Jingdong is thinking about what

On August 7th, the e-commerce giant Jingdong Group made two big news in a row: First, it released the second quarter of 2015. In the second quarter, the total transaction volume exceeded 100 billion yuan for the first time, reaching 114.5 billion yuan, and the net loss was 51.04 billion yuan; Second, it announced that it will spend 4.13 billion yuan to buy 10% of shares in Yonghui Supermarket.

From the outside world, the cooperation between Jingdong and Yonghui Supermarket, which still suffered a net loss in the second quarter, means that physical goods O2O will fall into the hands of giants. The market is concerned with the benefits of such cooperation. What is the relationship between the cooperation of JD.com and Yonghui Supermarkets and the fresh concept of Yonghui Supermarket?

Net loss of 510 million

According to Jingdong's financial report data, as of June 30, 2015, Jingdong's total transaction volume (GMV) reached 114.5 billion yuan, a year-on-year increase of 82%, and net income reached 45.9 billion yuan, a year-on-year increase of 61%. Net income from service projects and other projects was 3.3 billion yuan (about 500 million U.S. dollars), a year-on-year increase of 108%. According to the statistics of the National Bureau of Statistics released in the first half of the national online retail sales growth of 39.1%, Jingdong's total transaction volume is still maintained at twice the industry average growth rate of growth.

Jingdong chairman Liu Qiangdong said at the analyst meeting after the publication of the financial report that Jingdong has already achieved a comparative advantage in first-tier cities such as Beijing and Shanghai, and the three- to six-tier cities are slightly inferior. However, since the first half of this year, the growth rate of orders in the third- to sixth-tier cities has far exceeded that of the first and second-tier cities. It is believed that the number of orders from the third to sixth-tier cities will soon exceed half of the total orders.

Liu Qiangdong also disclosed that as of now, in more than 40,000 townships in China, Jingdong has covered 20,000; Jingdong's services have covered more than 46,000 villages, and can reach 100,000 before the end of the year. Among the 46,000 villages, each village has a “villager agent” in Jingdong responsible for the promotion, promotion, delivery, collection, and after-sales service of Jingdong in the village.

However, while revenue continues to grow rapidly, Jingdong still does not cross the red line of profit and loss. Financial data show that the second quarter net loss of 51.104 billion yuan (about 82.3 million US dollars), while net loss of 582.5 million yuan the previous year (about 93.9 million US dollars), a slight decrease year-on-year.

Jingdong's calculations

At the same time as the release of the second quarter report, Jingdong announced that it has reached a strategic cooperation with Yonghui Supermarket and will subscribe Yonghui Supermarket to increase its shareholding at RMB 9/share. The total transaction amount is 4.31 billion yuan.

In the eyes of the outside world, through this transaction, Jingdong will not only hold 10% of Yonghui's shares, but also be free to appoint two independent directors. The purpose of this move is to strengthen the cooperation between the two in the O2O field.

In fact, Jingdong's cooperation with offline retail companies can be traced back to November 2013, when Jingdong and Tang Jiu convenience stores launched the O2O project. After Jingdong arrived home this year, Jingdong teamed up with Super Lotus, Lotte Mart, and Supermarket, but none of the above cooperation involved investment. Even the previous cooperation with Lenovo, Li Ning, Xtep, Ling Zhi and other apparel companies is also the same.

In the eyes of the outside world, the attraction of Jingdong’s RMB 4.3 billion investment is Yonghui’s advantage in fresh food, and the imagination of deeper cooperation in stores, logistics and distribution. Retail expert Hu Chuncai, general manager of Shanghai Shangyi Consulting, said that with partners like Yonghui, JD’s approach to the offline market will be smoother. “Yonghui has a very strong advantage in terms of freshness, and currently domestic e-commerce companies are The fresh aspects are relatively weak."

Yonghui stated in the announcement that cooperation between the two parties mainly involves four aspects: strengthening alliance coordination, actively exploring online and offline cooperation models and O2O business development, warehousing and logistics cooperation, and jointly tapping Internet financial resources, and the two sides will establish a high-level regular communication mechanism. Jointly negotiate major issues for cooperation.

In addition, fresh food is the biggest temptation of Yonghui to JD. Jingdong Chief Financial Officer Huang Xuande said in the second quarter financial analysts conference call that Jingdong’s focus on O2O development is fresh. In May of this year, Jingdong led a $70 million round of financing in C’s round-the-clock Orchard Tiantian Orchard.

Yonghui has seen development opportunities for Jingdong, which has strong logistics but lacks fresh resources. In the current business arrangement of Jingdong Home, providing "two-hour retail fresh food delivery within 3 km" service is the core business. Yonghui's distribution of more than 300 stores and fresh delivery systems in major cities undoubtedly created conditions for the rapid expansion of Jingdong.

Yonghui's "pain point"

In the process of exploring the O2O model, the traditional retail industry lacks its own online business and embraces the e-commerce industry as its ultimate destination. In Hu Chuncai's view, Jingdong’s advantage in e-commerce operations, logistics and distribution is an urgent need for Yonghui. However, some analysts believe that when large-scale supermarkets such as RT-Mart and Wal-Mart are building their own e-commerce platforms, Yonghui needs capital for blood transfusion, and the two-line battle has failed.

As early as May 2013, Yonghui had already launched the e-commerce business “Half the Sky”. However, the business had stopped operating in less than two months, and the e-commerce business of Yonghui was in the limelight. However, Yonghui was unwilling to end its online business. Then it launched the “Yonghui Micro Store” and proposed to launch the e-commerce platform during the year.

Jingdong's investment also brings a substantial amount of real money. After the IPO, Yonghui kept a rapid pace of expansion. Statistical data shows that Yonghui has opened more than 50 new stores each year, which is also a test for Wing Fai Capital's operational capabilities. In August last year, Yonghui had received 813 million shares in private offerings and obtained milk financing of 5.692 billion yuan.

Zhang Xuansong, chairman of Yonghui Supermarket, said in an interview with the media that capital operation is not an end in itself. Yonghui Supermarket hopes to further enlarge and strengthen the company. The raised funds will be used for investment chain supermarket store expansion, logistics distribution center construction and fresh cold chain logistics system development projects.

China e-commerce enters competition stage in the Red Sea

It is not only Jingdong that wants to lay out O2O. Two days after Jingdong and Yonghui announced their cooperation, on August 10th, Alibaba and Suning announced that they had reached a comprehensive strategic cooperation.

In this regard, some analysts said that through barbaric growth, China's e-commerce has entered the Red Sea competition stage, the war has gradually entered the non-standard commodity areas from the standard commodities, O2O has emerged as the e-commerce giant battlefield.

The GF Securities e-commerce team believes that in the long run, companies with all or some of the following conditions will stand out in the competition for Internet retail transformation. First, it has the advantage of “heavy assets” under the line (rich operating experience under the line, strong supplier resources, brand, logistics, store network, and its geographical location, etc.); second, the wide range of offline tentacles; and third, the company’s strong execution and decisiveness. And the strategic thinking is clear; fourth is the company's deep transformation from the overall strategy, organizational structure, management system, and talent introduction; Fifth, the company's transformation is more closely integrated with its own existing resources, and has its own characteristics.

In addition, “China Economic Weekly” reporter found that agencies generally believe that the domestic leading e-commerce companies in the O2O field of a series of strategic actions are expected to stimulate the domestic capital market. Among them, Dongxing Securities believes that the exploration of the O2O transformation of commercial and retail enterprises and the reshaping of channel values ​​will usher in new opportunities for development.