Amazon’s strategic model of frantically striving for market share at the expense of profits has yielded profitable returns for Amazon, but it still seems far away from JD.com, which takes Amazon as its benchmark.
On April 29, Amazon announced its first quarter 2016 financial report. The financial report showed that its first-quarter revenue was US$29.1 billion, a year-on-year increase of 28%; most notably, Amazon achieved a net profit of US$513 million, which was the fourth consecutive quarter of profit, compared with a loss of 57 million in the same period last year. Dollar.
Not long after, on May 9, JD.com, considered the “Amazon of China”, also released its first quarter financial report. According to it, the net profit in the first quarter was -864.9 million yuan (approximately -134.1 million U.S. dollars), a year-on-year loss increase of 5.
Continuing the story mode,
Can it still keep investors daydreaming?
Overall, except for the expected loss, most of the recent events surrounding JD.com are negative.
Especially after the news came out in May that Xu Xinquan, the former president of JD.com’s overseas business unit, had joined LeTV, everyone pointed out that the reason for Xu Xinquan’s resignation was that the Russian business in which JD.com focused its investment was basically stagnant or even declining. "Closed" status, and JD.com will lay off employees in its overseas business units based on profit demands.
Beginning in June 2015, the overseas business, which was an important driver of JD.com’s profits, was eventually separated due to the current profit demands. After a year of ups and downs, it eventually became abandoned. In a sense, JD.com has already found it difficult to continue with this story.
Entering overseas markets is not a story for the capital market, but what if it is to enter secondary overseas markets? Especially in markets such as Russia and Southeast Asia, Liu Qiangdong, who has been involved in the Internet circle, naturally understands the samadhi of it.
This is not Liu Qiangdong's "original creation". Ten years ago, game manufacturers used this concept to successfully stimulate their stock prices, such as Perfect World and Kingsoft, both of which frequently entered overseas markets. The brand, various postures and various publicity are seen in the media, but in essence, this kind of overseas expansion is exactly to enter a lower-end market than China, thus forming a high-dimensional and low-dimensional situation to achieve the goal of attacking the other country. occupy a large area of ??this type of market share.
The story of Perfect World has been told for ten years and continues. The fundamental reason is that this story has achieved profitability, although compared with the domestic market, the profits of these game industries in the third world are It's really minimal. But for the gaming industry as a whole, which is making profits, and for individual companies, which are also making huge profits, this story is not a bad seasoning.
But for JD.com, such a story is a bit extravagant. The target overseas market may not be fully developed, but there are still strong local companies competing with it. However, e-commerce is not as powerful as games in terms of black technology. As the domestic market has not yet been able to achieve profitable large-scale development, and the other country is not acclimatized to the environment, this story of going overseas will be difficult to achieve. It makes investors so delusional that it is even a bit boring.
However, when one story failed, JD.com’s choice was to replace it with another new story.
Following the pace of learning and benchmarking,
JD.com’s imagination bottleneck
The reason why JD.com was not disliked by the capital market in 2015 is because it still has a story , that is, the story of Tencent’s blessing, and it is quite effective from the data.
Compared to Amazon, which is constantly striving for self-improvement, the real story of JD.com in 2015 is that Tencent became its traffic entrance.
But this seemingly overwhelming story also fell into disillusionment in 2016. After the release of the first-quarter financial report, during an analyst conference call held by JD.com, JD.com Chief Financial Officer Huang Xuande attributed the main factor of the slowdown in transaction volume growth to Tencent.
He said that the growth of traffic brought by Tencent Portal to JD.com has begun to slow down in the past three quarters. In the past three quarters, the average decline in each quarter has been about 20% or more. "This actually means that Tencent's traffic has increased the growth of JD.com's business." Maximizing level of contribution”.
Affected by the lower-than-expected performance in the first quarter of this year, JD.com’s stock price suffered a sharp decline. Ratings agency Fitch International even pointed out that JD.com does not have an "investment grade" credit rating because "it faces the challenges of lackluster profits, weak cash flow, and high fixed costs."
Behind this story is actually the result of the long-term dispute that Tencent’s social traffic can be used in entertainment fields such as games, but cannot be used in consumer fields such as e-commerce. Tencent’s ten-year e-commerce trial and error and ultimate failure, as well as its final choice of JD.com, which is already well-established and the number one B2C e-commerce company in the country, as a partner. After directly introducing traffic to JD.com, it still cannot solve this knot.
But for Liu Qiangdong, under the Alibaba model with a clear profit model and characterized by storefront rent collection, and now that Alibaba has entered a stable development period in the 20-30 years that is slightly higher than the consumption growth rate, He and JD.com, which operates a "specialty store" model, were under the pressure of being unable to achieve profits through self-operation, but still chose to tell stories to find more capital to maintain their ability to trade losses for scale to find tomorrow's possibilities.
