Q3 2020 JD.Com Inc Earnings Call
Thank you operator, and welcome to all <unk> on our Twentytwenty earnings Conference call. Joining me today on the call on monthly she feel on Genie retail Mr. Jones day, while you on P logistics.
On the cheap on her CFO and my somebody on Rcs on.
For todays agenda, Andy will discuss highlights for the spot on 20, and other management will join the <unk> session.
Before we continue I refer you to our Safe Harbor statement in the earnings press release, which applies to this earnings call as we will make forward looking statements.
Also on this call he told discussions on certain non-GAAP financial measures. Please refer to our earnings release, which content on recalculation on non-GAAP measures to the most directly comparable GAAP measure.
I don't like pitch in on that I like otherwise stated all Fieger's mentioned during this conference call I am on B now I would like to turn the call over to our CFO Sandy.
That's true you Hello, everyone. Thank you for Tony on earnings call. Today, We are pleased to report a strong set up initially, though [laughter] third quarter on Twentytwenty.
We delivered a solid performance, yes, seasonally light quarter and that's moving.
From an operating and financial metrics.
Did you mean by simple in contributing to the society and supporting the recovery of really called on it.
We have opened up our retail ecosystem.
South field supply chain infrastructure and technology capacity, we empower our suppliers, our merchants and our business partners.
We love our business with a long term philosophy and pursue new long term sustainable growth.
Our mission is to improve operating efficiency, so the supply chain through technology innovation.
And we shared growth opportunities and economic benefit with our stuff business partners and society.
Our Oh, we moving effort into putting society and our users continued to gain positive recognition and we chopped for more and more consumers.
This has been reflected in our solid growth of active users and improvement in new they engagement.
Across different tier cities.
Our new active customers in the past 12 months reached 442, moving I'd be more than 100 moving customers I'll.
32% from a year ago [noise], the highest growth rate in the past three years.
We often momentum before really net additional customers compared to last quarter the largest expansion in the seasonally light September quarter in our history.
They once again validates our long term operating philosophy to grow our business with a customer centric focus.
We continue to generate traction on the lower tier cities.
Which contributed about 80% of our new users this quarter.
We are also inspired by the further enhanced consumer loyalty and engagement of our coal users core.
Who appreciate the consistency of products and service quality, we deliver every day.
Oh coal users are buying products for more categories from us and more frequently.
We have become a part of many new Yorkers daily life.
It's worth highlighting that our DD perks members exceeded 10 he meeting in October.
An important milestone for our paid membership program.
Depends on what the first pay the E Commerce membership program in China debt.
Decide to better serve our core users.
Besides the benefits offered on TV App, such has shopian rebates and free shipping Kupol DB plan has partnered with over 600 industry, leading brands to provide our members with comprehensive privileges in sectors, such as moving PK treble.
Hotel bookings Phoenix education dining and entertainment on.
Our data shows that DB plan has effectively improved the engagement and retention of our coal users.
As our plus members shop more frequently we the ARPU average revenue per user that is multiple times higher than that of non class members.
By integrating with the resources of our brand partners.
TD plot has also created an industry benchmark in the paid E commerce membership.
[noise], our Q3 financial results largely reflect our coal pizzuto growth with an enhanced user engagement.
We reported net revenue of 174, feeling on beat for the third quarter, a year over year growth of 29.2% maybe.
Maintaining strong growth momentum even on the back of Q2 Big peak season and over last year's high base.
General merchandise revenue grew by 35% year over year led by the supermarket and health care categories.
Net service revenue grew 43% year over year led by the accelerated growth of JD logistics and strong performance of our advertising business.
Our net service revenue contributed to over 13% of total net revenue.
Maybe another historical record.
I see commonly gradually return to normal from the peak of Kobe mentoring Optik TV logistics continued to gain trust from its business partners and the delivered accelerated revenue growth.
Besides our solid uses and topline growth.
There are few notable operating and financial performances, we want to highlight.
First day. These retail operating margin reached 3.9% in Q3, a record in our history and an improvement of 56 basis points compared to the same quarter last year.
What's notable is that our operating efficiency continues to improve even as our product mix shift from the large ticket size, but low frequency categories, such as Threec income uptime.
On the small ticket size, but high frequency consumer staple categories.
Although volume for the supermarket categories grew by over 48% year over year in Q3.
Another key metric illustrating our operating efficiency improvement is our inventory turnover days we.
We took further reduced to 34.3 sales in the last 12 months.
This is one of the lowest among the top global retailers.
And our own kids kids Teleco record.
Despite the total number of SK, new managed by US continue to increase with our category expansion.
Once again this validates the power of our scale driven business model and our long term margin trajectory.
