Why does JD.com promote procurement and sales?

In the wave of e-commerce live streaming, JD.com's procurement and sales team has gradually come into the spotlight with its unique identity and strategy. This article deeply explores the operating model, market performance and the business logic behind JD.com's procurement and sales live streaming room.

"It can work behind the scenes as well as in the front stage." JD.com's procurement and sales frequently become the center of public opinion.

Last year on November 11, a JD.com salesperson called out to top anchor Li Jiaqi, saying that they had received a letter of warning from the brand's lawyer because the price of the Haier ovens sold by JD.com was lower than the price in Li Jiaqi's live broadcast room. After the incident, JD.com's salesperson launched slogans such as "no talent commission, no routine, no pit fees", and the staff personally went live on the live broadcast, which unexpectedly became popular. The total number of viewers in JD.com's salesperson live broadcast room exceeded 380 million.

Since then, JD.com, having tasted the sweetness, has started to use procurement and sales personnel for live broadcasts on a large scale and has greatly increased its emphasis on procurement and sales. Not only has it increased the annual fixed salary of procurement and sales personnel from 16 salaries to 20 salaries, and set no upper limit for performance incentives, it also announced that it will recruit at least 10,000 procurement and sales personnel in the next three years, calling procurement and sales "the gatekeepers who ensure that JD.com's products are cheap and high-quality."

This year's Double 11, JD.com's procurement and sales once again challenged Li Jiaqi. JD.com Supermarket announced that the procurement and sales live broadcast room will offer an additional 10% discount on the basis of the price in Li Jiaqi's live broadcast room. In addition, JD.com's procurement and sales adopt the method of spot sales, which is in contrast to Li Jiaqi's pre-sale model.

At the JD.com Double 11 launch conference not long ago, the JD.com procurement and sales team once again became popular with a self-created rap "Procurement and Sales Overcoming All Obstacles". The lyrics sharply commented on the current chaos in the live streaming e-commerce industry, and mentioned problems such as false advertising of Hong Kong mooncakes, pre-prepared meals of questionable quality, and sweet potato vermicelli.

Whether it is through piggybacking on big anchors or self-marketing, JD.com's procurement and sales have finally been noticed by the public.

Why does JD.com want to promote procurement and sales to an unprecedented level? Can it really make up for JD.com's shortcoming of not having big anchors?

01 How is the performance of JD.com’s purchasing and sales live broadcast room?

In fact, JD.com's purchasing and sales live broadcast room is a general term, which includes comprehensive live broadcast rooms such as "JD.com's Really Cheap Purchasing and Sales Live Broadcast Room", as well as live broadcast rooms in subdivided fields such as JD.com's beauty purchasing and sales, JD.com's 3C digital purchasing and sales, and JD.com's health purchasing and sales. Each live broadcast room has a different start time, basically covering the popular time periods.

According to Dingjiao One, the anchors of JD.com's procurement and sales live broadcast room usually include one anchor and one or several procurement and sales staff. During the live broadcast, the procurement and sales staff uniformly wear red vests with the words "JD.com Procurement and Sales" on their clothes. The anchor introduces the product as a whole, and the specific product details and advantages are explained by the procurement and sales staff. In the middle of the live broadcast, the corresponding procurement and sales will be changed according to the product being broadcast. Some of the live broadcast products are from JD.com's own stores, and some are from third-party stores on JD.com.

The overall style of the live broadcast room is relatively simple, with only a simple background and popular explanations. There is no exaggerated live broadcast with a rap style, and no staff to cheer and interact. Products are introduced one by one according to the step-by-step process, and the anchor emphasizes authenticity, low prices, and logistics guarantees.

Li Feng, who is familiar with JD.com's procurement and sales work, told Dingjiao One that although the traffic of some JD.com procurement and sales live broadcast rooms for sub-categories has not yet fully recovered compared to Tmall and Taobao, some low-priced flash sales products in the live broadcast rooms can be sold quickly, and there are also viewers asking questions and interacting, and the broadcast situation during prime time is still good. According to his observation, the procurement and sales live broadcast room in a certain sub-category usually has 40,000 to 50,000 viewers in the morning, about 130,000 to 150,000 at noon and in the afternoon, and the most at 20:00 to 22:00 in the evening, with 250,000 to 300,000 viewers.