This is also Liu Qiangdong's consistent nature. Even as a fresh food e-commerce company, he has to break love rumors with his subordinates, promote self-built logistics, and even appear in person to deliver goods, in order to create an entertainment-worthy atmosphere. Brother Qiang, who is obsessed with the story atmosphere of mass communication, essentially lacks the same pragmatism as Amazon.
Even as benchmark companies, JD.com and Amazon are still very different. Amazon's starting point is to sell books, which is more similar to Amazon, while JD.com's starting point is to do online Gome and Suning, specializing in 3C electrical appliances. In actual operation, it seems that all parties are gradually moving from the vertical field to the comprehensive platform category, but Amazon is not like JD.com. The so-called self-operated products of JD.com are still represented by domestic companies, rather than truly produced by themselves. On the contrary, in addition to selling books, Amazon also uses its platform advantages to launch its own hardware such as the Kindle e-book reader, which directly affects the e-book market, forming a sustained profit system similar to the Apple App Store. Low cost and long tail. In addition, Amazon's cloud computing AWS business, which operates outside of e-commerce, had an operating profit of US$604 million in the first quarter, accounting for more than half of the operating profit of US$1.1 billion in the quarter. These are all truly profitable stories.
In March this year, JD.com launched an e-book reader "JDRead" on its own crowdfunding platform. No matter in terms of appearance or performance configuration, this is a product that competes with the current e-book supremacy, Amazon Kindle. In May, JD.com announced that it would jointly establish a "JD-Mellanox Joint Innovation Laboratory" with Mellanox to provide better innovation for data processing and deep learning cloud computing technology.
This may be another time that JD.com wants to follow Amazon’s storytelling rhythm. It’s a pity that it’s too late, and after all, it makes 3C appliances. Its book buying scale is not inferior to Dangdang, and its demand for cloud computing is strong. However, in front of the capital market and consumers, the two stories still feel that they do not match.
At least, the prospect of profit is far away...
Too many stories and swinging balance beams
In Liu Qiangdong’s latest story, there are two directions , one is pragmatic and the other is black technology.
In a pragmatic story, Liu Qiangdong said that in the future, JD.com will focus on technological innovation, category expansion and the creation of "three networks". Regarding the "three networks", Liu Qiangdong explained that JD.com wants to build a everyone's power grid, a small and medium-sized power grid, and a fresh food cold chain network.
This actually represents a change of direction for JD.com, from sacrificing profits for scale to deeply cultivating vertical markets to win profits. “Now, the entire consumer market is very weak. Under this circumstance, we believe that if we simply maintain the growth rate as in the past, the company will pay a lot of price, and this approach is not consistent with maximizing the interests of shareholders.
"Liu Qiangdong's words not only show that JD.com has reached the ceiling, but also wants to use this loyalty method of making money to regain the confidence of investors.
This formed JD.com’s balance beam: On the balance beam of profit and scale, JD.com is beginning to waver. After all, its benchmark company, Amazon, has been making profits continuously since the second quarter of 2015. What about the results of the past two years? Amazon’s new market value in 2015 was equivalent to 6 JD.com. But what about JD.com? After the news of the Alibaba-Suning alliance was announced in August 2015, JD.com’s stock price plummeted, with the largest drop of nearly 40% in one month, and its market value evaporated. Nearly 20 billion U.S. dollars. Overall, JD.com has suffered losses of 30 billion yuan for five consecutive years.
Benchmarking has become a bet, relying on the unprofitable story of the benchmarking company to maintain its own development model. It is already unsustainable. JD.com must make a profit, but where is the profit point? JD.com has not found it. Instead, it wants to use new stories to deceive.
The latest JD.com story is about drones, which can be told on Amazon. Two years later, JD.com finally caught up with the story of human-machine delivery. However, the purpose of this story about Amazon was to use drones to reduce costs in densely populated urban areas. After it was told at the end of 2013, it was immediately picked up by the Federal Aviation Administration. The Federal Aviation Administration (FAA) stopped it, but JD.com launched it at this moment and threatened to expand the coverage of drone delivery from 230,000 villages to 420,000 villages, hoping to use drones to solve the "last mile" in rural areas. It would be too impatient to use such a delivery method to stimulate investors' imagination about rural e-commerce, which has yet to be solved.
Because this story is similar to Amazon. A story about huge operating costs and sacrificing profits for scale, but the last thing JD needs at the moment is this story. It can be seen that JD and Liu Qiangdong, who are still telling stories, are still struggling on the balance beam.