The glory of e-commerce is spreading to every corner of China.
In a village in southern Hebei, 74-year-old Grandma Chen is standing at the gate, waiting for her younger brother to deliver the goods to her door. Alone at home, she usually buys the oil, salt, sauce, vinegar, and milk powder and soy milk from her daughter Cui Lili online. Since JD.com is the only door-to-door courier in the village, Cui Lili usually chooses JD.com to do it herself, and each time she has to collect a free shipping quota of 99 yuan.
Now, Cui Lili finally doesn't have to worry so much, "You can buy with confidence, and you don't have to do the math every time to make up the bill!"
On August 23, JD.com threw out an explosive news: Adjusting the shipping fee standard for self-operated products, JD PLUS members have unlimited free shipping throughout the year, and the threshold for self-operated free shipping for ordinary users has been reduced from 99 yuan to 59 yuan. Since 2016, JD.com's self-operated free shipping threshold has been maintained at 99 yuan for a long time. This is the first time that JD.com's self-operated free shipping threshold has been lowered.
In this regard, there are not a few people who are as happy as Cui Lili. "Good thing, I used to be reluctant to pay for postage on JD.com when I bought something worth a few yuan, but now I may not compare prices and buy it directly on JD.", some netizens said.
In fact, the lowering of the free shipping threshold is an important step in JD.com's low-price strategy, and it is also a manifestation of JD.com's low-price strategy.
Low prices have become a strategic choice for major e-commerce companies. However, the low price of e-commerce will naturally produce two contradictions: first, the contradiction between low price and consumer experience, whether the product can maintain high quality and good service while maintaining low price; , The contradiction between platforms, the biggest beneficiaries of low commodity prices are consumers, while the profit margins of merchants and platforms are compressed.
For a long time, JD.com has been synonymous with high quality and good service in the field of e-commerce. Does it give up quality and service when picking up low-priced weapons? JD.com’s choice is low price, quality and service. This is destined to be a difficult road, and it is also a road that it must take-one-dimensional low price does not have long-term vitality.
Three-dimensional low price
If you define the e-commerce industry, then this year is destined to be a year of comprehensive low-price competition.
Since the beginning of this year, JD.com has successively launched a series of measures such as JD.com’s 10 billion subsidy channel, the function of single-piece price, and the double compensation service for buying expensive products, so that consumers can intuitively feel that it is serious about low prices. In March of this year, JD.com's "10 billion subsidy" channel was officially launched. By 618, the number of products participating in the 10 billion subsidy had already been 10 times that of March.
Consumers also intuitively feel the changes in JD.com. Wang Zhe is an ice cream lover and will store ice cream all year round. This summer, she found that JD.com’s ice cream is also very cheap. Recently, Haagen-Dazs strawberry flavor 473ml is only 69 yuan, which is the same price as other platforms, and you can buy it on the same day and arrive the next day; Baxi chocolate 1100g is only 59 yuan, which is cheaper than other platforms. All are cheap.
Rome was not built in a day. Following Liu Qiangdong’s proposal that low prices are the only basic weapon, JD.com has achieved a comprehensive three-dimensional adjustment from top to bottom around low prices. On the top, it has reached an agreement on corporate strategy and cognition. In the middle, it has completed the organizational structure adjustment. Investment promotion, traffic operation and other aspects of layout.
On November 20, 2022, at the Jingdong business management training meeting, Liu Qiangdong, the founder and chairman of the board of directors of Jingdong Group, established the company's most important strategy for the next three years: "Ensuring low prices based on quality and service is the most important thing for past success. Weapons are also the only basic weapons since then.” Since then, Jingdong’s low-price route has had strategic guidance.
As the saying goes, a strategy that can be implemented is a good strategy. If an enterprise is regarded as a high-speed aircraft, then the organizational capability is the core engine that drives the aircraft to continue flying. After the low-price strategy was determined, JD.com adjusted its organizational structure. While mobilizing the enthusiasm of middle-level managers, it cleared obstacles for the implementation of the low-price strategy and made low-price more effective.
In April this year, JD.com carried out a new round of proactive reforms in its business structure and organizational units. Taking JD Retail as an example, JD Retail canceled the business group hierarchy and changed the business group into a business department. The person in charge of the original business group served as the person in charge of the business department. Specific categories are split into combat units for procurement and sales.
