The essence of a consumer electric trader is to coddle consumers

Liu Jianqiang/Wen (published in the seventh issue of the entrepreneur)

Jingdong Mall 2011 Years of sales are still outside like to guess the topic, the disparity of figures (20 billion yuan or 30 billion yuan) shows that there is a huge difference in understanding the company.

2008, the Beijing-East announced sales of 1.3 billion yuan. After the breakthrough of 10 billion yuan in 2010, the founder of Daiju East began to enjoy the fun of guessing. In 2008, there were more than 800 employees in Jingdong, currently 25,000. Liu says his staff will reach 40,000 by the end of 2012.

Jingdong Mall has become China's independent corporate sales of the largest companies. According to Liu's expression, the 2nd to 10th sales can not add up to more than Jingdong. These include the newly rising Suning (microblog), and another well-known company Dangdang (which was listed on the NYSE at the end of 2010, with a total revenue of 3.6 billion in 2011).

If asked (100 billion. 80 billion), Liu will reluctantly agree that 60 billion yuan is closer to the sales revenue to be achieved in 2012.

Low prices and continuous improvement of services is the core driving force for the growth of Beijing and east. The company, which was first known for selling 3C products on the Internet, has rapidly expanded its territory to home appliances, department stores, books, food and beverages, and even tried to sell train tickets. It pursues "all-inclusive" with the unchanged low price strategy. Its service quality is beyond what it sees as a model for Amazon. At the same time as the traditional retail model was the electronic commerce Revolution, Liu did not intend to spare his electric trader comrade.

This is a company that has profoundly changed the power of the business, forcing its peers to move forward or give up.

Its enemies have increased significantly. They even formed a "union". Its advocates have increased significantly, and those who have benefited are suppliers and consumers.

But, like most Chinese companies, Jingdong Mall is still losing money, though Liu is reluctant to comment on rumours of a 2011-year loss of more than 1.1 billion yuan. Jingdong Mall 1 years ago completed the amount of 1.5 billion U.S. dollars in the third round of financing, but increased the outside of its capital chain will be broken, they claimed that only the market can be saved, but the outlook is not optimistic.

The fear, if not the hope, is that Beijing is taking the road to expansion and destruction in one way and will collapse faster than it has grown. Consumers who are deeply stimulated (they get the goods by pressing their mouse in the morning) are worried: will all this suddenly disappear?

The "spoiled" consumer

June 19, the electric dealers announced the "6 18" promotional results. Jingdong Mall claims from the computer, mobile phones to diapers, milk powder, a variety of category sales have multiplied, effective orders 1.5 million, one-day deal 1.016 billion yuan. Among them, the computer machine 8 hours sold 30,000 units, "an average of one second." Copy paper sales weight more than 150 tons, "equivalent to 20 elephants."

The company's Twitter platform, Cat (Weibo), said 55 million people had taken part in the day-cat online shopping, but did not disclose the turnover. It noted, in particular, that the sale of 150 tons of zongzi that day was "equivalent to the weight of 50 adult elephants".

Two companies apparently chose different kinds of elephants.

June 18 is Jingdong's store celebration day, but also its price promotion day (2010 Beijing East announced the turnover of 100 million yuan). Now, it unexpectedly becomes many electric business common festival, the day Cat, Suning buys and so on the company all chooses on this day launches the promotion to the Jingdong.

Both sales figures are not verified. Liu in this year's "6 18" on the day of the micro-blog said: "Electronic business data fraud is the industry's open secret." Immediately someone commented: East Brother this word curse also bring himself, true righteousness.

It is worth calculating that the influence of Jingdong in this game is regarded as "encirclement and suppression of Beijing East" of the price war magnified how much. In Liu's view, each peer to the Beijing-east of the declaration of war has aroused more originally did not know Jing Dong as the curiosity of those who.

"There's only one winner," Liu wrote on Weibo, "Consumers!"

But consumers look dissatisfied. They complain that Jingdong's goods are not much cheaper than usual, complaining that the amount of consumer subsidy paid by the cat is too small. They are not stingy with the use of the word "liar" for the electric dealers who are accustomed to seeing their faces. Of course, they may also be disguised customers.

They are complaining of "helplessly" place orders. In fact, it is e-commerce that allows Chinese consumers to truly experience the "God" feeling. In the summary of Liu, they enjoy "at home, goods to pay, fair, inexpensive" services, can be freely returned to buy goods, more importantly, this service is not due to the consumer's geographical, rich and poor differences and different.