Secondly, our free seat and home appliance categories continue to outperform the industry tremendously and we continue to gain market share.
Our unparalleled supply chain capability by to position us in particular amidst the absence of new flagship products from the leading electronics that started in Q3.
As we mentioned before our Threec and home appliance categories have significant operating and cost structure advantages over our peers, enabling us to provide the best value and service to cost consumers.
We continue to expand our supply chain capabilities further be bringing more customized products to different consumers and create value for our business partners.
Thirdly, JD logistics is another problem that example of our long term investment induces centric experience and supply chain infrastructure.
Since we opened our service to third parties in 2017.
Good day logistics has made notable progress in providing its customers with integrated logistics services to improve their warehouse management and fulfillment efficiency.
As stated on logistics gain more consumer customer recognition.
Revenue generated from third party customers contributed nearly half of JD logistics total revenue growth in September.
TB logistics also supports the growth of our three P merchants on our E Commerce platform.
Products Mark to Acs delivered by day, do logistics come with more transparency and more reliable services.
And therefore are often the preferred shopping choice of customers and help generate more organic traffic.
Moving down the line, our compute gross margin improved to 8.7% this quarter compared to 8.4% in Q3 last year.
This was mainly driven by the margin improvement to update the retail and JD logistics.
With our continuous improvement in operating efficiency, our marketing R&D NTM expense ratios in the third quarter improved across the board by 16 basis points.
30 basis points and eight basis points respectively.
Compared to the same quarter last year.
As a result, our non-GAAP operating income grew 77%.
3 billion RMB and non-GAAP operating margin was 3.8% up 82 basis points from the same quarter last year, the highest level in our history.
Moving to the bottom line on non-GAAP net income attributable to ordinary shareholders in Q3 gross at 80% year over year to 5.6 billion RMB from 3.1 billion on being in the same period last year non.
Non-GAAP net margin was 3.2% up 90 basis points from a year ago and again a historical record.
Excluding the temporary relief on the social security benefit the margin improvements we recorded in the first three quarters have clearly demonstrated the snowball effect that we continue to generate with our scale driven business model.
With our healthy profitability as a basis for.
We plan to reinvest in fast growing businesses.
Specifically the supermarket category is a key growth area that we are very committed to continuing our investment.
To further strengthen our consumer immense share and market leadership.
Our online B to C supermarket operations continue to generate growth momentum, we have been exploring various new business models in different markets to better capture the growth opportunity in this category.
Our aim is always to better serve the diverse needs of our customers with quality products and services.
Logistics infrastructure is another strategic area, we will continue to invest in to expand our integrated service capacity for the long term growth.
We will also continue to invest in our users and our people all of these investments truly reflect our long term operating fees on taxes.
Free cash flow for the quarter improved to 7.5 billion on being as compared to 63 million RMB in the same quarter last year free.
Free cash flow for the last 12 months reached over 30, feeling on beam grew by 93% year over year.
As of September 30th Twentytwenty cash on cash equivalents restricted cash and short term investments added up <unk> of 127, beating RMB.
We have a strong liquidity position.
In conclusion.
He showed remarkable receivable again in Q3 as China emerges from the pandemic we.
We delivered to both robust topline growth and year over year improvement on profitability, we're always investing in our capabilities in strategic areas.
It's quite clear that these achievements were driven by our unique business model and operating philosophy, but more importantly babies receiving is underpinned by our relentless focus on operating to value for our consumers.
I'm going to serve the empowerment of our business partners through our technology and infrastructure.
Many users I still shifting from offline to online and the E. Commerce penetration is really accelerating in many categories.
He is well prepared to capture the secular trend and we will continue to invest for the long term.
This concludes my prepared remarks, let's open the call for questions. Thank you.
[noise] [noise] gentlemen, the question and answer session of this conference call.
In order to be fair callers, who wish to ask questions.
<unk>.
More than one question please.
Request to join the queue for sure.
Again after your first question.
And if you have questions. Please press star on them.
And retrieved.
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Once again.
Once.
Yeah.
First question comes true.
Goldman Sachs. Please go ahead.
Thank you. Thank you Richard I don't.
Dong Sandy Ray on team and congratulations on a very strong results. My question was around your supermarket strategies on do you just mentioned about the investments into supermarkets.
Could you just share how how are we thinking about the strategy you will make a white house just thoughts on home where are we on the progress.
That's true selection initiatives and would you be able to share some any thoughts on new matching models like like the P. Ordering next day, so pickup model, where most people talk I mentioned as the community groups such as how do we think about these.
Given we do have a lot of strong usage and supply chain capabilities Vic.
[noise] [noise] [noise].
