Event: JD.com officially launched the 10 billion subsidy program on March 3, and set up a first-level entrance on the home page of APP, covering the whole category. When the activities are unlimited, JD.com plans to normalize it. Both proprietary merchants and third-party merchants can participate. The subsidy of 10 billion yuan adopts the bidding principle, and the lowest bidder who meets the inventory requirements wins the bid. There are certain rules and restrictions on activities.

Core ideas:

Tens of billions of subsidies are proven "good medicine". Pinduoduo relies on 10 billion subsidies to achieve the myth of user growth, and it is also a "good move" for Pinduoduo to "sink" and break the circle. By subsidizing big-brand products, Pinduoduo has a positive relationship with the brand, thus changing users' impressions of Pinduoduo's "mostly white brand", "mainly sinking market" and "mid-and low-end e-commerce platform". As a result, Pinduoduo successfully broke the circle, attracting a considerable number of users in first-and second-tier cities under the premise of infiltrating more target customers, and the change in user structure also raised the customer unit price and pushed up GMV.

The root cause of JD.com 's introduction of 10 billion yuan subsidy is that he hopes to regain the "low-cost weapon." once the downward circle is broken and the problem of sinking is solved, which is tantamount to solving a series of problems such as flow and growth anxiety. Sinking the market is an important increment that JD.com can not give up. Pinduoduo's success shows the great development potential of the sinking market. The failure of Jingxi, which is based on the sinking market, makes JD.com need to re-find the grasp of the sinking market, re-convey the "low-price mind", and put the "low-price" label on the premise of "authentic guarantee" and "quality service." re-attract new users.

In the e-commerce stock market, players play a zero-sum game, and the loss of one person is the gain of others. Based on this, we have made the latest judgment on the competition pattern: low prices are the lifeblood of fighting for more, and Pinduoduo has the ability to maintain low prices, and there is a high probability of following up subsidies, and consumers' minds will continue to be maintained in the long run, but can not avoid affecting the growth of revenue in the short term; JD.com 's 10 billion subsidy is more to increase the sales of those who are JD.com 's target group. We think that this part of the customer group can be divided into two categories:

One is the return of JD.com to Pinduoduo users in the past two years. Under the premise of approaching price differences, such users will re-choose JD.com in food, home appliances, 3C and other major consumption decisions. The second category is the consumption upgrading of JD.com 's original users, which affects users' purchase decisions after the price reduction. The judgment of profit margin will depend on whether the underlying logic of "small profits and quick turnover" can run well on the JD.com platform, grafting more subsidy costs to merchants and brands; the essence of retail is service and price. BABA / offline prices if not followed up, both services and relatively low prices of JD.com and absolutely low prices of Pinduoduo will further erode the market share.

Risk Tips:

1. Business performance may be adversely affected by the macroeconomic and advertising market environment, and the performance fluctuates greatly.

two。 Subsidies may affect JD.com 's gross profit margin and net profit margin for the whole year.

3. JD.com 's "10 billion subsidy" growth is not as expected.

4. The information and data used in the research and report are not updated in a timely manner.