Jiangnan Mall's journey was not smooth sailing. The previous e-commerce war had attracted many merchants and buyers. However, as the war ended and subsidies disappeared, 80% of the buyers vanished along with them.
These buyers, drawn by discounts, left once the incentives were gone. Furthermore, the e-commerce experience in 2003 was incomparable to that after 2008, and logistics were nowhere near as swift as in later years. Considering these factors, 80% of buyers quickly departed after the subsidy period. Fortunately, 20% remained, numbering around four to five million people, which was enough to sustain the balance of an e-commerce platform.
This situation made things very difficult for sellers. To attract substantial customer numbers, they had to engage in price wars, leading to intense internal competition where many sellers struggled to turn a profit.
To maintain seller vitality, Jiangnan Mall often provided rebates to ensure seller profitability. Consequently, Jiangnan Mall's operating revenue was not high. The total merchant turnover for the year was around 60 billion yuan. Jiangnan Mall's profit from commissions was 900 million yuan, and advertising revenue was 1.1 billion yuan, totaling about 2 billion yuan. This was far from the extravagant revenues of Alibaba and Taobao in later years.
When factoring in Jiangnan Mall's operating costs, the company actually incurred a loss for the year. However, it was believed that the advent of smartphones would resolve these issues.
The true catalyst for the explosion of online e-commerce in later years was the smartphone shopping platform. With a phone in hand, users could browse for items during idle moments while walking or commuting, and immediately search for something they needed, rather than needing to open a computer and log into a website.
This was the ultimate form of e-commerce.
Even without smartphones, the situation in 2004 was significantly better, with a substantial increase in active user numbers. The 80% of users who had previously disappeared seemed to remember the affordability of online shopping, occasionally logging back into their accounts to make purchases.
Next was Jiangnan Optoelectronics. This company’s revenue was also staggering. Jiangnan Optoelectronics' primary business was the production of memory chips. The memory chips incorporating the special substance known as Black Gold possessed capabilities far exceeding those of comparable products, and were impossible for competitors to replicate. They couldn't even discern the composition of the substance added to the chips.
Moreover, the ex-factory price of these chips was about one-third cheaper than traditional chips with equivalent storage capacity. As a result, upon their market debut, these products were virtually unbeatable. Within a very short period, they had captured the entire domestic market and even a significant portion of the international market. By the time competitors reacted and began drastically reducing their own product prices to match Jiangnan Optoelectronics' performance and price point for memory chips, Jiangnan Optoelectronics' memory chips had already secured about 11% of the global market.
However, this situation was destined not to last. Jiangnan Optoelectronics' memory chips offered superior stability compared to competitors' products, and their production cost was only about one-fourth that of competitors. At the current price, Jiangnan Optoelectronics could still achieve enormous profits. If competitors continued to sell at this price, they would inevitably incur losses; they were merely forced to do so to maintain their market share. Every day they persisted in this manner consumed significant company funds, effectively amounting to slow suicide.
If this continued, within a year, all these memory chip manufacturers would go bankrupt.
However, many countries were preparing to increase import tariffs on Chinese electronic chip products, thereby artificially raising the prices of Jiangnan Optoelectronics' products to help maintain the competitiveness of their own memory chips.
Jiangnan Optoelectronics had no perfect solution for this. Fortunately, these countries dared not push things too far, and the increase in tax rates was limited. The market would likely still maintain around a 10% share, with a total operating revenue of approximately 900 million US dollars for 2003.
But this was not a significant concern. Currently, Jiangnan Optoelectronics' memory chip production technology was still at a relatively low level, allowing foreign chips to maintain a comparable technical standard.
However, once Jiangnan Optoelectronics' chip production level caught up with the times, meaning when Jiangnan Optoelectronics introduced new-generation lithography machine technology and natural chip technology, the resulting memory chips would be like a Gatling gun against a flintlock musket.
Jiangnan Optoelectronics’ production cost for a 1TB memory chip would be the same as its competitors' production cost for a 1GB memory chip. At that point, they could raise tariffs to a hundred thousand percent if they wished.
Furthermore, if some countries were preparing their citizens to never use the world's most advanced electronic equipment, then so be it.
In addition to the direct sale of memory chips, Jiangnan Optoelectronics' own manufactured "finger disks" were also bestsellers both domestically and abroad. In one year, nearly 20 million finger disks were sold, generating around 300 million US dollars in revenue. Combined, this amounted to 1.2 billion US dollars, equivalent to approximately 9.6 billion yuan, making it the third most profitable company within the Jiangnan Group.