Thanks, Jonathan Oh, you're on your question regarding supermarkets and fresh I think first of all on this is a huge market and we have us in a structural opportunity for this category.
So so this will definitely be a strategic priority P. Four hour.
And we have as I mentioned, just now we have demonstrated to approve to the business model for our traditional b to C operations and now we have we have experimentation and we are also exploring different business models or initiate.
In this area covering a top tier cities and lower tier market.
So so because this is a huge market we understand that there are many companies entering into the market, but we believe by until the day there will be quite a few players Oh, we don't have to compete head to head at this stage. So so the fact is on you know fresh produce.
Even more on top of category for ecommerce operate on retail.
Due to the loans ticket size and high loss ratios during the production and fulfillment process. So you.
You know, we don't believe subsidy is a competitive advantage on the people buying.
Find a way or solution to improve the operating efficiency of the existing business processes and reduce operating costs. So they say exactly our mission on our operating philosophy. So we will continue to invest in infrastructure and our supply chain capability to be.
Our core advantages in this category or this area.
Thank you so I'm just a supplement for for the various new business models. We are experimenting that would include a you know the seventh fresh store warehouse business model on the the commitment.
Well purchase model all the distribution warehouse models.
Thank you next question.
On my strong of Jefferies. Please go ahead.
Hi, Good evening, Thanks management for taking my questions and congratulations on a strong second half results keeping our strength you shifted true.
Can you comment about how we should think about it is oh.
In 2021 and in particular, our strategies in lower tier cities on penetration and cash.
Your comments about the competitive landscape in the on.
Good day space.
Next year. Thank you.
Okay.
On the new.
Earth moving gross unit.
She left Sidney retail.
And neutral reaching a huge on though.
Good day.
Why don't you go more heavily behind the new loans.
I mentioned on on Google and doesn't go on listen only issue for them to future.
On the solidly general orders.
Our goal is doing fine. Thank you here says.
See true entry.
John Index for table.
The solution.
Orange, you're not going on.
Good day.
A a new to the impacts also Oh go on a virus. It's funny when do we see the overall growth on myself on consumption passing on growing rapidly and city in the beneficially this process and our penetration rate into the Chinese consumption market has been going up especially.
In the lower tier cities and ammonia users about 45 years old. So we believe people are shopping behaviors on my husband and anything to say.
Okay leader, who will take on those.
We will hear from her yes, yes.
Cash flow through job, so service relative to that.
Later on today.
She was on the loans.
The money on synergies in a certain new gortney, though revenues on those orders on the though Oh, well do it I really do for your country adoption through on.
Good books for nickel, but do though you got those portfolios.
Good day approval and Fortunately minimally.
Got you could have something similar growth.
Okay, [laughter] diluting would you.
On a same time, we do focus is performing how the different categories like so it's a very strong demand in the categories on health care products household products and a fresh food et cetera.
On other categories due to the impact of international supply chain or the gross income lower than expected, but overall for the Oh, we are comprehensive platform that offer all kinds of categories. So these ensure well have a very on sustainable and stable growth this year and the same time.
The leverage on the stress on supply chain and older reputations and Mike I'm not sure Oh, we have among Chinese customers to keep on legal position on this market.
I'm going to read on reservoir Moqueta human tissue pursue on seamless search on a person's jobs on no doubt [noise].
Earlier on new marquee Chicago on and we'll have a true.
Cubic Asia real questions on that hit on.
Net.
Starting to execute on.
She talking Patrick on really.
On a same time, Oh, well also continue to explore new traffic food online.
Online and offline and we're continuing to strengthen on me and capacities in terms on supply chain and our omni channel strategies on.
Based on these new.
Just on the plantings and our especially competitiveness will continue to a better position on this market.
Okay colour on that because you receive orders on to go though.
No we're working on some new level.
If I can fill in the focal on long haul, though 'cause it so that you saw.
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Option on how to John.
So moving through the course with on though so what I'm going to flow.
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Through two for two free completed the income.
Thank you this is true.
Moving on.
As we have seen that over these courses we have a very healthy gross income something new says you see on our existing users on shopping more frequently on our platform and putting new users because they already been educated and having on quite a busy on.
Other platforms when they become more mature and more on customize the online shoppers they will shift to a better platform that can provide better services for them a female that JV and the platform with the strength of supply chain and services, we have a better on competitive amazed to match the shopping.
Sales for more and more customers, so we would rather not.
For perspective to see a sustainable growth on our users day.
Google now there's no liquidity a teacher kinda, you live which will.
On a disciplined dealer.
Yes, the kupol.
Thank you GAAP if this is true.
Entirely knock on wood is equally who have you guys on the material with LG electronics yet.
On the non liter bottle.
