Analysis of the third quarterly report of the three giants of e-commerce: Who can get rid of the vortex of "involution"?

Wen Chengyu is a professional investor and a columnist who understands unicorns

At present, Alibaba has disclosed the interim report of fiscal year 2022. JD.com and Pinduoduo Inc. disclosed the third quarterly report of fiscal year 2021. All three companies are representative companies in China's e-commerce industry. Combined with the financial reports of the three companies, the net profits of Ali and JD.com decreased year on year, showing a weak state. Although Pinduoduo Inc. 's revenue failed to meet market expectations, its net profit turned into a profit. The performance is already quite bright.

Then, why do e-commerce giants, who used to be all-powerful and swallow thousands of miles like tigers, now have the phenomenon of weak profits? However, the emerging e-commerce tiger is full of vitality. What laws does this reflect? I think their financial statements and the relevant data of the Bureau of Statistics may show some problems.

First of all, let's look at the latest quarterly reports released by the three companies so far. However, because the current financial reports of the three companies cover different time periods, it is impossible to make a direct comparison between the data of the three companies. Therefore, for the analysis of financial reports, we adopt the way of longitudinal analysis of their respective companies.

I. Alibaba

Alibaba's fiscal year runs from April 1 of that year to March 31 of the following year. Therefore, its interim report actually covers the financial data of the second and third quarters of each year. According to Alibaba's financial data, we extracted its interim income statement from 2019 to 2021. As follows:

First of all, we found that Ali's net profit is declining year by year.The most direct impact on the decline of net profit is not from his operating profit, but "interest income and net investment income". The income of this subject has not only declined year after year, but also dropped particularly sharply in 2021, reaching 91%. Ali's explanation for this is that the main reason is that in the three months ended September 30, 2021, the market where the shares of listed companies held by us were invested in capital changed and the profits were lost, while the same period in 2020 was a profit. In the same period of 2020, the revenue decreased year-on-year. Ali's explanation is:The main reason is that when we obtained 33% of the shares in the three months ended September 30, 2019, the one-time income of the people was 692 yuan, which was partly offset by the fair value of the shares we invested in the three months ended September 30, 2020.

That is to say, the biggest impact on this subject is the market price changes of equity securities invested by Ali. It is the decline in the market price of the equity invested by Ali that leads to the decrease in the income of this subject. It can be seen that this subject actually has a great impact on Ali's profit. This is because Ali's assets of 262.611 billion yuan belong to "equity securities and other investments", accounting for 15.54% of the total assets.

If we look up from the net profit account, we will find that there is an account called "investment profit and loss calculated by equity method". Without the contribution of this subject in 2021, Ali's net profit will be much worse than it is now. This subject has also become a major subject affecting Ali's net profit. This account mainly comes from the income brought by the account of "investment accounted by equity method" in Ali's balance sheet. Mostly from Ant Group Co., Ltd.. The growth in 2021 mainly comes from the change of fair value of assets held by Ant Group Co., Ltd.. Ali's total assets in this subject are 214.54 billion yuan, accounting for 12.43% of the total assets.

Then, from the analysis of the above two types of subjects, Ali's investment business has a significant impact on Ali's net profit. Changes in the fair value of assets in these subjects directly affect Ali's net profit. Ali has 27.97% of its assets in this category. It can be seen that the investment business is also a significant business for Ali. This feature is the same as Tencent we analyzed before(See "The Mystery of Tencent's Third Quarter Profit and Loss"). Tencent also lost more than 1.1 billion in its "comprehensive income" in the third quarter because of changes in the fair value of its assets. Only Tencent put the profit and loss of such assets into the "Comprehensive Statement of Comprehensive Income", which did not cause the book loss of "net profit". Ali, on the other hand, put it directly into the income statement. Become an important force affecting net profit.

However, the impact of investment subjects on net profit should be based on operating profit after all. Therefore, the analysis of Ali's profitability should be based on the analysis of operating profit. However, Ali increased its stake in Gaoxin Retail (RT Mart) in this fiscal year, which led to the consolidation of Gaoxin Retail. Therefore, when we analyze, we must have an analysis after eliminating Gaoxin retail data.

