Recently, JD.com completed the acquisition of all shares held by Walmart's subsidiary in Dada Group (NASDAQ: DADA), increasing its stake to 63.2%. Regarding the purpose of this increase in Dada Group, a source from JD.com revealed to China Business News that this move demonstrates JD.com's consistent confidence in the long-term and stable development of Dada Group. It also reflects optimism and recognition for Dada Group's future prospects, the importance of Dada's position within JD.com's ecosystem, and expectations for further deepening the strategic partnership between the two parties.
The reporter noted that before JD.com increased its stake in Dada Group, there was a change in management at Dada Group. Guo Qing, a former member of the S-team, the highest decision-making layer of Meituan, replaced Shan Su as the chairman of Dada Group.
Dada Group is an important piece of JD.com's immediate retail business segment. In fact, JD.com has been laying out its immediate retail for nearly a decade. In 2015, JD.com launched its own O2O immediate retail platform, JD Daojia, marking the beginning of its exploration of O2O immediate retail. However, just one year later, JD.com merged JD Daojia with Dada Express into Dada Group and stepped back from the daily operation and management of JD Daojia. By 2021, JD.com's attitude changed, and it suddenly increased its stake in Dada Group, raising its stake to about 51%, gradually realizing the consolidation of Dada, and gradually reclaiming management and operational rights.
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From the perspective of immediate retail business, JD Miaosong, which integrates the original JD Hour and JD Daojia two immediate retail brands, used to focus on home delivery of supermarket products and fresh vegetables. Recently, the reporter found that tea beverage brands such as Luckin Coffee, Mixue Bingcheng, and Bawang Cha Ji have also settled in the "Coffee Milk Tea" channel of JD Miaosong, and catering brands such as Burger King and Yonghe King are also included. This indicates that JD Miaosong is targeting Meituan's core business area - the catering takeaway segment.
The separation and merger of JD.com and Dada
Before launching JD Daojia in 2015, JD.com had already tried many O2O models. For example, in 2013, it cooperated with Taiyuan Tangjiu Convenience Store to purchase products from JD.com through the O2O model. In March 2015, JD.com focused on building an O2O life service platform, integrating various O2O life categories, and providing consumers with the delivery of fresh and supermarket products. The project was then called "Pai Daojia," which was later renamed "JD Daojia" in April 2015 to leverage the brand power of JD.com.
In its early stages, JD Daojia quickly expanded its business scope. By November 2015, it had covered 11 major cities in China and provided a variety of home services, including medicine, flowers and cakes, and housekeeping and laundry. In December 2015, JD Daojia also reached a strategic cooperation with Yonghui Supermarket, further expanding its supply chain and logistics network.
By April 2016, JD Daojia merged with the crowdsourced logistics company Dada. The merged company was then named "Dada-JD Daojia" (later renamed "Dada Group"), with crowdsourced logistics continuing to use the Dada brand and the O2O platform continuing to use the JD Daojia brand. In terms of equity, JD Group exchanged its O2O subsidiary JD Daojia and JD Group's business resources and $200 million in cash for about 47.4% of the new company's shares, becoming the single largest shareholder. The original Dada CEO, Kua Jiaqi, became the CEO of Dada Group, and the original president of JD Daojia, Wang Zhijun, became the president of the new company.
Zhao Zhenyin, a researcher at the National Engineering Laboratory for E-commerce Transaction Technologies, told the reporter that JD.com chose to merge JD Daojia and Dada Group because the O2O immediate retail market was in a rapid growth phase at the time, with fierce competition and many giants entering the market. JD needed to assess its competitiveness and resource investment in this field. The merger can better concentrate resources on core businesses (such as e-commerce and logistics), while leveraging Dada Group's professional advantages in the field of immediate delivery to achieve synergistic effects.
The reporter learned from JD.com and Dada Group at the time that although JD.com remained the largest single shareholder of Dada Group after the merger, Dada Group maintained independent operations. In the following years, the proportion of revenue contributed by JD.com to Dada Group has been decreasing.Dada Group's prospectus published in 2020 showed that from 2017 to 2019 and for the first three months of 2020, the revenue generated by JD.com accounted for 56.7%, 49.1%, 50.5%, and 37.8% of Dada Group's total revenue, respectively.
