Unveiling Jingxi’s self-operated business: Creating a “Pinduoduo” within JD.com

In the territory of e-commerce giant JD.com, a new platform called "Jingxi Self-operated" is quietly rising. It has attracted widespread attention in the industry with its highly competitive prices and innovative cooperation model. From 9.9 yuan for 16 packs of tissue paper to the "quasi-self-operated under strong control" model of in-depth cooperation with factories, Jingxi Self-operated has not only reshaped the supply chain, but also set off a price revolution in the sinking market.

During the 618 shopping festival this year, a type of tissue paper became an instant hit on JD.com, with orders exceeding 1 million, becoming the platform's "hottest product". This type of tissue paper is not from big brands such as Xin Xiang Yin and Qing Feng, but from JD.com's new platform - Jing Xi Self-operated.

At that time, the lowest price for the entire tissue category was 9.9 yuan for 10 or 12 packs. But Jingxi's self-operated product sold 16 packs for 9.9 yuan.

"This is the first of its kind in the industry and it's also the industry's ultimate." Liu Heng, the purchasing and sales manager of Jingxi Self-Operation, told us that if other platforms continue to compete on low prices, Jingxi Self-Operation will not blindly follow suit. "We have conducted many tests and found that 9.9 yuan for 16 packs has reached the ultimate low price boundary to ensure basic services and user experience."

Recently, Spicy chatted with this buyer for 2 hours. Behind the ultra-low-priced goods are many secrets of Jingxi Self-operated and even the entire e-commerce industry.

This super low-priced tissue comes from a brand-new cooperation model, "quasi-self-operation under strong control" - the factory behind it only needs to supply goods at the lowest price according to the platform's requirements. In addition to production, the factory can be a hands-off shopkeeper. Marketing, logistics, after-sales and other links are all handled by the platform. The platform does not deduct points from merchants, nor does it charge service fees.

Jingxi's self-operated business relies on buyers' careful selection, JD's brand, platform, user scale advantages and strong operational management capabilities to quickly expand sales, maximize operational efficiency, and reduce costs to the lowest possible level, thereby achieving the lowest price on the entire network.

Jingxi’s attempt to operate a “quasi-self-operated business under strong control” began in May this year.

A series of extremely low-priced and high-quality products, including tissue paper at 3.9 yuan, quartz sports watches at 7.99 yuan, sun umbrellas at 7.89 yuan, wireless Bluetooth headphones at 8.9 yuan... Jingxi Self-operated, which focuses on "good factory goods at really low prices", enters the market from household daily necessities, personal care and cleaning, fresh food, accessories and clothing, etc., aiming at the sinking market.

Judging from the market feedback, Jingxi Self-operated is indeed a surprise. During the 618 period this year, Jingxi Self-operated data showed that the number of orders exceeded 1 million within 4 hours of the opening, an increase of 220% from the previous day, and the monthly purchase frequency of users in June reached 7 times.

For Liu Heng, the purchasing and sales manager, the revamped Jingxi self-operated business has made him no longer just an "Internet guy" sitting in the office.

On the contrary, he looks at the overall price of raw materials every day, walks into the factory workshop, tries every means to optimize costs, and works with various bosses to develop products and expand sales... Sometimes he feels like a brand manager, and sometimes, he feels more like a factory manager.

"Jingxi's self-operated procurement and sales need to keep abreast of the dynamics and trends of the upstream and downstream industries." In mid-November last year, Liu Heng had already transferred to Jingxi's business line and took root in the personal care and maternal and child track. "Take paper products as an example. Procurement and sales must understand the market changes of bamboo pulp and wood pulp, the production capacity differences of factories in different regions, and the layout of new products and trend products in offline channels."

The continuous expansion of Jingxi's self-operated business and the transformation of JD.com's identity as a procurement and sales company have become a microcosm of JD.com's turnaround in the low-price era.

1. Detailed explanation of the first keyword of Jingxi's self-operated model - zero burden on the factory: no care for anything except production

A media report revealed a detail that Liu Qiangdong often talked about the example of himself spending 9 yuan to buy a solar lamp in Italy. "He would also buy such cheap goods because he needed them to be able to be used for a few days and would just throw them away if they broke. But JD.com might only have ones for 50 yuan, and only Pinduoduo has ones for 9 yuan."

As early as 2022, Liu Qiangdong had clearly defined the "low-price strategy" within JD.com, and the emergence of Jingxi Self-operated Business has brought a new window of opportunity for JD.com's "low-price strategy".

Taking paper products as an example, Wuhan is one of the national paper production bases and is located in central China, with convenient logistics and express delivery. Jingxi has recruited a large number of buyers and sellers who are very familiar with the supply chain and factories. The entire team went directly to the industrial belt factories in Wuhan to produce ultra-low-priced goods in batches.

In response to the needs of low-end users, Jingxi has also developed a set of product selection logic that corresponds to it. Currently, Jingxi's self-operated products can be divided into the first, second, and third categories.