Therefore, we have made the following analysis of the data in Ali's income statement:

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It can be seen from the table that Ali's operating profit has the following characteristics:

  • Gross profit margin continues to decline
  • The intermediate cost rate remained stable
  • Operating profit margin continues to decline

From the above,The fundamental problem encountered by Ali is the continuous decline of gross profit margin.Ali's explanation for this is:Mainly due to the increase of direct sales ratio due to the increase of high retail sales, the cost of storing goods has increased.It is because the proportion of direct business has been boosted by Gaoxin Retail. But after we excluded Gaoxin Retail (RT Mart), we found that Ali's gross profit margin was still declining. This is not the problem of Gaoxin Retail. This is Ali's own problem. Moreover, although Ali's intermediate expense rate has not changed, we can find that its "sales and marketing expenses" have increased rapidly from Ali's income statement. We made a comparative analysis of this:

As can be seen from the above table, there are the following trends between Ali's sales and marketing expenses and revenue:

  • Sales and market expense rates continue to rise
  • The growth rate of income is declining. After excluding the share of Gaoxin Retail in 2021, the income growth rate dropped significantly.
  • The growth rate of sales and marketing expenses themselves is getting higher and higher. And faster than the income growth rate

To sum up the above, we can get the following information:

1.Ali's income growth rate is declining.

2.Gross profit margins are declining.

3.The rate of sales and marketing expenses keeps rising.

4.The growth rate of sales and market expenses is obviously faster than the growth rate of income. And the growth rate is getting higher and higher.

These four points of information can make us clearly feel that the business environment faced by Ali seems to have entered a certain bottleneck period. The increase in sales and marketing expenses did not bring about the increase in revenue and gross profit margin. On the contrary, the situation of both is still declining. As for the high growth rate of sales and market expenses, Ali's explanation is:The increase is mainly due to the increased market and promotion of our mobile business apps (including Amoy, Amoy, Lazada and Amoy).In other words, Ali's high growth in sales and market expenses is to expand its share in the field of mobile e-commerce. However, judging from the results of revenue and gross profit margin, it seems that Ali's efforts are not ideal. On the surface, Ali has met a strong opponent in the field of mobile e-commerce. However, we should pay attention to,Once the gross profit margin of an enterprise continues to decline, it is necessary to consider whether there is a problem in the overall market faced by the enterprise.Because, although gross profit margin reflects the competitiveness of enterprises' products and services in the overall market, if the market itself shrinks, then no matter how strong the product competitiveness is, it will not bring the growth or stability of gross profit margin. Without the support of market demand, the competitiveness of enterprises' products or services will not be displayed.

In this regard, we obtained the data of "online retail sales of physical goods" from the National Bureau of Statistics. Considering that Ali's current financial report reflects the situation in the second and third quarters. Therefore, we also processed the data of the Bureau of Statistics. Exclude the data of the first quarter contained in the data of the first three quarters of each year from 2019 to now. The following table is obtained:

It can be seen from this table that in the past three years, the growth rate of "online retail sales of physical goods" in the second and third quarters has also been declining. Especially this year, the year-on-year growth rate is not as good as a fraction of last year. This is consistent with the trend of income growth rate and gross profit rate in Alibaba during the same period. About 85% of Ali's income comes from business. That is, online and offline business services. Most of them are online business services. So,Ali's income growth rate is declining, gross profit rate is declining, sales and market expense rate is rising, and behind the declining operating profit rate is the declining market growth rate of the whole Chinese e-commerce industry. Especially in the second and third quarters of this year, its growth rate was directly a cliff-like decline.It is the decline of e-commerce market power that makes Ali's income growth drop sharply, resulting in Ali's gross profit rate and operating profit rate getting lower and lower. More and more resources are invested, but less and less returns are made. Ali is becoming more and more involuted. The involution of individuals originates from the stagnation of society. What about JD.com?

Second, JD.com

JD.com's net profit in the first three quarters of this year fell like a cliff. The specific reasons also involve investment business and main operating business. Let's take a look at JD.com's income statement for the first three quarters in the past three years:

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From the table, we can find that "investment income calculated by equity method" and "other net", two investment subjects, have a significant impact on JD.com's net profit.

  • "Investment income calculated by equity method": This subject has changed from 2.611 billion yuan last year to 645 million yuan this year. This loss was mainly caused in the third quarter of this year. JD.com's explanation for this is that it is mainly due to a number of profit-seeking methods to calculate the non-profit value of invested funds.
  • "Other net": According to JD.com's interpretation, this account is a comprehensive account and contains the following contents:Others are other non-economic profits/(lessons), mainly including the income/(loss) of long-term investment in fair value, the income/(loss) of investment and capital, the value of investment in resources, government supplements, interest income and income/(loss).In the first three quarters of last year, the income of this subject was 11.544 billion yuan, while this year it lost 568 million yuan. JD.com's explanation for this situation is:The decrease in other accounts is mainly due to the decrease in the share price of listed companies, resulting in the loss of the fair value of the certificates of investment.According to JD.com's third quarterly report, JD.com holds "securities investment" of about 21.9 billion yuan in the current period.

From these circumstances, JD.com, like Ali, investment business is also a major impact on its net profit business. Similarly, these businesses also have an impact on net profit on the basis of operating profit. When we look at JD.com's income statement, we can find that JD.com's operating profit has dropped sharply before the investment business came into play. Therefore, JD.com's fundamental problem lies in his main business. A sharp decline in operating profit.