One of the main significance of this adjustment is to reorganize the relationship between self-operated and POP (specialized, monopolized and other third-party stores). POP and self-operated operations are fully connected in the combat unit, and are managed by a unified person in charge to achieve "equal rights" in traffic.
Various measures have cleared the obstacles for the entry of third-party merchants to ensure the supply of low-priced goods. Compared with self-operated businesses, third-party merchants are important bearers of JD.com's low-price strategy, which can further reduce costs in logistics and other aspects, and have greater room for low prices. In January of this year, JD.com launched the "Spring Dawn Plan", allowing individual sellers to open stores on JD.com.
The strategy established by Liu Qiangdong, the adjustment of the organizational structure, and the recruitment of third-party merchants, this series of actions are finally implemented in products and operations. In terms of commodity flow distribution, JD.com bases on the lowest price of a single product, and products with less profit and lower prices will get more traffic; The weight should not be less than 50%.
Since Liu Qiangdong proposed the low-price strategy for more than half a year, JD.com has made one move after another. The lowering of the self-operating fee threshold is undoubtedly another ammunition loaded. However, everything has just begun, and JD.com is ready for a protracted war.
reliable low price
At present, e-commerce is all about low prices, but the development of low prices is actually full of contradictions:
First, low prices are extremely prone to conflicts with product quality. You get what you pay for in many cases, and the low price of a product is often linked to low quality;
Second, the contradiction between low price and user experience. This seems to be the experience of many consumers. After buying something, the price of the product is quite satisfactory, but they can’t wait and can’t wait. They almost forget the thing. Arrival has greatly affected the shopping experience of consumers.
With JD.com's business model, it is not a wise choice to blindly focus on low prices. A smarter way is to elevate the single-dimensional competition of low prices. The so-called dimension enhancement refers to technology or model innovations in the same field that are not at the same level of competition and are higher than those of competitors in the same industry. As the saying goes, when entering the opponent's field to compete, don't forget to take advantage of your own strengths.
So, what are the strengths of Jingdong?
In that famous internal conversation, Liu Qiangdong, while emphasizing that low prices are "the only basic weapon", also proposed three elements of customer experience in the retail industry, namely price, quality and service, among which quality and service are "0 ", the low price is "1". Without low price, all other competitive advantages will be zero; without quality and service, low price is like a castle in the sky, and it will not go far.
For a long time, JD.com has been synonymous with "quality" and "reliability" in the field of e-commerce in China. Although some merchants take the low-price route and mainly place the task of selling volume on other platforms, they will also open JD.com stores, just to show consumers that "we have JD.com stores, we are reliable and trustworthy."
Such a "reliable" impression is the result of JD.com's more than ten years of efforts to combat counterfeiting and shoddy products and shorten the delivery time of logistics. All in all, the products are of higher quality, the service is better, and the consumer experience is better.
When JD.com enters the low-price competition track, its "reliability" is still continuing. The lowering of the free shipping threshold for self-operated products is one of the representatives.
Take McFuddy’s barf raw bone meat freeze-dried dog food 2kg as an example. On August 25, the price of this product was 85.5 yuan on JD.com, 85 yuan on Tmall, and 99 yuan on Pinduoduo. After JD.com lowered the free shipping threshold this time, consumers can enjoy low prices while buying with more confidence, and enjoy JD.com’s free 211 limited-time delivery logistics service, and get a triple experience of low price + quality + service.
"It's okay to buy small household items, and things with poor quality can be used. The broom I bought before is just that, but some things can't be settled. Fake is fake, and dog food is. Jingdong is now cheaper and cheaper. It can also guarantee the quality and delivery the next day. Isn’t this equivalent to enjoying the service of a special car at the price of an express car? It’s too profitable.” Li Qing, who has a medium-sized dog at home, said.
In terms of low-price competition, JD.com is already familiar with it. Its previous battle with Suning made it the roost in the home appliance 3C. But Liu Qiangdong has always understood that low prices are not the goal. JD.com’s real goal is to satisfy users and exceed expectations, and improve user experience. Target."
