The economic and geographical differences between China and the United States determine that Amazon logistics is more attractive to C-end than Jingdong logistics

(1) The difference in the development status of the manufacturing industry determines that the development space of B2C and C2C models in China and the United States is not the same

Observing the growth path of Amazon, Amazon started with its own model and launched the 3P platform business in 2001. In 2012, the transaction scale of Amazon 3P platform surpassed eBay and completely became the king of e-commerce in the United States. In addition to its own business, Amazon currently provides more FBA (Amazon Delivery) and trading platform services for merchants, and extends AWS cloud computing services beyond e-commerce, and is committed to becoming an infrastructure provider.

Jingdong also started with self-operated e-commerce and self-built logistics, and the starting point of the model is similar to Amazon, but the difference in industrial background, as well as the difference in economic geographical location between China and the United States, resulting in the development path of Jingdong logistics may not be exactly the same as Amazon.

In the past few decades, the United States has gradually experienced the hollowing out of the manufacturing industry, and the main source of goods in the consumer industry has turned to foreign countries, mainly relying on external input and selling through the establishment of giant warehouses. The offline is Walmart and Cosco, and the online is the B2C model of Amazon. While China is a big manufacturing country, with large and small manufacturers all over the country, Taobao C2C or small B2C transaction mode realizes the link optimization from factory to user, the point-to-point diffuse network structure and the demand for e-commerce services form a high coupling, the network effect can be fully exerted.

(2) The differences in economic geography and other endogenous conditions make logistics outsourcing more cost efficient in China

The rise of China's e-commerce is inseparable from the support of the offline logistics system, and at the same time, it has brought huge incremental demand for the express delivery industry in the early stage of development, forming a constantly strengthening positive feedback. The growth rate of e-commerce GMV and the growth rate of China's express delivery business basically match, and the two are coevolutionary. The express delivery industry in the United States has experienced a price war and reached a steady state before the emergence of e-commerce, forming a situation of UPS, FedEx and USPS. The lack of network carrying capacity designed around business parts and the weak supply force restrict the development of e-commerce such as Amazon to a certain extent.

So, why did the US express demand switch from the B end (manufacturing demand) to the C end, and did not give birth to new logistics companies, but gradually through Amazon's self-built way to meet it?

We believe that the deeper reason for this phenomenon lies in the differences in internal conditions such as economic geography between China and the United States. The most typical characteristic of the geographical economy of the United States is the "U-shaped structure", that is, the left side conducts trade with the Pacific Ocean, the right side conducts trade with Europe, and the important economic belt is almost highly distributed in these two regions. The United States is 2,500 to 2,700 kilometers from north to south, and about 4,500 kilometers from east to west. But the average population density of the United States is about 34 people per square kilometer, and the lower population density and labor costs in the United States make the distribution cost far higher at the end of the country than in China.

Due to the coverage of end outlets and the impact of distribution cost factors, UPS and FedEx later launched the service of e-commerce express delivery products, but also through the cooperation with USPS (UPS or FedEx is responsible for transit and transportation, USPS bear the last kilometer of distribution) to complete. For platform merchants in the United States, Amazon's warehouse arrangement model is more cost efficient than network express (FedEx and UPS model). For example, the full cost of using FBA services (delivery to performance center fee + FBA fee) is less than half of the minimum self-performance fee.

To sum up, the hollowing out of the manufacturing industry in the United States makes the retail industry mainly rely on external inputs, and large retailers become industry chain integrators. Low population density and labor costs make Amazon's self-built distribution more efficient than outsourcing. China's world factories and industrial clusters make C2C e-commerce model and network express mutually promote each other. High labor density and low labor cost make third-party outsourcing more cost-effective comparative advantages.

(3) The response of Jingdong Logistics: the formation of Jingxi Express and the construction of a closed-loop ecology of community group buying

Due to the differences in the development structure of the manufacturing industry and economic geography, the B2C model of Jingdong and the corresponding warehousing and distribution model of Jingdong Logistics have failed to replicate the development road of Amazon in China. With reference to the views of Guangfa Retail's previous research report "Competition intensifies, platform expansion enters the deep water zone", pet products, makeup, diapers and other easy-to-transport standard products have achieved a high e-commerce penetration rate; Fresh, packaged beverages, and packaged food are the main categories with large volume and low online rate. Their common characteristics are high performance cost (heavy, blithe, fragile, perishable, etc.). In the future, such consumer goods need to increase scale effect to dilute distribution cost by increasing order volume. It is more likely to be fulfilled by non-B2C express delivery solutions such as same-city retail and community e-commerce; Due to the lack of perfect external infrastructure that can be directly utilized in the new solution, the trading platform may need to invest part of its own/assets to build a new performance system together with social resources, and even transform the production link (fresh is a typical category), and the return period of investment may be significantly extended.

