Huge amount of information: The full text of Liu Qiangdong’s speech at the sharing meeting explains the logic behind JD’s decision-making for the first time – Passionategeekz

On the evening of June 17, Liu Qiangdong, Chairman of the Board of Directors of JD.com, deeply analyzed the core logic of JD.com’s takeaways – the essence is to build a supply chain, and also talked about the six-character formula of the company’s strategic development: experience, cost, and efficiency.

Liu Qiangdong revealed that one of JD’s most important strategy in the future is international business. He emphasized that JD.com’s international business does not follow the cross-border e-commerce model, but insists on local e-commerce, local employees, local procurement, and local delivery.

Sina Technology sorted out the full text of Liu Qiangdong’s internal sharing, and slightly deleted and modified:

JD Group will have a new business model coming out every three years, and we have always maintained it. Of course, in the past five years, JD has not had anything new, which is a pity. The past five years can be said to be the five years that JD has lost and the five years that have gone downhill. It can be said that the five years without innovation, growth, and progress should be considered the five years that have the least distinctiveness and contributed the least value in my entrepreneurial history. In the future, there will be an innovative project every year, and now 6 innovative projects including stablecoins are being launched one after another.

All businesses revolve around the supply chain

In 2007, we started our second company – JD Logistics Company. After that, a new company came out every three years, and then JD Finance, JD Industry, JD Health, and JD Production. Of course, we only revolve around the “supply chain” of JD Group’s business. If there is anything that has nothing to do with the supply chain, I will never touch it. Now, almost all business is done 100% around the supply chain.

So, throughout my life, or the entire JD Group, I have been conducting business around the supply chain. We are not a so-called diversified company. It seems that we have many companies, but in fact, all companies serve the supply chain, including the takeaway we do today, which is also for serving the fresh food supply chain.

What you see is the takeaway dispute with Xing Ge (Wang Xing), and the people order food, but in fact what we are doing is the fresh food supply chain behind it, which is what I really want. I can never make money by selling food at the front end, but I can make money by relying on the supply chain.

We now have 40% of cross-selling, and users will buy our e-commerce business, so the money we lose is more cost-effective than buying traffic. This is the logic.

Brands create much more value than retailers

In 2009, we made another big decision, which was to enter the home appliances. Just like entering logistics in 2007, all investors opposed it at that time because Amazon did not make home appliances, and there were also powerful Gome and Suning at that time. Everyone thought we were too small.

But why do I think it can be done? The core logic is that in 2009, the net profit of the entire home appliance brand industry was less than 2 points, only 1% of the point, including Midea, Haier and Gree. The net profit of the entire home appliance industry industry was 1 point, but the net profit margin of the two retail giants (Gome and Suning) was as high as 6%, while Suning was at its highest point was 6.5%, with a gross profit margin of 17% and 18%.

I calculated that if we sell home appliances online, we can reduce the cost to 6%, which means that my gross profit margin can make money by 8%. I can give 10 points to consumers. Of course, I don’t give 10 points to consumers, because I insist that the social value created by brands is much higher than that of our retailers, and the risks and things that brands take and do are much higher than those of our retailers.

Without a brand, the economy will never have quality

When the industrial chain division of labor, JD.com has a “three-month theory”. We hope that retailers can only get one-third of the profits and two-thirds should be taken away by brand owners, so as to promote the development of the brand.

Because there is no brand, our country’s economy will never have quality. If this country always relies on garbage and cabbage, the country’s economy will never be good. Because the boss can’t make money in the factory that produces garbage goods, he has to work hard to squeeze his employees. The industrial workers are suppressed so that they have no money to consume, and they can only buy junk goods, so the entire economy will be vicious.

A wealthy country and a truly powerful country must bring its economy to a positive cycle, and it depends on the brand to make more money. After the brand makes money, it will invest in research and development, produce better and higher-quality products, and then have newer products. Brands desperately raised their employees’ wages, Gree also raised their wages, Midea also increased their wages, Haier also increased their wages, and workers’ incomes increased, so he also bought branded goods, and then retailers, brand manufacturers, consumers, and industrial workers are all win-win.