On the evening of June 5, 2020, Dada Group made its debut on the NASDAQ in the United States. However, due to the pandemic, Dada Group held a virtual bell-ringing ceremony at the Shanghai Tower.
Regarding the relationship between Dada Group and JD.com, Philip Kuai, then CEO of Dada Group, stated in an interview with our newspaper after the listing ceremony: "Dada has such a deep relationship with JD.com that it is unreasonable to deliberately separate from it. In fact, we have a very good win-win relationship, which is to maximize the win-win for everyone. The prospectus also disclosed that the proportion of JD.com's revenue in Dada Group decreased very quickly, only about 30% in the first quarter of this year (2020). In other words, the sources of Dada's revenue are very diversified, the absolute value of JD.com is increasing, but the proportion is decreasing."
However, it was also from 2020 that JD.com began to realize that there was an opportunity for the integration of instant retail and B2C shelf e-commerce to meet consumers' multi-level consumption needs. Retail e-commerce industry expert and founder of Beijing Bailian Consulting, Zhuang Shuai, pointed out to the reporter: "With Meituan's continuous investment and development in instant retail business, the competitive pressure on JD.com's instant retail business is also increasing. It needs to establish a differentiated competitive threshold through the synergy with the main site's shelf e-commerce business."
JD.com gradually intended to strengthen deeper cooperation with Dada Group in business. After Dada Group's listing, there was also greater pressure for performance growth, and the relationship with JD.com underwent subtle changes, turning into a desire to obtain more support from the major shareholder JD.com in business. In mid-2020, the reporter learned from insiders of Dada Group that the ongoing "Natural Selection" project cooperation between JD Daojia and JD.com had significantly increased the traffic of JD Daojia's business.
However, the progress of Dada and JD.com's cooperation in instant retail seems to be somewhat below the expectations of JD.com's management. Less than a year after Dada Group's listing, the major shareholder JD.com decided to increase its holdings in Dada Group to more conveniently and directly promote the development of instant retail business.
In March 2021, JD.com announced that it would subscribe to newly issued common shares of Dada Group for $800 million, increasing its equity ratio from 46.46% to about 51%. After completing the transaction in February 2022, JD.com further increased its holdings in Dada Group for $546 million in cash and some strategic resources, holding about 52% of the shares. After the transaction, Dada Group was consolidated into JD.com.
Soon after, in August 2022, Philip Kuai retired and resigned as CEO and chairman of Dada Group's board of directors, and JD.com officially took over the specific business of Dada Group.
New battle of instant retail
"Before 2020, JD Daojia was the industry leader in the field of instant retail. In the following three years, due to Meituan's increased investment in instant retail and the advantage of its ground promotion team and rider scale, it surpassed JD Daojia in terms of growth rate and GMV scale." Zhuang Shuai pointed out that the reason behind the change in market structure is on the one hand, JD.com, in order to cope with competition from Pinduoduo, Douyin, and Kuaishou, was unable to make more investments in instant retail business; on the other hand, due to the internal organizational restructuring of JD.com, instant retail was affected to a certain extent.In 2021, JD.com increased its stake in Dada Nexus to a controlling position, reflecting its long-term optimism and strategic adjustment for the instant retail market. On the eve of the "Double 11" shopping festival in 2021, JD.com partnered with Dada to launch the Hourly Purchase service. JD's Hourly Purchase integrates all capabilities, including JD Daojia, Dada Express, and the Haibo system, representing a collection of all service capabilities within the JD ecosystem that can provide hourly delivery of goods.
In the second quarter of 2022, JD's Hourly Purchase continued its rapid growth trend, with GMV increasing by more than double year-on-year. As an important traffic entry point for Hourly Purchase, the "Nearby" channel on the JD App has covered all cities where Hourly Purchase has been launched nationwide. Driven by increased exposure, click-through rates, and conversion rates, the GMV of the "Nearby" channel grew by more than 80% quarter-on-quarter.
