The test of the pressure of the capital chain: JD.com's listing "Strong March" Liu Qiangdong will have no retreat (VC320)

It is understood that the funds raised by JD.com will reach 3 to 5 billion US dollars in recent days. JD plans to conduct a "beauty parade" of investment banks in Beijing next week to select listed underwriters. The IPO date is initially determined in the first half of 2012. This means that JD.com's IPO process is much earlier than expected.

Why does it go public and what does it depend on? Jingdong and Liu Qiangdong must face these problems.

Subtle timing

News about the listing of JD.com has been circulated in multiple versions. Last week, this version was considered by the industry to be closer to the truth.

Given that investors are not very optimistic about Chinese Internet stocks, the decision to go public on JD Mall is quite surprising. According to the previous listing timetable, Jingdong Mall should be listed in 2013.

There is a view that this may be related to the third round of financing conducted by JD.com at the beginning of the year.

In April 2011, JD.com successfully raised US $ 1.5 billion from an investor consortium led by Russian venture capital firm Digital Sky Technologies, setting a record for Chinese Internet companies' external financing. However, some insiders questioned that, according to the traditional style of the PE / VC industry, there will be a large gap between the financing figures and the final arrival figures. The reason why JD.com announced this number in a high-profile manner is considered to some extent Self-improvement.

Earlier news said that in July and August 2010, the repayment period of JD suppliers was extended from the usual 15 to 30 days to 2 months or even longer, which indicates that JD.com ’s capital chain is highly strained, so During the financing process, investors and Liu Qiangdong signed a gambling agreement, including the listing date, profit plan and final return ratio. But since then Liu Qiangdong announced publicly that there is no agreement on gambling.

The current landing in the US market is not an ideal time for Chinese companies. PPLIVE, Thunder and other companies have postponed their IPO plans to the US. Therefore, JD Mall does not need to take risks. If Jingdong Mall finally chooses to launch an IPO in the near future, it may mean that it is facing investor pressure, that is, institutional investors may look forward to quick recovery of investment. Without ignoring the Internet bubble in China, it is a rational choice to race against the clock to get listed to recover part of the investment.

"Simple" trading

On the surface, JD.com is engaged in a simple transaction: it has a large amount of realizable traffic, which can be regarded as a sales channel and potential consumer flow, and in this way forced the producer to obtain a certain degree of purchase difference, Thereby making profits.

Behind this means the market has more complicated logic: when the purchase volume and sales volume are large to a certain extent, a large sales channel like JD.com should obtain considerable pricing power and account period advantages-different from other small-scale channels, JD.com ’s cash flow comes from the basis of bulk purchases, fast sales, and slow repayments.

In other words, JD.com uses the period difference to achieve cash flow: when selling a commodity externally, JD.com does not require a large amount of cash input, but adopts the form that the upstream supplier first arrives and the consumer pays immediately ; When cash flows to Jingdong's accounts, it will choose to pay back to the manufacturer according to a certain period of repayment, this cycle depends on Jingdong's sales-when a certain type of product Jingdong has a sales advantage, it will have The ability to define the payback period.

To some extent, this is a copy of the offline Gome or Suning, but only in the form of online transactions. In the past few years, JD.com has acquired this right in the 3C field, especially in the category of notebook computers and digital cameras. According to informed sources, JD.com has three goals in 2011, one is to achieve sales of 24 to 26 billion yuan, one is to account for 20% of the sales of books and soft department stores, and one is to steadily develop the logistics system. From the current point of view, the only thing that can be accomplished is the third goal. So far, 3C sales in Jingdong still account for 89%. It is reported that in the 3C field, JD.com's repayment period can even exceed 2 months at the longest, which means that it is possible to expand the sales of the backlog of upstream manufacturers' funds.

However, this system depends on another link: JD.com's sales capacity-it has the power to define the payment cycle only when its sales volume is sufficient to contain the supplier's impulse to flee.

The "secret" that is widely circulated in the industry is that in the 3C field where JD is dominant, small distributors account for about 30% of buyers-that is to say, the products purchased by these distributors from JD.com are even better than those from manufacturers. The prices of regular distribution channels are more advantageous.

People in the field of home appliances said that this may be a certain degree of subsidies in price. "There is a certain price system for factory shipments, and this will not be disrupted. And JD.com takes advantage of the payment cycle to subsidize bulk buyers, so as to obtain greater sales and thus a longer time for payment , This is a dangerous chain. " The amount of this part is estimated to be around 250 to 500 million per year-the greater the sales of JD.com, the greater the loss. However, the goal of JD Mall is to continue to rush forward, to quickly gain market share, and to achieve low prices through discounts-to expand sales-to continue subsidies.

Jingdong Mall's sales in 2010 were 10.2 billion yuan, an increase of more than 200% from the nearly 4 billion yuan in 2009.

An analyst said that when evaluating a vertical B2C like JD.com, the basic valuation tool they adopted was the PS value, which is sales. This may explain why JD.com adopted aggressive measures to expand sales.

But this chain will one day face huge risks. As more institutional investors enter and the IPO is realized, it will adopt more cautious subsidies. As the market situation changes, institutional investors may also realize that the market in exchange for subsidies is not enough to support JD.com ’s future, and a quick exit will be a better choice.

"Upgrade" challenge

It is worth noting that with the inflow of billions of dollars of investment, the competition in the e-commerce industry has escalated significantly. With the layoffs of group buying site Gaopeng and apparel retail site Fanke, the e-commerce industry has already shown signs of crisis.

Last month, Jingdong Mall suddenly abandoned Alipay in the name of reducing costs. To some extent, this is just one of the challenges facing Liu Qiangdong. Liu Qiangdong has publicly admitted many times that the growth of JD.com is being dragged down by management joints from within the company.

A middle-to-high-level person who has left JD.com said that in JD.com, a business line is often a hilltop. When a manager is replaced, it means that the business line is back. What is more serious is that if Jingdong wants to achieve the goals planned by Liu Qiangdong, it must have a stronger talent echelon. For example, according to the general laws of the industry, Jingdong Mall needs to hire more than 400 delivery personnel in order to complete the autonomous distribution within the 5th ring of Beijing area, which is a large labor cost. According to news from the e-commerce industry, JD.com ’s daily sales are currently averaging around 50 million. Behind the constantly refreshing sales records, logistics and information systems are facing more and more severe tests. The key calculation of the battle.

The bigger challenge comes from the market. Internet analyst Lu Bowang said that in the next five years, JD.com will continue to lose money. Once listed, Liu Qiangdong will have no retreat.

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