jingdong CEO liu last night at the China Europe international business school keynote for the beliefs and values: jingdong strategic thinking in the Internet age, from which he talked about the importance of a team, why to do a huge sum of money to do the design principle of logistics, logistics, and guide the consumer retail industry theory of sugar cane.
when it comes to why do logistics, liu said, in addition to ensure that the user experience at the same time to guarantee the rapid transfer of cash flow. Self-built logistics there is a big opportunity: one is no UPS in China, no Fedex; Second, China’s logistics cost was staggering. Join the three is a traditional Chinese express model experience is very poor. In the construction of the concrete design, is to minimize the goods flow, make the goods closer to consumers, reduce the handling to reduce, reduce the number of handling, improve the efficiency of the industrial chain.
the following for liu speech activity:
liu: respect of zhu dean, fellow alumni, I’m liu. I sincerely appreciate you give me a chance to share. Before you speak to introduce this contract today. I began to do business, 06 development smoothly. But I don’t think a mature theory to support it, I also need to get new knowledge of nutrition. So finally chose to central Europe. After graduation I did a decision was to jingdong all executives to central Europe to learn. At present already sent 11. One time I asked everyone in central Europe about that, the results of each executives expressed the china-eu learning in their career is the best and the most valuable. So I hope later we jingdong 60 senior executives, and 350 management personnel, have an opportunity to central Europe to learn.
in the past 10 years, we also know that in Chinese Internet companies, one of the most controversial company, one of the most controversial entrepreneur, I believe the jingdong and me. A variety of questions on the market, since so many years, the market remains the same, is the jingdong questioned and discussed. Over the next half an hour, I will introduce to you how I look. Jingdong loss is most serious, lost 17 million a year. Then someone said you are not afraid of? In fact also afraid. If a entrepreneurs bring to the enterprise failure, is a disgrace.
we are based on what we are doing is valuable. I don’t believe that an enterprise for the industry, create value for customers, will eventually collapse! If it failed, it must is not a business model problem, but the problems on the execution.
jingdong all strategy over the past 10 years, have left the inverted triangle. The nabla development from down to up, the first is the team. This is also why we work with Alma mater. Any company, is a team success and failure also must be because the team. The other reason is nonsense, are not.
such as IBM when buy in PC profiteering era, it is considering the demise of the PC, so sold the PC, focus on the server and software services. In kodak, for example, has said it is far more lucrative than kodak only drug in the world. These companies at the time of peak, the profit is very good, star in the world, the more have to be sent back.
the kodak digital camera invented, the results of its own new technology appeared, focused on traditional star products, the results finally failed. If caught the kodak digital camera technology, may be completely different today. Kodak has violated the consumer value, choose the traditional imaging technology. When the choice of a business and consumer interests deviation occurs, is doomed to be a failure. What no other factors, it is an excuse.
as entrepreneurs, the most should spend time and effort to do, is to the team.
why do jingdong logistics? Do the benefits of logistics are obvious. We have 52% of last year is within 6 hours to order. 80% is within 24 hours of delivery. Door card, a replacement door and so on. Can also do it: about 700 cities across China, each city to build a PeiSongDian, cargo ready to fully, coupled with fast delivery speed… To succeed? Not sure, you certainly can’t support the cost of such a large scale warehouse.
cash flow is very important, 700 warehouse, give you 5000 $and you buy goods. So we really have a big appeal, is how to establish an efficient logistics. China has no logistics giants like FedEx, so give us a chance. In China, the logistics cost is very high. The third is the service, service quality is controlled in China. The interests of the joining trader and brands.
it is wrong to join the Chinese express model. All the service sector, if join, at the beginning of development will be very very fast. Ucc coffee, for example, join thousands of stores a year, but so far, didn’t make a starbucks. It is against the interests of consumers, is of little value in the long run. We China’s huge opportunity of services, is to insist to do your own brand. Many, many.
jingdong do not express company. Express company after is all low cost fast flow of goods, such as a tee, they just like that, the network is very complex. Jingdong model is very simple, we are from the warehouse to the consumers at home. Platform in Shanghai and Beijing platform completely without a dime relationship. A tee is reticular jingdong is wheel spindle shape. Is completely different.
a few Numbers to share:
jingdong logistics costs accounted for 5.8% of sales revenue, about 5 to 6% the year before last year. So what is the value? Give you an example: traditional channels logistics will carry a lot of time, such as lenovo computers, move once, to the area from the factory areas to the cities again, to the store again… , according to statistics, China’s goods from the factory to the consumer’s hands, handling in 5.2 times on average. We have higher analysis data, to achieve more than 8 times. So China’s logistics cost is very high.
in a word, the core of jingdong logistics design is to reduce the flow of goods. Us through the large data in product also tell you when I was in the production market where, where is the customer. Once is moved to the right warehouse, the second is to the end consumer. Because carry less, so the cost is low. Our last year’s inventory turnover days is 32 days, everyone knows what it means. What is this? Others is 70 days, 90 days! And they only manage the SKU number in 10000, my SKU number in more than 200!
look at earnings, their average payment days is 142 days, that is to say, your capital turnover of two times a year. Jingdong? We only have 39 days. What does it mean? Cash means jingdong suppliers turns over 10 times a year! Look at operating fee, jingdong electric products, rate is 8%. China’s two major appliances, rate 17%. Jingdong low price is low (operating) cost on the basis of low price. We continue to cultivate the habit of consumers, in the habit of people online purchase electricity. This pattern has only succeeded in China.
I speak so along while, in order to tell you, why a decade has been losing money and still insist! Eventually cashflow from your efficiency. We seek to reduce the flow of goods. Create value for consumers, it is the core of our appeal. Warehouse with integration, it can really make a enterprise, industry to success.
