Liu Qiangdong is playing a big game

Author | Liu Baodan

Editor | Zhang Xiaoling

A month ago, veteran JD-SWR player Yan Xiaobing, who had briefly left, returned to take charge of the newly established Innovation Retail Department. Since then, JD-SWR has launched a series of intensive actions, integrating Jingxi Pinpin and 7FRESH, establishing pre-warehouse projects, and even rumors of acquiring Yonghui at full ownership, all of which are releasing new signals.

Obviously, JD-SWR is going to make a big move in the new retail industry.

An insider from JD-SWR said that the Innovation Retail Department is a first-level department independent of the core retail business of JD-SWR. Yan Xiaobing's return has elevated the status of this department, and he reports directly to JD-SWR CEO Xu Ran.

Currently, Yan Xiaobing is still sorting out the business of the Innovation Retail Department. It is not simply putting the original business together. In the future, it will definitely integrate innovation, and internally, everyone is very excited about this.

On August 1st, there were rumors that JD-SWR was acquiring Yonghui. Although JD-SWR denied it, the frequent adjustments to the new retail business still aroused speculation about what kind of big game Liu Qiangdong is playing. And is it possible for JD-SWR to create another new retail unicorn?

Action

Since its establishment more than a month ago, the Innovation Retail Department of JD-SWR has been taking continuous actions.

First, JD-SWR Pinpin and 7FRESH were included in the Innovation Retail Department and underwent brand upgrades. Starting from July 27th, "Jingxi Pinpin" officially changed its name to "JD-SWR Pinpin".

Pinpin is a community group buying business, established in 2021; 7FRESH is JD-SWR's offline fresh supermarket brand, established in 2018. Before being included in the Innovation Retail Department, these two businesses had been struggling.

The peak moment of Pinpin was when Liu Qiangdong personally led the team, but it still couldn't save its decline. After experiencing industry reshuffling, the business had to resort to layoffs and contraction. At its peak, the "JD-SWR Pinpin" business was present in more than 20 provinces, but it had already withdrawn from most of them last year.

Now, there are signs of Pinpin's restart and expansion. According to Wall Street News, there are as many as 75 cities applying for group leaders in the background of Pinpin, including cities such as Qingdao, Wuhan, and Langfang. Taking Wuhan as an example, you can submit information for review by entering keywords of certain city streets.

As one of the key contents of JD-SWR's cooperation with Tencent, the JD-SWR Pinpin mini-program has recently been launched in Hefei. Currently, it provides self-pickup services in Beijing, Langfang, and Hefei.

As another main business of innovative new retail, 7FRESH has also accelerated its store opening plans. In the last quarter alone, it has landed at least 4 stores in Beijing and Tianjin. Roughly estimated, there are more than 30 7FRESH stores in the North China region.

JD-SWR previously stated in its financial report that 7FRESH is conducting supply chain testing. Once validated, it can expand its scale and even its business scope.

In addition, the former pre-warehouse business unit under the retail division, as well as the newly established technology research and development department and supply chain operations department, have all been included in the Innovation Retail Department. This is clearly a well-thought-out deployment. Pre-positioning warehouses can solve the problem of delivery within 30 minutes and serve as the infrastructure for fresh food delivery. According to Wall Street News, two warehouses in Beijing have already started operating, and six more are under construction.

On August 1st, the latest news is that JD-SWR is considering a full acquisition of Yonghui, and the two parties are in contact. If the acquisition goes through, Yonghui's more than 1,000 stores will quickly complement JD-SWR's offline layout.

As early as 2015, Liu Qiangdong saw the potential of Yonghui's offline fresh food supply chain and increased his holdings multiple times. Currently, JD-SWR holds 13.38% of Yonghui's shares, making it the second largest shareholder.

However, JD-SWR has stated to Wall Street News that they currently have no intention of a full acquisition.

Behind this series of strategic deployments stands a key figure: Yan Xiaobing. As a veteran of JD-SWR, Yan Xiaobing has been a key player in the e-commerce battle, responsible for the 3C electronics business and reporting directly to Liu Qiangdong. With his offline experience, he has been in charge of the operation of JD-SWR's offline stores such as JD-SWR Home.

