Jiang Fan: Taobao Flash Sale exceeded expectations, need to add money

"Short-term will be very actively involved."

$Alibaba(BABA.US) $JD.com(JD.US) $MEITUAN(03690.HK)

The 618 event has started, flash sales + food delivery officially enter the mid-stage battle.

Compared to JD's 3.9 yuan Kudi coffee, Taobao is more generous, directly offering free orders. On April 30, "Taobao Flash Sale" was launched, and six days later, daily orders exceeded 10 million, followed by "giving away 100 million cups of milk tea" on May 6. Starting May 16, the 618 event began, and the biggest feature of Taobao during this year's 618 is:

Daily milk tea giveaways.

The reason for being so generous is due to the support from Taotian CEO Jiang Fan.

At last week's earnings meeting, Jiang Fan focused on answering market concerns about the food delivery business. In Jiang Fan's view, the instant retail track is large, Taobao has a mature user, merchant, and logistics system, making this endeavor a natural progression. The attempts over the past two weeks have exceeded expectations in terms of scale growth and efficiency improvement, and can also enhance Taobao user activity. In his response, Jiang Fan mentioned "active involvement" three times.

In summary:

Well done, exceeded expectations, need more investment.

Next, the pressure is on Meituan and JD.

Recently, in a widely circulated anonymous memo, JD's latest food delivery battle status is as follows:

Order scale and public opinion heat greatly exceeded expectations, team morale is unprecedented.

Dong Ge has already increased the food delivery loss budget to 20 billion. At the current subsidy level, 20 billion will soon be gone, and later it will be necessary to increase commissions or have merchants participate in subsidies.

Currently, subsidies cannot be stopped, as stopping them would cause order volume to fall, greatly affecting morale. Fulfillment efficiency still needs improvement.

JD internally is quite concerned about Alibaba's entry, as they spend more money, have Taobao e-commerce traffic support, and have lower average losses per order compared to JD.

Meituan seems to be still observing, with not much real action, only daily announcements of flash sale business progress.

One reason is that Taobao Flash Sale has only been in the market for over two weeks, with the first week being the May Day holiday, even if Meituan does nothing, the natural traffic growth during the holiday can sustain it. However, in the past two weeks, the loss of orders and riders is visibly noticeable. Taobao and JD together have 40-50 million orders a day, while Meituan's daily average last year was only over 60 million orders, so it's impossible not to be affected, just to what extent it will hurt Meituan.

But some local Meituan service providers have already felt the competitive pressure, and subsidy levels are quietly increasing. As the 618 event period approaches, Meituan will have to join the subsidy battle, according to feedback from some regional service providers:

In June, all staff will cancel leave and enter wartime status.

This will be a war that no one can afford to lose.

【Jiang Fan's Q&A at Alibaba's earnings meeting】

Q: We mentioned investing 10 billion yuan in instant retail to expand platform business, what is the investment plan? How will it affect profitability?

Jiang Fan: Alibaba is not entering the instant retail track for the first time, we have been laying out in this market for many years, investing in Ele.me and doing businesses like Hema, so entering this market is a very natural thing for us. Of course, recent market changes have occurred.

Let me talk about some reasons and advantages for entering this market:

First, the instant retail track is very large, it is a demand that all Chinese people have, now 500-600 million, and in the future 1 billion people's demand, it is also a very fast-growing track. Taobao has a very broad user base, and we will naturally incorporate instant retail as a new service and category into the Taobao platform.

Second, we have existing mature merchants entering this market, Ele.me has been doing it for many years, and there is a mature logistics system, realizing instant retail experience on Taobao is built on these foundations.

I think this is our advantage, based on these advantages, I believe we can quickly achieve a very good experience while also having a good balance in commercial efficiency.

In the past 2 weeks, we have tried Taobao Flash Sale, which exceeded our expectations, whether in terms of scale growth or efficiency improvement. This will bring multiple benefits:

First, for an e-commerce APP like Taobao, instant retail is a very high-frequency scenario, if this service can be established on Taobao, Taobao users' activity and scale will have a good long-term reflection.

Second, we see the possibility of combining far-field and near-field e-commerce, in the future, the focus will be on actively investing, converting Taobao users into instant retail users, upgrading the business model based on new business, making the APP more active.

In the short term, our investment focus is on new users, Taobao has a very large user space, which can turn them into instant retail users, short-term will be very actively involved in the business.

Q: Will the investment in instant retail increase pressure on Taotian Group's EBITA?

Jiang Fan: The mid-term goal is to stabilize market share, we will make many investments, including user experience, competitively priced products, and we are in the investment period, our EBITA will fluctuate with the competitive situation, you will see this situation over the past few quarters.

Starting this quarter, new investments will also affect our EBITA, but on the other hand, it will also bring user growth, frequency, and stickiness, which is a substitute for market marketing investment, we will consider it overall. We expect Taotian EBITA to have some fluctuations in the next few quarters as the competitive situation changes.