In just two years, why can Jingdong Logistics turn losses into profits?

So, where is the next profit enhancement point of Jingdong logistics?

In fact, the answer to this question can be divided into long-term and short-term, the former obviously in the continuous investment in research and development costs, through technical means to improve the efficiency of hedging labor costs, but its continuous driving force is the continuous improvement of profitability, in addition to research and development, there should be another way: Pushing JD logistics to the market as far as possible can, on the one hand, reduce the dependence on JD Group and dilute the pressure of JD's e-commerce business slowing down; on the other hand, in the fact that the group cannot fully increase prices in accordance with the law of the market (which will affect the group's profitability), seek new markets outside JD, which is conducive to improving the market pricing ability.

Jingdong logistics prospectus to "integrated supply chain customers" and "other customers" as the caliber of the total revenue is divided, and the former can be divided into: Jingdong self-operated and Jingdong open platform customers, as well as Jingdong system of foreign services revenue, at this stage, the last category is still quite low.

According to the information in the prospectus, the revenue from Jingdong Group has decreased from 77% to 71.6% of the integrated supply chain revenue, and in the past three years, Jingdong has strengthened the expansion speed of the open platform, and Jingdong Logistics has extended its tentacles to merchants to provide integrated supply chain management services for the latter.

In recent years, Jingdong has been quarreling with some express delivery companies, such as removing Suning's daily Express from the service list for the reason of "ensuring service quality". However, in the context of the independent development of logistics, Jingdong will inevitably continue to erode the market of the original express delivery companies in the Jingdong ecosystem. For Jingdong Logistics, the business of opening merchants is like the meat on the lips. When the service capabilities arrive, the use of group and logistics data and customer management capabilities are readily available.

We also estimate that the cost of logistics expenditure roughly accounts for Jingdong's self-operated GMV in the range of 3%-4%, if the open platform has trillion yuan GMV for Jingdong logistics services, then its potential market will be in the range of 30-40 billion yuan, in 2019, we judge that the income brought by open platform merchants to Jingdong logistics is about 10 billion yuan, obviously, Jd Logistics has mined less than 30% of merchants on the open platform.

Even if some merchants that are difficult to completely have a relationship with Jingdong logistics in the short term are excluded (such as small scale, inappropriate categories, etc.), Jingdong Logistics still has considerable space here at this stage.

However, this has caused a new problem: if you want to cover the vast majority of merchants in the Jingdong system, it is necessary to consider whether the management and operation capabilities of the enterprise will be synchronized after the asset expansion, after all, the upward pressure on the ROE (return on equity) of the enterprise is very large.

Calculated by operating profit margin, SF's ROE in the first three quarters of 2020 is roughly 7%, excluding the losses caused by convertible bonds, Jingdong Logistics operating profit of 1.55 billion yuan during the same period, ROE is 2.7%, SF's total assets are twice that of Jingdong, operating profit is more than 5 times, considering that the two enterprises are relatively close to the business service, which can be explained:

First, the market pricing system of Jingdong Logistics is indeed suppressed by the group, but it also proves that once it is pushed to the market, Jingdong Logistics can open the ceiling of pursuing profits with pricing power to a certain extent;

Second, considering that Jingdong is unlikely to give logistics sufficient room to raise prices in the short and medium term, which is different from SF Express, if measured in the previous three quarters, we believe that ROE may be around 5%.

In other words, if Jingdong Logistics is properly managed and everything goes smoothly, compared with SF's management ability, when the assets expand with the expansion of the business, the return on assets will be maintained in a relatively reasonable range.

Before this, we have judged: Jingdong logistics independence is built on the premise of slowing growth of e-commerce, when the latter becomes the Red Sea, how can there be much hope for the ecology attached to the Red Sea? However, after a few days of deliberation, we have to admit that the above has been one-sided: the growth rate of e-commerce is slowing down, but the current pursuit of Jingdong Logistics is to digest the stock market in the group's ecology, and it is not yet time to consider changes in the broader market.

When the outside world will focus on the Jingdong logistics section of the package, we still tend TO think that the medium term focus is still TO B business, the package can be used as a sign of brand growth, can not be completely bet on this, although to improve the package as a reason to cancel the base salary, but the goal is to reduce expenses, which is accurate.