As for the turnover of live broadcasts of procurement and sales in this niche field, Li Feng said that it ranges from tens of thousands to hundreds of thousands of yuan per day. If a well-known brand is broadcast, it is possible to sell four or five million yuan a day. "The turnover has been good recently, but because of the big promotion, the targets set for procurement and sales are also high, and the performance is based on year-on-year comparisons."

Merchants who have participated in JD.com’s purchasing and sales live broadcast room have initially enjoyed certain results.

Wang Peng has his own store on JD.com (equivalent to supplying JD.com) and a flagship store. The products in his own store have been shown on JD.com's live broadcast room for several times. He said that JD.com's live broadcast for procurement and sales does not have any commission or slot fees. Most of the products sold are from his own store. The higher the turnover of his own store, the higher the profit of JD.com. However, the performance of the live broadcast is ultimately directly related to the performance of the procurement and sales team.

He mentioned that the highest transaction volume during live broadcast was 70,000 yuan, and several other times also reached tens of thousands of yuan. In addition to live broadcast, the products in their store are also posted with sliced ​​videos of the products recommended by procurement and sales. According to his feedback, the conversion rate of products with sliced ​​videos recommended by procurement and sales is indeed higher than usual.

Netizen Xiaoyu has been buying things in JD.com's live broadcast room recently. The cheap prices and next-day delivery are the reasons why she frequently places orders. She mentioned, "It's really cheap in JD.com's live broadcast room. I got a lot of bargains. I usually do some small tasks and get a small red envelope. I can buy some tissues for free. In the live broadcast room, with the added coupons, the things I can buy are really cheap, and the things I buy can be returned. Most of the time, I can get bargains."

Han Bing spent some time watching JD.com's purchasing and sales live broadcast room and found that most brands of beauty products in the room were priced close to those on other platforms. Some individual products were slightly more favorable than on other platforms. For example, a double essence had the same price as other platforms but came with a customized sample.

However, she noticed that the professionalism of the sales staff was also insufficient. Once, when a type of seaweed crumbs for children was sold in the live broadcast room, Han Bing asked the anchor, "Can an eight-month-old baby eat it?" Both anchors were stumped and responded, "We will confirm this later."

Some netizens also had a bad shopping experience in JD.com's purchasing and sales live broadcast room.

Netizen Zhang Shuai told "Dingjiao One" that he had spent 981 yuan to buy a water purifier from a certain brand of JD.com's own store in JD.com's purchasing and sales live broadcast room during the big sale. The light started to stay on after less than a month of use.

"Later, when the maintenance worker came to my house, he said it was time to replace the filter. He also said that white substance should have flowed out when the water purifier was used for the first time. It was something in the filter. But when I thought about it, I changed several buckets of water when I first used it, and there was no white substance. There is a high possibility that there is something wrong with this water purifier, otherwise the filter would not have had such a short life." Zhang Shuai said.

During the after-sales process, Zhang Shuai and the store's customer service went through many rounds of arguing, and it took several months before the customer service finally replaced his water purifier. He said that JD.com's procurement and sales and JD.com's self-operation were originally a guarantee of credit, but this experience made him feel that he still couldn't "buy with his eyes closed."

However, the above cases are also special and may involve improper operations by the merchants, and cannot be entirely attributed to JD.com's procurement and sales live broadcast room.

02 The “Red and Black” of JD.com’s Procurement and Sales

From the results point of view, JD.com's procurement and sales have indeed helped JD.com to gain a lot of presence in the low-price war and live broadcast breakthrough battle.

Let’s first take a look at what procurement and sales look like in JD.com.

JD.com is essentially a self-operated e-commerce company, whose business model mainly relies on selling goods and earning the difference.

Initially, JD.com started out by selling 3C products and gained a foothold in the market through low prices and efficiency. During this period, JD.com's purchasing and sales team was headed by Liu Qiangdong, and they needed to be able to negotiate effectively with suppliers.