As a either in a possible now in the future I would like to be poor oki word for our long term development. The first is cutting over user experience second we'll keep open and we'll develop on.
On the channel strategy and strength in Alberta, and attitude and focusing on supply chain. The four key areas, we'll be in a lot of revenue on Saturday and Sunday.
Thank you for your question.
Maybe they had on the phone net would have benefited that are going to sit here on funding for his as I mentioned I don't mean remark alone isn't sat on our new users for comments on larger cities in history and no longer have that our marketing has resumed on or decreasing.
That means we have a hard index and retain these users more efficiency on these were driven by our improved technology and offerings on behind on a from a platform on so so so far we have it on a healthy on their cash. So you are shifting from.
Hi, [laughter] I listened to the no big price about high frequencies.
Thank you.
Next question is going on of G.
New Street research.
Hey, good morning, good evening and thanks for taking my question. So I know that on last quarters that you guys announced like you're not going to provide guidance going forward, but given the fact that we're seeing a pretty profound seasonality weighted second to fourth quarter promotions kind of where they are perhaps could kinda give us kind of a directional view on how we should look at the fourth quarter.
On if it's kind of the similar trajectory that we should look on a year over year basis, compared with other stocking orders or any kind of color there would be a pretty helpful. On then either on the margin side. You know we've seen is a pretty significant operating margin leverage on the first nine months of year. On just you know is there any reason why we can't see that same kind of a step up on.
As shown in the fourth quarter as well, so any kind of directional view on the margin as well as Canada on the revenue side color would be great. Thanks.
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Oh sure did you said 11. It is on her question, so philosophies and tried and true really continuing to squeeze momentum from the first half yet on the day, England, a new user acquisition, particularly in those orders here on okay. So this on others would make this fall.
On to fall <unk> season.
In the past stuff on 11 promotion on offer hope and fit it all internally on patient and do you remember at Hendrick War on very healthy so far I had just mentioned.
So so I I think the trend abuse or shifting from offline to online continues and we will [noise].
Pat and focus on user acquisition engagement on it.
[laughter] color for older fossil cash flow.
But you know we also on love. The fact that we see stronger seasonality. This year actually users on an all cash I didnt hear by the E Commerce platform.
So this is a gain on a cash fall for Calpine and that's what's on often by you can now see that's the scale by net of our retail business and logistics business have been gradually new lives. So we don't see opportunity for on Saturday, we need to show E Commerce in China.
On to captive on until like on.
On to me that the extra on coffee Sadly generally in my first month on month cavity on user experience and in some of our philosophy on head grade on new business initially either leased how to gain market share in the long run so I do not see similar cash back to margins.
This maliki you before and after the last year.
Thank you next question is from Gregory Zhao please.
Please please.
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Hi, Thanks for taking my question on their congratulation on those from quadrant Armstrong. So my question is about church <unk> onshore. So when there was a group of Asian countries. The Mesa to treat it like a free trade agreement orders are reaching though on a comprehensive popular shape on is on a lot on products and services to cover.
Moving to agreement on when there was from a free cash flow from smells would be introduced a new decrease a help on any stand.
Opportunities from our jobs to China E Commerce, and also true cross border ecommerce marquee accounts.
How would you do you can take for our growth.
Opportunities friendship.
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On this issue money from kidney week sales resource to question I regard to focus on corporate costs.
It has been growing that do this year and I refer feedback on our NPS score, which is on net promoter scores on to show. The on this experience also growing rapidly we pay our highest attention to oh, the feed up on a duty free on products and the cooperation on the cross border Indeed FX.
A month due to US you can give on launching would assume unless you know me on that.
Yes, I can go on budget.
Yes, I did it do we have a good workout some crossover those ratios.
So Sean.
Oh suspicious on newly announced the news recently, you're on one day ago with new following the news and try to understand the implications on decent new regional all cooperation on <unk>. The fact is they are very positive news for both the production assumption in RCM and on Asian region.
Oh woman here, where the on loans.
Got it on the use of mobile compatible.
Moving on to me.
Because it wasn't due oh I'm sorry.
True with you with a true she on.
Well that comes on but I.
And of course, we will take four of them based on our our strength in our cooperation with the international brands and also on the supply chain capacity to catch this opportunities. So we'll watch closely on the development and does the seat opportunities to Oh corridor, that's about all of our business and thanks for question.
Thank you next question is on the line Okay.
She's gross.
Even make a light on.
I'm not sure I'd be curious on your gross margin. So we see on gross margins and not for future gross margin on and improved in the auto. However, we also know tease that guilt marketplace and advertising revenue actually grew on us.
Lower than direct sales thesis. So I'm just wondering on one TV news up behind the gross margin percentage up as it means Oh on one key about some new gross margin actually improving on July.