Products, services, and prices are the core three elements of Jingdong's business philosophy at any time, but the emphasis is different under different development stages and development strategies. Low price is a comprehensive war. While the price is equal to or lower than that of other platforms, it is necessary to do a good job in products and services and bring reliable low prices to users. This is JD.com's multi-dimensional low price competition route.
real low price
Low-price competition is not uncommon in the history of Chinese business, and it broke out frequently after the rise of the Internet. However, unlike shared travel and Internet coffee, this low-price competition among e-commerce companies such as JD.com, Taobao, and Pinduoduo is destined to last for a long time. And the protracted low-price competition can easily go astray and become a war of value destruction.
The low-price strategy of e-commerce naturally contains a "low-price vicious circle": low-priced products greatly compress the profit margins of merchants and platforms, preventing them from developing better and eroding the value of merchants and platforms. Low prices that blindly damage the interests of merchants and platforms are destined to be unhealthy and unsustainable.
So, can JD.com, which wants to implement a low-price strategy, jump out of this "low-price vicious circle"?
While Liu Qiangdong made harsh words and moves on low prices, he was very sober at the same time: neither at the cost of harming the consumer experience nor at the cost of harming the industry ecology. In his view, blindly pursuing low prices may be effective in the short term, but it will be harmful to the entire industry in the long run, and will eventually lead to a decline in brand profits or even bankruptcy, destroying the entire ecology, and JD.com’s interests will also be damaged.
Since its establishment in 1998 and officially entered the e-commerce industry in 2004, JD.com has experienced 20 years of ups and downs in China's e-commerce industry. Different from other platforms, it has more concentrated B-terminal genes. Liu Qiangdong once put forward the famous "30 cents and 50 cents theory", which means that 30 cents of the profit per yuan should be reserved for partners.
Under the low-price strategy, such genes are also emerging. This year, JD.com has given a number of measures to support merchants. For example, during the 618 period, it released a "burden reduction and income increase" gift package to help merchants reduce operating costs by an average of 30%; in order to reduce merchant costs, it is no longer required to use JD Logistics, and You can choose express delivery independently.
Therefore, Jingdong has attracted a large number of merchants to settle in. The financial report shows that in the second quarter, the number of newly added merchants on JD.com increased by 417% year-on-year, showing an accelerated growth trend compared with the first quarter; as of the end of the second quarter, the number of effective merchants operating on JD. Supermarkets, fashion, home and other categories have seen significant growth.
If it doesn't come from merchants, where does JD.com's low-price space come from? The answer lies in scale, supply chain management, and logistics management.
On the one hand, unlike other platforms that focus more on the open model, JD.com has a higher proportion of self-operated businesses, which allows it to increase the scale effect of its self-operated business, drive the continuous reduction of procurement costs, and pass on profits to consumers.
On the other hand, relying on technological innovation to drive the continuous optimization of supply chain costs and efficiency, JD.com can go more leisurely without blindly compressing the profit margins of merchants and sacrificing product quality and shopping experience. In the words of Liu Qiangdong, every penny cheaper on JD.com comes from a higher product turnover rate and a more reasonable order delivery process planning.
According to the results of the second quarter of 2023 released by JD Group, JD.com’s inventory turnover days continue to remain at 31.7 days on the basis of self-operated product SKUs reaching tens of millions. In contrast, the global retail giant Costco has an inventory turnover of about 30 days and SKUs in the thousands.
At the same time, benefiting from the efficiency improvement and cost optimization brought about by supply chain technological innovation and refined operations, JD.com’s performance expense ratio fell from 6.1% in the second quarter of last year to 5.8% in the second quarter of this year, a year-on-year decrease of 0.3 percentage points.
In the book "Beyond Competition: Business Models in the Age of Minor Profit", companies are divided into three categories: temporary winners are opportunists, temporary winners are pragmatists, and permanent winners are long-termists . JD.com also hopes that it will become a long-termist, offering a more sustainable low price, which is a real low price that does not excessively compress the profits of merchants and platforms.
It can be said that, unlike the usual scale development logic of “compressing the profit margins of merchants and bringing low-priced goods-attracting users”, JD.com’s low prices have two development logics: First, self-operated to reduce procurement costs on a large scale, and third-party traffic subsidies , and then attract users with low-priced products, which is the logic of scale; second, the improvement of supply chain efficiency brings about the release of profit margins, which is the logic of efficiency.
Driven by double logic, JD.com started a low-price competition to upgrade the dimension.