Among them, Liu Heng called the third category of goods "the most cost-effective traffic model", which plays a role in attracting customers. "Most of the third category of goods are about ten yuan. Not only are they the lowest in the entire network, but they can also guarantee quality and ensure that the factory has enough profit space."

In addition to the third category of goods, filling the first and second category of goods is Jingxi's greater goal. "This type of product is mainly a substitute for big brands, and it is on par with big brands in terms of quality and performance."

From May till now, the feedback from users on the first and second category products has far exceeded expectations, "the monthly sales rate of new products is as high as about 95%." At the same time, Liu Heng also admitted that in the past, JD.com lacked sinking pallets, and the existing users on the site were not sensitive to white-label products.

So far, Jingxi Self-operated has reached cooperation with nearly 2,000 merchants and has become one of the main platforms of JD.com. "Jingxi Self-operated supports multiple merchants for one product, which can not only avoid the phenomenon of merchants not supplying goods in time, but also urge merchants to optimize costs in a timely manner."

In February this year, a daily necessities company from Zhejiang Province settled in Jingxi Self-operated. "Convenience" is one of the labels that the manager Li Geng has refined for Jingxi Self-operated. "We only need to quote the price, and Jingxi Self-operated will take care of all the links including operation, sales and after-sales, which saves us the operating costs and marketing expenses that we need to invest in other e-commerce platforms."

"E-commerce platforms compete with each other to lower prices, and merchants have the most difficult time. On other platforms, we not only have to ensure low prices, but also need to invest large amounts of advertising fees, and losses are not uncommon."

Many platforms require factories and enterprises to invest manpower and resources in a large number of promotional and operational activities. The operation manual of a certain e-commerce platform is hundreds of pages thick, and it takes two years to train a mature operator. This makes the cost of online sales for industrial belt factories high.

Some e-commerce platforms even have to invest more than 40% of the selling price of goods to invest in traffic; some e-commerce platforms force factories to lower prices. As long as there is a merchant with a lower price than you, you will have no traffic at all. The vicious price competition forces factories and merchants to only sell inferior products as good ones, short-change them, and engage in false advertising. In an ecosystem where bad money drives out good money, a large number of companies suffer heavy losses and are unable to continue.

The "loosening" of Jingxi's self-operation on merchants actually provides them with a sense of security. "As long as merchants calculate their profit margins in advance and quote reasonable prices, there will be no risk of losses in Jingxi's self-operation."

The reputation that Jingxi has accumulated among factories and merchants in industrial belts has also led to the deepening of cooperation. Manufacturers of three types of goods revealed to Liu Heng their willingness to cooperate with JD Express. "White-label factories cannot always rely on low-priced goods. They hope to drive the factory's high-quality product line through the mindset and shopping experience established by JD Express at the user level."

In the planning of Jingxi Self-operation, in the future, JD.com’s self-operated warehouses and JD.com’s logistics distribution will be one of Jingxi’s core competitive advantages.

Currently, for merchants with daily sales of 1,500 orders, JD Express can pick up parcels at the door of merchants and factories. After small-scale tests in Yiwu, Dongguan and other regions, the proportion of Jingxi's self-operated businesses using JD Express or warehouse delivery gradually increased in the third quarter.

2. Detailed explanation of the second keyword of Jingxi's self-operated model - improving supply chain efficiency and reducing costs

Merchants and factories are used to viewing the platform as Party A. An instruction or a turn from the platform affects the merchant's operating strategy and profit margin. In the survival rules of e-commerce, most merchants and factories have full-time positions to connect and communicate with the platform.

"JD.com has gone the other way, with its own Jingxi team going to factories to serve merchants." After June 18 this year, Liu Heng's team members went deep into factories in industrial belts all over the world.

"In February, we went to attend an industry department store exhibition. Even though we had JD.com work badges, a few people still thought we were scammers. They suspected we were middlemen." As a senior buyer with more than ten years of experience, Liu Heng once again stood at the starting line when he first entered the industry. "In remote industrial belts or small factories, there are several big wolfhounds as soon as you enter the door.

The reason why Jingxi Self-operated is so actively promoting on-site co-creation is still out of consideration of efficiency and cost.

In the early stage of cooperation, the addition of Jingxi's self-operated professional team supplemented the white-label industrial belt and factory operation capabilities, helping manufacturers reduce the costs of production, transportation, labor and other links. In the medium term, the on-site model can also improve the efficiency of product development for both parties. The traditional product selection process is cumbersome. Merchants need to send samples to the headquarters in a unified manner, and then procurement and sales need to call repeatedly to modify the details, which is inefficient and has large errors. "One day on site can complete a week's work."

However, by eliminating all middlemen and directly connecting with white-label merchants, this model also places higher demands on JD.com's procurement and sales. "JD.com's procurement and sales must understand the industry, the goods, the business, and management."

