In 2019, Pinduoduo officially launched the “10 billion subsidy” project. Big-name products such as iPhone and Dyson are almost the “lowest prices on the entire network”, which caused a sensation in the entire e-commerce industry for a while. Enter the market within the Fifth Ring Road.
However, because of disturbing the brand’s price channel, Pinduoduo has also turned against many brands. However, after the price bombing, the “10 billion subsidy” seems to have become the killer that Pinduoduo relies on most.
In the past five years, Jingdong also wants to use Pinduoduo to defeat Pinduoduo. According to media reports, JD.com will officially launch the “Ten Billion Subsidy” channel on March 8, which will have a first-level entrance in the JD.com app. Since Liu Qiangdong’s return, he has repeatedly stated that he wants to “return to the low-price strategy”. Now that the launch of the “10 billion subsidy” also means that JD.com will “roll up”?
“Ten billion subsidy” has become a daily
Before JD.com officially upgraded the “10 billion subsidy” to the first-level entry of APP, JD.com had also launched similar “subsidy activities” before, such as launching the “JD. Compared with “Jingdong Spike”, the “10 billion subsidy” has changed from a “big promotion” model to a “daily sales” model, and the discount and coverage are also greater.
According to insiders of JD.com, in addition to JD.com’s traditional superior categories such as 3C, other self-operated products and third-party online stores will also join the “10 billion subsidy” camp. More importantly, JD.com may set up a “double compensation” mechanism in the background, similar to Pinduoduo’s “buy expensive, you must pay” to implement low prices.
Industry insiders believe that it is not surprising that JD.com has upgraded its “10 billion subsidy” project. After all, since Liu Qiangdong returned to JD.com at the end of last year, “low price” has become a key word in many of his speeches.
After the “Double 11” last year, Liu Qiangdong said in an internal speech, “Low price was the most important weapon for our success in the past, and it will be the only basic weapon in the future.” How to win the battle, the key to winning Dangdang and Suning lies in “price”.
“Chinese Entrepreneur” once reported that since Liu Qiangdong’s strong return, the direction of JD.com’s core business has changed significantly. According to insiders of JD.com, the group is carrying out a “special action for low-price mentality”, and among the five elements of cost, efficiency, commodity, price, and service, “cost” is put in the first place.
In fact, it is not unreasonable for Liu Qiangdong to be so eager to “change”. Now when it comes to “cost-effective” e-commerce platforms, most consumers immediately think of low-priced products in short video live broadcast rooms, and a piece of wallet mail from Pinduoduo. But it is rare to think of JD.com.
However, in 2012, when the online e-commerce platform was still immature, JD.com gained its reputation by relying on “price wars”. At that time, Gome and Suning were still giants in the home appliance industry, and JD.com wanted to share the online home appliance market. Liu Qiangdong directly posted on the social platform, saying, “All major appliances in JD.com will maintain zero gross profit in the next three years, and guarantee that the ratio Gome and Suning chain stores are at least 10% cheaper.”
JD.com’s “price war” was very ingenious. For JD.com, the home appliance category is just a very small segment, but it is Suning’s basic market. JD.com can sacrifice the profits of home appliances, but Suning cannot. At that time, JD.com had the support of multiple organizations, and JD.com, which has enough bullets, also opened up the mind that “major appliances can also be purchased online”.
But on the other hand, Liu Qiangdong can indeed gain insight into user needs. As for why he started a “price war”, he once said on social platforms, “The gross profit margin of Suning’s major appliances is as high as 25%, and JD.com can sell them for only 150 yuan.” . By sacrificing part of the profits, you can win a huge user scale, and this deal is not a loss for Liu Qiangdong.
From fighting price to fighting quality
Although JD.com has no shortage of experience in price wars, the fierce battle against Suning Gome was, after all, ten years ago. Consumers will not look back on the past, but only pay attention to the present. In fact, Jingdong has indeed become “more and more expensive” in recent years.
In the early stage of JD.com’s development, because the platform has strong bargaining power and billing ability in the 3C field supply chain, JD.com has always maintained the positioning of “cost-effective 3C”, which also makes JD.com different from Ali, Suning and other e-commerce platforms. has maintained an independent position.
But with the continuous expansion of JD.com, JD.com began to focus more on service, hoping to replace “low price” with “high quality”. Considering that JD.com started with 3C products, 3C products have high retail prices and are more professional. JD.com further emphasizes the image of quality and service, which is indeed more in line with the tonality of the platform, and it is easier to achieve a profit balance point.
But this obviously did not satisfy Liu Qiangdong. He personally sent emails to the executives, criticizing them for being “arrogant”. It is reported that Liu Qiangdong once cited an example in his internal speech, saying that he was on a small island in Italy, and he could buy a lamp for 9 yuan through a friend business platform, but on the JD platform, the cheapest lamp still costs 50 yuan.
Judging from the sales data, compared with the new forces of e-commerce, JD.com has also clearly felt the pressure in recent years. During the “Double 11” period last year, the order volume of Kuaishou increased by more than 515% year-on-year; the transaction volume of Douyin Mall increased by 629.9% year-on-year, while JD.com only announced some sales platforms, but judging from the development of the past few years, the sales growth rate is obvious has slowed down.
According to JD.com’s 2022 semi-annual report, the year-on-year growth rate of the number of active users has also dropped to 9.2%, which is the “trough range” in the past two years. The online market is being shared by other platforms, and the loss of users is also increasing. This may be the reason why Liu Qiangdong is anxious to return.
The target is still sinking the market
With the upgrade of JD.com’s “10 billion subsidy” launched, many users have begun to look forward to whether JD.com will repeat the feat of “punching Suning and kicking Dangdang” back then? At present, the probability of Jingdong’s complete transformation to “low price” is not high.
On the one hand, Liu Qiangdong once again emphasized the “low price strategy”, which is targeted. “Low price” is not the will of Liu Qiangdong alone, but is determined by the overall market demand.
According to a recent consumer research report released by McKinsey and Bain, consumers have significantly reduced their shopping frequency and are more actively looking for discounts and promotions than before. In the first three quarters of last year, the sales volume of the consumer goods market increased by 5.9% year-on-year, but the average selling price fell by 2.1%. The consumer market is obviously entering a new round of “low price cycle”.
On the other hand, the sinking market has obviously become a new round of “expanding domestic demand” exports. Since last year, relevant departments have released strategies related to “expanding domestic demand”, which mentioned keywords such as home appliances going to the countryside and green products going to the countryside. This also means that sinking markets will be more likely to explode a new round of consumption than first- and second-tier cities. need.
However, Jingdong has regained the core of “low price”, but this does not mean that Jingdong will lose the keyword “quality”. “Low price strategy” will have certain rationality in different consumption cycles, but “price reduction” cannot be used to attract consumers. Almost no platform can rely solely on “burning money” to get to the end.
It is true that Pinduoduo ushered in its first profitable quarter in just 5 years by relying on its “low price strategy”, while it took 12 years for JD.com to become profitable. But on the one hand, this is because Pinduoduo is stepping on the shoulders of its predecessors, and it is already facing a very mature e-commerce market, and this is the foundation laid by platforms such as Ali and JD.com with real money.
On the other hand, due to different user groups and business models, the huge JD.com empire cannot survive only on the “low price strategy”, because JD.com has been doing some “difficult but correct things”, such as improving supply chain efficiency and rural revitalization plans. wait.
In the 20th year of its business, JD.com may need to return to its “original aspiration”, but this original aspiration is not just “low price”. A reasonable profit balance point may ensure that JD.com can make corrections and go further.