Author: Miao Zhengqing
Among strategic worries and tactical worries, people always prefer the latter, but the key is how to distinguish them.
On the evening of May 17, JD.COM The financial report for the first quarter of 2022 was released. Although the net income increased by 18% year-on-year to 239.7 billion yuan, the net profit loss was 3 billion yuan. In the first quarter of 2021, JD's net profit was 3.643 billion yuan. This is the second quarterly loss after JD lost money in the first quarter of 2016, six years later. The last time Jingdong lost more than 3 billion yuan in the first quarter was back to 2014.
The epidemic has a deep impact on Jingdong.
A key detail is that JD will delay the renewal time of platform merchants in 2022. According to the original plan, JD should complete the renewal of all businesses before 18:00 on March 31 (businesses will pay the service fee for the new year). However, affected by the epidemic, some businesses are under financial pressure and cannot pay the fees as scheduled. In view of this, JD postponed the renewal time to April 30, which, in the view of some US equity analysts, affected the "book" of JD's first quarter financial report.
Worryingly, after the explosive growth of users in 2021, JD's user growth is slowing down visually. In the quarter, JD's number of active buyers in the past 12 months reached 580.5 million, compared with 569.7 million in the fourth quarter of last year, a month on month growth of only 1.8%. You should know that the total number of users of JD will increase by about 100 million in 2021, with an increase rate of more than 20%.
For Xu Lei, who just took over as CEO of JD 40 days ago, this financial report is not good: this is his first quarterly report as CEO. But luck did not side with him. In the past month or more, JD has not only faced epidemic challenges, but also been involved in public opinion crises for many times.
"Xu Lei and JD are both facing new elements, and they need to adapt to these elements and find ways to survive and develop." An American stock analyst told Hu Xiu that from May to mid June, Internet companies will successively issue quarterly financial reports, which may be a "miserable month". Under the dual impact of the epidemic and the weak consumer market, these Internet companies are under great pressure, "Due to the 618 consumption season in June, a turning point may be formed, which is why some investment institutions begin to increase their positions in China concept stocks." The expectation of the capital market may serve as a footnote: when the Hong Kong stock market closed at 16:00 p.m. on May 17, JD's share price was 214.8 Hong Kong dollars, an increase of 7.4%.
Behind the loss
The main reasons for JD's loss are JD Logistics and JD's new business, as well as the merger Dada Amortization of intangible assets of the Group.
JD's new business ushered in a wave of revenue growth, with quarterly revenue reaching 5.756 billion yuan, up 11.7% year on year. However, the loss of new business also tends to expand, from 2.28 billion yuan in the same period last year to 2.38 billion yuan.
Compared with the new business, JD Logistics' losses were slightly better. In the first quarter, JD Logistics realized an adjusted loss of 798 million yuan, 1.366 billion yuan in the same period last year. However, the average revenue of a single customer in the quarter did not exceed the level of 340000 yuan in 2021. Public data calculation shows that the average revenue of a single customer of JD Logistics in the quarter was about 303000 yuan.
It is worth noting that in the first quarter, JD was optimizing its personnel and business structure in terms of new business and logistics business. Business lines such as Jingxi began to "strategically withdraw" from some places with poor business conditions, and optimized business line personnel based on this.
The epidemic has affected the progress of JD's business structure optimization. A person familiar with the matter told Hu Xiu two weeks ago that due to JD's transfer of more manpower and material resources to Shanghai and other cities, related businesses in some areas of East China were affected, and some links that would have been optimized in March to April were also pressed the pause button.
In contrast, logistics brought more good news to JD. In the quarter, the number of integrated supply chain customers of JD Logistics reached 59000, an increase of about 20% year on year. However, the gap from the annual "peak" of 74000 customers in 2021 is not small, which means that JD Logistics needs to Rio Tinto Exhibition users.
The epidemic has not always had an adverse impact on JD. For example, the frequency of JD users' consumption has increased ARPU reached a new peak in the past three years (ARPU: average contribution income value of users), but the epidemic did affect the growth of JD's active users - compared with the 1.8% growth rate of users, the data on the consumer behavior side of JD's users was significantly better. The logic behind this may be that JD's existing core users increased their use rate under the epidemic.
In 2021, Jingxi and other products aimed at the sinking market are the secret of JD's explosive growth of users. However, under the impact of the epidemic, JD faces many challenges in the "sinking market". The most obvious challenge is: will more price sensitive people care more about cost performance under the situation of weak consumption?
From another perspective, we can see that JD is trying to solve the growth problem. In the first quarter, JD's marketing expenditure increased by 24.4% year on year to reach 7 billion yuan, which is the highest in the history of JD in the first quarter. "Buying money for flow" is not a sustainable way to play. It is more like a last resort under the influence of the epidemic in the first quarter, or a "preliminary layout" that has to be made for the upcoming 618 World War.
In fact, 618 has been fully prepared by JD since the first quarter, not only because of its special significance to JD, but also because of the special relationship between 618 and CEO Xu Lei. However, relevant people told Hu Xiu that the epidemic in Shanghai and other places in the first quarter affected the pace of preparations. This may be a key detail beyond the first quarter's financial report: given that JD's financial report in this quarter is not optimistic, JD's senior management's expectations for the second quarter may increase, but affected by the first quarter, JD needs to solve a series of challenges in the next few days, which seems not easy. Under multiple pressures, JD has a tendency to tighten its belt. For example, its R&D expenses fell by 3.2% year on year.
"The problem JD needs to solve in the rest of 2022 is to optimize its cost model and find growth points. The industry is more concerned about its user growth potential than its revenue." US equity analyst Liu Bin told Hu Xiang that for China Concept Internet companies, May to June may be a "cocoon breaking" moment, And these old Internet companies are generally undergoing the renovation of "high-level architecture and underlying genes", which requires more time.