Then, we analyze the information of the operating profit part of JD.com's income statement as follows:

JD.com is different from Ali and Pinduoduo Inc. in that its revenue mainly comes from self-operated business. In other words, it is actually a channel business. Then, this leads to its real revenue not "revenue" on the income statement, but gross profit after subtracting operating costs from revenue. Because as a channel, his business model is to buy and sell according to the contract with suppliers. What really belongs to him is the gross profit between buying and selling. Therefore, our analysis of expense rate and revenue growth rate is based on JD.com's current gross profit.

From the data in the table, we can get the following information:

1. JD.com's operating profit margin fell precipitously in 2021

2. The decline in operating profit margin is due to the decline in gross profit margin and the increase in expense ratio

3. Among the expense rates, the most influential ones are marketing expense rate and performance expense rate.

4. Both the marketing expense rate and the performance expense rate have increased obviously.

That is to say, JD.com also suffered the same gross profit margin reduction problem as Ali this year. However, at the same time, its most important performance expenses and marketing expenses have also increased significantly. Among them, the performance fee rate has increased for three consecutive years. JD.com's compliance expenditure is mainlyIncluding purchasing, purchasing, distribution, customer service and payment.Estimates are mainly logistics costs. Inflation in the field of means of production is serious this year, and it is inevitable that logistics costs will rise. As the gross profit rate declines and the expense rate rises, the operating profit rate also encounters a double squeeze. It's no surprise that the cliff-like decline.

The decline in JD.com's gross profit margin may reflect the situation of the consumer market more directly than Ali. Because JD.com is a channel provider and Ali is a platform service provider. JD.com sells goods directly by himself. Therefore, his gross profit margin can directly reflect the cold and hot market. Then, we have compared and analyzed the "online retail sales of physical goods" of the National Bureau of Statistics in the first three quarters of the past three years, as follows:

It can be seen that the growth rate of online retail sales of physical goods in the first three quarters of the past three years has been declining continuously. Although the growth rate in 2021 is not much lower than that in the same period in 2020, if we review and analyze Alibaba, we find that the online retail sales of physical goods in 2Q-3Q have dropped like a cliff year on year, we can understand that the market impact on JD.com should mainly occur in 2Q-3Q. Based on this, we can judge that the harsh market environment has caused substantial damage to JD.com's gross profit margin.

Therefore,This year, not only the gross profit rate decreased and the marketing expense rate increased due to the sharp decline in the growth rate of the e-commerce market in JD.com, but also the inflation in the field of means of production led to a significant increase in the performance expense rate. Compared with Ali, JD.com's impact came from two aspects. Therefore, it is inevitable that his operating profit rate will fall precipitously.

III. Pinduoduo Inc.

After Ali and JD.com showed us an involution picture of desperate struggle in the declining market power, Pinduoduo Inc. seemed to bring us a fresh warm wind. It made a profit of 1.149 billion yuan in the first three quarters of 2021. The loss in the same period last year was 5.803 billion yuan. Let's take a look at Pinduoduo Inc. 's quarterly income statement for the past three years:

The above statements are translated from Pinduoduo Inc. English statements. It can be seen from the table that Pinduoduo Inc. 's "interest and net investment income" and "net other income" also have a great impact on the net profit in the first three quarters of 2021. Among them, "interest and net investment income" has continuously had a great impact on Pinduoduo Inc. 's net profit in the past three years. According to the disclosure of Pinduo's multi-year report,"Interest and net investment income" mainly comes from the interest and investment income of its deposits and wealth management products. This is different from Ali and JD.com, which mainly come from stock investment. As for "other net income", it is mainly deferred revenue related to value-added tax. This is also different from JD.com's investment income.

It can be seen that Pinduoduo Inc. does not have much investment business. His income mainly comes from his main business. That is, operating income. Therefore, we have made the following analysis on the main business data that generate Pinduoduo Inc. 's operating profit:

From the table, we can get the following information:

1. Pinduoduo Inc. 's income growth rate is not only high, but also more than doubled in the first three quarters of 2021

2. The cost rate is declining

3. Operating profit margin has greatly improved in 2021

4. The sales and market expense ratio continues to decline

5. But gross margins continue to decline

From the above, we can clearly see that Pinduoduo Inc. 's business quality is improving rapidly. In particular, the substantial increase in revenue has led to the continuous decline of its expense rate, especially the sales and market expense rate. Especially in 2021, this trend is accelerating. This is equivalent to saying that Pinduoduo Inc. needs less and less resources to earn income. The market seems to be particularly fond of Pinduoduo Inc..