In terms of reporting hierarchy, Yan Xiaobing reports directly to JD-SWR CEO Xu Ran. Several industry insiders have stated that the parallel reporting hierarchy with JD-SWR Retail indicates that JD-SWR attaches great importance to innovative new retail businesses.

Apart from community group buying and QiXian, what else will the Innovative Retail Department do? "They may not only focus on offline businesses, there will definitely be more, and the upper management is probably considering it," said an insider from JD-SWR. The approach to innovative new retail is still under consideration, and there will definitely be major moves in the future.

However, this does not mean massive capital investment. Zhuang Shuai, a retail e-commerce industry expert and founder of Bailian Consulting, believes that every company attaches great importance to innovation, which is inevitable. However, even with importance attached, the investment may not be sufficient. JD-SWR's investment in new retail will not be as aggressive as in the past few years, with heavy spending and acquisitions.

The Chessboard

As the second largest e-commerce platform in China, alongside Taobao and Tmall, JD-SWR excels in online shopping and has established its own self-operated and logistics systems, setting itself apart.

However, with the growth of traditional e-commerce reaching its peak and the impact of new competitors such as Douyin and Kuaishou, JD-SWR, like Alibaba, also needs to find new areas of business growth.

After his return, Liu Qiangdong not only proposed a return to low-price strategies but also set a development blueprint for JD-SWR for the next twenty years. Innovative retail is an important piece of the puzzle.

JD-SWR is reviving and expanding its community group buying and fresh food businesses, aiming to integrate online and offline, logistics, and supply chain resources to make an impact on offline businesses.

Wang Xing firmly believes that community group buying is a once-in-a-decade opportunity for Meituan, and it is highly likely that Liu Qiangdong also sees this point.

However, JD-SWR is currently not dominant in this field. After several years of development, the community group buying market has formed a competitive landscape with leading players such as Duoduo Maicai and Meituan Youxuan. The contours are basically clear, and the focus of platforms has shifted to regional fine-grained management. JD-SWR's community group buying does not possess advantageous genes. In terms of fresh supermarkets, Alibaba's Hema is also leading the way. Hema CEO Hou Yi stated at the beginning of the year that 2022 is the maturity period for Hema's new retail, and the company's performance continues to grow rapidly. From capital pursuit to low point of losses, and then to performance growth, Hema's model has become a benchmark for new retail.

Innovative retail, deep cultivation of offline, integration of online and offline, the prospects are promising, but the threshold for capabilities is also high. The biggest characteristic of offline business is its heavy reliance and continuous burning of money, which JD-SWR has experienced firsthand and should be well aware of.

The optimistic side is that after several years of extensive exploration, most people have been eliminated, a few have fallen behind, but some individuals have eventually found a profitable model, which has established the business logic of new retail.

The profitability of community group buying is increasing. Currently, Duoduo Maicai has achieved a preliminary balance of profits and losses in some regions. Huatai Securities believes that with flexible adjustments to the organizational structure and continuous optimization of operational efficiency, Meituan Youxuan will also end its continuous loss-making state and gradually achieve a balance of profits and losses.

After seven years of exploration, Hema announced that it achieved profitability in the fourth quarter of 2022. At the end of last year, Hema had more than 300 stores and is expected to IPO in November, becoming the first split-listed business after Alibaba's restructuring.

In the next 20 years, Liu Qiangdong has planned a bright future for JD-SWR, with three trillion-dollar companies and seven hundred-billion-dollar market value companies, all of which require potential businesses to support them. Innovation in new retail is undoubtedly one of the key areas.

If Hema successfully goes public, which is highly likely, it may become a guide for the future path of Seven Fresh. For the ambitious and innovative new retail industry, this is not only tempting but also encouraging.

Just a month ago, Liu Qiangdong found 20 growth rules for JD-SWR and stated that in order to defend the core categories that influence user mindset, they must "resolutely fight!" There is also a crucial statement that growth should be driven through innovative store formats.

Liu Qiangdong, who has regained his fighting spirit, has re-entered the offline market. This means that the pattern of the new retail industry may soon be disrupted, and a new round of offensive and defensive battles is about to begin.