Jingdong 2020Q4 has adjusted the organizational structure of the Jingxi business group and officially entered the community e-commerce. At the same time, Jingdong Logistics' public mail Express will be renamed Jingxi Express and incorporated into the Jingxi business group to support the back-end supply chain and build a closed-loop ecology of community group buying. Sinking the market may be a new opportunity for JD logistics growth.

Second, facing the future: change the track, to the consumer industry integrated logistics providers

(1) Industry trend: The path from the consumption supply chain to the manufacturing supply chain is clear

In the next stage, Jingdong Logistics is trying not only to provide express delivery performance services, but also to open up marketing, warehousing, distribution, after-sales and other links to provide integrated supply chain services for merchants. In fact, integrated logistics is the final development of express giants, but to expand integrated logistics (heavy cargo, cold chain, freight forwarding, supply chain, contract logistics) is a global dilemma. In recent years, UPS, FedEx, DHL integrated logistics business revenue CAGR is less than 10%. DHL's integrated logistics profits barely grew, and only UPS grew slightly after 2012.

Compared with 2C logistics, 2B logistics has the characteristics of decentralized competition pattern and low industry concentration. Taking contract logistics as an example, due to the high degree of customization in different industries, it is difficult to standardize. As a result, contract logistics providers who focus on B-end customers are difficult to form scale effects, and there is great resistance in competing for rival customers or developing new customers. The business cultivation period is usually 1-2 years. It is difficult to have a winner-take-all situation in the industry. From a global perspective, the contract logistics market is highly competitive. In 2019, CR10 was less than 20%, and DHL, which ranked first, had a market share of 3.2% and revenue of 191.1 billion yuan. The domestic market is also highly fragmented, with the revenue of SAIC Anji, the largest market share in 2018, reaching 25.1 billion yuan, with a market share of 1.5%.

The retail industry has high requirements on the response speed of the supply chain, the chain is relatively short, and the overall efficiency of socialized third-party logistics is usually better than that of self-built logistics. From the customer structure of DHL, CEVA and other supply chain companies, customers are mainly concentrated in retail, consumer, automotive, electronics and biomedical industries, retail and automotive are the two most important downstream industries of supply chain logistics.

The value chain of China's current retail industry is undergoing a switching process from channel operator to manufacturer. Initially, the development space of the e-commerce platform was constrained by the cost efficiency of express logistics, and the excess income was earned by the express logistics industry; Later, with the continuous optimization and iteration of the cost efficiency of network express delivery enterprises, the supply chain efficiency of the e-commerce platform has been greatly improved, the online penetration rate has continued to increase, and the excess income is earned by the e-commerce platform. Further, e-commerce channels have been gradually integrated through development, and new exogenous influencing factors have brought changes to the channels, reshaping the channel pattern (such as information technology) and building a new channel pattern. At present, the monopoly of channel links will gradually break the delicate balance between the cost of channel self-establishment and outsourcing. At this time, channels become the way to obtain first-hand customer data, and customer-centered brands become the core to obtain competitive advantages at this stage.

Although the short chain of the supply chain has begun to become a new attempt of major e-commerce and retail platforms, we believe that the short chain of the channel is still in the exploratory stage, because the influence of terminal retailers on the upstream is temporarily limited, the end can not provide greater ability to support the upstream, and the discourse game between upstream brands and e-commerce has been in a state of concern. We believe that the short-chain operation of the brand is more effective: we see that from the distribution channels represented by Glmidea, to the direct sales channels represented by MUJI, UNIQLO and Xiaomi, and then to the direct online factory stores, the brand continues to extend to the downstream of the industrial chain through its own influence and control.

We believe that the necessity of brand short-chain operation lies in: (1) the brand competition on the supply side is becoming more and more fierce; As a part of the supply side, the brand needs to continuously improve efficiency to gain competitive advantage. (2) The balance of power in circulation channels is gradually shifting from the platform to the client side; (3) To reduce the number of goods handling, compress the industrial chain links, and give profits to users, so as to obtain long-term loyalty has become a necessary task for brand owners to stand out.

