Research report: re-understanding Jingdong

01 Company Profile

The first self-operated e-commerce, fine operation, quality growth

1. Supply chain is king, authentic products + logistics lead online quality consumption

Looking back at the development history of Jingdong e-commerce, unlike the platform e-commerce led by Alibaba, Jingdong insisted on the full-link self-support from goods to logistics to after-sales service at the beginning of its establishment, and built low-cost genuine products and fast logistics as labels.

Establish a benchmark of e-commerce industry experience, and lead the upgrading of domestic e-commerce "brand goods and quality services" together with Tmall.

1) Genuine product control: Jingdong has long been based on 1P self-management, and 3P platform merchants are strictly admitted. Internal quality control from the "purchasing and marketing - quality control - warehousing - distribution - service" and other key links to focus on control, combined with external industry and government supervision system to ensure the quality of the brand.

2) Transaction payment: JD has long supported cash on delivery service (up to 2018, JD's orders still accounted for 6%), which is an important and differentiated service for early online shopping to solve the trust problem in addition to Alipay's third-party guarantee model.

3) Logistics and distribution: Logistics experience is the core advantage of Jingdong. Since its establishment, many rounds of financing have been used for the construction and upgrading of the distribution system.

In 2007, Jingdong began to build its own distribution system, and launched the "211" logistics time service in 2010 - same-day delivery of orders before 11 a.m. and next-day delivery of orders before 11 p.m., becoming the benchmark of e-commerce logistics services, and constantly upgrading the launch of "Beijing Zhunda" (designated time delivery), "Beijing Shiunda" (one-hour delivery) and other multi-level distribution time services.

By 2019Q3, Jingdong operated a warehouse area of 16 million square meters in the country, and same-day/next-day delivery services covered 2,146 districts and counties (2018), and the proportion of same-day/next-day orders during the 618 promotion period in 2019 was also maintained at more than 91%.

4) After-sales service: Different from platform e-commerce, which is responsible for after-sales service by merchants themselves, Jingdong self-operated products are all provided by Jingdong customer service, providing services such as 7-day return without reason and door-to-door pick-up.

2. Hand in hand with Tencent & Walmart, join forces to move towards comprehensive e-commerce

Timely and appropriate alliance, so that Jingdong from the 3C electrical appliances based vertical platform truly transformed into a full category of integrated e-commerce.

In particular, the introduction of two strategic partners, Tencent and Walmart, has greatly made up for the shortcomings of Jingdong's front-end traffic and back-end supermarket supply chain, quickly opened the gap with rivals, and become the undisputed second largest B2C e-commerce outside Ali (market share in 2016 has reached 24.7%).

As of 2019Q3, Tencent and Walmart held 18% and 9.9% of JD's equity, respectively, the first and second largest external shareholders.

Review Jingdong's development after listing in 2014:

1) Traffic side: Alliance with Tencent to expand the front-end user traffic pool. In 2013, JD.com's annual purchasing users (AAU) reached 47 million, and the growth rate has slowed to 61.8%. In March 2014, Tencent took a strategic stake in Jingdong, and injected its two major e-commerce companies, B2C Easy network and C2C Paipai Network, into Jingdong simultaneously, and the "Jingteng" alliance was formed.

Jingdong has become the leader of Tencent's e-commerce layout, obtained the mobile QQ and wechat two super app level entry, access to Tencent users' social traffic pool, and obtained Tencent promotion support.

In 2014, the growth rate of Jingdong's active users rebounded to 97.5%, and the proportion of 3P platform GMV increased from 28.6% in Q4 2013 to 43.6% in Q4 2014.

2) Supply chain side: marriage with Walmart, trade beyond the supply chain. In 2016, Walmart bought a strategic stake of 5% in Jingdong and injected Yihaodian into Jingdong at a price of 9.5 billion yuan. Subsequently, Walmart continued to increase its stake in JD in the secondary market, becoming JD's third largest shareholder.

After the cooperation between the two parties, Jingdong has become the core e-commerce partner of Walmart in China, Jingdong absorbs the original Yihaodian supermarket supply chain and user resources, Walmart opens Jingdong online flagship store and connects its stores to Jingdong Home, opening up the back-end supply chain of both sides and improving the efficiency of purchasing and marketing.

The development of Jingdong FMCG category has reached a higher level. In 2018, the GMV proportion of Jingdong Food, Ribai and other FMCG category platforms was about 20%, and the share of most subcategories exceeded Tmall.