Taking paper products as an example, the paper industry has low barriers and serious internal competition, which has always been a major pain point in the industry. "In the face of the pressure of fixed assets such as factories and equipment, once the factory stops operating or the production line is not saturated, it will face the risk of losses. Therefore, maintaining production operations is the factory's primary goal." Liu Heng often needs to prescribe the right medicine when communicating with merchants. "Jingxi's self-operated deterministic daily sales and repurchase rate can ensure that the equipment is turned on and operated every day. This is what the factory values ​​most."

Image source: pexels

Compared with branded merchants, white-label merchants have a price advantage from two aspects: first, the greatly reduced brand marketing and promotion costs, and second, the "water squeezed" from various costs such as labor, packaging materials, and freight. Therefore, JD.com's procurement and sales also need to help factories "calculate accounts" from the overall business level and conduct standardized calculations on the overall business chain.

"For example, the factory's water and electricity bills, rent, daily production equipment startup hours, equipment wear and tear, etc., there is room for improvement and optimization in these aspects."

After a paper product manufacturer in the paper product industry belt of Wuhan, Hubei, cooperated with Jingxi, JD.com's procurement and sales penetrated into every link, helping the manufacturer reduce the cost of raw material reserves, production labor and logistics transportation. Initially, the distance between the loading stage of this manufacturer and the door of the warehouse was as long as 50 meters. Through the optimization of the production link, the loading distance was shortened to about ten meters. "Don't underestimate these 40 meters. It is calculated that if workers walk 100,000 meters less a month, the efficiency will naturally improve."

Liu Heng also mentioned a packaging detail, "Compared with standard products, paper express packaging bags will not be reused, and users will throw them away after unpacking." Therefore, under the premise of ensuring safety, using recycled bags has also become a reasonable way to reduce costs. "The products with the best cost-effectiveness often have high sales and large scale, and one cent may affect the profit margin of hundreds of thousands."

In addition to factory operations, JD.com's procurement and sales also need to put a lot of thought into product development. "On the one hand, we can launch trending products in a timely manner according to the seasons, such as summer water guns and swimming rings. These products often need to be launched online in advance to seize the timeliness. On the other hand, we also need to explore innovative products and create explosive products."

Since the end of last year, the Jingxi team has expanded to more than 200 people, of which more than two-thirds are in the procurement and sales department. "Some of the procurement and sales staff previously worked on e-commerce platforms, such as Tao Factory and 1688, and some are young people introduced by industrial belts and factories who have ideas and abilities."

3. Detailed explanation of the third keyword of Jingxi’s self-operated model: strong control of product quality

JD.com’s keen sense and insight into prices runs in the blood of the group’s development.

The vigorous "Beijing-Suzhou Price War" (the 815 home appliance price war between JD.com and Suning) in 2012 allowed JD.com to surpass Suning and Gome and become the leader in the home appliance industry. The heroes behind this confrontation were none other than the JD.com buyers and salesmen wearing red vests.

11 years later, the price war in the e-commerce industry has re-emerged. Times have changed, and when all e-commerce platforms have joined the trend of low prices, JD.com, which was a little hesitant, has been in a passive situation. Until last year's Double Eleven, JD.com's procurement and sales once again put on a red vest, breaking the industry's floor price momentum, and finally showing some momentum of JD.com.

The pain from previous experiences has not yet completely subsided, and the Jingxi team, which has learned from the lessons, particularly emphasizes "multi-party checks and balances."

Jingxi's on-site model involves three positions:

One is a senior industry belt sourcing expert who is proficient in industry professional issues and the layout of core industry belts and factories, and is responsible for drawing industry belt maps, targeted development, and product expansion.

The other is the quality control post responsible for checking the companies and factories. Once any qualification and quality problems are found in the factories and products, they can use a veto to cancel the cooperation. "The quality control post will even judge the factory's strength and cooperation risks based on the workers' salary payment and social security payment."

The remaining one is the buyer who is responsible for category planning, promotion and sales, and online product launch.

JD.com's low-price path has changed several times. Previously, JD.com once proposed "separation of purchasing and sales" and tried to adjust the conflict of interests between self-operated and third-party merchants with a resolute attitude, but the scales still failed to balance. This time, JD.com gently pushed the elephant to turn around through the idea of ​​three-party checks and balances. "Purchasing and sales cannot be both players and referees. There needs to be a quality control post to check and balance, which can also avoid the emergence of one-man rule and corruption to a certain extent."

This approach also brings Jingxi a differentiated advantage that distinguishes it from other extremely low-price e-commerce companies, that is, strong control over product quality.

In addition to Jingxi's self-operated business, JD Jingzao, JD No.1 Store and other businesses will also introduce this three-party checks and balances management system.

Of course, this is just the starting point for Jingxi Self-operated. How to further overcome the impact of low prices, fill the category map, and thus leverage the diversified demands of the sinking market is still a question that Jingxi Self-operated needs to think about in a longer period of time.