JD.com makes a move towards instant retail.

A 100,000-word article: JD.com is launching a new wave of offensive despite the stock price decline and four rumors. On October 18th, JD.com held a press conference on the three-kilometer model of instant retail, announcing the "Five-Year Action Plan" for the future. Although specific targets were not disclosed, the claim of driving trillion-dollar consumption implies that JD.com has high expectations for the instant retail market.

"Instant retail is a major battle that JD.com must win in the retail sector." JD.com Retail CEO Xing Li-jun said at the conference that instant retail is an important part of JD.com's "more fast, good, and cost-effective" consumer experience, as well as an important part of responding to external challenges and achieving stable growth.

Currently, JD.com has four major businesses: JD.com Retail, JD Logistics, new businesses, and the instant retail business done by Dada, mainly including the instant retail platform JD Daojia and the instant delivery service Dada Kuai Song.

The so-called three-kilometer model of JD.com's instant retail mainly refers to the efficient closed-loop model of "consumers placing orders, stores shipping goods, and delivering goods within hours" within a 3-5 kilometer radius, with JD.com's open platform as the main driver, focusing on instant demand, local supply, and instant delivery.

In other words, the future focus of JD.com's instant retail market is to build a platform that connects local merchants, consumers, and delivery personnel to provide instant retail services.

Different from traditional e-commerce platforms, instant retail platforms have local attributes, so sellers have geographical characteristics, and "hourly delivery" has become a common trend in the industry. The advantages of JD Daojia lie in local supply chain integration, instant delivery capabilities, and digitization.

As of now, there are over 400,000 physical stores on JD Daojia, covering more than 2,000 counties and districts nationwide. This number continues to increase, and JD Daojia has added over 130,000 new online stores since the beginning of this year.

In terms of delivery, Dada Kuai Song provides same-city delivery service with a delivery time of about 1 hour, and its current capacity is in the millions of riders.

Fu Bing, General Manager of Dada Kuai Song, said, "Dada Kuai Song has built a full-scenario service system including instant delivery, on-site delivery, and picking, and continuously achieves win-win results in delivery efficiency and experience through capacity upgrades and technological innovations."

In terms of digitization, JD.com integrates B2C capabilities and JD Daojia's O2O capabilities to provide various digital operation tools for physical retailers and brand merchants.

According to JD.com's "Five-Year Action Plan," JD.com will help over 2 million local small and medium-sized physical stores transform digitally, provide over 10 million flexible employment opportunities for society, and drive trillion-dollar consumption in collaboration with ecological partners.

Behind JD.com's increased investment in the instant retail track, the e-commerce market is becoming more competitive. Alibaba, Pinduoduo, Douyin, Xiaohongshu, Kuaishou, and others are all making efforts in the e-commerce business. Under intense market competition, the pressure on JD.com's performance growth is visibly increasing.

On August 16th, JD.com released its Q2 2023 earnings report, achieving revenue of 287.9 billion yuan, an increase of 7.6% compared to the same period last year. The growth rate has slowed down in recent years, and the sustainability of growth is also questionable. Recently, JD.com's stock price has experienced a significant decline, especially on October 13th, when JD.com's Hong Kong stock fell by as much as 10%, reaching a record low of HKD 102. The decline in stock price is due to institutional pessimistic expectations for JD.com's third-quarter performance growth. Institutions such as Macquarie and Morgan Stanley have downgraded JD.com's Hong Kong stock rating.

In this situation, JD.com needs more performance highlights, and instant retail is not only a hot track in recent years but also regarded by the industry as the new growth driver in the slowing e-commerce market. JD.com naturally cannot miss this new opportunity.

According to the "Instant Retail Industry Development Report" released by the Ministry of Commerce, instant retail has maintained an average annual growth rate of over 50% in recent years. By 2022, the market size of instant retail has reached CNY 504.286 billion, and it is expected to triple compared to last year by 2025.

JD.com's confidence largely comes from Dada's performance. As the first stock of instant retail, Dada has been in a loss-making state since its listing in the US in 2020. After three years of development, it has finally achieved profitability and has a good development momentum.

On August 16th, Dada released its second-quarter financial report, achieving revenue of CNY 2.8 billion, a year-on-year growth of 23%. The adjusted net profit improved by more than 17 percentage points compared to the net loss of CNY 350 million in the first quarter, turning losses into profits.

Among them, JD Daojia's performance is impressive. In the 12 months ending on June 30, 2023, the total transaction volume (GMV) of JD Daojia platform reached CNY 70.8 billion, a year-on-year growth of 30%.

However, although such performance is inspiring, as a subdivision track of the e-commerce industry, the instant retail track has long been targeted by Internet giants. Meituan Flash Purchase, Alibaba's Ele.me, and Fresh Hema are all making efforts, and JD Daojia faces considerable competition pressure.

Taking Meituan as an example, in the past four quarters, the scale of Meituan Flash Purchase has reached CNY 175 billion and is expected to exceed CNY 400 billion by 2026.

Since last year, Ele.me has also cooperated with Xiaomi Group, Suning.com, and Apple authorized stores. Especially on September 22nd this year, it simultaneously started selling the new iPhone 15. According to Ele.me's data, the transaction volume of Apple authorized stores exceeded more than a hundred times the usual level within two hours of the sales, showing strong sales.

More importantly, Meituan and Alibaba have begun to enter JD.com's core territory and continue to expand the home appliances and digital product categories. A close combat has already begun.

Instant retail will transition from the previous stage of rapid expansion to the stage of refined operation. Zhuang Shuai, a retail e-commerce industry expert and the founder of Bailian Consulting, believes that in the new stage, all parties involved need to compete in terms of supply chain + digital service capabilities and all-category, all-scenario offerings.

The year-end promotion is approaching, and the new battle of instant retail will soon begin. Li Changming, the General Manager of JD Daojia, revealed that during this year's JD.com 11.11 promotion, JD Daojia will provide "free shipping within hours for all categories" service, bringing millions of low-priced and high-quality products.

The "35711" plan for the next 20 years demonstrates JD.com's ambition for future development. Faced with an increasingly competitive e-commerce market, JD.com needs a strong counterattack, and instant retail presents an excellent opportunity for incremental growth. This time, JD must demonstrate its strength and prove itself as a leading e-commerce giant that can withstand market challenges and continue to steer the direction of the industry.