Liu that the essence of consumer e-commerce is "pampered consumers", that is, an excellent user experience, which includes product quality, price and service. "Compete with anyone," he said, "You can win because of the user experience, the customer chooses you because of the user experience, there is no second reason." ”

In 2007, after getting the first investment (10 million USD), Daiju began to build its own distribution system. In the previous 3 years, Jingdong use of Third-party Express, service quality can not be controlled, the user is difficult to satisfy. "We want to find a best courier company to outsource. Liu found the Shun Fung Express. Cooperation quickly terminated: Shun Fung can achieve satisfactory delivery, but the price of Jingdong, impossible.

The decision to build a distribution team is at least a milestone in the history of Jingdong Mall. It met with numerous objections. In the era when electricity merchants invested heavily in advertising to get customers, Liu's choice seemed foolish.

It now appears that Liu's understanding of "acquiring customers" is far from profound. Jingdong Mall is still a retailer, but has moved its previous physical stores online. It still needs to be more closely linked to the customer than a momentary increase in traffic. Liu judged that China's third-party Express level (including price) in 3 years will not meet the requirements of Beijing-east. 3 years, in a fast-growing market, for a company that determines the user experience, it is intolerable. In fact, until today, the third party Express is still not suitable for the needs of Jingdong, and the Beijing-East distribution has begun to provide third-party services.

Liu had shown a similar firmness in 2004, when he was founded in Beijing. When he found that online sales were growing far beyond the physical stores, he immediately shut down the existing 12 3C chains (Gome, Suning had to face this choice for years to come, and it became more difficult).

April 2010, the results of the construction of the original distribution. Beijing East announced the launch of "211 Limited" service: Beijing, Shanghai, Guangzhou, Chengdu, the four cities from Beijing-East self-distribution area, small pieces of merchandise can be achieved before 11:00 to submit the spot order, on the day of delivery, the night before 11:00 to submit the spot order, the next morning delivery. The huge increase in delivery speed is far from advertising comparable, this year, Jingdong sales breakthrough 10 billion yuan, compared with 2009 growth of 150%. "Excluding night breaks, our delivery time is only 4 hours." "Liu to" entrepreneur "said. "When we started, everyone thought it was impossible, unsustainable, and sooner or later stopped," he said. "At present, the Beijing-East self-distribution has covered 300 cities nationwide, of which 25 promised 211 time limit, the performance rate can reach 97%." "This logistics speed is definitely the fastest in the world." Liu said. "Jingdong is the first in the world to do this, and Americans have never thought of doing so." This year Amazon started in the United States, only in a few cities. ”

"We are going to do the hardest and hardest thing," he said. Others are difficult to make, you have done, what is value? If it's too easy, everyone can do it, and you'll face a life-and-death problem one day. Tomorrow, as soon as someone comes in with 20 million, it's done. "This is what Liu said in an interview with the entrepreneur in 2009.

In the new standards set up in Beijing, the domestic business of the manufacturers are forced to follow up. "This is the result of our four or five years of continuous optimization, not a day." There is no ability to coddle consumers, which is a threshold. "Liu said.

Low cost

Liu criticized domestic rivals for not weighing the user experience. At the same time, they weigh the price war (one of the user experience elements) without heavy cost.

"As a retailer," Liu said, "Selling is someone else's brand, than who is cheaper, price war is certainly a normal." But low prices are only the result, regardless of the cost of low-cost anyone can do. The core is to make you the most efficient and lowest cost. ”

As a result, Liu's complete statement of the nature of the consumer electronics business is to provide a good user experience (products, prices, and services) based on low cost and high efficiency. Under this premise, Liu thinks that empty talk is meaningless.

He still takes logistics as an example. "Logistics accounts for more than half of the cost of the electricity business, but it is flexible, the level of management caused by a large difference." This is the biggest piece of our cost reduction. "Liu believes that the Jingdong logistics and the Shun Fung as the representative of the Consumer-to-consumer Logistics has a qualitative difference." The latter is grid-like, each point and a national point is interlinked, both send and receive, and Jingdong is wheel-like, one-way, from a point to more points, only send not accept. What does that mean? " Shun Fung Courier, never know the next minute is who called over, send how many parcels, where to go. How many pieces, how much weight, do not know, may only send one piece, may send 100 pieces. So its couriers must be redundant at every point in the country, at least 30%, including its vehicles and aircraft. There is no way, UPS (United States package) is the same, because the randomness is too strong. If the Consumer-to-consumer logistics is used by the proprietors, the latter must be apportioned due to the increased cost of redundancy.

