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JD Seven Fresh initiates an instant retail price war

六月清晨搅
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Our reporter Li Jing reports from Beijing
Local instant retail has always been a hot commodity in the field of new retail, but it is not easy to chew on.
In 2017, JD.com benchmarked Alibaba Hema and officially established its self operated supermarket brand "Seven Fresh", aiming to provide consumers with high-quality fresh products and lifestyle services through an omni channel retail model.
However, the business development speed of JD Seven Fresh is not as fast as expected earlier. In the past few years, JD Seven Fresh has mainly established stores in the Beijing Tianjin Hebei and Greater Bay Area. It was not until September this year that JD Seven Fresh officially entered Shanghai.
On November 1st, during the "JD 11.11" period, JD Qixian Supermarket launched the "Breaking Through Price, Not Afraid of Competition" campaign, sparking a price war that affected the instant retail industry.
The reporter from China Business News also learned from people close to JD Innovation Retail that recently JD Seven Fresh completed the integration of pre warehouse, which means that the fulfillment time and service experience of online orders will be greatly improved.
Price War Rises Again
JD Seven Fresh has a significant price battle power during the "Double 11" shopping festival.
In the "Breaking Through Price is Really Cheap, Don't Be Afraid of Competition" campaign of JD Seven Fresh, prices are generally much cheaper than other instant retail platforms, and many products are priced at 50% or even 9.9% off, claiming that "there are no tricks, no strategies, it's just a direct drop". As can be seen from the search, products such as Fresh Abalone, Frozen Pipa Legs, Weilong Gluten, Classic Toast, etc. on the platform can be obtained by flash sale for only 0.99 yuan.
Zhao Zhenying, a researcher at the National Engineering Laboratory of E-commerce Transaction Technology, pointed out to reporters: "As an annual promotion event in the e-commerce industry, 'Double 11' has a high level of attention and participation. Choosing to launch a price war at this time can more effectively attract consumers and media attention, increase sales and market share
According to the battle report released by JD.com, the effect of this price war among JD Seven Fresh is obvious. Only 72 hours after the start of the event, JD Seven Fresh achieved a year-on-year triple digit growth in both the number of online orders and the number of transactional users. Popular products in multiple categories such as fruits, vegetables, aquatic products, meat, poultry, and eggs were sold out.
Fruits and vegetables, as the most typical scene of instant retail, are also the key areas of JD Seven Fresh Supermarket's layout in this event. The "Super Breakthrough" activity drove a year-on-year increase of 229% in vegetable sales and 106% in fruit sales. Among them, the transaction volume of Provence tomatoes increased by 233% year-on-year, the transaction volume of yellow grain sweet corn increased by 270% year-on-year, the transaction volume of Zhonglingshan Roman lettuce increased by 137% year-on-year, the transaction volume of Ehuan jelly orange increased by 100% year-on-year, the transaction volume of Fujian Guanxi red meat honey pomelo increased by 177% year-on-year, and the fruit cutting increased by 300% year-on-year.
In addition to fresh products, during the "Super Breakthrough" event, various regular foods such as frozen foods, dairy and cold drinks, side dishes, and snack foods at JD Seven Fresh Supermarket also saw multiple hot selling items, driving a rapid increase in transaction volume.
The reporter observed that after JD Seven Fresh launched a price war called "breakdown price", some heavyweight players in the instant retail track also followed suit and adjusted their prices. The reporter learned from some instant retail platforms that "the platform compares prices across the entire network almost every week and then makes price adjustments".
However, JD Seven Fresh stated that for the same product, the adjusted prices of competitors are still inferior to JD Seven Fresh's breakdown price. At the same time, it emphasizes that "JD Seven Fresh did not intentionally engage in a price war against anyone".
Zhao Zhenying believes that in the context of slowing economic growth and increasing downward pressure on the economy, price cuts can attract consumers, but long-term price wars may lead to problems such as decreased profits for enterprises and increased supply chain pressure. Whether other players in the instant retail track follow the price war may be decided after evaluating the sustainability and scope of JD Seven Fresh's price reduction strategy.
