E-commerce giants build offline alliance what does Jingdong want to do after taking off five Star appliances

 E-commerce giants build offline alliance what does Jingdong want to do after taking off five Star appliances

Investment and M & A refers to offline discourse power

After more than a years operation, recently, Jingdong group has officially completed the acquisition of 54% equity of Wuxing Electric Appliance Co., Ltd., and previously owned 46% equity of Wuxing Electric Appliance Co., Ltd., which has become a wholly-owned subsidiary of Jingdong group.

Talking about the acquisition, Liao Jianwen, Chief Strategic Officer of Jingdong group, said in an interview with Securities Daily: looking at the whole e-commerce today, including Jingdongs expansion of various offline retail entities such as super experience stores, represents a large strategic layout of our core categories. Jingdong will embrace the industry with a greater mind, and many of its competitive relationships in the past will become strategic partners, which is also a manifestation of Jingdongs continuous opening up.

Why does Jingdong aim at five star appliance? It is understood that although the coverage area of five-star electrical appliances is mainly concentrated in East China, its strength can not be underestimated.

According to the data disclosed by Pan Yiqing, President of Wuxing Electric Appliance Co., Ltd., as of January 1, 2019, the number of self operated stores of Wuxing electric appliances has reached 300, and wanzhentong Township franchise stores have covered nearly 60% of Jiangsu Province. In the next seven years, the number of self operated stores of Five Star Electric will increase to 1000.

Such resources are very tempting for Jingdong, which started as an e-commerce company. Many stores of Wuxing electric appliances are concentrated in Jiangsu Province, where the residents income is relatively high and the retail industry is relatively developed. At the same time, Wuxing also covers the third tier, fourth tier and county-level markets. JD can quickly occupy the market in more developed regions with strong purchasing power, and can test its offline strategy and copy it to the whole country. Yi Guan analysis of circulation industry analyst Chen Tao said in an interview with Securities Daily.

Behind the wholly-owned holding of five-star appliance is Jingdongs ambition to occupy the offline home appliance market. After the wholly-owned acquisition of Wuxing electric appliances, Jingdong has accelerated the expansion layout of its own offline stores in the whole country, in order to accelerate the realization of rebuilding a Jingdong appliance offline. It has been revealed that Jingdong electric plans to quickly connect its offline business with local cities nationwide within three to five years, thus rewriting the pattern of offline home appliance retail market.

Mo daiqing, director of the online retail department of the E-commerce Research Center for e-commerce, told the Securities Daily: in recent years, Jingdong has been developing a sinking market, and its household appliances are mainly concentrated in the first and second tier cities. Five Star Electric has accumulated resources of low-level cities offline, which can be supplemented.

Jingdong itself is going to expand offline, which can be deployed with the help of five-star stores, which can save costs for JD, but it still faces challenges in store operation experience, staff team management and user acceptance, he said. In the future, JD may also acquire or invest in such objects as five star electric appliances, because at present, JD is still expanding. The way to acquire or invest in such objects can speed up its expansion.

On whether there are plans for M & A, Liao Jianwen said: we are thinking about how to improve our moat and how to deepen our adaptation to the growth of the industry. In this big background, Jingdong will keep an open mind and constantly explore new goals.

Giant overlapping alliance competition upgrading

In fact, in recent years, a number of e-commerce giants have launched in-depth offline layout with retail enterprises through capital merger, cooperation and other modes. Suning Ali has joined hands with the former to invest in Taobao, Tencent, Jingdong, Wal Mart, online and offline, and Gome. Jingdong has made a lot of efforts. Several major business alliances have been formed, but they are constantly intertwined. The more abundant the cooperation network, the more obvious the alliance phenomenon in the industry.

Li Chengdong, a former strategic analyst of Tencent Jingdong and an angel investor of e-commerce, said in an interview with Securities Daily: in the face of e-commerce encountering industry ceiling, Alibaba, Jingdong, Tencent, Baidu, etc. are all expanding their offline layout. In the past two years, mainstream e-commerce has been in full swing in household appliances, FMCG, supermarket, etc., and by increasing capital operation, they have really mastered the offline discourse power, It will be even more obvious this year.

In terms of expanding categories and enhancing offline discourse power, Jingdong is also making continuous layout. In recent years, JD has been accelerating the expansion of its offline layout. In addition to five star appliance, it has successively invested in Gome retail, Dixon, Lenovo laiku and other offline entities, completing a round of integration, and a new echelon combining online and offline is forming. Under the high-speed competition of home appliance retailers such as Suning and Gome, JD is speeding up the offline layout to expand its stores and supply chain advantages and develop offline retail formats. At the same time, driven by e-commerce giants, retail channels are also changing. The new retail mode of online and offline integration has become the reform direction of major platforms, channel sinking has become the common goal of e-commerce and retail giants, and the competition in this battlefield is becoming increasingly fierce.

In Chen Taos opinion, in the past two years, e-commerce giants have frequently carried out capital operation, with consideration of strengthening offline layout and freedom. The acquisition of five star electric by Jingdong is also a strategic continuation of the previous capital level operation. A few years ago, Jingdong has invested in five star electric appliances and transformed its stores to open flagship stores. After this acquisition, JD will invest more offline strategic resources, so that its offline strategy can be continuously penetrated and extended. At present, mainstream e-commerce companies are constantly exploring a sinking market with more potential and increment. Jingdong is one of them. It accelerates investment and cooperation in offline stores, and constantly introduces new businesses such as Jingxi and super speed, so as to speed up the layout of sinking market.

With the continuous deepening of e-commerce and retail giants in the sinking market and other channels, complementary advantages and resource coordination have become their common choice. In the next few years, there will be more possibilities, breadth and depth after the collision of e-commerce retail giants, but the specific effect needs to be further observed, and the supply chain of partners and the degree of data openness need to be considered.

Source of this article: Yang Qian, editor in charge of Securities Daily_ NF4425