On October 26, at the 2024 'Power of Evolution·Liu Run Annual Speech', I said this:
Customers 'always' want to buy better products at lower prices. This was true 100 years ago, and it will still be true 100 years later.
This should also be the eternal pursuit of enterprises.
A classmate commented, saying that this is indeed the case. No one's money comes from the wind. Let consumers buy better products at lower prices. As long as you can do this well, you will definitely be chosen by the market.
However, in recent years, there has been a widespread race to the bottom on price. Without the lowest, only lower. In the end, when there is nothing left to cut, quality is sacrificed for lower prices.
Must I also participate in such 'vicious competition'?
On JD.com, I heard a different answer.
Don't sell cheap goods, but sell goods cheaply.
A colleague from JD.com said that the end of low prices should not be 'low quality and low price'. Because such products are cheap to buy but expensive to use. The end of low prices should be to make the price of 'good goods' 'not expensive'. That is, 'cheap and good'. This has also been JD.com's most strategic work focus in recent years.
So, how can we achieve 'good goods at not expensive prices'?
After listening to the sharing from JD.com colleagues, I gained a lot.
Today, I will also try to tell you. I believe it can give you some inspiration.
Big Brand Low Price
Question: When you need to buy which products do you first think of JD.com?
I guess many people's answer may be the same as mine, which is when they need to buy 3C and home appliances. Especially big-brand 3C and home appliances.
Yes. 'Buy 3C and home appliances, go to JD.com' is already the mindset of many consumers today.
However, big-brand 3C and home appliances are often not cheap. I asked JD.com colleagues, does JD.com's 'good goods at not expensive prices' strategy also include them?
Of course, they said. So you will find that today on JD.com, many big-brand 3C and home appliances have already seen significant price reductions.
This is also the first step of JD.com's 'good goods at not expensive prices' strategy: big brand low price.
But usually, big brands have extremely strict price systems. Without lowering or even improving quality, how does JD.com lower the selling price of products?
JD.com colleagues said, first, through the 'strategic bulk order' model.
The so-called strategic bulk order is to find 'star products' and 'potential bestsellers' that consumers truly need and like. Then, use extremely large purchase volumes to gain extremely high bargaining power and costs that are spread thin enough by economies of scale.
Many products on JD.com adopt this 'strategic bulk order' model. Among them, there are both currently hot-selling flagship phones, laptops, and tablets, as well as trendy open-ear headphones, 4K projectors, smart health watches, and other categories.
For example, air conditioners. JD.com's procurement and sales team found that in recent years, with the strengthening of green consumption concepts, consumers tend to buy energy-saving and environmentally friendly first-level energy efficiency air conditioners. After researching and analyzing big-brand air conditioners on the market, they selected a Gree first-level energy efficiency 1.5-horsepower inverter wall-mounted air conditioner and promised to sell 700,000 units per year, thereby reducing the price by 200 yuan. Consumers only need 2699 yuan to buy this big-brand air conditioner.
After launch, this air conditioner sold very well. By this year's 618, 700,000 units were sold out. They urgently added another 300,000 units. In September this year, after the national trade-in subsidy campaign was launched, on JD.com, this air conditioner could be bought for only 2159 yuan, and sales doubled again, truly allowing consumers to enjoy the shopping experience of 'buying big brands at low prices'.
Since the beginning of this year, JD.com has successively reached strategic cooperation with Lenovo (three-year sales target of 120 billion), Midea (three-year sales target of 210 billion), and Xiaomi (three-year sales target of 200 billion). It should be said that this volume is extremely rare in China's retail industry. It will also be clearly reflected in selling prices.
Secondly, it relies on C2M oriented towards 'simplicity'.
C2M oriented towards 'simplicity' means starting from data and consumers' core needs, and reversely guiding production. In this way, every cost can be spent on, or even only on, the needs that consumers care most about. Theoretically, such products will definitely be more popular and have lower selling prices.
Therefore, JD.com's procurement and sales colleagues need to have detailed observation and thorough understanding of the cost structure, market conditions, sales data, and other information of their respective categories. Because this information will intuitively tell you what kind of products consumers really want, how much such products cost, and what selling price is considered 'low'.