So, today JD.com is definitely the largest in the home appliance industry, and Gome and Suning together are less than one-fifth of ours. But you see, the net profit margin of Chinese home appliance brands exceeds 10%, while the net profit of the three home appliance companies Midea, Gree and Haier all exceeds 10%. JD.com’s net profit in the home appliance field is about 3 to 4 points, which is the “three-money-five theory”, which means that the profit of brand owners is twice that of ours. Back then, Gome and Suning’s profits were three or four times that of brand owners, which is our logic in making home appliances.

Why do we feel successful? It does not mean that it is too confident to be aggressive, but it analyzes the distribution of the economic interests of the industry and the cost of the industry, with a cost of up to 15%.

JD.com’s core competitiveness lies in low cost

The reason why JD.com has not died today is that I share a set of data and you will know: we have more than 1,600 logistics centers in mainland China, with more than 10 million self-operated products, and our inventory turnover days are 30 to 50 days. Just this set of numbers, as long as you have worked in retail and understand the retail industry, you will know what it means. This is the core competitiveness.

So, since JD.com has come to this day, the various descriptions of JD.com are actually laymen. Experts should look at JD.com’s core competitiveness, which is as low as Costco and Sam’s Club. The comprehensive retail cost is only 10%, because I also do logistics. Looking at our financial report, the gross profit is 17% and 18%. In fact, there are advertising fees and logistics revenue, which are all placed on the numerator and denominator. Our entire self-operated retail expense rate is only 10%.

What does 10% mean in the retail industry? There are only five companies in the world that can achieve a cost of only 10%. There are only five companies in the world, one is costco, one is Sam’s Club, one is ALDI, one is JD.com, and one is Amazon. Only these five companies can add up all the costs of self-operated operations to 10%. Traditional supermarkets require 20%, while Gome and Suning require 15%. Therefore, behind JD.com’s arrival to this day is actually our cost, efficiency and experience, which supports our arrival to this day.

During the Wenchuan earthquake, 120,000 yuan was donated, and the “authorized letter” was written and then he went to the disaster area for rescue.

During the May 12th earthquake in 2008, I decided to go to the disaster area on May 13. At that time, my family had 120,000 yuan in personal money. After donating the money, I couldn’t sleep. So I called a group of off-road friends I knew and asked a few people to drive from Beijing to Pingwu County near the Wenchuan earthquake center to help with the rescue.

Before I went, I sent all my employees a letter similar to a suicide note, explaining what to do if I couldn’t come back. We worked for 14 days at that time, and after 14 days, all roads were open, and all social vehicles and SUVs could enter. We didn’t need us anymore, and then we came back.

After I came back, I set a rule that when disasters occur anywhere in our country, the nearby warehouse storage manager has the right and must donate the goods. We have donated more than 20 times since 2008. The supplies may not be very valuable, which is about the equivalent of thousands of trucks of supplies. But what I am pleased with is that all the natural disasters that have occurred in our country since 2008, our JD rescue supplies are the first to arrive. At the fastest time, the rescue supplies arrive in 4 hours.

JD.com does not regard profit as its biggest pursuit, and dares to say this at any time

By last year, the total transaction volume of our third-party platform was more than 4 trillion yuan, the group’s net income was 1158.8 billion yuan, our net profit was only more than 40 billion yuan, the salary we paid was 116.1 billion yuan, and the five insurances and one fund we paid to our brothers was 18 billion yuan. In 2007 to the present 18 years, we have paid more than 100 billion yuan in five insurances and one fund. These things can legally become the wealth of my Liu Qiangdong and the net profit of our JD.com. This is not nonsense, because in China, outsourcing employees is legal, but we, JD.com, never did it.

I am not bragging about myself, because this is my dream when starting a business. It is to make money legally and must make money. It is too terrible for companies not to make money. It is not a responsibility for companies not to make profits. Failed companies bring huge burdens to society, but we have truly achieved that we did not regard profit as the top pursuit. JD.com dares to say this and dares to say this at any time.

Some people will say that you are pretending, it doesn’t matter. If an entrepreneur can give up 100 billion yuan of real money, it’s good for everyone to pretend, and the world will be better.

