Jingdong Liu Qiangdong "One Yuan Annual Salary" Behind The O2O Chess Game

Recently, the Jingdong announced a pay plan. The plan revealed that in the next ten years, Liu Qiangdong's annual salary will be reduced to $1 and the equity incentive plan will be launched. He hopes to tie up his relationship with Jingdong so as to enhance investor confidence.

Parallel to the "one yuan annual salary" is the news of Jingdong's 4 billion 300 million yuan stake in Yonghui supermarket. Behind the high priced supply chain, Jingdong's ambition for O2O is highlighted.

"One yuan annual salary"

The Jingdong Board approved a 10 year salary plan for the company's chairman and CEO Liu Qiangdong in May this year.

The plan stipulates that within 10 years, Liu Qiangdong will receive only 1 yuan in cash and salary in the form of zero cash each year.

Can't Liu Qiangdong even afford a cup of milk tea? It's too naive to think so.

According to Jingdong's equity incentive plan, Liu Qiangdong was awarded the right to purchase 26 million shares of Jingdong A-class common stock, involving about 0.9% of the total share capital of Jingdong, and only when ADS per share reached or exceeded 33.4 US dollars (equivalent to the price of Jingdong's not less than $16.7), Liu Qiang could make cash in this part of shares.

At $16.7 per share, Liu Qiangdong's share will be worth $434 million, equivalent to 2 billion 780 million yuan.

In the 10 years, the company can no longer grant Liu Qiangdong additional shares.

In fact, "one yuan annual salary" is not only Liu Qiangdong's initiative, but also has become a common way for enterprises to face a crisis.

Many enterprises have adopted "one yuan annual salary", such as Sany.

In the 2008 economic crisis, all directors of Sany [micro-blog] cut their salaries by 90%, and accepted the application of voluntary pay reduction by executives. Sany, micro-blog chairman Liang Wengen even took the initiative to apply to reduce their annual salary to $1.

For Jingdong, which has not shown much difficulty at present, Tang Xingtong, an expert member of the China Electronic Commerce Association Research Center, believes that "one yuan annual salary" is only for the team.

A gesture on the ground is of no practical use.

The above equity incentive plan is designed to stabilize investor confidence.

Stabilizing investor confidence may be aimed at alleviating the negative impact of its continued loss in the latest financial report.

In August 7th, Jingdong released its second quarter 2015 earnings report.

According to the financial report, although the total volume of Jingdong's second quarter pactions was 114 billion 500 million yuan, an increase of 82% over the same period last year, net income reached 45 billion 900 million yuan, an increase of 61% over the same period last year.

Despite the strong growth of Jingdong, it seems that no effective profit model has yet been found.

In the second quarter of last year, Jingdong, whose net loss was 582 million 500 thousand yuan, still had a net loss of 510 million 400 thousand yuan in the same quarter this year, with a net profit margin of -1.1%.

The net loss of the company in the second quarter of 2015 was 15 million 700 thousand yuan (about 2 million 500 thousand US dollars), with a net profit margin of -0.03%.

But things are not developing in the direction of Jingdong expectations.

According to statistics, in August 5th, the closing price of Jingdong was 34.32 US dollars, to August 12th, in a short 5 trading days, its lowest price dropped to 25.64 US dollars, the biggest drop was 25.29%. According to its total share capital 2 billion 735 million shares, 5 trading days, Jingdong evaporated market value 23 billion 700 million US dollars, evaporation to 39% cases.

Stake in Yonghui

In fact, in addition to lowering wages, Jingdong is trying to boost market confidence.

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According to Jingdong's 2015 China Daily report, its total liabilities amounted to US $7 billion 284 million (about 46 billion 545 million yuan), a sharp rise of about 53.7% compared with the US $4 billion 739 million at the end of last year.

Under such circumstances, the Jingdong announced that it would invest 9 yuan per share, totaling 4 billion 310 million yuan, to join Yonghui supermarket.

If the paction is completed, Jingdong will hold 10% of Yonghui supermarket.

And has the right to nominate Yonghui two directors (including an independent director).

The two sides will strengthen supply chain management capabilities through joint procurement, and will continue to explore opportunities for strategic cooperation in areas such as O2O.

Tang Xingtong believes that joining the Yonghui supermarket is an important step for Jingdong to integrate resources from the perspective of logistics strategy.

"In order to form a complete chain of consumption, the purpose of capital investment is to cooperate with the upstream and downstream pformation."

He said to the new financial reporter.

In addition, Jingdong also looks at its fresh products.

Share.

Liu Qiangdong once said that in the fresh part, the amount of Yonghui supermarket is the same as that of the supermarket chain (the first half of the year accounts for 43% of Yonghui's sales), and the cost structure is the best in the industry. Jingdong believes that fresh commodities can be profitable, and gross profit is very healthy.

According to the semi annual report of Yonghui supermarket, the company now has 361 stores, a 24 increase compared with the beginning of the year, and has reached 541 stores.

In 2015 1-6, there were 23 new stores in Yonghui supermarket, 32 new signing stores, and 3 million 346 thousand and 500 square meters of business shops opened, compared with the same period last year, which increased by 629 thousand and 600 square meters, with an average area of 9480.20 square meters.

Li Yan, an analyst at I Asset Management Co., Ltd., said that Yonghui's more than 300 stores are obviously unable to cover the whole country. The logistics of Jingdong can help Yonghui to expand its products and services to the whole country. Meanwhile, the purchase frequency of Jingdong users will rise with the richness of service content.