Since then, the purchasing and sales positions of JD.com have always played a vital role in JD.com's self-operated model. They are not only responsible for the purchase and sale of goods, but also for ensuring the quality and cost control of goods, as well as maintaining sensitivity to market trends. The professionalism and negotiation ability of purchasing and sales directly affect JD.com's competitiveness and profitability.

Li Feng introduced that procurement and sales are generally grouped by category. There may be several groups under a business department, such as beauty group, maternal and child group, clothing group, etc. Each group has a person in charge who is similar to a team leader and manages a certain number of procurement and sales personnel. The team leader needs to check with all procurement and sales every day about the revenue and year-on-year growth of the brands they are in charge of, make a brief comparison with other platforms, and follow up on the strategic approach, goals, and current situation.

Procurement and sales have a relatively large degree of autonomy. When negotiating pricing and supply prices with merchants, they need to look at the brand's past sales data, as well as the scarcity and production year of the goods. For example, within a three-year shelf life, the price is one for the first two years, and a lower price for the last two years. Procurement and sales also need to expand their own merchants, that is, to attract investment. According to him, there are many brand stores on JD.com, but relatively few white-label merchants. Procurement and sales need to look for new merchants with potential on other platforms. For example, if a brand that suddenly becomes popular on Douyin has good traffic, procurement and sales can directly negotiate and invite the merchant to open a store on JD.com.

For merchants that are recruited, procurement and sales need to be followed up all the time. Most of the newly recruited merchants will have some exclusive slots or guarantee mechanisms. Sometimes a category or brand can also strategically make a loss to increase sales. Procurement and sales often mediate between the platform's strategy and mechanism, profits, and the profits of the merchants.

In certain circumstances, the purchasing and sales department has considerable authority. Li Feng said that the purchasing and sales department does have a veto power. If a merchant does not cooperate well with a purchasing and sales department, there will be no purchasing and sales connection work unless the merchant complains or uses other means to replace the purchasing and sales department. However, even if the purchasing and sales department is replaced, if the corresponding purchasing and sales team does not recognize the brand, it will be difficult to develop the brand.

What do merchants who often work with JD.com think of its procurement and sales?

Wang Peng has been working with JD.com’s purchasing and sales for more than 10 years. He is involved in daily product launches, pricing, event participation, warehouse turnover, and replenishment. “For example, if we have a new product and its operation plan and want to sell it in our own store, we need to communicate with purchasing and sales, provide the product’s operation plan, competitive products, price, advertising budget, etc., and then send samples, and finally wait for the approval of purchasing and sales. Purchasing and sales have to ‘collect their work’ every day to understand the sales situation, inventory, activities, etc. of the products.”

Some procurement and sales are indeed helpful to merchants. "For example, some procurement and sales will communicate with us about products and marketing. They also visit factories and industrial belts to tell us which products are more in line with consumer needs. They have also helped us introduce JD's offline channels and coordinate with anchors to promote products." Wang Peng said that the concept of this type of procurement and sales is to work together with merchants, and he will feel proud when the brand grows in his hands.

There are also some unscrupulous purchasers and sellers who use the power of the platform to squeeze merchants. Wang Peng talked about some of the "hidden rules" he had experienced. The smaller complaints were inaction, and the more serious ones were taking money from suppliers.

Wang Peng once communicated with purchasing and sales about joint marketing with other brands. Purchasing and sales said that it involved cross-departmental cooperation and could not be coordinated. His store had some small products attached to large categories that could contribute several million yuan in sales each year, but purchasing and sales asked to cut them off, on the grounds that the sales of small products belonged to another group and had nothing to do with their group.

There are many reasons to ask merchants to spend money. Once, the salesperson said that they would be fined for listing their products in the wrong category. After some discussion, the salesperson asked them to invest 50,000 yuan to buy a resource position so that they would not be fined. The more familiar salesperson would find a reason to ask merchants to support his work, "For example, if the net profit this month is not enough, support tens of thousands of yuan, and give you a resource position next month, but it may not be really fulfilled."