More than 120,000 full-time delivery guys

We entered takeaway on March 1. So far, there are more than 120,000 full-time delivery guys. We have 3,000 to 4,000 people joining the company every day. The most important thing is that there is insufficient manpower HR, which is scattered all over the country. It is a huge challenge for our HR. It is not that we don’t want to recruit more full-time riders, but that it takes time, and HR is indeed not enough.

From this perspective, everyone can understand why JD.com has done that in the 21 years since its founding of its business, why not, and why it is the opposite of others? We are not trying to show off or show off ourselves, we have thought about it from the first day of starting a business.

Just like JD.com’s headquarters is here, not in the city center. Because large enterprises should not be in the city center. Think about it, today JD Group has 60,000 people. If 60,000 people are in Chaoyang or Haidian, our company will block all four or five blocks in the surrounding area, seriously affecting the normal operation of a city and the lives of ordinary people.

JD.com’s six-character strategy: experience, cost, efficiency

Our strategy is six words: experience, cost, and efficiency. The experience is the best and the cost is the lowest. Of course, the lowest cost must not be based on squeezing employees.

I would say without politely that if JD did not have the advantages of self-operating JD.com, if it were a pure platform model, JD.com would have died long ago. It is because of its own operation that it has gained the trust of countless users. Everyone trusts us, JD.com, and is relying on its old capital.

I don’t want to squeeze employees, but we need to have a normal fighting spirit in our industry, so I don’t have any way, but I will raise my salary for my brothers. At that time, I said, I knew it was very hard and it was a little harder than before, but I would keep rising cash income, rising seven times. In a year and a half, you ask all my brothers, no matter how poor cash income is, it will increase by 50%, and employees above P5 basically doubled.

In 2023, I returned to work in JD.com. Now that JD’s strategy has completely recovered, everyone should be able to feel the experience, cost and efficiency. I believe that during this period, JD.com’s shopping experience is actually much better than before. We also look at this number every month, and the experience is slightly improved.

In terms of cost, on the basis of gradually increasing discounts, we have adopted a large number of technologies, especially artificial intelligence,robotTechnology continues to reduce costs, and our inventory turnover days firmly believes that it can be optimized to 20 to 25 days.

For JD.com, if one day of optimization is to optimize it, the future will be 10 billion cash flow, and 50 billion cash flow can be produced in five days, which is real money. Our account period is 59 days, which means we are very efficient and will not squeeze our suppliers, and we do not need to delay the 90-day account period or the 120-day account period.

JD International’s business does not follow the cross-border e-commerce model

The most important thing in the future is the international community. We have been working in Europe for three years. Now that Europe’s infrastructure is basically completed, it’s not enough. We have to work for another half a year. We will not start business until the end of this year and next year. However, we have been working for four years since the European business model. The poor JD.com’s business model is that it is very slow, hard and tiring. You have to work for several years to do business.

JD.com’s international business does not follow the cross-border e-commerce model. I firmly believe that the cross-border e-commerce model is unsustainable in the long run. In addition, cross-border e-commerce can only sell bargains, which seriously affect the image of our country.

For a long time, Made in China has become a representative of high quality. 30 years ago, Made in China, Europeans and Americans began to be afraid to buy Made in China when they saw Made in China. Think about it, since 2010, it has been a good idea for the whole world to see Made in China.

So, in a word, my international business strategy is local e-commerce and local construction team. We have more than 2,000 employees, and then locally purchase, locally ship, and only sell branded goods.

Of course, our strategy is different from Amazon. If I do exactly the same as it, JD.com will not have any advantage compared to Amazon. So, we signed 1,000 Chinese brands in the early stages of the international market. Our definition is to make these 1,000 Chinese brands successful, and we JD.com succeeded because these 1,000 brands do not have them, and neither do local retailers. If the goods we sell are the same as Amazon, all of which are local European and American brands, JD.com really has no advantage.

So, it may take five years to come. These 1,000 brands need to be negotiated one by one, to make compliance for them, to do local certification, to do a lot of work, and to work for another five years, it may take only to bring all of these 1,000 brands overseas, and then ship them in the whole container, customs declaration and local sales.