Fusion front warehouse
Before starting this round of price war, JD.com made an important move by integrating its Seven Fresh and Pre Warehouse businesses. It is reported that JD Seven Fresh and its front-end warehouse business completed integration at the end of October, and the core starting point for promoting front-end warehouse integration is to enhance user experience. After the integration is completed, the SKUs of JD Seven Fresh Supermarket and the front warehouse will be fully connected, and unified quality will be guaranteed both online and offline.
With the integration of front-end warehouse business, JD Seven Fresh's fulfillment speed has also significantly improved, and the average delivery time within 3 kilometers has been shortened to 27 minutes.
Before JD increased its focus on instant retail business this time, the position of JD Seven Fresh within JD was not actually evident. This time, JD.com boldly integrated its seven fresh and pre warehouse business segments, and increased its resource investment.
Regarding this move, BOE responded to reporters by saying, "There is a saying within JD.com: 'Don't forget about users when making decisions.' When expanding certain businesses, it is necessary to start from the perspective of user needs and experience. From an industry perspective, looking back at the development process of instant retail in the past decade, it can be said that there have been ups and downs. After a brief rise, it has encountered bottlenecks due to factors such as user acceptance and market maturity. In recent years, the demand for instant retail from users has significantly increased, and JD Seven Fresh has increased its focus on instant retail to improve user experience
The integration of JD Seven Fresh and pre positioned warehouses is a positive measure, "said Wang Peng, an associate researcher at the Beijing Academy of Social Sciences. Pre positioned warehouses can shorten delivery distances and times, improve delivery efficiency, and enhance user experience. Meanwhile, the low cost of pre positioned warehouses helps JD.com optimize its supply chain, reduce costs, and maintain competitiveness in price wars. In addition, the front warehouse also helps JD Seven Fresh expand its business scope and increase market coverage.
What is the difference between the store and pre warehouse models?
The pre warehouse mode usually chooses to layout warehouses within a range of 3 kilometers from the community or consumers, store goods by renting community shops or small warehouses, and then achieve fast delivery through riders. The front warehouse mode sets up a small warehouse near consumers, which can shorten the distribution distance, ensure the freshness of goods, and improve consumers' shopping experience, especially suitable for fresh food e-commerce and instant retail. Therefore, Dingdong Shopping, Daily Fresh, Meituan, Hema, Wal Mart, etc. have layout or test the front warehouse mode.
From the perspective of market demand, the advantages of front-end warehouse operation are becoming increasingly apparent. The inventory of the pre warehouse is determined based on consumers' online orders, mainly to meet their immediate needs for emergencies, gifts, gatherings, etc. The inventory of products in stores is generally determined based on consumers' offline purchasing needs, mainly to meet their hoarding, experience and other needs, supplemented by meeting immediate needs.
Compared with the store model that also provides instant retail services, the front warehouse distributes goods according to real-time demand, with multiple product categories and structures, equivalent to the optimal combination of goods in different retail formats such as supermarkets, convenience stores, specialty stores, and department stores.
In terms of cost, front warehouses are generally not located in street facing areas, and rental costs are lower than those of physical stores. Plus, there is no need to face consumers, more inventory than in stores, and fewer staff needed than in stores.
So in the field of instant retail, pre positioned warehouses are becoming increasingly popular. According to the "Instant Retail Industry Development Report (2023)" released by the Research Institute of the Ministry of Commerce, combined with research data from top instant retail enterprises, it is estimated that the average annual growth rate of the pre positioned warehouse model market size in 2022 and 2023 will exceed 50%.
From the perspective of the instant retail market, it is still an imaginative market. The latest report from the Market Research Institute of the Research Institute of the Ministry of Commerce shows that as of 2023, the domestic instant delivery market size is 341 billion yuan, a year-on-year increase of 24.8%. The instant e-commerce industry also maintains high compound growth, with an average annual growth rate of over 30%. It is expected that by 2027, the size of the instant e-commerce market will exceed 5 trillion yuan.
However, currently JD.com has not disclosed the layout of its front-end warehouses to the public. JD Seven Fresh has not given a positive response regarding how long this price will last.
I hold a cautious and optimistic attitude towards the instant retail battle led by JD Seven Fresh. The instant retail market has enormous potential and growth space, but also faces fierce competition. However, price wars are difficult to sustain as short-term measures, and companies need to focus on long-term development and comprehensive competitiveness enhancement, "said Wang Peng.
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