce platforms is mainly marketing promotion and fulfillment expenses that can promote growth.

Ali spent the most money on marketing, spending 4 billion yuan more in the quarter than the same period last year;

Pinduoduo also spent more money on marketing, 7 billion more than the same period last year, Wang Jie's analysis of "fixed focus", mainly spent on Temu, this quarter's marketing expenses on Pinduoduo's main station are declining;

In addition to the subsidy, Jingdong also sponsored the Spring Festival Gala at the beginning of the year, but the marketing cost was only three to four percent of the other two; In addition, JD's fulfillment fee was 16.8 billion, a year-on-year increase of 9%, however, considering that it is higher than the growth rate of JD Mall's revenue7%, indicating that the growth rate of JD Mall's order volume is higher than the revenue growth rate, reflecting that even if it is subsidized for growth, it is not easy.

In terms of internal management and R&D expenses, JD.com is the most economical, with a total of more than 100 million yuan in the two expenses; Ali spent the most money on these two expenses, but it also began to save this quarter, and the proportion of revenue from the two expenses combined decreased slightly; Only Pinduoduo rose slightly, and the two expenses increased by a total of 600 million yuan.

Behind the desperate internal cost reduction, the three giants of e-commerce are all pursuing higher human efficiency.

The most exaggerated is Pinduoduo, after the launch of Temu in September 2022, the number of employees has not increased much, but the revenue has increased even faster. In 2022, Pinduoduo will use 13,000 employees to achieve a revenue of 130.6 billion yuan, and a single employee will support tens of millions of income a year, and in 2023, the number of employees will increase to 17,000, generating an income of 247.6 billion yuan, and a single employee will support at least 14.5 million yuan of income a year.

In 2023, JD.com will use 517,070 employees to achieve revenue of 1,084.7 billion yuan and unit employee revenue of 2.1 million yuan, and in fiscal year 2024, Alibaba will use 205,000 employees (as of March 2024) to generate revenue of 941.2 billion yuan, and a single employee will generate 4.6 million yuan of revenue a year.

Compared with the revenue of employees, Pinduoduo's human efficiency is 7 times that of JD.com and 3 times that of Alibaba.

Where will the three giants of e-commerce go in 2024?

Cats and dogs are at different stages of development, and the current business focus is also different, so it is necessary to look at the three giants of e-commerce from a higher perspective. Li Rui, a senior practitioner in the e-commerce industry, analyzed the "fixed focus" that Pinduoduo, which has been developed for less than 10 years, still has potential energy, and can also rely on the traffic distribution mechanism and improve operational efficiency to increase market share.

However, Ali and JD.com, which have been developing for more than 20 years, have particularly difficult growth, so they have to increase investment in exchange for growth at the expense of pressure on profits.

Entering 2024, in the context of the reduction of industry increment and the rationalization of consumption, cats and dogs can not "lie flat", but seize the business that they think is the most promising and enter the investment period again.

Unlike around 2015, Ali will enter 2024, one of the main lines is to be asset-light, continue to shrink the asset-heavy self-operated business, marginalize low-quality business, and increase investment in key businesses.

"Fixed focus" mapping

Alibaba's three key businesses are Taotian, International Digital Commerce, and Alibaba Cloud. The three lines increased investment at the same time, in exchange for varying degrees of growth, but also failed to avoid further erosion of profits.

Among them, the fastest-growing international digital business, with a revenue volume exceeding that of Alibaba Cloud; Despite the sharp price reduction of Alibaba Cloud's core products in the quarter, it still maintained 14 consecutive quarters of profitability, and after abandoning private and hybrid clouds, the product revenue of public cloud achieved double-digit growth.

JD.com's next two priorities are to develop 3P businesses with higher gross margins and build a low-price mentality.

Although Jingdong has made a big deal about subsidies of 10 billion yuan a year, it has not changed much, and the growth in exchange is not obvious, and it has not hurt profits.

The low-price strategy has made JD.com's 3P business more urgent. It is difficult for JD.com to achieve the same price as its competitors, so it is necessary to expand the capacity of third-party merchants and let third-party merchants help JD.com establish a low-price mentality.

JD.com's gross profit margin in the quarter unexpectedly increased to 15.3%, indicating that the proportion of 3P business has increased, however, focusing on the development of 3P business, it means that the traffic is inclined to small and medium-sized businesses, in Li Rui's view, JD and Ali are facing the same problem, in the short term, the profit pressure of the e-commerce business will be relatively large.

Temu is undoubtedly Pinduoduo's most promising business, and a large part of the recent market valuation of Pinduoduo's growth is due to its optimism about Temu.

Temu itself has not light assets, it is not a high-margin business, and it is currently mainly a fully managed and semi-managed model, with a low markup rate. Wang Jie said that Temu's task now is to increase revenue and reduce losses, and achieve breakeven at a faster speed.

In addition to the U.S. market, Temu is also developing regions such as Europe, Japan, and South Korea, and at the same time, in order to reduce losses, it is trying to control various expenses such as marketing, subsidies, and fulfillment.

In a research report in May this year, CICC speculated that in Q1 this year, Temu's revenue was 30.2 billion yuan, and its operating loss narrowed to 1.4 billion yuan.

In the past year, Ali and JD.com have fallen into a low-price "fight", and it seems that Pinduoduo is the easiest to live. However, entering 2024, the situation is changing, when Ali and JD.com get out of the impact of structural adjustment, they will join the share defense war of the local market with a more active attitude, or the enclosure war of overseas e-commerce, Pinduoduo, which still has a large gap in volume, may face unprecedented challenges.

Is Ali the success of the defense, or Pinduoduo becoming the new king, or the success of JD.com's counterattack? In less than a year, the answer may be revealed.

*Image courtesy of Pixabay. At the request of the interviewee, Wang Jie and Li Rui are pseudonyms.

View original image 16K

• 

• 

• 

• 

• 

• 

• 

• 

• 

•