In August 2022, Xin Lijun, then CEO of JD Retail, became the new chairman of the board of Dada Nexus. The new management structure of Dada Nexus also reflects JD.com's emphasis on instant retail business.
From an industry background perspective, the "2022 China Instant Retail Development Report" released by the China Chain Store and Franchise Association (CCFA) shows that the scale of China's instant retail open platforms is steadily increasing, with the potential to reach a scale of 1.2 trillion by 2025.
Xin Lijun, then CEO of JD Retail and chairman of the board of Dada Nexus, regarded instant retail as a must-win battle for JD Retail, stating that "instant retail is an important part of JD's efforts to provide consumers with a more 'more, faster, better, cheaper' consumption experience, and it is also an important part of working with merchants and brand partners to face external challenges and achieve steady growth."
In 2023, Xin Lijun promoted JD's three-kilometer model for instant retail. This model, centered on the three elements of instant retail—immediate demand, local supply, and immediate delivery—achieves an efficient closed loop within 3 to 5 kilometers, where "consumers place orders, stores ship goods, and products are delivered within hours," providing a clear direction and model guidance for JD's instant retail business.
In December 2023, Xin Lijun resigned from his position as chairman of the board of Dada Nexus due to personal reasons, and Dan Su, CFO of JD.com, succeeded him.
Entering 2024, JD.com continues to increase its investment in instant retail business. In March of this year, JD's Hourly Delivery service announced that it would lower the free shipping threshold to "free shipping for orders over 29 yuan," with no limit on the number of times. Data shows that after JD lowered the free shipping threshold for Hourly Delivery, the number of users placing orders on JD Hourly Delivery increased by 25% quarter-on-quarter.
In May of this year, JD integrated its existing Hourly Delivery and Home Delivery services into a new brand image called "JD Second Delivery," and launched a Second Delivery section in the most core position on the JD App's homepage, demonstrating the importance attached to this business.It is understood that as of May 2024, JD's second delivery service has covered more than 2,300 counties, districts, and cities across the country, with more than 500,000 cooperative stores, covering all categories of goods, including fresh food, supermarket convenience, wine, mother and baby, pet medicine, mobile 3C, etc.
"JD's planning and tactics in the instant retail business, including the launch of hour purchase, JD second delivery, and even JD vegetable purchase, aim to build a diversified and all-round instant retail service system. These measures have to some extent enhanced JD's competitiveness in the instant retail market," said Zhao Zhenyin.
In September, JD once again took action and announced the acquisition of all shares of Dada Group held by Walmart, with JD's shareholding in Dada Group reaching about 63.2%.
"JD has clearly defined the main station as the core development platform, and instant retail has evolved from JD hour delivery to JD second delivery, which will basically fully integrate into the main station, develop in conjunction with the shelf e-commerce platform, and obtain differentiated advantages," Zhuang Shuai said. The pattern of two superpowers (Meituan Flash Purchase, JD Second Delivery) and many strong powers (Ele.me, Dingdong Vegetable Purchase, Douyin, Hema, etc.) in instant retail has been formed. JD Second Delivery is one of the two superpowers, and currently, it only needs to increase the recruitment of couriers and improve the urban operation system, increase supply and strengthen platform operation capabilities, and further enhance user experience. The improvement of these four capabilities will become the opportunity for JD Second Delivery to achieve further growth.
It is worth noting that after Meituan gradually extended its business territory from catering takeaway to instant retail, JD also extended its business territory to Meituan's stronghold of catering takeaway. At present, some catering brands on JD Second Delivery are "merchant self-delivery," and some are provided by "Dada Second Delivery." However, in terms of the number of catering brands and quantity on JD Second Delivery, there is still a significant gap compared to Meituan.
In August 2024, Dada Group underwent another high-level adjustment, and Guo Qing, a former member of Meituan's highest decision-making layer S-team, became the new chairman of the board of Dada Group. What kind of changes this will bring to Dada Group and JD's instant retail business is still worth observing.