JD Q1 increased marketing, reduced research and development, and gradually returned to a retail company

Photo source: Visual China

On May 16, JD Group released its performance for the first quarter of 2024. The core data is that the total revenue reached 260 billion yuan, up 7% year on year, and the net profit attributable to common shareholders of listed companies under non US GAAP was 8.9 billion yuan (about 1.2 billion dollars), up 17.2% year on year. In the first quarter, JD Group's net profit margin also increased from 3.1% to 3.4%.

Affected by the double growth of total revenue and net profit data, JD US shares rose at the opening.

In the context of the whole year price war in 2023, what the outside world worried about in the past was how JD balanced the conflict between self operated businesses and third-party businesses. Now, JD tells the story of holding the service advantage of self operated businesses, driving the increase of shopping frequency with better user experience, and then driving the business of third-party businesses with price power.

From the perspective of Q1 revenue structure, JD still has a competitive advantage in the original 3C category of household appliances, with a year-on-year growth of 5.3% from 116.99 billion to 123.21 billion, but lower than the growth rate of the market and other business segments.

JD achieved a year-on-year growth of 8.6% in the non core category of "Daily 100" category. The total commodity income of the two increased by 6.6%.

In addition, the revenue from services reached 51.5 billion yuan, up 8.8% year on year, of which the revenue from logistics and other services increased 13.8% year on year.

The overall data growth of general merchandise and service revenue can be seen as JD has taken another step forward in the ecological prosperity of platform self support and third-party businesses.

At the financial report conference, JD's management told a story of "positive circulation", saying that in the long run, JD will first use the advantages of 1P (self support) to drive the improvement of GMV, and then in turn provide platform traffic and space for third-party merchants' price power products, after which the two can achieve a positive circulation, "Jingdong is confident that its revenue and profit will continue to grow positively," said Dan Su, the CFO of Jingdong.

According to data from JD, the number of third-party merchants of JD exceeded one million in the first quarter. It also emphasized that the service standards of third-party merchants are also in line with JD's proprietary business, from free mail of 59 yuan to free door-to-door return and exchange. JD has also increased its investment in logistics. In March this year, JD further optimized the open platform package rules and popularized up to 59 packages for other third-party goods.

This reflects the data from the financial side that in Q1 2024, JD's performance expenditure increased by 9.3% to 16.8 billion yuan from 15.4 billion yuan in 2023, and its percentage in total revenue increased from 6.3% in the same period last year to 6.5%. Caibao said that "the increase is related to the adoption of a lower threshold for free mail services".

A bigger industry background is that whether Taobao or Jingdong, after a year of low price competition with Pinduoduo, it has long been found that "hard to fight only price" is not the way, and starting from its own platform advantages is the correct solution.

Therefore, we can see that the management of Taotian and JD will emphasize better service and better goods before expressing price power in the conference call. Taotian is emphasizing that 88VIP members have exceeded 35 million, and JD is emphasizing the logistics policy of popularizing up to 59 packages of third-party goods. For shelf e-commerce, low price is regarded as one of the dimensions of competition, and developing strengths is the key to the current competition.

Another data is that in the first quarter of this year, the number of active users of JD retail achieved double-digit growth.

"Platform ecology, content ecology and instant retail" are three major campaigns of JD in 2024. Judging from Q1 financial report, JD's platform ecology has entered a benign track. In the war of instant retail, "Jingdong Houda" has officially upgraded to "Jingdong Second Delivery", and began to roll in competitors on time effective performance. Xu Ran, CEO of JD, also said frankly that JD's content ecology is still in the early stage of construction.

In Q1 of 2024 in the past, JD chose to spend more money on the aspects that can bring direct income, and also made efforts on operating costs.

According to the financial report, while the marketing expenses increased by 15.6% (the promotion activities and Spring Festival Gala sponsorship expenses increased), JD reduced its own R&D expenses and personnel costs. Among them, the R&D expenditure in this quarter decreased by 3.6%, and the general and administrative expenditure decreased by 21%, which was mainly due to the reduction of equity incentive expenses. Between retail companies and technology companies, JD chose to be more like the former in this quarter.

In addition, the financial report shows that JD has completed the repurchase of about 98.3 million Class A ordinary shares with a total amount of US $1.3 billion between January 1 and May 15, 2024.

Xu Ran, Jingdong's CEO, said, "We are very happy to start this year with a steady performance in the first quarter".

In the face of how JD balances growth and profits, Xu Ran said on the conference call that it depends on two dimensions: first, JD's online e-commerce penetration rate in electronic 3C, supermarket, home decoration, outdoor and other goods will continue to increase; second, JD's adjustment from the service experience will continue to stimulate the increase of user activity and shopping frequency, Jingdong is confident to form its own advantages to drive the positive cycle of prosperity of third-party businesses.