618 Preview: Why is JD.com more worth looking forward to after changing coaches?

With about a month to go before the annual 618 shopping festival, this year's event is destined to be a watershed moment because the person who created it is no longer on the stage.

Recently, the change in JD.com's CEO has sparked much discussion in the industry. JD.com's CFO, Xu Rong, has been promoted to CEO, while former CEO Xu Lei has retired and will serve as the first chairman of JD.com's advisory committee, continuing to participate in important management and project work related to JD.com's strategy, organization, and business. This person, who was once the "leader" of JD.com during its darkest hour, has bid farewell to the limelight after 399 days.

However, my focus is not on Xu Lei's departure. After all, JD.com has always been JD.com's own, and even if someone else becomes CEO, they are only a senior executive of Dong Ge's will. Moreover, as a CEO who did not come from the founding team, Xu Lei can be said to have already reached the pinnacle of his career, and now he has retired after achieving success, so there is no need to over-interpret his departure.

What I really care about is how JD.com will perform this year, including during the 618 shopping festival and beyond to 2023.

Impressive first quarter report, a series of reforms have shown results, and development vitality is still strong

Before discussing the 618 shopping festival, let's take a look at JD.com's performance at the beginning of the year.

Just before JD.com changed its CEO, the company released its first quarter report for 2023. The report showed that JD.com's total revenue for the first quarter was RMB 243 billion, a year-on-year increase of 1.4%, slightly higher than the market's expected RMB 240.7 billion. Among them, JD.com's total revenue from retail business in the first quarter was RMB 212.4 billion, a year-on-year decrease of 2%.

However, JD.com's net profit attributable to shareholders for the first quarter was RMB 6.261 billion, a year-on-year increase of 309.33%, reaching a new high since the fourth quarter of 2020. Looking at the growth curve, JD.com's net profit growth rate in the previous three quarters remained above 100%, and the speed of profit recovery far exceeded expectations.

In addition, JD.com's retail business, which is its core area and has been experiencing negative growth in revenue, has also achieved a turnaround in terms of profit. In the first quarter, JD.com's operating profit from its mall business was RMB 9.84 billion, far exceeding the market's expected RMB 7.41 billion, a year-on-year increase of 4.6%, and the growth rate was also higher than the market's expected 3.5%.

Although many industry insiders believe that JD.com's first quarter report was lackluster, I hold the opposite view. Overall, JD.com's first quarter report is impressive and has many bright spots. Although the revenue pie is smaller, there is actually more "cake" to eat, which is already very difficult in the context of the ongoing epidemic in many parts of the country over the past quarter. This is fully worthy of recognition.

The change in JD.com's stock price also coincides with my view. On the second day after the financial report was released, JD.com's Hong Kong stock price rose by more than 7%, and JD.com, JD Health, and other JD.com-listed companies all rose, indicating that the capital market also recognizes this financial report. Time goes back to November last year, when the Chairman of JD.com's board of directors criticized some of JD.com's management at a video conference, saying that the executives had deviated from the core of the business strategy, which is cost, efficiency, and experience, and further refined the experience into three aspects: product, price, and service. Subsequently, a series of measures were taken in response to these three aspects, such as launching the "Billion Subsidy" channel, which set off a wave of major changes from top to bottom in JD.com.

Now, it can be seen that this series of changes strongly led by JD.com has played a certain role and achieved remarkable results. It can be said that JD.com has a good "opening" in the first quarter of 2023. Next, it depends on the performance of the new CEO, Xu Ran.

"Merchants" are placed on a new height, the ecosystem is more open, and consumers benefit more

After reading the financial report, let's take a look at JD.com's overall plan for this year's 618.

At the JD.com 618 Merchant Conference held on April 20, 2023, JD.com stated, "This year's 618 coincides with JD.com's 20th anniversary of entrepreneurship, and it will also be the 618 with the most investment and strongest measures to help merchants grow in history. JD.com not only wants to help merchants sell goods well this year's 618, but also wants to enable merchants to achieve sustained and stable growth, comprehensively assist brands and merchants in high-quality development, and create a 'more, faster, better, and cheaper' JD.com 618 for consumers."