GF Securities analyst Hong Tao believes that the alliance between Yonghui and Jingdong is complementary to resources and is highly recognized by both sides' core competitiveness and values.

"For Yonghui, the alliance Jingdong means huge electricity supplier flow and perfect warehousing, logistics resources, and abundant cash can be used for expansion and supply chain construction. For Jingdong, Yonghui stores and fresh is an important part of its O2O strategy."

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He said that the core of retail is not to pursue the continuous improvement of net interest rate. Instead, we should reduce the operating cost through the improvement of supply chain efficiency, thereby reducing the selling price, keeping the price advantage between competitors and grabbing market share.

Yonghui and Jingdong are all enterprises that have been focusing on supply chain efficiency for many years. This is also the basis for mutual recognition and alliance.

And Jingdong shares the idea of Yonghui coincides with its rival, Alibaba.

A few days after the Jingdong announced its investment in Yonghui supermarket, Alibaba announced that it would become a second largest shareholder with a high price of 28 billion 343 million yuan and become a second largest shareholder with 19.99% stake. Suning will subscribe no more than 14 billion yuan to the new Alibaba issued shares of no more than 27 million 800 thousand shares, accounting for 1.09% of the total share capital issued by Su Ningyun.

The two electricity giants are all heading for the same line. Does this indicate the future development path of the electricity supplier?

"It should be the exploration of how the online and offline businesses will operate around the Internet and users in accordance with the new rules."

Tang Xingtong gives an example: previously, supermarkets only sell things, and in the future they may also be used for warehousing. In the past, electricity suppliers had to do logistics and distribution. In the future, they could use supermarkets to facilitate consumers to pick up goods 24 hours later.

Promote the integration of online and offline businesses, and graft their advantages into one another, thus changing the old business models. This will be a topic of research for future electricity providers and traditional retailers.

build

In recent years, Jingdong has spared no effort in building up the logistics system.

According to the second quarter report, as of June 30th, Jingdong's self built logistics has covered 2043 districts and counties throughout the country. There are 7 logistics centers in the country, 166 large warehouses in 44 cities, 4142 distribution stations and self promotion points, covering 2043 counties in the whole country.

In the second quarter, 20% orders from the third party platform were issued by Jingdong logistics.

As of July 31st, Jingdong provided the "211 time limit" service on the same day and the number of distribution services covered by the following day were 135 and 951 respectively.

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In addition, Jingdong channels continue to sink to low level cities and towns.

Liu Qiangdong once revealed that Jingdong has covered 2106 districts and counties in 4000 districts and counties of China. Among the more than 40 thousand townships in China, Jingdong has covered 20 thousand, and the service of Jingdong has covered more than 46 thousand villages, and 100 thousand can be covered by the end of the year.

That is to say, Jingdong in these more than 46 thousand villages, each village has the villager's agent of the Jingdong, they are responsible for the company's promotion, publicity, delivery, collection and after sale service in this village.

On the other hand, "Jingdong is home" is also an important part of its logistics system.

At the beginning of May, as a part of Jingdong's O2O strategy, Jingdong came home and launched a new mode of crowdsourcing logistics, "Jingdong crowdsourcing".

It is mainly responsible for the O2O service of Shang Chao category. It provides all kinds of life service items such as fresh food, supermarket category, flowers, takeaway, meal and so on within 3 kilometers, and realizes fast delivery within 2 hours based on mobile terminal positioning.

According to Jingdong, Jingdong has reached 7 cities. At present, the number of business orders is growing rapidly. The profit mode is divided into Jingdong and supermarkets.

Liu Qiangdong said, in the long run, "Jingdong home" will contribute a lot of GMV and revenue to Jingdong, and it can be profitable business. More importantly, home business will increase user purchase frequency.

The "Jingdong home" business has been on the line for 5 months, with the highest daily orders exceeding 50 thousand orders. This year, the business will expand from the north to the Guangzhou and Shenzhen to 12 cities such as Nanjing, Tianjin and Chengdu.

Jingdong CFO Huang Xuande said in an analyst conference call that the O2O industry is still in the early stage of development, although there are many companies in the industry, but there are not many target markets.

According to his disclosure, Jingdong's O2O business is mainly carried out by the entity product electricity supplier, using the existing logistics system of the company.

The company sells fresh products through the "Jingdong home" mobile phone application, linking supermarkets near residential areas to users.

Although the number of users is not too large, the company has already seen some results.

In addition, cooperation with Yonghui supermarket is part of Jingdong's O2O strategy. However, the cooperation between the two sides is more strategic than that of O2O partners.

In the future, "Jingdong will arrive home" or will combine with Yonghui supermarket to build up a new consumption mode.

Hong Tao believes that one of the core services of the future "Jingdong home" is user orders and 2 hours of service.

Then the Jingdong courier went to nearby Yonghui supermarket to buy it and sent it to the user's hand.

Users pay extra delivery fees as a 2 hour service.

In Hong Tao's view, there are two points to note in this mode: first, users do not normally require orders, and no requirement is made for time limitation, and all goods procurement, warehousing and distribution are in accordance with Jingdong.

If users choose 2 hours to reach service in time, they will automatically switch to Yonghui supplier mode; secondly, Jingdong and Yonghui cooperate to explore this mode, but in the future, it should be a non exclusive platform and cooperate in different regions and the most powerful supermarkets in the region (giving priority to Yonghui store).

It is similar to Ali's investment in Yintai, to explore deep cooperation in the form of equity cooperation, and to make this model platform and socialized in the future.