And where is the reason for the decline in Pinduoduo Inc. 's gross profit margin? Revenue and operating costs determine gross profit margins. Pinduoduo Inc. 's income has increased greatly, so the decline in gross profit margin can only show that his operating costs have increased faster.

That's true. So what does Pinduoduo Inc. 's operating cost include? According to Pinduoduo Inc. 's financial report, the increase in operating costs is mainly due to transaction fees, cloud service fees and logistics fees. These are all important and necessary costs of Pinduoduo Inc. 's main business. And considering that Pinduoduo Inc. is a start-up. In the rapid growth period of enterprises, the improvement speed of internal management efficiency can not keep up with the high speed of business development, which leads to the phenomenon that the operating cost rises too fast. This is a normal phenomenon. Some related media have reported the internal management problems of Pinduoduo Inc. before. Therefore, we think that the increase in gross profit margin in Pinduoduo Inc. may be related to its growth stage. With the substantial growth of business volume, the difficulty of management has increased, and the operating cost has risen too fast.

So, what is the overall e-commerce environment in Pinduoduo Inc.? It is at least in the same e-commerce environment as JD.com. The online retail sales data of physical goods in the first three quarters are as follows:

In the same market environment, Pinduoduo Inc. and JD.com have produced completely opposite business results. If Ali is also considered recently, Pinduoduo Inc. can be described as completely counterattacking two e-commerce bosses. This growth rate of income and operating profit can really envy the two bosses. The size of JD.com and Ali can be described as absolute "monopoly position" in the field of e-commerce. But why do they seem powerless in front of Pinduoduo Inc.? JD.com's net profit also let Pinduoduo Inc. give counterattack!

I think this is different from the market positioning represented by Ali, JD.com and Pinduoduo Inc.. Ali and JD.com are established Chinese e-commerce companies. The network covered lies in the consumer market of the first, second and third tier cities. Pinduoduo Inc., on the other hand, focuses on low prices, focusing on the sinking and low-end consumer market. From the involution picture of Ali and JD.com, we can see that the power of the consumer market they represent is declining, while the low-cost consumer market in Pinduoduo Inc. is expanding. Especially in the second and third quarters of this year. The growth rate of online retail sales of physical goods fell precipitously. Behind this must be a sharp drop in transaction volume and average transaction unit price. Combined with the financial reports of the three home appliance companies, we can find that Pinduoduo Inc. 's revenue increased greatly during the same period. However, the revenue growth rate of Ali and JD.com has dropped sharply. IIIThe picture of the company's revenue just matches the overall scene of the cliff-like decline in the growth rate of online retail sales of physical goods. This shows that China's e-commerce market is undergoing structural changes:The level of consumption is constantly decreasing. Consumption power is flowing downward.

At the same time, we can also see from the comparison of the three companies that from the financial statements, in the world of the Internet, scale does not mean anything. High scale does not necessarily have monopoly conditions. On the contrary, it may be threatened by emerging companies that are more suitable for the market. The world of the Internet is flat. The status of Jianghu is to see who can better meet the needs of users.


# 老虎财报热评

Disclaimer: The above content represents only the personal views of the poster and does not constitute investment advice on this platform.

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  • 哎呀呀小伙子
    ·2021-11-29
    为什么我总觉得未来的快手或者抖音能颠覆电商这个赛道?
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  • 梅川洼子
    ·2021-11-29
    第一次见有人把这三家公司放一起比较,有点意思。
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  • 权力的游戏厅
    ·2021-11-29
    阿里云和阿里的广告业务已经跟电商形成三分天下了。
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  • 以肉克刚
    ·2021-11-29
    最不看好的就是拼多多了,靠病毒式砍一刀和补贴的市场是不可持续的。
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  • 德迈metro
    ·2021-11-29
    多多大跌不是因为财报,二十因为转向农产品这件事情让市场没有了预期。
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  • 灌饼高手00
    ·2021-11-29
    大强子 的京东搞的是电商里面最赚钱的电器,物流也是自建的,所以护城河最深最看好。
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  • 迪士尼迪斯尼
    ·2021-11-29
    黄峥卸任的椅子还没凉,多多这艘船的航向就被改变了,有点不可思议。
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  • 丹尼尔加
    ·2021-11-29
    你最看好 的拼多多或许是最满意前途的,财报大大的不及预期。
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  • 刀哥拉丝
    ·2021-11-29
    中长线看还是阿里最有潜力,现在阿里的收入,电商已经不占主导了。
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  • 玉米地里吃亏
    ·2021-11-29
    阿里巴巴的财报其实也还行的,利润下降是不是因为罚款计提了?
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  • 灯塔国02
    ·2021-11-29
    市场已经给出了答案,这三家财报谁好谁不好一目了然。
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