JD.com: JD.com has added 130,000 employees in the past two years, bringing the total number of employees to nearly 520,000

JD.com is heavy and huge. The latest official data from JD.com shows that JD.com has nearly 520,000 employees, which is twice that of Alibaba, five times that of Tencent, and 30 times that of Pinduoduo. In the past year, many Internet giants with the main theme of "reducing costs and increasing efficiency" have reduced the number of their employees. According to statistics from Latepost, Alibaba reduced nearly 14,000 employees in 2023, Tencent reduced about 3,000 employees, and Baidu reduced 1,500 employees. JD.com has the largest change in the number of employees - an increase of 66,445 people.

Including the new employees in 2022, JD.com has added a total of 130,000 employees in the past two years , but JD.com is under considerable pressure.

Last year, JD.com’s market value fell to its lowest level in nearly five years. At the same time, JD.com also launched drastic reforms internally, including replacing senior executives.

In the view of Xu Ran, CEO of JD Group and JD Retail, 2023 will be the "year of adjustment" and 2024 will be the "year of execution."

After two consecutive quarters of revenue growth of less than 4%, JD.com's revenue growth returned to 7% in the first quarter of 2024, with revenue of 260 billion yuan for the quarter.

Whether JD.com can find a balance between its huge system and revenue in the future, whether it will rebound from the bottom or run aground, still needs time to test.

Most of the new employees come from logistics

JD.com’s 130,000 new employees mainly come from logistics.

Unlike Internet companies that are used to operating lightly and in an "asset-light" mode, JD.com chose to spend a lot of money to build its own logistics system in 2007. By the end of the first quarter of 2024, the scale of JD.com's supply chain infrastructure assets reached 154.1 billion yuan, a year-on-year increase of 12%.

JD.com started building its own logistics system in 2007, when Liu Qiangdong decided to improve user experience by building its own warehousing and distribution network to solve the problem of unstable third-party logistics service quality. The logistics business started in Beijing and gradually expanded to the whole country. By 2015, JD.com's logistics cost per order was significantly lower than the industry average.

Li Chengdong, founder of Dolphin Think Tank and e-commerce analyst, is not surprised by the speed of JD.com's employee expansion. He said: "JD.com is mainly self-operated, and warehouse and logistics employees account for nearly 80% of the total number of employees. Individual delivery efficiency is limited. As the business scale expands, the number of employees will inevitably increase."

As Li Chengdong said, among JD.com's 520,000 employees, more than 70,000 are responsible for warehousing and nearly 360,000 are responsible for distribution.

Changes in the number of employees in various positions at JD.com from 2019 to 2023/Source: Company financial reports, compiled and drawn by Yan Finance reporters

JD Logistics' first quarter 2024 financial report shows that as of March 31, 2024, JD Logistics' warehousing network has covered almost all counties and districts in the country, including more than 1,600 warehouses operated by JD itself and more than 2,000 cloud warehouses operated by third-party owners on the cloud warehouse ecological platform. The total management area of ​​the warehousing network exceeds 32 million square meters.

In general, JD Logistics has performed well. From 2019 to 2023, JD Logistics' operating income growth rate has remained above 20%, and it has achieved profitability for two consecutive quarters, with net profit growth exceeding 120% year-on-year.

JD.com's logistics business is also looking for new growth points. In the first quarter of 2024, JD Logistics' revenue increased by 14.7% year-on-year to 42.14 billion yuan, of which external customer revenue reached 29.25 billion yuan, accounting for about 70%.

JD Logistics' operating income and growth rate in the past five years (including forecast) / Source: Wind

In addition to its own JD Logistics, JD also acquired instant delivery company Dada Group and highway express freight company Deppon to improve its logistics and transportation system.

Dada Group is mainly responsible for JD.com's instant retail and delivery business. JD.com increased its stake in Dada to 52% in 2021 and 2022. Although Dada Group has not yet made a profit, its losses are shrinking year by year.

JD.com acquired 66% of Debang shares for nearly 9 billion yuan in 2022. In the first quarter of 2024, Debang shares had a total revenue of approximately 9.3 billion yuan, a year-on-year increase of 25.31%, and a net profit attributable to the parent company of 92.79 million yuan, a year-on-year increase of 27.74%.