For example, desktop computers.
Procurement and sales colleagues found that in gaming scenarios, consumers' core needs are 'the graphics card must be at least RTX4060', 'the CPU release must be good enough', and 'the case must help with heat dissipation'. However, in office scenarios, such as finance and accounting, their core needs become 'fast operation', 'sufficient memory', and 'just enough is fine'. For them, many powerful functions are actually an excess 'redundancy'. At the same time, JD.com's relevant sales data also shows that the search volume for desktop computers in the price range of 'below 3000 yuan' has increased significantly in recent years.
So, they fed this information back to Lenovo and co-created and launched many products.
For example, Lenovo's 'Xiaoxin' desktop. In 'Xiaoxin', procurement and sales made a bold attempt: they put a laptop CPU that is cheaper but completely sufficient for ordinary users into 'Xiaoxin', and boldly promised to sell exclusively. In this way, it neither affects user experience nor reduces costs. The new product launch price of 'Xiaoxin' is only 2599. The extremely low pricing made it quickly rise to the number one desktop single product in that quarter as soon as it hit the market.
Another example is the Lenovo Laifu series. Among them, a 27-inch all-in-one desktop can meet the core needs of smooth office work, sufficient memory, and large screen. JD.com reduced the price to as low as 1999 through exclusive sales. During this year's Double 11, it also became the top seller in all-in-one machines.
At the same time, in gaming scenarios, the 'Legion Super Edition' series launched this year uses high-performance laptop CPUs that are completely sufficient for users, also offering a 10% discount and improving cost performance. One of them, the Lenovo Legion Blade 7000K priced at 7699 yuan, entered the top 5 of JD.com's gaming console single products and also made it onto JD.com's Gold List.
Finally, there is the cost reduction and efficiency improvement in logistics fulfillment.
The 'selling price' of a product never only includes the product 'itself'. Transportation, warehousing, and distribution are also costs. These costs will ultimately be calculated into the 'selling price' in some form and borne by consumers.
In other words, whoever can better solve these non-product cost issues can offer lower selling prices.
JD.com colleagues shared with me a story about 'red wine + swimwear'.
In a warehouse in Dezhou, Shandong, storing red wine, based on seasonal promotional characteristics, they creatively added clothing warehouse swimming supplies, and adopted multiple storage methods, greatly improving warehouse utilization, saving 170,000 yuan in costs a year.
Considering that JD.com has more than 1,600 warehouses nationwide, this saves a considerable amount of cost. These saved money can increase JD.com's room for price reductions.
And this is just a small part of JD.com's entire supply chain cost reduction and efficiency improvement. Similar cost savings are meticulously pursued to the extreme in all aspects of JD.com's supply chain.
The 'strategic bulk order' model. C2M oriented towards 'simplicity'. Cost reduction and efficiency improvement in logistics fulfillment.
It is these that together constitute the core advantages of JD.com's supply chain, allowing consumers to spend less money when buying big brands.
Price Band Downward Exploration
But this is not enough.
Because different consumers will definitely have different choices. If I don't want to buy big-brand products, are there other brands for me to choose from?
JD.com colleagues said, of course. We should also provide different users with product choices of different brands and price ranges.
This is the second step of JD.com's 'good goods at not expensive prices' strategy: price band downward exploration.
So, how to do it specifically?
JD.com uses two methods.
The first is to enrich small and medium brands.
Take earphones as an example.
In the past, earphones sold on JD.com were priced above 100 yuan, and some mid-to-high-end brand earphones could reach thousands of yuan. But now, small and medium brand earphones with lower prices but good quality are becoming more and more common on JD.com.
Even now, searching for JD self-operated earphones on JD.com, the cheapest one is only 8.18 yuan. But the positive review rate can still reach 96%.
Speaking of this, JD.com's procurement and sales person Xiao Tang told me a story.
FIIL earphones is a new brand founded by rock musician Wang Feng. Last year mid-year, FIIL President Wu came to JD.com as a guest and talked about trends and changes in the earphone market.