Hi, This is sandeep Ah that's pretty much on the Oh youre concerned about gross margin on I think for de leasing on the gross margin improvement was mainly contributed by the change on the production mix on as we mentioned that the customer purchase behavior is.
Shifting from.
The who oh, sorry, low frequency to high frequency on average.
And also on the no benefit that it would we do like some opex growth. So the growth marquee gradually improving for all the products and then PPL fossil fuel gross margin on so again [noise] visits contributed by the scale benefits and passionately.
Contributed by the relief on the social security benefits by the government on you know the majority of the benefit was realized in the first half year with a small amount left into free so actually what happens on new actually after a the.
Then the topline products it.
Much of this is supposed to go from advertisers on this kind of Oh classified or a slower growth of the commission revenue.
Cash flow from repeat fixated on the although the GMV, we actually feel very healthy botch. The the TMB on the product categories with lower Commission resource will foster a better pet free we hired a new usage.
Thank you next question.
Just from a new show.
Please go ahead.
Hi, Good evening management. Thanks for taking my questions on also congrats on the solid results on my question is related to the growth trend for the general merchandise I think this quarter to growth rate, 35% still very solid, but I'm, just a little bit more interesting to GAAP matter.
<unk> view on on any elaboration you could provide income saw a slight decelerate the growth off on the second quarter achieved for these general merchandise I think you mentioned the supermarket actually grew about 48% for just wonder, which category actually esperions up bit more seasonal.
Slower growth than.
Before on and then just very quickly on the single stage G. M. B performance on how do you rate and compare that with your expectation versus true 18 seems like it was actually stronger than June 18, and is that driven by pricing or any reasons off on a strong single thing. Thank you.
Oh, that's amazing pension.
On what do you know on exercise on I mentioned earlier that you only saw the Boston author Malden [laughter] resolve their volume grew by 48% on either quarter. So what happens is at the so he feel for how we are on.
The second quarter I see that on all three smoothed out that's okay and I should not hold me to remember there were some comments with interest sales in the first half on including the Clinton ports on the incentive liquid. So that's on the field of all jobs what is for GAAP income.
After he says they already had sufficient inventory sort after home and also on if you read the afresh if they don't have fresh produce category.
Largest that's about pest free seafood. So it wasn't a Jack on Oh go into a few comments on cases reported during the quarter were in relation to the importance of Stifel.
On the other south type range. Other fresh produce work continues to grow revenue was wrong doing the whole her on the where we are relatively lower teekay side as revenue contribution. So overall, we see the other members of the human growth and the traffic on other gen.
On the merchandise continued to be loans long on doing with her on her.
Uh huh.
Sorry, what was your second question.
From here.
Both well, who knows whether were going up on the leadership.
Did you feel like your question related to the single thing with promotion yes.
George on Moody's is centered on the Lucerne de Supercars jihadi guesses on them.
It's worth looking into your models you hold true come Harlem, New development going on here, if you don't mind me, though.
As we have brought in a structure that we will not only on looking at this on the 11th the single day, if we look at the rents the motion period from on Nov to first go to the 11, we're very pleased with the growth without <unk>.
Moving on womens boots on Michigan's recall, you feel free to do on the phone for you know based on girls, you'll see the usual day.
Patrick tomato likely are those a bit on ground. So hopefully you can count on deals Im sure you all though he or she hall, Tony you mentioned Oh really.
Yes, Oh and.
And for this year because of the I didn't make an impact and store where would you like to drag the time that even longer because these are time of other brands partner over pay high attention on these activities. So if we get the times like October the first revenue though.
Revenue for one and half from on time, we are achieving a much better results than expected.
I must admit he was moving even on our you know a listers with no. Other news on how many years will be run off limits on the go through the true then tenure.
Fidelity from Dallas shortly the true.
For the reasons why we love is on a woman even better than the six when they tell them first of all I think they're on two reason and one reason is on the come from consumer side as we understand that by the end of the year a lot of consumer as they have on a bigger stuff like to purchase more stuff.
Anyway flow look too much on the.
The monthly sales on John No no no.
She ever just income July 4th holiday, So doing John please click on truck Michelle Please with how to me on how to some people true.
If you live with income.
Google, though so.
That's on the supply side. In addition to the brand partner. We also think that's for the on small and medium sized businesses. They are better recovered value in June from this epidemic. So they are in a more I'm comfortable and were ready position to prepare their products and to do their office.
There's also contribute to a better performance on the field.
Thank you next question.
Yes. Please go ahead.
Hi, Thank you minutes on Yeah. My question is on the logistics business, we sold in the third quarter revenue growth year over year salary versus the last couple of quarters.
So I just wanted to get on understanding.