Debang shares' net profit attributable to shareholders and growth rate in the past five years (including forecast)/Source: Wind

Cost reduction and efficiency improvement remain urgent

However, JD.com has long been controversial for its asset-heavy business model. Although building its own logistics has improved operational efficiency and service quality, it also means high investment costs and small profit margins; it also requires a lot of personnel and is difficult to organize and manage.

Wind data shows that from 2018 to 2023, the total number of JD.com employees increased from 190,000 to 520,000 year by year, but the average annual revenue per employee decreased year by year, from 2.5821 million to 2.0975 million yuan. The average revenue per employee decreased by about 484,600 yuan in six years.

At the same time, it is worth noting that in 2023, JD.com's revenue was 1,084.662 billion yuan, 1.2 times that of Alibaba (941.168 billion yuan) and 4.4 times that of Pinduoduo (247.639 billion yuan), but JD.com's net profit attributable to the parent company's owners was 24.167 billion yuan, only one-third of Alibaba (79.741 billion yuan) and two-fifths of Pinduoduo (60.026 billion yuan).

Revenue and revenue growth rate of Alibaba, JD.com, and Pinduoduo from 2020 to 2023/Data source: Alibaba, JD.com, and Pinduoduo financial reports

"JD.com employs too many people, and the labor cost accounts for too high a proportion, so the profit is less," Li Chengdong analyzed.

At the beginning of establishing the logistics system, Liu Qiangdong stipulated that all employees, including front-line logistics couriers, must sign formal labor contracts, enjoy unified welfare benefits, and pay five insurances and one fund. Even the newly acquired Deppon Logistics will gradually pay for all employees (including outsourced employees) starting from 2023.

In the twelve months ending March 31, 2024, JD Logistics' total human resource expenditure (including its own employees and external personnel) reached RMB 84.3 billion, about twice its revenue in the first quarter of 2024.

In addition to high labor costs, e-commerce growth is also under continued pressure.

In the past three years, Douyin e-commerce has been growing rapidly through content-driven and explosive product creation; Pinduoduo, which focuses on the sinking market and overseas markets, has achieved an average revenue growth rate of 62.19% between 2021 and 2023. In the first quarter of 2024, Pinduoduo's revenue growth rate soared to 130.66%.

In contrast, JD.com 's revenue growth rate dropped from 27.59% to 3.67% from 2021 to 2023, the lowest since its establishment.

The growth bottlenecks and competitive pressures that JD.com faces are unprecedented.

Not long ago, a video of JD.com’s senior management meeting was leaked, in which Liu Qiangdong bluntly said: "Anyone who has poor long-term performance and never works hard is not my brother."

According to media reports, at the meeting, Liu Qiangdong emphasized the culture of hard work and dismissed executives who were unwilling to work hard on the spot. At the same time, he asked each department to prepare a list of layoffs, and layoff information was frequently leaked internally. However, this news has not received an official response from JD.com.

In a recent media interview, JD.com management admitted that JD.com suffers from "big company disease" and that employees' fighting spirit is obviously slack. Based on this, various adjustment measures have been introduced, including shortening lunch breaks, increasing daily meeting systems, and strictly investigating the behavior of punching in for others.

An internal employee of JD.com revealed to the reporter of Yan Finance that apart from the rumors of layoffs, the information circulating on the Internet is basically true. The logistics business segment where he works has been conducting a talent inventory since the beginning of the year, and the personnel are in a dynamic adjustment.

"There is no faster way to reduce costs than layoffs. The number of front-line couriers has been increasing for a long time and they are rarely laid off, but for back-end staff, layoffs have always been a sword of Damocles hanging over everyone's heads," said the employee.

The above employee added that, in terms of logistics business alone, this year is a cost year, and the company is focusing on promoting the "Thanos Operation" to reduce costs and increase efficiency in all aspects of logistics fulfillment, such as warehouse delivery, terminal delivery, and warehouse delivery. In terms of specific actions, this is reflected in the organization of human resources, adjustment of outsourcing ratio, reduction of packaging material costs, and optimization of warehouse delivery and other operations.

This series of adjustments can be seen as a continuation of JD.com's previous drastic reforms.

At the end of 2022, through organizational adjustments and internal speeches, Liu Qiangdong established the "low-price strategy" as JD Retail's core strategy for the next three years, striving to acquire the "down-market" and launch head-on competition with Pinduoduo.