(PPT is out of order, liu humouring him is the person who never use PPT.)
this theory only suitable for consumer goods industry. We think it is the rule of a 10 day sugar cane, this law in one thousand to never be broken. Brand strong industry doesn’t suit, such as apple. Apple’s brand is too strong, are actually selling apples do not how to make money. But the situation is quite rare. In fact all of the consumer electronics brand without the evergreen tree. Why is that? Because of consumer electronics, always need to innovate.
we recall that when we were in college, if you have a Walkman, radio, there is a love China you cow! Cattle to the sky! Even more than you take an apple mobile phone today cattle! All of the consumer electronics brand, fire over 10 years in a row, I met an apple. Jobs is the only one. This person really is a genius, is god gave us the gift of mankind. So only one company has broken the ten years… Can, but I don’t think apple fire again for 10 years. (laughs)
when the sugarcane cut down its length, the total profits in the industry chain, it is destined to. If a sugarcane cut down very long is very good, that everyone came in… And sugar cane is shorter, deformity. But it doesn’t matter, brothers, because the industry is bound to integration, will someone quit. Consumer electronics industry has more than 40 before, now only the 13. Still too much. The Internet industry, are generally there are only three. All over the world. The worse, perhaps only one. Only in this case, the market will tend to be more rational. So the consumer electronics industry will also go to the stage.
industry profits (the length of the sugar cane) is relatively stable, this is the benefits of competition in the market. We put the sugar into the 10 pieces of content. Why do we do in this industry, because only in this way, the market tends to be rational, we didn’t have enough strength to occupy the more sugar cane. I think companies like god code, and ultimately will not exist.
basically, the brand manufacturer and retailer’s profits are in 3 ~ 5%, wal-mart, so successful, almost to the point of a big MAC, but its profit margins at this level. You won’t be able to see the financial net rate. As a commercial circulation enterprises, the core is the deal. Commercial circulation companies around the world, and net income divided by GMV, its net interest rate is between 1 ~ 2%. Maradona, group net profit 16.6 billion, turnover GMV1.68 trillions, except that which is 1%. So from that level, flat electronic dealer net interest rates, is worse than the traditional. Why is that? Because wal-mart much eat sugar cane, it ate section 4, 5, and flat, eat only 1 day. Platform may be very short, you got to do to eat 3 ~ 5% of the profits, but in the long run, the expanding of the section, you will shorten the other section, you lose money, your Banks lose money, finally died this pattern, and then return to normal. I tell you, five years later, all of China’s enterprise’s electronic Commerce Department, should be turned off.
do e-commerce boss, have been forced to do. A staff in jingdong for 3 years, the e-commerce experts. This is not normal. No apple, to this day, set up the electronic commerce. Your boss a reckoning, there appeared to be no let enterprise electronic commerce live better. So do the electronic commerce students here today, after you go back to resign.
when the whole industry chain based on rational, the 10 sessions of sugarcane will be more clear. It escapes the market rules of business. This is today I all to share. Thank you all!
here is a question and answer session
q: in your report, compared with other 3, 40 companies, starting with jingdong, jingdong sales is ten times today. When the jingdong started sugarcane section number, please do more more, other companies are doing the opposite split. How do you make sure that you do more more costs, lower than others?
liu: today we’re doing with 7 or 8 years ago do no difference, we will focus on the core, do a professional and high efficiency. When I do electricity in 2004, many businesses get a lot of financing. I am a person with a colleague, to start Posting on a BBS. Today, 97% of our orders are their distribution. Our distribution is one of the best in the industry.
in the second place, from creating value level, the comprehensive rate at 17%, dangdang we at 10%, lower than his seven points. We manage 2.5 million SKU, platform billions of transactions. Inventory turnover we only have 32 days, 90 days. We just do better than competitors, we do all the things, all around the reduce cost, improve efficiency, increase experience these three points.
q: jingdong often price than we (the supplier) for low price to sell, could you tell me how to make money jingdong?
liu: 70% of our gross margin from the rebates. To put it bluntly, the purpose or to compete for consumer users. Consumers for service and quality are all don’t know, because of the price for the first time. But one year, two years later, such as you, I promise you will continue to use the online shopping more than 90%, more convenient! After market mature, is to rely on services. At that time, we would be appropriate to add some money.
q: jingdong, 76% of the sales comes from the self from the rest of the open platform, could you tell me how to fusion of these two kinds of business model is?
liu: this two modes in jingdong is indispensable. Standard products, jingdong proprietary certainly win. Simple example, said lenovo notebook, jingdong purchase is 10000 units, the other is purchasing 10 8, he how to compete with jingdong? But non-standard products, proprietary is can’t do. Brand is highly fragmented, massive SKU, the seller must rely on platform.
q: you just said platform, jingdong how to control the quality? Bad quality will affect the reputation of jingdong?
liu: for three years, we are really scared. Our platform only 29000 dealers, very cautious. Recently found a SKU is false, we sent him a lot of money. In a word, in jingdong sell a fake, fines of up to 1 million. According to the dealer’s financial data, until you collapse. We put all the data provided to the state administration for industry and commerce. Third, for our own employees move a knife, who introduced the ABC three-level management personnel may not be a promotion and pay increase, more than three times, ABC all fired.
q: now many platforms, including ali are doing their own logistics, logistics enterprises in the expansion. Jingdong is also investing heavily in logistics. Will there be repeated? Jingdong?
liu: this question is very good! It is absolutely redundant construction. There is no need to build them. I just say half a day to this.
liu: really is an orderly flow of logistics to create value. I hope that with the continuous expansion of jingdong, the accuracy of the logistics must constantly improve. Now we reached 92%, 99% we will do it later. So the whole handling efficiency is the highest. nullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnullnull