Look at these five key questions from Ali, Jingdong, and Pinduoduo

In the second half of the e-commerce rivers and lakes, who are you optimistic about? After the lively double 11 carnival, Ali, Jingdong, Pinduoduo, the three home appliance giants, have shown their third quarter earnings. Before the earnings report was issued, Pinduoduo had always been considered to make a fortune in the muffled voice. The market value first surpassed Baidu and then surpassed Jingdong. The call for Pinduoduo to be ranked second in the e-commerce platform is getting higher and higher. But just as everyone is looking forward to the bright eye data of Pinduoduo Double 11 this year, Pinduoduo chose to avoid it. In 2019, the double 11-day cat reached a turnover of 268.4 billion yuan, and Jingdong’s double 11 record was 204.4 billion yuan (the total amount from November 1st to 11th). The lack of Pinduoduo Double 11 data adds to the mystery of this e-commerce competition. However, the earnings reports released in November have revealed many clues. In the financial data of Ali, Jingdong, and Pinduoduo, many disputes have settled down. Tabpear found that these five points are particularly worthy of attention.

The second and third disputes in e-commerce have always been large and fierce in the e-commerce sector. The “three-nation kill” of Ali, Jingdong and Pinduoduo has attracted attention. On the evening of October 10th, Pinduoduo held a mobilization meeting around the year. Huang Wei’s internal speech said that Pinduoduo’s real-time payment GMV in the latest quarter has surpassed Jingdong, and the dispute over the e-commerce sector has become hot. Of course, the definition of real GMV is difficult to define. It is hard to say who is stronger by this data alone. To determine the volume of an e-commerce platform, it is necessary to comprehensively observe from the dimensions of GMV, number of users, and market value. With Tmall/Taobao's two giant e-commerce platforms, Ali is undoubtedly the leader in the e-commerce field. Although both Ali and JD have not announced the GMV in the earnings report, Ali’s new chairman, Zhang Yong, announced at the 20th anniversary party of Ali that the goal of $1 trillion in commodity transactions (GMV) in FY 2020 has been achieved. At the end of the fourth quarter of 2018, JD.com announced the GMV for the first time at 1.68 trillion yuan, and as of September 30, 2019, Pinduoduo had a GMV of 840.2 billion yuan (about 117.5 billion U.S. dollars) in the past 12 months.

From the GMV data, Pinduoduo is still only half the size of the Jingdong transaction, and Jingdong is about one-sixth of Ali. Ali is still far ahead, Jingdong ranks second, and Pinduoduo is twice as far away as Jingdong. Market value is also a dynamic recognition of capital to the platform. On November 5, affected by the release of the financial report, Jingdong’s share price once rose more than 7%, and the market value exceeded Pinduoduo. So far, the stock price has fallen slightly by 0.4%, and the market value is still 46.6 billion US dollars. Pinduoduo issued a financial report on November 22, the revenue was less than expected, the net loss was 2.335 billion yuan, higher than analysts expected. The stock price fell 23% on the day and the market value fell to 8.5 billion dollars. At present, the market value of Pinduoduo is 39.5 billion US dollars, which is 7 billion US dollars lower than Jingdong. Of course, the market value of the two is much lower than Ali's 487.6 billion US dollars. The market value is a number that is affected by many factors and changes in real time. In particular, Ali business is far from e-commerce, and Alibaba Cloud and rookie logistics account for an important part. It should be said that the market value is only a measure of the three platforms of the capital market, Ali first, Jingdong second, Pinduoduo third.

Which platform has a better growth effect? In terms of revenue growth, in the quarter, Ali's total revenue was 119.02 billion yuan, higher than market expectations, higher than the 85.15 billion yuan in the same period last year. Ali has increased revenue by more than 40% for 11 consecutive quarters. It is not easy for these volumes to maintain this growth rate. According to the financial report, in the third quarter of 2019, Jingdong Group's net income was 134.8 billion yuan, a year-on-year increase of 28.7%, compared with 20.9% in the first quarter and 22.9% in the second quarter, showing an accelerating growth momentum. Although Jingdong’s net income exceeds Ali’s, Jingdong is essentially the self-operated “selling” income, which is included in the overall revenue of the platform. It is necessary to know that this part of the gross profit is low. Part of the service profit that is easier to make money, Jingdong has increased from 7.2% in Q1 in 2017 to 11.9% today, a slight increase in the proportion. Pinduoduo's revenue slowed down year-on-year, with a growth rate of 123% to 7.513 billion yuan, less than the market expectation of 7.65 billion yuan. From the perspective of revenue growth, Pinduoduo's growth rate is significantly higher than its peers. However, Pinduoduo has the fastest growth rate. On the one hand, the revenue from the platform is less than 10 billion, and the scale of revenue is small. On the other hand, Pinduoduo has started a subsidy of 10 billion since June this year.

