Why Does Jingdong Want To Buy A Loss Making Shop No.1?

　　 JD.COM I spent 9.5 billion on store 1. As a deep user of, you should know that Wal-Mart This time, it was a loss. But there's another layer that maybe only a few people think about - why can't Wal Mart tolerate it Shop 1 Another loss? How close is Jingdong to tmall after it takes No.1 store? Will the powerful alliance hurt the innocent.

In this regard, we found a bone ash retail operator who knew Wal Mart, Jingdong and tmall. Huang Ruo, the founder of Tesco, used to be the COO of dangdang.com and the founding general manager of tmall. He interpreted the big case for users with his vision of more than 30 years of immersion in the retail industry.

Huang Ruo: a leading figure in China's chain and e-commerce, known as "Huang Yaoshi" in the world. Chief operating officer, founding general manager of tmall. He has nearly 30 years of business and industry experience. He has been a senior executive of several global top 500 enterprises for a long time. He has successively served as the general manager and executive vice president of many well-known enterprises such as lotus, Wankelong and Tianjin world. As a practical business manager, he has rich experience in large-scale enterprise management, and has a deep understanding of different enterprise systems and consumer behavior in the East and the West. Now, the pursuit of the heart is in the process of starting a business. He is the author of "I see e-commerce" and "I see e-commerce 2". Both books are sold online in Jingdong and dangdangdang.

Why does Wal Mart have to sell store 1?

The owner of shop 1 is not an investment company, but a retail company. I wrote in my book "I see e-commerce" that no matter how rich the retail companies are, they all work hard to earn a dime and a dime. Therefore, for Wal Mart, store 1 loses 1 billion a year, which is equivalent to offsetting the sales of 100 billion yuan in global sales, because the net profit of offline super market is only 1%. If it's an investment company, it may be able to tolerate a huge loss first, but for a retail company, it's really like cutting meat.

The main reason Wal Mart wanted to buy store No.1 was that they didn't do well offline in China, but they needed the huge market in China. At the critical point of e-commerce boom, they saw that Chinese consumers were going online, so they wanted to borrow shop 1 to cultivate China's online market. After several years of operation, they couldn't bear the long-term loss of store 1.

In this awkward mentality, JD is willing to take over the offer. On the one hand, it can help Wal Mart quickly get rid of the annual loss of about 1 billion yuan, and at the same time, it can exchange a higher value stock in his hand, which is cost-effective for him. This is just like Wal Mart has an uncompleted building in Erdos, which has a huge loss every year, and may increase in value in the future, but the risk coefficient is too large. At this time, the real estate company is willing to take a real estate in Beijing's Fifth Ring Road and exchange it with Wal Mart. Of course, Wal Mart will be willing to.

　 Why does Jingdong want to buy a loss making shop No.1?

What JD wants most is not to climb Wal Mart, but to fight tmall and Taobao. Compared with tmall and Taobao, what Jingdong is most worried about is that it is far behind tmall and Taobao, and the purchase frequency is not in the same order of magnitude.

Jingdong started from selling digital products. Although it gradually extended to department stores, users were not sticky enough to Jingdong. A user would not buy more than 10 times a year, while Taobao tmall was 50 times. If Jingdong only regards itself as a second rate e-commerce platform, it is enough for a user to buy six times and eight times a year, but if it benchmarked with tmall and Taobao, the gap would be too big.

The biggest value of e-commerce is the users. The number of purchases not only affects the sales volume, but also affects the frequency of communication. If users buy 10 times, they will have 10 word communication opportunities. If they buy 100 times, they will have 100 times of communication opportunities. This is the biggest weakness of Jingdong, and it has been trying to make up for it.

For Jingdong, the purchase of No.1 store into the supermarket FMCG can greatly enhance the user's activity. The second is to strengthen its own strength in East China, which is the strongest region of tmall after all.

The most important point is that he stabbed Taobao and tmall again. Why does Jingdong survive today is because the front-end can't compare with Taobao and tmall, so it tries its best to strengthen its strength in the back-end. This time, it bought No.1 store and cooperated with Wal Mart. Wal Mart's supply chain was connected to Jingdong, and then the warehouse logistics of No.1 store was integrated, which added a layer of weight against tmall and Taobao.