What are some of the things we did you know maybe services or a new new initiatives, especially for the third party merchants, where we saw the growth.
M doesn't during it we've also heard that stuff in our church that so some of the range of more more willing to work with GT, which is huge average some of the traditional on its just its infrastructure.
Well it was not able to chew on handled with again post cold. So just wanted to check with you on and see if you have any.
On the news regarding that kind of situation.
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[noise]. Thanks for your question on a few I imagine indeed, we have seen accelerating growth off our business in Q reader racism first I think is attributed to our long term.
Well I'm firm commitment to a two hour improvement on user experience.
You know that converts on it because in your local T M Jewish which.
So Jason.
Oh on the time, where we're moving a bit on Cotai future GMV Jesus is done.
We are on Chipotle Magenta channel on movie, which is what.
Lucy each yeah, I see the fees each day.
Those wall tile coatings, yeah, yeah.
Good day on the CRO, who died adjacency to sit on a conclusion on merging with me today.
Good day logistic over better positioning and to provide the best to you.
Moving to live by technology, and two weeks from over efficiency improvement. So we have always and increase on investment than in our capacity duty to provide more services and even structured to cater to them. All so all the customers and no matter if during the call these period or even.
Normal price will always be sure we provide the best in supply chain services to our customers to provide value for them. I think this is the key reason they choose us.
Richard.
Thank you.
Thank you next question is from James Li.
Please go ahead.
Thanks for taking my questions on two questions here first on online pharmacy can you talk about on the key frictions, you're trying to resolve to drive higher online options.
Should we think about you as more supply constrained on demand constrained.
And maybe can you update also on the margin profile on thriving free.
Obviously, you mentioned, maybe two times higher than offline pharmacy chains and also second can you talk about in location on the new anti Trust regulations, how does that impact E commerce in GB bags.
So I will comment on access for the continuation to be called has often involved and called because they are a income you know a fuel price that you have and I said you make on these how to debt.
[laughter].
Oh, yes, so [noise] Johnny on it would take on the second question regard to on the end they trust on reported growth.
It is different from typical CPC pricing.
JD is mainly a b to C retailers way things all merchandising immigrating markings sales. We ended up just as a first point I wasn't it on a second a day continuously expanding to the other characteristics beyond free feel like fashion.
Actually day do you have the [laughter] on why and I committed behaviors that virtuous are being asked to do.
Australia or PD, one or two on so third point I want to make it a day to 40 support the other 12 regulation, which we believe is very important for healthy growth and innovation also busy ecosystem in particular on and they country economy in general.
And lastly, which is most important [noise].
Since day, one on go to each Hulu.
Subsequent to a business the principal according to a 45 cents on which if we make one bottle package 40 cents gross.
And 45 cents for all employees and the remaining 45 cents for JD continuing growth as such a JD is fully committed to a healthy ecosystem, ladies rely on cooperation coexistence and coat dilution.
Thank you.
Well she is from John loans.
She Uh huh.
Hi, Thanks, I agree even imagine my thanks for taking my questions.
Well, it's funny you on younger ones, which on a dumb don't make on Sunday.
John are you guys thinking on the on them would change that's what you put on there John you got a you can find more true of course on on fresh I know just on your tongue go idle do cenci changes come down a little more true don't wish great teams on channel. So much another true should that be true. Most of you know couple teaching planning on going on John John just true.
So do you don't Marshall mentioned that switching to digital malls, you're talking to you know sundeep bajikar feed not huge on ventured into somebody on the Oh debt to go to a true Oh tone tie on I Kinda why don't we jump on its own journey.
Did you Moshe meet on Washington agent on Whats your went on at least your views on contingent on the you got your debt would alter your more true no genuine teachers aren't you wage on Sandy journey gone Jon just to get on multi buys you a changeable unit Asia extra process inside that told you don't do you know what's your name and then on the minimum volume is your color on somebody on she.
George you got an extra profits that they got so much model Giga <unk> extra profits on what did you find shops I have two questions debt. First question is about the grocery E. Commerce business management mentioned the idea a JD is a pilot on some of the French gross remodels, including seven fresh on a commodity grew by more day. So.
True could management provide on colors on that strength on the weakness of each on the models and which model into management's current view has the potential to become the dominant model in a few channel for the online online fresh grocery business and the second question on spot on the guidance on Q4.
Sandy mentioned, JD, well reinvest well reinvested the extra profits earned in the first nine months in true or improving user experience in Q4. So can management give some thoughts on counters what is the size of the extra profits on your debt.
Guys are M into investing to fall. Thank you.
Oh, it's a moving those with or without the your weighted Cynthia.
People moving.
This is true like some day retail after your first question about the fresh food commodity.