Moreover, the Jingdong logistics system includes warehousing, Consumer-to-consumer logistics is not included. Jingdong Existing level warehouse 6, two level 18, three level 600. Through information optimization, you can budget the sales of each product in the next few days, so that when the user places an order, the goods are shipped to the local warehouse ahead of time. If it is consumer-to-consumer, in order to achieve 211 limit, may need to airlift, cost unbearable.

The transfer accuracy rate of Jingdong secondary warehouse can reach 92%. Jing-dong's Predictive analysis system determines its market demand through the click-through rate of merchandise. "Consumers usually have a 2.7-day decision-making cycle," Liu said, "We use this cycle to manage our logistics system accurately and to make inventory turnaround time faster." We now manage 2 million SKU (single product inventory), one-month inventory turnover is only more than 20 days. No one in the world can do better than we do, whether it's online or offline. "Liu's example of Amazon is clear: the first quarter of this year, Amazon's inventory turnaround period is 44 days."

"Logistics is the operation, there is a large number of detailed management, not just rely on which strokes to win, dozens of links to achieve the ultimate." "Jingdong goods warehousing (including into the distribution station) before the use of plastic turnover box, logistics loss rate is significantly lower than the industry average level (1.1%)." "Again such as the use of tape, others use 1 we use 0.5, after testing, no problem." How to use plastic bags, how to use the box, how the driver is the fastest in the station, how to distribute the goods to the distribution, how to select the fastest route (for example, avoid traffic lights, traffic jams, do not pass the pedestrian street, try not to turn left), his backpack in the order of the goods, which has a lot of knowledge. Many people think that logistics is not technology, is physical work, in fact, it is very technical. This set of management system is very complex, the threshold is very high, give you 100 billion you can not establish a shun Fung overnight, the same as Jingdong. ”

Liu said that from 2009 to 2011, Jingdong Mall Logistics costs overall decline of more than 30%, on average, no more than 20 yuan per order. "It is still down," Liu said, "not yet optimized, our Asia 1th (Shanghai Logistics Center) after the completion of the highest target is a single courier cost of not more than 15 yuan." At that time, Jingdong was at least 10 yuan lower than any company. ”

Moreover, Jingdong Logistics cost accounting not only covers warehousing, distribution, mining sales, call center, staff wages, taxes and so on, and even employee options have been counted. "Our distribution staff also have stock," Liu said, "after the rounds of financing, the price has been very high." ”

He stressed that the cost reduction of Jingdong Express is not based on sacrificing the interests of employees. "Two months ago, we just took out 300 million cash to employees, 5-year interest-free home loans." ”

The logistics system is testing the external courier business, the current daily delivery from the third party 60,000 packages, in early September will be officially opened to the public. Will it become "grid-like"? Only six points to receive goods, will not change our logistics system. ”

Control Board

"10 years later," Liu said, "Jing Dong or do these three things, the front-end is the user experience, the backend is cost and efficiency." Our business belief is that this company is valuable when we are cheaper than others, more efficient than others, and experience better than others. ”

So why do such companies lose money?

2011, the average daily order of about 300,000, about 100 million year. If its 30 billion yuan sales are true, the average of 300 yuan per order. Liu said that each single 20 yuan logistics cost calculation, in accordance with the "logistics accounted for more than half the cost of electricity", assuming that it is 70%, the 2011-East per single total cost average of about 30 yuan. So, 10% gross profit margin can achieve break-even. If Jing Dong loses 1.1 billion yuan, its gross profit margin is only about 6%. 2011, Dangdang's gross profit margin from the last year's 22.2% to 13.8% (loss of 230 million yuan), Jing-dong is clearly far below this level. Of course, because of the main business differences, such comparisons are not accurate. Or it's not as much of a loss as it is rumored to be.

"It's impossible for a valuable company to be unprofitable," Liu said. "If you want to make a profit, slow down a little bit faster." "His explanation is that, as each month is growing, Jingdong distribution, customer service, warehousing needs three months ahead of the preparation, resulting in redundancy 20% to 27% staff, warehouse redundancy 30% to 40%." "The monthly composite growth rate of 8% companies is very scary, we are not just for today." If my annual growth rate slowed to 30%, 40%, I redundant 5% on it, and I dropped the cost of 20%. ”

If the logistics cost down 20% that can be profitable, then the Beijing-east last year's loss degree under 400 million yuan, its gross margin corresponding to less than 9%.

"We have been saying since 2007 that our money is unsustainable and that we are burning investors ' money," he said. We don't need people to know how big our logistics system is, how sophisticated our management is, what we do and what our customers feel. We are not outside the belief that there is no technical content, no operational management capacity, only by burning money. ”

So are investors "not just for today"?