In any case, the huge purchasing and sales team supports JD.com's business.

03 Is it a good move for JD.com to promote procurement and sales?

To a certain extent, it is natural for JD.com to promote procurement and sales.

Na Mingyuan, co-founder of Dolphin Think Tank, explained: First, JD.com's original model was to determine sales based on procurement. The importance of procurement and sales is beyond doubt. Procurement is an absolute factor in what to buy and how to sell. In order to prevent corruption, there is a rotation system, but many resources are controlled by procurement and sales, so procurement and sales are very important.

Second, JD.com increased its purchases and sales in order to increase the number of merchants on the platform and expand its SKUs. JD.com is mainly self-operated and cannot put too many products in its own warehouses. In addition, its original purchases and sales were mostly for big brands. If it wants to attract more merchants in the future, it will need more purchases and sales.

Third, JD.com used to lag behind Taobao and Douyin in live streaming, but due to the competitive environment, it also had to do live streaming. Let the procurement and sales team do it, so that they can find better products and get better prices.

On the marketing level, JD.com justifies its low-price strategy by promoting its purchasing and sales staff, which is actually to attract consumers and promote sales.

Psychology expert Yu Yuan analyzed that the professional knowledge of products and the control of costs by purchasing and sales staff can bring a sense of trust to consumers. According to social identity theory, consumers tend to imitate the behavior of people they believe to be professionals or authorities. As product experts, JD purchasing and sales staff are more likely to gain the trust of consumers through their recommendations.

Secondly, consumers are increasingly paying attention to transparency and sincerity. JD’s live broadcast of procurement and sales emphasizes no slot fees and no commissions, and this model just caters to this psychological demand.

In addition, JD.com wants to use positive emotions to manipulate and display the professional charm of its purchasing and sales personnel through the promotion of its purchasing and sales groups and individual celebrity purchasing and sales personnel, so that consumers will have a favorable impression and be more likely to accept their recommendations. The establishment of such positive emotions is helpful in maintaining long-term consumer relationships.

However, some consumers also said that JD.com's marketing for purchasing and sales was a bit too much. Whether consumers will pay for it ultimately comes down to the product itself.

As for the effect of having the procurement and sales team sell goods through live streaming, Na Mingyuan believes that by utilizing the procurement and sales team to expand SKUs and increase supply, prices will be lowered under competition. The expansion of the procurement and sales team is very beneficial to JD's original system, but he believes that having JD's procurement and sales do live streaming is more of a gimmick than a practical significance.

The advantage of purchasing and sales people being anchors is that they are more familiar with products and platform rules. Compared with anchors who simply sell goods, purchasing and sales people are more professional in content.

But compared with other big anchors on other platforms, Na Mingyuan believes that the biggest problem of procurement and sales is the lack of traffic. "Every profession has its own expertise, and farmers know a lot about agricultural products, but they may not be able to be good anchors or sell agricultural products well." He also pointed out that it is actually difficult for platforms to handle the relationship with big anchors. Whenever a big anchor emerges, it will have a siphon effect, sucking away all the traffic. If the popular procurement and sales anchor leaves, it will be another problem.

This is similar to the situation of Oriental Selection and Dong Yuhui. A platform has its own difficulties in cultivating big anchors or not.

Meng Qi, a senior e-commerce practitioner, believes that JD.com's salary increase and expansion of purchasing and sales personnel indicate that JD.com is returning to its core business and continuing to engage in B2C business, and the value of purchasing and sales has been further enhanced.

Regarding live streaming, he also believes that it is more intuitive than pictures and texts, and has a higher conversion rate, which can be considered an attempt to add icing on the cake. However, as users become more rational in their consumption and the number of users on each platform is relatively fixed, live streaming may not necessarily bring about a qualitative improvement in JD.com's overall sales. It is just a marketing method.

* At the request of the interviewees, Li Feng, Wang Peng, Xiao Yu, Han Bing, Zhang Shuai and Yu Yuan are pseudonyms in this article.

Author | Aileyi Editor | Wei Jia