At the same time, although the ones selling Chinese brands, they are all like Midea and Haier. To be honest, the quality of our good brands in China has really surpassed that of Europe and the United States, and innovation is even better than them. For example, small home appliances. All the innovations of small home appliances in the world are in China, and 98% are in China. So, we hope to bring these brands out.

So, in a word, we cannot achieve all JD’s business models in three or five years, but it may be achieved in ten or twenty years. But this is how companies are. If we firmly believe that we must do the right things to go long.

We must insist on innovation every year

I just mentioned why we are making takeaway. What we want behind takeaway is the fresh food supply chain, because JD Group serves the supply chain. To be honest, Brother Xing and I are good friends, of course, he probably has some opinions about me during this period. A few days ago, I was asking if I could invite Brother Xing to have a drink during the 618 period. One of the guys was a little familiar with both parties. He said he suggested that you wait a moment. Now is not the best time, and I think it makes sense.

I am serious, I respect him very much and recognize him very much. But the market is very big, I think the market is very big, and in another month, I believe that all the friends here today will see that our takeaway will soon come out with a completely different business model from Meituan. So, we have been doing a lot of projects since the first day of work.

I am allowed to keep it a secret and meet you in a month. We also hope that this business model can truly and thoroughly solve the food safety problem and allow consumers to buy cost-effective and safe food and food.

In the past year and a half, the group has about 6 innovative projects.

We also have stablecoins. We hope to apply for stablecoin licenses in major currencies in the world. Through stablecoin licenses, exchanges between global companies can be achieved, cross-border payment costs around the world can be reduced by 90%, and efficiency can be increased to within 10 seconds. I hope that one day when everyone consumes around the world, JD stablecoin can be used as a global payment method.

What I want to say is that in the future we will still insist on innovation every year. Although so many innovative projects cannot be successful, some projects will fail in the end, and some of them will lose some time and money for this, but this is how the company is. If you don’t take these risks, you will never be able to make something successful. So we will have some new innovative projects every year.

It is not easy to do new models because our supply chain has already been laid out for seven or eight, and we have done all the supply chain links. We are not planning to launch a brand new business model, but we will deepen, strengthen and make the existing business models centered on the supply chain as the core.

The above is what I shared with you brothers, thank you everyone!

Interactive communication part:

ask:Before you got the takeaway, you had a meal with Wang Xing, Cheng Wei and Yao Jinbo. Does it mean that you have to go to takeaway, online car-hailing, hotel and travel, and home delivery services respectively?

Liu Qiangdong:Who said I want to enter online car-hailing?

ask:Then why invite the four of them?

Liu Qiangdong:Because Lao Yao and Cheng Wei are familiar with me and Wang Xing, I mainly invited Wang Xing that day, but I hope to find two brothers we are familiar with and trusting to be able to make a certificate next to me. I said it very directly, and I said, “Brother, I am going to officially enter takeaway.”

ask:Will you be able to travel home or hotel?

Liu Qiangdong:The hotel and tourism industry is going to do, and it has been announced tomorrow.

ask:What is your goal in doing this?

Liu Qiangdong:There is a huge supply chain behind the hotel, which is very messy and has high costs. We started with convenience stores, which had 1.5 million. The second is catering, we make takeaway. The third one is hotel and tourism, which is behind it. The experience we define is products, prices, and services. This is in line with the fact that JD Group only does supply chain, and this is our logic.

Second, consumers. For example, you have some food needs and travel needs. You have already bought something from me and are a shopping user. I can also provide you with services during your travel.

ask:You have adjusted your organizational structure, is it flatter now?

Liu Qiangdong:Yes, so far, I have only five floors separated from the couriers and the most grassroots employees. This is the rule that I have made a death decision. Many companies have thousands of people, including sixth and seventh floors, and we have the fifth floors so far.

The core is to organize flat and fully authorize it. For example, our business webmaster has many permissions and does not require layered approval.

Senior management is to formulate strategies, which is strategic control, culture, and systematic processes. These are all our senior management. Middle-level cadres are doing management, and the core of management is to select people. You have to choose the right webmaster, and you have to choose the right warehousing manager. This is the business of middle-level cadres.

ask:Whether you are personally or in your business, you have a strong sense of social responsibility. How did you pass it on to your hundreds of thousands of employees?