Starting with today's capital from the first round of investment in Jingdong, Liu agreed in the contract, "I will always have a majority in the board." The Board of Directors is the company's highest authority, as a founder, can't control the board, what else? I have full confidence to lead the company forward, I do not believe which investors can replace me and the company to do better. I want to control the board, this sentence I very naked said out, will not hide with you. Liu's request had allowed some investors to turn away, but, "whether one or 10 investors come in, Liu necessary to control the board." The general founders always feel that investors will not move him, the board leaves his business can not control, so do not make an agreement, this is a misunderstanding. It has to be controlled by a contract, not the money and then the sheep into the wolf, which is not good faith. ”

Today capital President Xu advocated Jingdong focus on the 3C business, so, "we do home appliances she objected, do daily necessities she objected, do book audio-visual she opposed, do pop platform she opposed." I said, Xu, I can only regret to tell you that your objection is invalid, or let us Open the board of directors to vote. ”

Investors opposed to build express, Beijing East built. When the group-buying site flourished, all investors advocated the BoE hurriedly joined, the distribution team into a marketing team. Liu did not obey. "If a company does not contribute value to an industry, do not enter it." ”

For the history of "capital chain" as long as the "listing" rumors, Liu said, in the choice of timing, he and investors "have always been highly consistent." Every year, the BoE will convene an analyst and investor conference, but it has nothing to do with the listing, "because we have a large volume, they need some numbers, we also need some technical communication." "I can tell you," Liu told the entrepreneur, "If investors have me I can't avoid having to discuss the listing with him, at least until after December 31, 2015." I have not promised any investors this time before will be listed. ”

"Our logistics system construction needs at least 10 years, is to a tape a bag so dig, dry towel twist water to that kind, need a lot of time to refine." A single express surface of the length, width, thickness, weight to achieve how much, in order to allow customers to take in hand feel not to be reduced, but also to the maximum cost savings, the content also to play under, but also to facilitate the search, a piece of paper to be plucked for half a day. Now, the focus of management is here. ”

Liu's patience is beyond doubt. When he sold his burner in Zhongguancun for about 2000 years, he once taught a client who had never touched a computer to use the mouse. By the fourth day, "when he finally moved his mouse, he stopped picking it up." ”

Liu said

"Jing Dong never deliberately and others price war." We have always thought that low price is the conscious embodiment of the value of our existence of a process, not by who forced out. We 2004 years to do E-commerce, people say we price war, in fact, we have not changed. We are not pricing according to others, others are following us. ”

"The core business logic is not just low price, but the lowest cost." If I am 5 cheaper than you, I hope to be forever lower than you 5 points, but how to achieve it? It is not like the burning of money outside, but through logistics investment, information systems investment, and constantly reduce our costs, always maintain a low price advantage. The price is lower than yours, the net profit is same as yours, because my cost drops. ”

"As long as a new model can increase efficiency and lower costs, you can make a lot of money if you have a 10% gross margin." I do not think that retail sales must have 50% gross margin to be valuable, it is not so. If everyone pursues a gross margin of 40% or 50%, I don't think the business model will evolve or bring value to consumers. ”

"This continuous increase has been under pressure for 8 years. The likelihood of a meltdown in the past 8 years has been real, with the total number of recruits more than the end of last year. In the past I have always said that the biggest risk of jingdong is the risk of corporate culture dilution, the fact that we have the ability to manage, resist the pressure. I think the most dangerous time has passed. The number of new employees will not grow this year starting next year. The relationship between the growth rate of employees and the growth rate of sales is not entirely linear, because people's efficiency is improved. ”

"We usually spend half a year on each product, supply chain and so on after all the integration." I don't think we have the ability to do this product, I would rather sit than go to the ark. It's the easiest thing to do, take a picture, copy some information, it's too easy. 50 employees can have 10,000 products in three days, but that doesn't make sense. How do you manage it? "

"Su Ning Yi buys oneself to want to leather own life, this is a very big problem." Its users may have moved from the physical store to the Internet, while I was absolutely growing. It said that hit Jing Dong, originally did not know jingdong people also know. ”

"(other platforms) the proliferation of fakes, not to manage the sellers, want to do it." Now that we manage the open platform has 1 million SKUs, why not fake it? "

"I have always believed that vertical electric operators, only vertical brands can survive, not its electric platform is valuable, but the brand value." Vertical retail platform must die, of course, can also sell. Because the platform stickiness is far from enough, the cost of acquiring new users is far higher than your profit. ”

"Rebate site is of no value to me. Shandao is worthless. ”

"In theory, you can do the Jingdong, but Jingdong created countless first." ”