Interpretation Of The Three Hidden Worries Behind Jingdong'S Huge Losses

Faced with the embarrassment of huge losses, Jingdong said: "the main reason for the loss is the cost of employee equity incentive and the amortization of intangible assets arising from strategic cooperation with Tencent".

Without considering Liu Qiangdong's equity awards, the net profit growth of Jingdong in 2014 is quite obvious.

Jingdong's net profit in the 2014 fiscal year was 362 million 700 thousand yuan (about 58 million 500 thousand US dollars), up 62% from 223 million 900 thousand yuan last year.

Net profit margins under non US GAAP were 0.3% in fiscal 2013 and 2014.

In 2013, Jingdong lost 50 million yuan, and realized profits in the fourth quarter of that year.

By 2014, Jingdong suffered a huge loss of 5 billion yuan. At first glance, Jingdong's earnings report was very ugly.

But Jingdong's 2014 earnings report is not without merit.

Jingdong last year, the total volume of pactions in the fourth quarter was 85 billion 800 million, of which 42 billion 800 million of electronic and household electrical appliances traded, 43 billion of commodities and other commodities, accounting for 50.1%.

This means that for the first time, non 3C products occupy half of Jingdong.

Jingdong pformation of the whole category of e-commerce platform has been a success.

However, I believe there are three hidden worries behind the huge losses of Jingdong:

Secret worry: loss of Jingdong, rich Liu Qiangdong

Last year, on the eve of Jingdong listing, the board of directors of Jingdong gave the chairman of the board of directors of Jingdong group and CEO Liu Qiangdong an option reward of 4% of Jingdong shares.

The option premium was amortized at 3 billion 600 million yuan.

Jingdong listing prospectus also showed that in the first quarter of 2014, the company had a 3 billion 670 million yuan equity compensation expense, mainly to the Jingdong CEO Liu Qiangdong 93 million 780 thousand and 970 restricted shares.

Now there are two different voices in the industry. On the one hand, Jingdong is developing rapidly and has become a heavyweight opponent of Ali.

The other said, "Jingdong has a huge loss of 5 billion, of which more than half have gone into Liu Qiangdong's pocket", which exacerbated the loss of Jingdong last year.

The author believes that Liu Qiangdong did not take the time to take money, and it would be more conducive to the development of Jingdong if he wanted to fulfill this equity incentive mechanism after losing the deficit.

Jingdong's platform strategy has changed quietly.

In the year of 2014, Jingdong accounted for 39% of the third party pactions and reached 44% in the fourth quarter. The total volume of self dealing and third party platform pactions was 159 billion 300 million yuan and 100 billion 900 million yuan respectively, an increase of 70% and 217%.

Nevertheless, Liu Qiangdong said, "Jingdong will not deliberately pursue the number and scale of businesses".

So far, Jingdong's third party platform has developed to more than 60 thousand sellers, but Jingdong e-commerce platform is more inclined to the development of the third party platform: first, the gross profit margin of Jingdong direct business is only about 7%, while the profit margin of the open platform business is as high as 70%.

Only 7% of gross profit margins will lose money.

The solution is to increase the gross profit margin of the open platform business by 70%.

In 2014,

The rise in gross margin is not related to the active expansion of the third party platform business.

Second, there are quite a few of the more than 60 thousand sellers on the third party platform of Jingdong using the distribution service of Jingdong, which of course is also charged.

Now Jingdong is a mixed mode of "self operated + open platform", but there are problems in developing the third party platform too fast.

In January of this year, CCTV has exposed the rate of genuine products, including Jingdong.

According to the sampling inspection, the Jingdong's genuine rate is 90%.

Although in the comprehensive electronic business platform, this figure has won the first prize, but still like a slap in the face, fiercely hit Jingdong's face.

As Liu Qiangdong once said, Jingdong never sells fake goods, otherwise it has nothing to do with Taobao.

The author believes that with the strategic focus of Jingdong becoming more and more inclined to the third party platform, this inevitably makes people worry about how Jingdong should stop the phenomenon of fake goods on the platform.

Although Jingdong's supervision of the third party platform is relatively strict, it is easy to say, but in the actual operation process, no electricity supplier has guaranteed the third party business's genuine rate of 100%.

Moreover, the interests of the game is also very fierce.

I hope Jingdong won't smash its signboards because of the high profit margins of the third party platforms.

Last March, Jingdong joined hands with Tencent because Tencent promised to provide WeChat access to Jingdong.

From the point of order volume, Jingdong's mobile orders increased from 36% of Q3 in 2014 to 36% in the fourth quarter of the year, an increase of 372% over the same period.

According to Jingdong, in the fourth quarter of 2014, Jingdong's user experience and order conversion rate in WeChat and mobile QQ shopping portal were further enhanced.

These two social networking channels average daily total pactions in the fourth quarter of 2014 over two times the third quarter level.

But Jingdong is spending huge amounts of money in expanding the field of mobile e-commerce. Otherwise, Jingdong will not blame the huge losses on Tencent's cooperation.

The author believes that there are several major problems in the cooperation between Jingdong and Tencent: first, WeChat's innate gene is a social platform, and the introduction of e-commerce to WeChat platform will hardly achieve the desired satisfaction of both sides.

Two, Tencent put Jingdong in the two tier application which is parallel to WeChat's "friends circle", which means that Jingdong is not the only strategic partner of Tencent, and can add new people at any time.

Three, Tencent has its own patting and easy to fast e-commerce platform, to be successful and get rich early, just want Jingdong to try it first, and then grope for better mobile business model.

So two different bedfellows, Jingdong's future development in the field of mobile e-commerce may be far less than the PC end.

We have a high growth rate from the Jingdong side, and on the other hand, there are three hidden worries in Jingdong. On the one hand, in the long run of the company's losses, Liu Qiangdong took another 3 billion 600 million yuan, which is a bit of a misnomer.

If corporate executives kill their goose eggs in this way, they will definitely be unfavourable to the development of enterprises.

On the other hand, the strategic focus of Jingdong will be pformed into the third party platform, and the third party platform will bring Jingdong to the sale of counterfeit goods.

More importantly, the funds will be thrown into the field of mobile e-commerce. At present, it is still subject to the constraints of Tencent. If Tencent does not share the same dream with Jingdong, then the development path of Jingdong's mobile e-commerce will be more bumpy.