On January 8th, JD Group announced that its consolidated subsidiary, Dada Group, had discovered some questionable behavior during its regular internal audit process, which may raise doubts about Dada's online marketing service revenue and operating support costs for the first three quarters of 2023.
At the same time, Dada Group issued a statement stating that based on preliminary evaluations, the company currently estimates that the revenue from online advertising and marketing services of approximately RMB 500 million and the cost of operational support of RMB 500 million in the first three quarters of 2023 may be exaggerated, respectively.
The audit committee of Dada Group is hiring independent professional consultants and receiving their assistance. Pengpai News quoted an insider from Dada as saying that this incident was voluntarily discovered by Dada during an audit, or was caused by an individual suspected of committing fraud. Dada stated that he has reported the case to the public security organs.
Affected by this negative news, the stock price of Dada Group was halved. On January 8th, Dada US stock fell by more than 45%, with a market value of 447 million US dollars. JD.com was also affected, with the US stock market closing down 2.7% yesterday at $25.96, with a market value of $40.86 billion.
The first overall profit to be marked with a question mark
This incident had already been predicted, and the professional managers of Dada Group had already left half a month ago.
In December 2023, Dada just announced a management adjustment. Former JD Retail CEO Xin Lijun resigned from his position as Chairman of the Board and a member of the Board. JD Group CFO Dan Su took over as Chairman of the Board and a member of the Nomination Committee from Xin Lijun. In addition, the company's CFO Chen Zhaoming resigned from his position as CFO due to personal reasons.
From 2017 to 2022, Dada Group suffered losses for many years, with losses of 2.1 billion yuan and 1.33 billion yuan in 2021 and 2022, respectively. The loss situation will see a turning point in 2023.
On August 16, 2023, Dada Group released its unaudited performance for the second quarter of the 2023 fiscal year as of June 30, 2023, indicating strong growth in core performance indicators. The total revenue of Dada Group in the second quarter was 2.8 billion yuan, a year-on-year increase of 23%. After adjustment, the net profit improved by more than 17 percentage points year-on-year to profitability. Dada Group achieved its first overall profit after going public.
But in the third quarter of 2023, Dada Group returned to a loss making state, with a total revenue of 2.9 billion yuan, a 20% increase from the same period last year, and a net loss of 166 million yuan.
However, with the announcement, certain online marketing service revenue and operating support costs of Dada Group in the first three quarters of 2023 may be exaggerated. Some financial report data of Dada Group in 2023 have become a question, and the first overall profit achieved in the previous second quarter has also become unknown.
This incident once reminded people of the largest financial fraud incident in Chinese concept stocks before. From April 2019 to January 2020, Luckin Coffee was exposed to have false sales of RMB 2.2 billion, which directly caused a crisis of trust in Chinese concept stocks. Since then, Luckin Coffee has been delisted on NASDAQ.
Dada is JD's real-time retail flagship
Dada Group is a local instant retail and instant delivery platform under JD.com, with two major business units: JD Home and Dada Express. On June 5, 2020, Dada Group was listed on NASDAQ. According to the prospectus, JD Group held 47.4% of the shares in Dada Group, making it the largest shareholder. In February 2022, JD announced that it held approximately 52% of the shares in Dada and officially consolidated its financial statements.
Previously, an industry report from China International E-commerce Center stated that the real-time retail market size would reach 3.6 trillion yuan by 2030. JD.com, a subsidiary of Dada Group, believes that its model is quite unique and it is the only enterprise with B2C+O2O digitalization and supply chain integration capabilities.
Previously, financial report data showed that in the 12 months ending June 30, 2023, the total transaction volume (GMV) of JD to Home platform reached 70.8 billion yuan, a year-on-year increase of 30%. In the real-time retail platform, JD to Home is in the first camp of Tongmeituan and Ele.me. In the second half of last year, Tiktok also officially launched the "Houda" business into the real-time retail arena, and the Dada Express under the Dada Group has also become one of the cooperation capabilities of Tiktok's real-time retail.
In October 2023, JD Real Time Retail, with Dada Group as the main body, released a retail three kilometer model. Xin Lijun, then CEO of JD Retail and Chairman of Dada Group's Board of Directors, stated that instant retail is an important part of JD's efforts to provide consumers with a more "fast, efficient, and cost-effective" consumption experience, and that "instant retail is a must win battle for JD Retail.".
This became the last event for Xin Lijun to attend the public meeting as both JD Retail and Dada Group's number one position.
The 1 billion yuan financial data exaggeration incident involving Dada Group undoubtedly cast a shadow over JD Group's development in the real-time retail field.
In October 2023, Li Changming, the General Manager of JD Daojia, a subsidiary of Dada Group, stated in an interview with media including Blue Whale Finance that JD Daojia, which carries JD's real-time retail, will focus on three dimensions in the next one or two years: first, expanding the platform's full category product entry; second, expanding the penetration rate on JD's main website; and third, continuing to expand more merchants to enter through platformization.
In the dimension of market competition, JD Instant Retailing is facing Meituan and Lulema, which have strong "take out" users' minds, and Tiktok, which has more abundant traffic. This has become a comprehensive competition involving the supply of merchants, contract delivery and user traffic.