President Wu said that in 2016, the high-end over-ear headphone market was firmly occupied by international big brands such as Sony, Bose, and Sennheiser, with prices usually above 1,000 yuan. At that time, FIIL tried to break the monopoly of international big brands with the Diva series, which had excellent quality and technological innovation, proving that Chinese acoustic brands can also produce excellent high-end headphones.
JD.com sales data also shows that in recent years, the market demand for over-ear headphones has been rising rapidly every year.
You know? Xiao Tang said that day he suddenly had an idea to create a high cost-performance over-ear noise-cancelling headphone with FIIL: it would have high appearance, powerful functions, excellent sound quality...
That very day, the two sides set the plan to co-create over-ear headphones.
In September this year, the Key Max, with a launch price of 299, was exclusively pre-sold on JD.com. Its performance and quality, not inferior to international big brands, received a large number of positive reviews from consumers after its release. On the first day, it sold over a thousand units.
The second is to attract third-party merchants.
Compared with other platform merchants, the most essential difference of JD.com is that it started with 'self-operated'. However, in recent years, the number of third-party merchants on JD.com has been rapidly increasing. Especially after implementing traffic equality between self-operated and third-party merchants and launching the 'Chunxiao Plan', JD.com has attracted more high-quality third-party merchants to join.
As of the first quarter of this year, the number of third-party merchants on JD.com has exceeded one million. In the second quarter, the number of new merchants increased by more than 40% quarter-on-quarter.
Although they are difficult to compete with self-operated in logistics, services, etc., they have certain advantages in price. These advantages greatly enrich JD.com's supply of low-price products.
But since they are not 'self-operated', how does JD.com ensure their quality?
JD.com colleagues said that some places treat price as the only 'baton', giving traffic to whoever can offer low prices. Although JD.com now also attaches great importance to price, it is not the only standard. The management of merchants and the allocation of traffic must be considered from the trinity of price, quality, and service.
Therefore, JD.com's products are becoming more and more abundant. Good-looking, fun, and interesting novel products are also becoming more and more on JD.com.
Enrich small and medium brands. Attract third-party merchants.
In this way, JD.com can cut into differentiated needs, allowing consumers to buy more diverse products at lower prices.
Source Low Price and Self-Produced Low Price
But this is still not enough.
Especially in recent years, after buying 'pingti' (cheap alternatives) and white-label products became a 'trend'. What if I don't care about the brand, just want extreme low prices, just want to buy 9.9 yuan tissue, 16.6 yuan T-shirts, 19.9 yuan earphones? Can JD.com satisfy that?
JD.com colleagues said, of course. Because the 'good goods at not expensive prices' strategy has two more steps: source low price, self-produced low price.
What is source low price?
For example, you bought a toothbrush at a convenience store at the entrance of your community. Before you got this toothbrush, it often went through 5-8 transfers, including factory, brand, agent, wholesaler, retailer, and other links. These links all require costs.
And the so-called 'benefit consumers, no middlemen to earn the difference' is actually to go as far as possible towards the previous links. If you can directly connect with wholesalers, the cost and price of the toothbrush can be reduced a bit. If you can directly connect with the general agent, it can be reduced more. Connect with the brand, reduce again. The further forward you connect, the closer to the factory, the lower the price consumers get for this toothbrush.
But without 'middlemen', who will check the quality of products?
JD.com colleagues said that our Jingxi can go deep into the source of industrial belts.
For example, the paper product industrial belt.
Jingxi's procurement and sales people traveled all over Baoding, Wuhan, Xiaogan, Chengdu, and Chongqing, the core paper product industrial belts nationwide, visited dozens of factories, understood that the products of leading paper brands on the market are generally 3-4 layers per sheet, each layer 13.5-14 grams, familiarized with which factories can meet market demand at lower prices, and knew what kind of pulp is used for paper products, whether it is long fiber or short fiber, and the price of raw materials...
Only in this way can we find the ultimate 'quality and low price'.