Liu Qiangdong:I think the business philosophy and strategic culture of the company are honestly not required to be passed on to the webmaster and warehousing manager, but to me, the 17 SEC members. Webmasters cannot make decisions about whether they can make five insurances and one fund, only 17 of us make decisions. So I think that as long as this business philosophy can be used, the culture of our entire company can be passed on to these 17 people.

ask:JD.com now has 720,000 employees, just a short distance from the millions of troops. Do you have a sense of crisis in development? Where does the sense of crisis come from?

Liu Qiangdong:When I wanted to retire, I was not confident enough in myself, and people always doubted themselves. Because as soon as I graduated from university, although I went to a Japanese company, it was also a small company in China, with only 30 people coming to Beijing. I have not learned particularly advanced and macro-management, nor have I studied abroad. When I brought JD.com to hundreds of thousands of people, my confidence will be doubted and I will be doubted.

I speak so badly in English, but I wonder if I can still bring JD.com to an international company. I believe that everyone will have times of confusion and confusion, and I will have times of self-doubt, because I am also a human being.

But looking back, I think it still depends on a team, not me alone. The CEO is good at English, her international knowledge establishment, life experience, and culture. She has enough everything. There is no need to have to understand everything alone. No one can understand everything. Therefore, we emphasize more “cooperation”. Among our SEC members, some are good at management, some are good at strategy, and some are living and working abroad for many years. We emphasize that the SEC should be diversified and that everyone should complement each other. So our current playing style is to make up for each other’s shortcomings through the cooperation of the team.

ask:Brother Dong, it is better to say that the battle of JD.com is back, rather than saying that the battle of JD.com is back.

Liu Qiangdong:We haven’t walked through it, but we just didn’t want to work at that time.

ask:Is suffering the wealth of life?

Liu Qiangdong:Sometimes it is an ethical question. Did you say you haven’t gone through hardships? There are many people who really don’t have awe of the world, have no struggle, and have no innovation. They just think everything is what they deserve and may not be good. But it is also very painful to say that a hardship has come and it will be so (price) for the rest of your life. So, I think for me, whether you are in the highlights or in the darkest moments, keep the heart of an ordinary person, keep your bottom line, do what you firmly think is valuable, and keep doing it no matter what others say.

When people see a lot of things in their lifetime, I feel that their mentality will gradually become very peaceful. Now I just want to bring JD.com well. Because to this day, to be honest, it no longer belongs to anyone. After all, by the end of the second quarter, there are 900,000 employees, and for me, there are 900,000 families behind it. If you can manage JD.com well, these 900,000 families will have hope and dignity in their hearts.

ask:Mr. Liu, what do you think of the model of Pang Donglai and Yonghui?

Liu Qiangdong: It’s a pity that I haven’t cooperated with it in depth. I think Donglai’s business philosophy is the same as JD.com. Its gross profit margin is only increased by 15%, and all supermarkets need to increase by 20% or 25%, and it only increases by 15%, giving benefits to consumers. Then all products are extremely good, making the quality to the extreme, and making the cost-effectiveness to the extreme, fully trust employees, give employees five insurances and one fund, give employees good income and benefits, so that employees can truly like this job, and there will be no pain to work there.

If you want to squeeze employees, the employees in the supermarket are always squeezed and unable to find a job, and have to endure such low salary and no guarantee. Without five insurances and one fund, do you think they will serve well and ensure the customer experience. Do you think it is possible? I think it’s pure nonsense.

Brother Donglai’s success should be exactly the same as our entire JD.com’s philosophy, or changes in experience, cost and efficiency.

Of course, our country’s innovation has been very powerful in recent years. To be honest, I have been to almost every country in the world because JD Self-operated is the largest customer of all consumer brands in China. So whenever I go to each country, I will meet with the bosses of local consumer product brands and chat with them. In our country, from officials to scholars, to students, to workers, to white-collar workers, the people across the country can work hard, be smart, love to study, and have a very innovative spirit. There are very few such nations in the world. I may not be nationalism or something, but to be honest, some people are smarter than us, but we can endure hardships.

Thank you everyone!

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