Jingdong is "hungry" for young people
"JD needs to solve the growth problem, and the challenge will be magnified in 2022." Jeffery, a Chinese concept stock researcher in the United States, told Hu Xiang that in the Chinese e-commerce platform, JD is not the main "price advantage" compared with its friend, while its core categories such as 3C, clothing, cosmetics are not "necessities of life", "In the case of weak consumption market, JD is more affected by this."
Young people are regarded as more suitable "growth soil" for JD, but the young dividend is being "diluted" due to the impact of the epidemic.
In March 2021, Jeffery and others participated in a small seminar around China Concept Stock. A common understanding at the seminar is that the group represented by "Chinese consumers born in 1990~2000" may become a key increment of JD. Compared with the post-80s consumers, this generation of consumers has lower price sensitivity and higher consumption heat of non necessities, Among them, consumers born between 1995 and 2000 are regarded as more dynamic groups. "Without the influence of epidemic situation and macro uncertainty, this generation of young people living in better material conditions will pay more attention to logistics speed and commodity quality, which is the potential strategic incremental space of JD."
A subtle detail is that during the recovery of the epidemic in 2021, a wave of consumption fever did appear in the 3C market. Taking mobile phones as an example, in the state of "annual shipments" continuing to decline for many years, there was a small growth in 2021 - and the generation Z consumers became the key behind this wave of growth. In addition, JD's sales on the Double 11 in 2021 increased by 28.58% year on year, exceeding the industry's average growth of 12.22%. According to JD's statistics, pet, beauty, fashion play and other categories related to family members in the year increased significantly.
However, the dividend of young people did not last for long. The epidemic hit in 2022, and this wave of growth encountered resistance.
According to the two sets of data, the data from the National Bureau of Statistics shows that the total retail sales of consumer goods in April fell by 11.1% year on year, 0.69% month on month, of which the retail sales of goods fell by 9.7% year on year. According to the data from China Academy of Information and Communication, in March 2022, the overall shipment volume of the domestic mobile phone market will decline by 40.5% year on year, of which the shipment volume of 5G mobile phones will decline by 41.1% year on year.
It is worth noting that Shanghai and Beijing, which are deeply affected by the epidemic, are crucial markets for JD: the data of the Double 11 in 2021 shows that Beijing and Shanghai rank third and fourth respectively in the provinces and cities that have made a good start to the Double 11. (Hu Xiu Note: Guangdong and Jiangsu rank first)
"From the perspective of the recovery of the epidemic in 2020, JD should have discovered the consumption dividend of young people after the epidemic. But when observing the overall consumption market and the state of high-end cities in 2022, it is not difficult to find that the situation has changed: retaliatory consumption trends and young consumption dividends will be delayed." An analyst who did not want to be named believed that before June 2022, It is difficult for JD to see explosive growth.
The epidemic is not the only "young trouble" of JD. It has other challenges at the "tactical level".
2021 Pinduoduo , Tmall and Meituan have increased their youth distribution, while Tiaoyin and Fasthand quickly entered the "battlefield" of young people's e-commerce by virtue of their traffic advantage. A key focus of competition is: the young category - those new categories that take Generation Z and even the post-00s as the main consumers.
This has evolved into a competition around brands and businesses. After the "choose one from two" ended, many brands began to layout on multiple platforms, but behind the "cunning rabbits and three caves" was the difference in investment strength. In February this year, the founder of a new consumer brand told Huxiao that many brands could only focus on one "shipping end" and one "traffic end" in 2022 because of high traffic prices and high logistics costs. The founder introduced that Tmall, JD and Pinduoduo are common options for the "shipping end", but with the rise of young people, platforms such as "getting things" have also become the focus of some categories. On the flow side, the voice is played, the little red book is played Station B The game between the live broadcast rooms becomes more intense.
An embarrassing problem for JD and other friends is that some new consumer brands have become "crafty" after being "educated" by the market for three to five years. For private domain traffic, these brands tend to sell their products through small programs, while the traditional logic of "content traffic e-commerce" has quietly changed: "content traffic private domain channels". For example, in Chaoplay, almost top brands will launch small programs and twitter numbers in 2021. When these brands have their own private pool, shipping channels, and content accounts, they are getting rid of the shackles of e-commerce platforms.
"In 2022, how to win young people will be the key question for JD." Liu Bin told Hu Xiu that JD needs to redouble its efforts to win young consumers from the growth trend of users and some categories in the first quarter of 2022.
618 is only a month away.
Someone familiar with the head e-commerce platform told Hu Xiu in April this year that 618 would be a fierce e-commerce battle. "If Shanghai and Beijing can return to normal before 618, the intensity of this fierce e-commerce battle will multiply." The source said that many changes have taken place in the e-commerce arena in the past six months, and the change of senior staff of several leading companies will further "intensify" the competition, "because both sides are in urgent need of war achievements."
However, there is no shortage of good news in JD.
On May 17, according to the information from the website of the Securities and Exchange Commission (SEC), Hillhouse HHLR Advisors increased its position in JD by 76% in the first quarter. After this round of overweight, JD became the second largest position of Hillhouse HHLR Advisors. Also in the first quarter, JPMorgan Chase Its funds have also greatly increased their holdings in JD, even by more than 1250%.
At present, the key issue for Xu Lei is how to win the 618 battle through continuous fighting in the next 30 days, and how to solve JD's growth worries as soon as possible under the pressure of weak consumption. After all, there is always one eye staring at him from far away Europe.