In addition, there were two other subsidiaries solely belonging to the Jiangnan Group: Jiangnan Technology and Jiangnan Railway Transportation Technology Development Company.
However, both of these companies were currently research and development units with no revenue, so they were not included in the statistics.
In summary, Jiangnan Group's total operating revenue for 2003 amounted to 43.66 billion yuan. However, the actual complete statistical data was 43.832 billion yuan, which converted to a total revenue of 5.475 billion US dollars.
Since the Fortune Global 500 ranking is based on operating revenue, the company at the very bottom of the ranking was Kawasaki Heavy Industries, with an annual operating revenue of 10.1 billion US dollars.
Viewed from this perspective, Jiangnan Group was still half the distance away from the Fortune Global 500. It was therefore understandable that Fortune magazine did not include Jiangnan Group in the Fortune Global 500. The future of Jiangnan Group was indeed long and arduous.
However, many people felt that the Fortune Global 500 ranking was unreasonable. They argued that the Fortune Global 500 should not be calculated solely based on operating revenue, but rather on profit.
Otherwise, if a company disregarded all profits and even sold products at a loss, wouldn't it be able to easily ascend to the Fortune Global 500 list?
So, if a Fortune Global 500 were to be compiled, shouldn't it be based on profit?
If that were the case, let’s examine which company had the lowest profit among the Fortune Global 500.
The results were astonishing. The most unfortunate was Time Warner, which had a profit of negative 98.6 billion yuan in 2003, meaning a loss of 98.6 billion US dollars.
Of course, this was an extreme outlier. Most companies were profitable, but their profits were generally below 1 billion US dollars. Only about 20% achieved profits exceeding 1 billion US dollars.
The remaining 40% of companies generally had profits around 300 million US dollars. Among them, Kawasaki Heavy Industries, the last-ranked company in the Fortune Global 500, had a profit of 100 million US dollars in 2003.
So, the question arises: what was Jiangnan Group's profit in 2003?
To answer this, we needed to calculate Jiangnan Group's operating costs for 2003.
Excluding the 60 billion yuan in loans, Jiangnan Group's main costs were divided into three major categories: research and development costs, server maintenance and network costs, and commercial network costs.
The highest was research and development costs. In 2003, Jiangnan Group invested a total of 1.8 billion US dollars in R&D. Jiangnan Optoelectronics, a major component, spent 1.2 billion dollars, while Jiangnan Technology received an investment of 600 million dollars.
Jiangnan Optoelectronics was responsible for the lithography machine and computer chip R&D led by Ni Guangnan, and new material R&D led by Tong He.
Jiangnan Technology primarily focused on natural chip R&D, network technology R&D, and the accelerating development of smartphones.
It was terrifying to note that Jiangnan Group's 1.8 billion US dollar R&D cost represented 33.3333% of its total revenue of 5.4 billion US dollars, meaning one-third of its revenue was poured into R&D.
Currently, the R&D costs for all large enterprises generally accounted for about 5% to 20% of their total revenue. Companies investing one-third of their revenue into R&D were rare, representing only about 1% of all enterprises.
In addition to R&D cost investments, server maintenance costs and network costs amounted to about 300 million US dollars. However, this was already the ceiling level of costs in China, given that Jiangnan Group's network traffic was also at the top tier domestically.
Finally, commercial sales network costs, which were the expenses for Jiangnan Commerce to maintain its physical store presence nationwide. Currently, Jiangnan Group had over 1,500 physical stores and 60,000 mobile stalls across the country. Coupled with other miscellaneous personnel costs, the total cost was approximately 400 million US dollars. The cost for Jiangnan Group to procure blind box products was about 500 million US dollars. These two combined amounted to 900 million US dollars.
These three major cost categories totaled 3 billion US dollars. Of course, there were other miscellaneous costs from various companies, totaling about 200 million US dollars. Thus, Jiangnan Group's total cost reached 3.2 billion US dollars.
5.4 billion minus 3.2 billion left a net profit of 2.2 billion US dollars.
Indeed, Jiangnan Group's net profit for the entire year 2003 reached an astonishing 2.2 billion US dollars. As mentioned earlier, 80% of the companies in the Fortune Global 500 had profits less than 1 billion US dollars. Based on this alone, Jiangnan Group could rank within the top 100 of the Fortune Global 500.
If compared to the profits of these top 100 companies, Jiangnan Group's actual ranking would be around 78th.
This meant that if a Fortune Global 500 were designed solely based on operating revenue, Jiangnan Group's operational capability would rank 78th worldwide. This was an absolute figure that would undoubtedly bring joy to the entire nation, with people exclaiming that the Chinese people now had their own Fortune Global 500!