Good bye.
A few days true true you go to the other side on them Oh transition then Sheila indoor though lesser control building sort of people have goodwill on the school what decision though.
Did the federal one too.
I suppose on market is indeed, a very huge segment on that you have seen that there are many participants it's like a fighting on exploring new indeed areas I'm quoting on traditional every day to learn an internet players and also some emerging company [noise].
Uh huh.
Good day water heaters is on feel good on the whereas on because it's easy for GAAP, though some overruns on the neutral personally practices.
It will go on the Google.
Google on some.
Some total people chasing you got that you're kind of growth or though on.
On the balance due to the on that would actually bullish on them.
And I want to address that.
For the China, China is a fresh and food market is very different the landscape is very different from European on the U.S. market is more complicated or in China, the traditional retailers, especially kind of raised the top 10 players tungsten supermarkets Bren only pick up on five percentof the overrun on Chinese market.
It's just a much smaller amounts compared with new western market on.
Washington, but simple grocers on sort of go with accident, let me put that on how many of whom the typical divorces on top of that orders are set on up in people pay debt hotels I feel good homework I also true that solution sales.
So isn't that people will be hotels is on two up at all.
In general we can categorize the fresh foods on my fits into five segments, where we call. These on the we call recruitment products, namely <unk> first is the need to see the new stuff warehouse doors and the third is the community group buying and force is a a the b to B and C is Ah.
Good day realistic.
Thanks Lisa.
Oh, yeah, if the <unk> from the producers Desert I see.
Let's move on these out relative to bookings into late it's it's true what people wouldn't do it on quick payback on that.
Good on the people people go Oh, hi, though.
On a limited on a yield on sort of the whole the split on the GAAP Hello.
Hello, there that hopefully here soon though I don't know related fish.
Got it on a quarter ago, you have heard on more simple City Council Untypical agreed on was.
Actual liquidity, we have just started our exploration and that's and then Lisa on categories, new stuff, reaching tracks, including the BDC model and the warehouses toward modem and we'll keep our eyes open and to explore new on territories actually for each different products.
Category the business models on the profitability Messrs are very different.
Okay.
Well my friend often go that route.
But she will live with I don't have agreed to lead on new don't achieve.
Sure on for Sheila a pool going on before Luckily confused volume was agreed up on Sheba Hugo.
High school so.
Post here lately youve on dwell on it with some.
Oh, we also noticed that so many companies in the competition. They are using these the channel a traffic flow field. However for J.D., we would rather to use over.
Okay, and all require new services to create a more sustainable sustainable on eco system the growth of the fresh foods fresh food Oh, let's with areas. So we rather not use this as a short term opportunities and using subsidies to boost the developments of the French food market.
Rather than to develop in a more sustainable on the stable on business model in this field.
As you know she says on live with her to pay law choose Wow Oh.
Choosing the deal flow for Tom she though.
Relative to other Kodak.
And for some of these business models. It has to be focused on these regions and true to localize the services and the answer to perform in the long run.
A slow moving new guys, who are the balance it out to people the relative how are you.
She said on when to quit.
Hello, I'm on three times a day go for John true because she is from Andrew so into the future.
So huh over going in on either later personally cushy soil this woman too.
So in addition to other pieces, he and the warehouse indoors molded modal well continue to be alert and continue to invest in the new model. So we weather the most a sustainable and if they don't do those so we'll continue to work with them on corn on strength on.
One thing to make sure these mode on old simple.
Going from like value on a customer.
Thank you.
Oh my goodness.
No that's not the big investments or a net income so I do remember that at the beginning of the year. That's the topic for this year is that Oh, we want them to deliver better gross margins. So so at this stage I have see that we are.
On because we have to ensure that I just made it so that means we have sufficient resources for reinvestment fourth quarter on such a because the lumpy situation changes revenue.
Exactly so we have to make a divestment to our investments in the value initially on.
Based on the ROI and some on the he should be sadly helped to offset non are actually on for the long price merger. So that means exactly say last year last year on.
So for next year I'll have to deal with the needle on Oh, Okay. Perfect. So I will then I share our thoughts on the resource allocation and all the other hobbies on next year I hope, our net corporate and Oh.
Next question was true.
On Morgan Stanley. Please go ahead.
All right. Thank.
Thank you for taking my question.
Felicia.
So I have a very quick follow up on.
Well if you look on next year.
Kevin Dotts on lot off.
Yeah actually true.
Hi, Patrick.
Right.
Well, what's your thoughts on the.
Yes sure.
We still teaching on is still.
So taking the Fisher offline.
Supermarkets or.
If I start to you.
Yes, I just bought into thinking.
Taking market share.