There are many key words in these statements, such as "most investment", "strongest measures", "sustained and stable growth", "high-quality development", and so on. More importantly, "merchants" have been placed on a new height by JD.com. It can be said that this is the main tone of JD.com's 618 this year.

In terms of specific measures, JD.com has also made a big move. For example, JD.com will launch a "reduce burden and increase income" gift package, increase investment by 20% for all merchants through a more open ecosystem, higher-quality traffic, and more efficient operations, help merchants reduce operating costs by an average of 30%, and double the sales growth rate of small and medium-sized micro-merchants. Immediately afterwards, on May 8, at the 618 Merchant Conference Advertising Marketing Special Session, the person in charge stated that the platform will provide merchants with over 1 billion high-quality traffic and tens of millions of advertising red envelopes, and promise to simplify the traffic field gameplay and shorten the traffic distribution chain, making every effort to increase the exposure of merchants.

At the same time, JD.com will also create a more open merchant ecosystem, continuously support more individual, individual households, factories and other characteristic merchants to open stores on JD.com through the "Spring Dawn Plan" (launched by JD.com at the beginning of the year), reduce the burden and increase efficiency for merchants, and promote social production and employment.

It can be said that this series of big moves is one of the direct impacts brought about by the restructuring of JD.com's retail organization on April 11. Previously, JD.com's retail business canceled the business group level, and the operating units no longer distinguish between self-operated and POP (third-party merchants). In other words, JD.com will promote the full integration of self-operated and POP, and POP will for the first time have the same rights and status as self-operated business. Above all, it is a key move for JD.com's internal transformation from the end of last year to this year, and it is also an important layout for JD.com to fight for ideal results in the battlefield during 618 this year. Undoubtedly, whether it is a billion-yuan subsidy or a 1 billion-yuan advertising red envelope, businesses and consumers will benefit from these changes and measures of JD.com this year.

Surrounded by enemies, the Chu song has not yet begun

Nowadays, the domestic economy continues to improve, and although the overall consumption market is weak, it is gradually recovering. For major e-commerce players, this means that this year's 618 will be an extremely competitive and more internal "war". Each player must have different considerations.

For JD.com, selecting CFO background Xu Ran to take over from Xu Lei, to some extent, can speculate that JD.com may be most concerned about the health of financial indicators during 618 and even 2023 or even longer periods, such as ensuring stable revenue growth. On the basis of this, more real gold and silver can be put into the pocket, and the walk should be more stable, safer and of higher quality. This is not only JD.com's expectation of Xu Ran, but also JD.com's strategic positioning of its core goals under new situations, new patterns and new challenges.

In my opinion, this is both JD.com's judgment on the overall environment at home and abroad, and a clear understanding of the current industry competition situation. Objectively speaking, the environment faced by JD.com is not friendly. On the one hand, it has to fight against arch-enemies like Taotian, and on the other hand, it has to face the hungry wolves like Pinduoduo, and also face the "junior" like Douyin and Kuaishou.

Moreover, from support to tools, from low prices to services, for the competition between the two groups of businesses and users, each player has the same attitude, "Eight Immortals Crossing the Sea, Each Showing His or Her Own Special Skills", and no one is willing to show weakness. At the same time, JD.com, with a complex and numerous business system, also faces many challenges and obstacles to overcome internally. Therefore, whether it is 618 or 2023, JD.com under Xu Ran's leadership will fight a hard battle.

However, I believe that 618 is created by JD.com, and it is JD.com's home court. This "reserved land" cannot and will not be lost. From the model to the industrial layout, JD.com still has its own unique advantages and moats. More importantly, under the guidance of JD.com's positioning and the new vitality brought by the new leader Xu Ran, the transformation centered on the six-character core of "cost, efficiency, and experience" will continue to bring new transformations and development vitality to JD.com internally, bring new value growth points to the e-commerce industry, and will also benefit more businesses and consumers.

JD.com under 618 and JD.com in 2023 are worth looking forward to.