JD.com's own products cannot completely match the prices of competitors due to cost factors such as logistics. Therefore, the low-price strategy referred to by Liu Qiangdong does not require that the prices of all products be lower than those of competitors, but to be the same or close to them. By introducing POP (Platform Open Plan third-party sellers on JD.com) merchants, the supply of low-priced goods on the platform will be increased, and the same low price level as competitors can be achieved.

After one and a half years of implementing the low-price strategy, JD.com achieved revenue of 260 billion yuan and net profit of 8.9 billion yuan in the first quarter of 2024. The former increased by 7% and the latter increased by 17.2% year-on-year.

JD Group's net income/Source: JD's first quarter 2024 financial report

Xu Ran pointed out in the earnings call that the number of quarterly active users has achieved double-digit year-on-year growth for two consecutive quarters, and the frequency of user shopping and the number of users in lower-tier cities have both increased, thus offsetting the decline in average customer unit price due to the increase in low-priced products.

Bet on live streaming

In addition to implementing the low-price strategy, in 2024, JD.com clearly identified the live streaming ecosystem as one of its core strategies.

"Content" is not JD.com's strong point, but at the moment, JD.com has to do it.

In fact, JD.com's live broadcast business started on "Double 11" in 2016, but for a long time, JD.com did not regard it as a core business, but only used it as a marketing tool. As a result, the live broadcast business developed slowly and lacked top anchors on the platform.

Starting from 2023, JD.com began to increase its investment in content construction, among which live streaming is the focus.

Last year, JD.com first launched the "Super Rising Star Plan" to support new anchors; then invited Luo Yonghao to live broadcast selling houses; during the "Double 11" period, JD.com launched a "no commission, no pit fee" procurement and sales live broadcast room, called out to Li Jiaqi, and set off a battle for the "lowest price on the entire network."

In April this year, Liu Qiangdong's AI digital human "Caixiao Dongge" made his live broadcast debut; during the "618 Big Sale", Xu Ran, who rarely appears in public, appeared in the live broadcast room with 360 founder Zhou Hongyi to build momentum together.

According to media reports, JD.com will invest a large amount of cash and traffic in the live broadcast business recently to increase incentives for cooperative institutions and creators. At the same time, it will upgrade the management mechanism for institutions and talents and implement rating management. Institutions that do not meet the standards may be eliminated. During JD.com's "618" period, the length of time, frequency of broadcasts, and number of orders of institutions will become important evaluation criteria.

JD Live responded that the situation was basically true, and the specific rules would be officially announced after JD's "618". As early as April, JD announced that it would invest 1 billion yuan in cash and 1 billion traffic to support content consumption scenarios and cultivate top talents.

Despite this, JD Live still faces considerable challenges.

JD.com's advantage lies in its sufficient supply chain and abundant inventory, but in live streaming e-commerce, "people" are more important than "goods". In addition, compared with Douyin and Taobao Live, JD.com's public domain traffic is limited, and the private domain traffic of stores and anchors has not yet been built.

JD.com is still exploring how to find a breakthrough in the fierce competition in live streaming e-commerce.

Last year, on the 20th anniversary of the establishment of JD.com, Xu Ran formally proposed the "35711" dream for the next 20 years to JD.com employees: JD.com will have 3 companies with revenue of over 1 trillion yuan and net profit of over 70 billion yuan, 5 companies listed on the Fortune Global 500, 7 listed companies that start from scratch and have a market value of no less than 100 billion yuan, pay 100 billion yuan in taxes each year, and provide more than 1 million jobs.

Currently, there are 5 listed companies in the JD system, including JD Group, JD Logistics, JD Health, Dada Group and Debang Shares. JD Industrial Development, JD Industrial and financial technology platform JD Technology are in the process of listing. Among them, only JD Group is among the world's top 500 companies.

Compared with the grand plans for the next 20 years, current problems may be more difficult.

In an internal letter in December last year, Liu Qiangdong admitted, "So many problems have arisen because of my poor management, and I blame myself very much. But no matter what, I will not lie down, and I hope that my brothers will never lie down. The organization is now huge, bloated and inefficient, and it does take time to change."

As for the elephant that is turning around, we still need to wait a little longer.

From Salt Finance