Therefore, although the growth trend of Pinduoduo is even more alarming, but the subsidy has caused more than 2 billion losses, the growth rate of revenue is still slowing down. It also shows that the rapidly growing Pinduoduo is facing the contradiction between retention and conversion rate. After the growth in revenue growth, we see that the number of users on the three platforms has grown. In this quarter, Ali's mobile retail market in China reached 785 million monthly active users, a net increase of 30 million compared with June 2019; annual active consumer growth was 19 million to 693 million. Last year, Ali’s customer cost was 390 yuan, down from 526 yuan two years ago. The number of active purchases of Jingdong in the past 12 months was 334.4 million, an increase of 13 million from the same period in the second quarter, the largest increase in nearly seven quarters. In 2018, Jingdong’s customer cost reached 1,503 yuan, and in 2016 it was 142 yuan. The biggest highlight of PinduoduoQ3's financial report is that the number of active buyers reached 53.63 million, a net increase of 150.8 million year-on-year, exceeding the 202.3 million households in Jingdong. In the fourth quarter of last year, Pinduoduo's customer acquisition cost was 143 yuan / person. From the data level, Pinduoduo, which has the lowest customer cost and the largest increase in the number of users, is not without worry. The “middle income trap” is always a problem that Huang Hao needs to consider. Pinduoduo needs to prove the extensive subsidy strategy, not all of them are wool users. The platform can finally achieve the revenue growth from the number of users, and the transition to the revenue growth brought by the user repurchase rate is a problem that Pinduoduo still needs to overcome.

Who is more successful in going to the mountains? Dimensional strikes and high-dimensional breakthroughs are common strategies in today's Internet companies, as are e-commerce platforms. The Pinduoduo, which relies on the “five rings” to highlight the crowd, also makes the sinking market the focus of competition. Ali launched a special cost-effective, Taobao special edition, Jingdong launched Jingxi, is not in the small town users in the third- and fourth-tier cities. According to the Q3 financial report, 70% of JD's new users came from the sinking market. According to a big data release, "Taobao Juyi & Beijing Tokyo Hi App Market Data Insight" shows that as of September 2019, not only nearly 60% of users from the third-tier and third-tier cities, but also users in low-tier cities. The proportion of TGI exceeds 1. On the day of the Double Eleven, Jingxi provided 100 million pieces of explosive items. The number of active users increased sharply on the day, an increase of 1257.95% compared with a month ago. Nearly 40% of Jingdong's new users from Jingxi.

Taobao and Jingdong struggled to sink, and Pinduoduo struggled to go up. "When the Double Eleven, we sold a total of 400,000 Apple mobile phones on our platform. Most of the buyers are after 80s and 90s, so the buyer is the younger generation." Huang Wei’s phone call in Pinduoduo Speaking at the meeting. According to QuestMobile, the increase in Pinduoduo users in the past year was mainly from new first-tier and second-tier cities. The proportion of users increased from 24.2% to 34.7%, and in June 2019, it increased by 114.4% compared with August 2018. However, Ali and JD.com, which have always had an absolute advantage in the high-end field, have become an important obstacle to the upside of Pinduoduo by virtue of the reputation of the platform and the protection of commodities. Zhang Yong said in a conference call that the number of high-end consumer users in Ali reached 13 million, and the retention rate was as high as 98%. Jingdong's double sales from 2014 to 2019, the sales of luxury goods on the Jingdong platform increased by 9.3 times. Calculate the consumption of active users of the three platforms, Pinduoduo is 1566.7 yuan in the third quarter; Ali is 8757 yuan in the first quarter, and Jingdong is 5493 yuan in the fourth quarter of last year. Pinduoduo consumes less than one-third of Jingdong.

What are the key killers of the three? Every step of the elephant is even more difficult, so for Ali, user stickiness is more important than adding users. “Technology is very important. It can accurately interface demand and supply, and it can also increase user stickiness. Operating efficiency is very important to Ali, so profit margin is an important indicator for management to measure growth.” Zhang Yong once worked. Said in the conference call. In the Q3 earnings report released by Ali, the net profit attributable to ordinary shareholders was RMB 72.54 billion (US$10.949 billion), and the market expectation was 16.93 billion yuan, up 20.03 billion yuan in the same period last year, an increase of 262%. If you don't advance, the giant wheel Ali will maintain a strong growth momentum, not only has a strong foundation, but also has a continuous expansion of new users. In the catch-up of Pinduoduo and the rebound of Jingdong, Ali cooperated with many brands to launch the double eleven limited custom products. And among the new users, the new model makes the ARPU (average revenue per user) number very impressive. And this year's dark horse business - live broadcast.