Therefore, Jingdong's acquisition of No.1 store is a win-win situation, even more meaningful than the cooperation between Ali and Suning. Suning, as a retail company, makes up for the weakness of tmall Taobao in the field of digital and home appliances, but Suning purchases few goods by itself, and most of the goods are still sold on a commission basis. And 90% of Wal Mart's products are purchased by itself. It is perfect to graft the advantages of the supply chain to Jingdong.

Since it is a win-win situation, where has the original loss gone?

Why is it difficult to do FMCG in online supermarket? There are two reasons. One is that purchasing does not have the advantages of Wal Mart and RT Mart. Most retail companies in China have not formed centralized purchasing, but offline supermarkets have accumulated decades of advantages in scale; Second, the distribution cost is too high, and the gross profit is very low, so the online operation mode can not eat the cost.

No. 1 store, though supported by Wal Mart's supply chain, has a purchasing advantage after so many years. But the cost of marketing and distribution is high, so we can't stop the loss.

After the No.1 store is sold to Jingdong, Jingdong will use its own logistics strength to greatly reduce the distribution cost of No.1 store. The number of the second Jingdong users has reached 123 million, and the sharing users also reduce the cost of customer acquisition.

Why is the price of 9.5 billion reasonable?

The sales of No.1 store in 2015 was about 10 billion yuan, and this year's sales should be close to 20 billion yuan. According to the valuation convention of retail companies, half of the sales volume is 50% of the current year's sales. The previous biography of 340 billion yuan is too much.

Will No.1 store and jd.com be completely connected in operation?

It's not easy to say now. From now on, Jingdong should feel that store 1 is still a valuable brand and will let it continue to develop. However, I don't think that this idea will last for long. For example, when Amazon acquired excellence, it felt that there were more people in the world who knew that excellence was more than Amazon, and wanted to continue to make excellence independent and bigger and stronger. But after a few years, excellence has slowly shrunk.

After Jingdong sucks up the nutrition of No.1 store, I think it will leave No.1 shop aside. After all, only Evergrande, the big one, was forced to be disabled in the end.

Therefore, smart businesses should be closer to Jingdong rather than No.1 store in the future. At the same time, enterprises starting businesses in the cracks will also be squeezed. For example, the imported food e-commerce "special shopping club" I made was not strong in the food supply chain, but now it has opened the No.1 store. The strong and the strong complement each other, leaving us entrepreneurs with much better opportunities to find their strengths.

Which link is most likely to have problems after the merger?

One is the loss of a large number of staff in store 1.

The team of No.1 store has experienced several shocks. For example, when Wal Mart became a shareholder, a group of people left when the founder left last year. This time, there will be a large number of staff loss, which is also very tragic for the employees of store 1.

The biggest challenge is that the culture of the two companies is incompatible. It can be seen from the background and style of the founders of the two companies. If the top management of Jingdong is allowed to manage shop 1, both sides will feel very estranged.

Will Wal Mart worry about not doing well in e-commerce in China?

For Wal Mart, the sale of No.1 store to Jingdong is an investment behavior. It just becomes a 5% stock of Jingdong. However, Jingdong is not his and has no management right.

Therefore, for Wal Mart, the cooperation with jd.com only solved the dilemma of No.1 store, but did not solve the dilemma of Wal Mart in China. What is Wal Mart's dilemma in China? China entered China in 1995, decades have passed, but there is no profit point in China. There is a sense of egotism in Wal Mart's culture. When I met with their executives, I publicly criticized that Wal Mart has two ways to do retail business, one is called Wal Mart, the other is called wrong way. It thinks that the successful experience in the United States can be copied to the world, but just as the gap between China and the United States is so big. For example, all his things emphasize the central process and standard. Every retail store is exactly the same. China can't let you find the same house. China's retail products are also very different, not to mention the different sales of goods in the East, West, North and south, that is, the beer consumed across different provinces is not the same.

The following is the cooperation between Jingdong and Wal Mart

Jingdong shares soared

At present, the total market value of Jingdong is about 28.8 billion U.S. dollars. This time, Jingdong bought store 1 by selling 5% shares. Therefore, the estimated value of store 1 is about 1.44 billion US dollars (about 9.5 billion yuan). Through the acquisition, confirmed that shop 1 did not reach the rumored valuation of 40 billion.

Affected by the acquisition, JD's share price rose sharply in the U.S. market on Monday morning, once rising more than 8%. As of the closing, JD quoted $21.06, up 4.62%.

At present, the total market value of vipshop, jumeiyoupin and Dangdang are about 6.58 billion US dollars, 650 million US dollars and 500 million US dollars respectively.