Providing omni-channel logistics services through third-party flexible supply chain suppliers, establishing an integrated logistics system integrating online and offline, and improving the comprehensive utilization efficiency and response speed of inventory, warehousing and transportation will become a more cost-effective way for brand owners.

(2) A preliminary study on the path for JD Logistics to obtain the right to speak in the upstream supply chain

From the perspective of enterprise genes, Jingdong Logistics was born out of Jingdong Mall and aims to serve Jingdong's online retail, which naturally has the attributes of second-party logistics. Therefore, Jingdong Logistics from the C end to the B end of the extension of the road, and SF Express such a typical third-party logistics service provider development path is not the same.

First of all, in the previous article, we have described the development status of the manufacturing industry in China and the United States, and we will not repeat it here. We believe that as the source of goods in the US retail industry shifts from domestic to foreign countries, the core node of the industry gradually shifts to the channel providers, and the channel providers lead the process of cost reduction and efficiency improvement in the supply chain. That is, American retailers actually play the role of "supply chain service providers" in the industrial chain.

We take Amazon as an example to analyze and observe its development path, and we find that Amazon has continuously strengthened its external interface capability during its solid development process, and AWS has also indirectly benefited from this: Amazon's early system capacity is configured in accordance with the peak demand, Americans shopping concentrated before Christmas, after Christmas the utilization rate of the system is low, internal suggestions will be idle system computing power and storage space rental, this is the earliest concept of cloud, Amazon through e-commerce, step by step to touch the entrance to the cloud.

In other words, through the development of nearly 15 years, Amazon has summed up its own high-speed growth momentum: customer-centric flywheel effect - better user experience brings more sales, thereby reducing costs and providing lower prices; Secondly, by opening up the mature capabilities of internal standardization, we gradually build a strong platform service capability.

Similar to the United States, China's e-commerce platforms are also seeking ways and means to speak upstream. Liu Qiangdong once used the "ten sugarcane" theory to compare the division of labor system of consumer goods and retail industry - there are ten sections of the industrial chain division of labor, each section represents a type of economic interest entities, but this will cause low efficiency - when the connection of various links (benefit sharing) conflicts with their own interests, each entity will inevitably be guided by their own interests, resulting in layer upon layer of price increases. Ultimately, the user pays; The reason why Jingdong does heavy (warehousing, distribution, after-sales, marketing and other links are self-operated in the early stage) is that he believes that the more sections in the industry, the better the connection to the user experience, the fewer times of moving goods, and the stronger the cost control; In the long run, the final result of the competition is that the profit of each link is fixed at a reasonable level; If you stick to only one link, the source of profit will tend to be single.

From the distribution of bargaining power in the upstream and downstream of the industrial chain, we believe that the incubation of private brands may be a feasible path for channel operators (i.e., second party logistics such as Jingdong Logistics) to deepen their understanding of the upstream manufacturing end and thus achieve the empowerment of the manufacturing end. In fact, the digitization degree of China's factories is relatively low, which is about 1/2 of that of Europe and the United States, and the advanced manufacturing technology reserve, the intelligent level of equipment, and the cloud degree of factories are all constraints on the realization of digital processes and factors in factories. We see that the digitization trend of factories has been initiated by the consumer side and has gradually entered the stage of forcing upstream reform.

However, the layout of Jingdong's own brands, although relatively early (2012), but the development is still lukewarm. At present, Jingdong has developed and is still operating its own brands involving food, maternal and child, home and other categories. The supply chain model of private brands determines that the factory directly connects the terminal through reducing the intermediate (circulation channels and advertising, etc.) costs, and the retailer directly obtains the pricing power, so high gross profit is also a natural attribute of private brands.

We believe that the core of brand incubation lies in delivering differentiated brand value and building brand trust; The embodiment of brand value lies not only in the simple import of traffic accumulation, data feedback and auxiliary quality control (which is actually the service provided by most of the platforms that propose brand support plans), but also in the transformation based on the deep supply chain running in, which will also accumulate experience for Jingdong Logistics to develop the growth curve of B end. Only from the upstream point of view, deep into the manufacturing end, with digital transformation to improve the factory large-scale production efficiency, in order to empower the industrial chain at the same time, to provide consumers with cost-effective goods.

In a certain sense, the process of brand incubation is the process of e-commerce platforms continuing to supplement and penetrate the upstream of sugarcane on the existing basis. In any case, brand incubation needs long-term certainty and persistence, and logistics companies with e-commerce platform attributes have a long way to go to attack the upstream manufacturing end.