Finally, they selected a factory in Chongqing and began to cooperate in producing a 3-pack tissue, each pack 1000 sheets, each sheet 4 layers, each layer 11.5 grams. This tissue is priced at 9.9 yuan on JD.com, and the raw material cost alone is 7 yuan, 2 jiao, 3 fen, 1 li.
Jingxi colleagues said that some low-price tissues look particularly affordable. But in fact, there may be various problems. For example, quality is not up to standard, very rough, and breaks at the touch. For example, false labeling of sheet count, marked 1000 sheets, actually 800 sheets. Therefore, when we select factories and goods, we must ensure both quality and quantity. We cannot do things that fool consumers.
Later, after this tissue from the Chongqing factory was launched, it was particularly welcomed by consumers. In the first month, it achieved over 200,000 orders. By June this year, it had become a bestseller with monthly sales exceeding one million.
Also because of the surge in orders, this factory expanded 6 production lines after cooperating with Jingxi.
This is source low price.
Use the certainty of quality to exchange for the certainty of sales. Use the certainty of sales to exchange for the certainty of orders. Use the certainty of orders to exchange for the certainty of low prices. Then use the certainty of low prices and quality to exchange for greater certainty of sales.
But what if I am still not assured about the quality of these white-label products?
JD.com colleagues said, then use JD.com's reputation as a guarantee, and we will do it ourselves.
Still taking paper products as an example.
According to statistics, the China Conservation and Research Center for the Giant Panda feeds 30-50 kilograms of fresh bamboo to an adult giant panda every day, leaving 15-20 kilograms of residual bamboo. But do you know where these residual bamboos finally go?
Many of them, as one of the raw materials for bamboo pulp paper, are eventually sent to a paper mill in Leshan, Sichuan.
The truck drivers of this paper mill collect residual bamboo on average every five days. After 2 hours, these residual bamboos arrive at the paper mill. After about 60 processes such as washing, cooking, and high-temperature disinfection, the plant fibers in the residual bamboo are extracted and finally processed into tissue. This 'panda paper' has sold over 1 million packs on JD.com this year.
Behind this is JD Made, which leads the 'panda paper' project.
And JD Made's slogan is 'same quality, my price is lower; same price, my quality is better'.
JD Made colleagues said that this panda paper made from bamboo pulp has good flexibility and strong toughness. And based on sales data of the younger generation of consumers, this generation of young people not only favors panda IP products but also particularly cares about the culture and connotation behind the products. So, we set our sights on the panda's food.
So, what is self-produced low price?
It means based on understanding of consumer needs, JD.com itself becomes the first responsible person for quality and price, leading the entire process from production to sales.
Written at the End
JD.com's 'good goods at not expensive prices' strategy is finished.
I don't know if you have now found a way to make the price of 'good goods' 'not expensive'.
To summarize, JD.com's method is to use the supply chain capabilities accumulated over more than 20 years to achieve cost reduction and efficiency improvement in self-operated, and open the door to welcome third-party merchants to provide guaranteed low-price goods. At the same time, go to industrial belts to find reliable white-label factory goods, and even personally engage in private brands. Use all eighteen kinds of martial arts to truly achieve 'cheap and good'.
So, we see that during this year's Double 11, the Southern Metropolis Daily conducted a survey of more than 3,000 consumers. In the survey, respondents uploaded 1,226 'price comparison sheets'. Among them, 882 price comparison sheets showed that they bought the same product at a cheaper price on JD.com. This proportion exceeded 70%.
So, what about you? What is your method?
At the end of last year, I wrote in an article:
It seems that people are increasingly having an unspoken consensus, that is: frantically competing on price is a war that must be fought and must be won in the next few years.
Being in it, our feelings are likely not too good.
But, you are not easy, in fact, your consumers are even more not easy.
Instead of thinking about how to make them pay more, think about how to do more for them. Don't treat them as problems, but help them solve problems.
Bless JD.com.
Also bless every one of you who is committed to 'good goods at not expensive prices' and is helping consumers solve problems.
Because consumers 'always' want to buy better products at lower prices. This was true 100 years ago, and it will still be true 100 years later.
With you, encourage each other.