In his letter to the shareholders of Pinduoduo, Huang Hao often mentioned the word "long-term". This means that Huang Wei hopes that Pinduoduo will lose money in exchange for growth. In the PinduoduoQ3 earnings conference call, Huang Wei also mentioned: "We regard spending money as an investment, a long-term opportunity. With such opportunities, we have to invest a lot." On the conference call David Liu, vice president of strategy at Pinduoduo, proposed a different strategy from Huang Wei, that Pinduoduo's future goal is to "emphasize user engagement." David Liu mentioned that Pinduoduo's spending per active user reached $1,567 at the end of September. How to make these users further increase the frequency of consumption, and it is more important to spend more money on Pinduoduo. Pinduoduo in the eyes of Huang Wei must "long-term exchange for growth", which is the road that Amazon, Taobao and Jingdong have all walked. In the eyes of David Liu, Pinduoduo should pay attention to the data dimensions such as “monthly survival, repurchase rate”. Some retail industry media also mentioned that Pinduoduo already has 500 million users, and the growth rate will inevitably slow down in the future. How to let these subsidized users finally stay is the key.

For JD.com, technology has become more prominent. Liu Qiangdong said that this year the company achieved a three-digit growth in technology revenue. In the next five years, technical service revenue will continue to exceed the revenue of the overall revenue, which will become an important driving force for Jingdong's revenue and profit growth. “In the past six years, Jingdong’s technology investment has far exceeded revenue growth. In the next five years, technical service revenue will continue to exceed the overall revenue, which will become an important driving force for Jingdong’s revenue and profit growth.” Liu Qiangdong’s earnings call Said in the meeting. Who has more development potential? Zhang Yong has disclosed new goals for the next five years: serving more than 1 billion consumers worldwide, serving more than 10 trillion yuan in consumption targets. From the current revenue results and 40% growth rate, Ali should be able to successfully complete the goal. The potential of the Ali platform is mainly from the sinking market of 600 million users. In this regard, Jiang Fan has disclosed that the penetration rate of the current Taobao market in the sinking market has reached 40%. In the past two years, more than 70% of Taobao's new users have come from the sinking market. On the other hand, the Ali platform system is taking advantage. Tabpear learned that some of Taobao's sinking users came from Alipay's diversion, and the future support for the E-commerce system will become more and more significant.

At present, Ali's research and development expenses account for 6%, and the technology dividend is gradually realizing. In the 2019 double 11, all the core systems of Tmall have been running 100% on Alibaba Cloud. In the future, when the concurrent transaction volume between Jingdong and Pinduoduo reaches Ali's volume, whether the technology can smoothly support business operations remains to be tested. In addition, Ali holds a total of 235.25 billion yuan in cash. Alibaba will raise $13 billion after the listing of Hong Kong stocks. Ali has sufficient cash flow as a guarantee for business expansion. The potential of the Jingdong platform is also derived from the sinking market performance and technology upgrade bonus. In the sinking market, “Jingxi”, which received the WeChat level entry in September, and the social e-commerce small program, such as fragrance and cloud shop. In theory, it is more advantageous than the Pinduoduo e-commerce link that was killed by the micro-envelope, but JD's sinking market operation ability always makes people feel that it is difficult to compare Pinduoduo.

The future growth of JD.com is still an upgrade of technology to the supply chain. In the first three quarters of 2019, its investment in technology and content reached 11.28 billion yuan, a year-on-year increase of 27.61%. In addition, the Jingdong Group said that in the first three quarters, the total investment in R&D of listed and non-listed companies in the JD system exceeded RMB 13 billion. Among them, the research and development expenses of Jingdong increased further to 1.272 billion yuan, an increase of 240% over the same period of last year, and the research and development expenses accounted for 15.0% of the revenue. Jingdong, who is making up the class, is not serious about technology investment. P/E ratio is a dynamic reflection of the capital market's expected performance. At present, Ali's price-earnings ratio is 22, and Jingdong's price-earnings ratio is 87.68. Pinduoduo has no price-earnings ratio due to losses. There is no accident, this one is still the best. On the basis of the scale, Ali is still unable to see the opponent within the visible expectations. The squid effect brought about by the rapid growth of Pinduoduo has caused Jingdong to worry about losing the position of the second child and not to run at an accelerated speed.