Yeah just suburbs.
Thank you.
Oh do you lose most of it [noise].
I feel like from Citigroup.
Good day and.
So the whole of eruption laying though even with Sony.
Sure on Tricia Ross on board approval that over the Soviet on another says on new layer. So you on the tissue Board member.
That shows on some told or what else is on corporate fortune pressure on well cool.
Good day believe she's on those shows.
He will take on more.
And indeed, a if you're 2022 Super all right supermarket platform have been benefited from the on for stuff on the impact also on the epidemic.
A lot of customers, who used to biting off lines have shifted to on online platforms and their behavior. In this day window and also to yourself on the yourself and assessment on on product selection and on our cooperation with orders that partner and over on the purely on fulfillment capacity Oh.
These have contributed to the faster growth of TD Super [noise].
I'm also a minute pushing those on another two less on guard shows or what have you. So because suddenly the keys on CESARS has actually come down on that.
The majority of these are good on whole Todd Gomer. She went on how cheap it's in the shared on partly because they get on to younger chemical is EBITDA well my Opendata Kenya.
And indeed, we do see a strong growth in terms of sales into market shares no. Richard is super categories. However, because on the shopping behaviors for these products categories are very different from a consumer electronics products actually be on for the fresh growth to raise their oh I saw the penetration rate is still that much.
We know there's still space to growth.
She well nothing going on.
And we'll have to live production parts on I'm sure.
Option packages income quarter, when 18 productions will be about growth.
Good day.
She's on Mitch has to go on the field pay doctors on this at all.
Though a you have to do that or did he has become the global I never want word appeal com or many on brand where many products both international brand New we're on domestic brands on actually for these categories. The market is very huge and the penetration rate as the steel on things.
Or whatever.
Couldn't border too hard to say range as if you look on the BARDA.
What was your ability to get right into that you're moving I'll see you Behold showgirls you don't build on common.
On to be told on the Google show that you must what different people.
And we use the actually why there's a lot of batches JV to operating Oh, we do have to go through several phases for phase one other brands or C.J.D. I said very effective sales channel to help them to bring on a constant increase sales opportunity.
Oh, the scope of moving much on her goods or a tradeoff changes we shows he's a good a P value.
The teams on Nickelodeon has on should be so [noise].
Well you asked a question on the price and this was about new lease on that she's on Travelport for New York Trina.
Well you know it was a lot of the team on the balance sheet.
And for Phase two would start to work with our brand partners to do more marketing and to manage their levers and offense to help them to increase their digital life isn't capacities to engage with their members you.
Even though there's a lot more price will come to that on both the problem loans due to publish on choose to do that he was on San Francisco.
What we're looking to making that as we go into two or whatever Canadian me on some of them essentially though I feel free to the problem I'm just a day, which was she all shareholder shown on the who do the dealer.
Oh, the month, but if on a convergence I wonder how if at all day.
And for Phase three we have continued to give us more C I products, namely the consumer to manufacture products to tailor to the news on different corporate income consumer from the lower tier cities will have special preferences et cetera, So currently or about 30% of our sales on the super.
Are coming from the differentiated products, we collaborate with our breast partner and these achievements are based on our above the day time, then the above the algorithm. So this is a very closed and the deeper cooperation with our customer with our brand partners new space. So will you.
Yes, so much loans that will attend true, though she doesn't go to go back on hold it appeared that the true.
You guys was true part of our philosophy.
On top of you sold all a shot on the source on the poultry if at all to make on Uh Huh.
Great Thats it houses on don't future, partially covered on what you're going to force you don't know what.
Well she will hook into she held true to myself shouldn't have you should have a good home he says those facilities or whatever it was usually.
And it was safe to enter over on me kind of strategies and T.D. Super is doing a great job and be very welcomed by multiple players with us on did you Super entered into omni channel on de Superstar Brent partners, both online and offline food they look at their business.
Oh, I and offline on data through our systems and tools. So these format. It's a a very well very well performing and Ah Ah well received by our best products and platforms and other benefits on her customer or people, who that was something that we on the general bondholder cash.
On them to be about.
Pets I'd like to share with you the sufficient that I believe much. If you were in the future will become the number one a category on to overall platform.
Thank you for questions.
Thank you. Our next question comes from the night of the Hanjin P. With Macquarie. Please go ahead.
Oh, great. Thank you for your time today I want to follow up on live streaming and I guess your partnership with quite sure on supports some I used to kind of on conviction experimentation going on there.
For extra interest.
Oh.
[noise], what's going on because you're committed ourselves for the New York.
Hi. This is actually just wanted to show you a few points about livestream <unk>.
So Joe on the imaging was I believe you guys are on booking her previous debt, hoping that goes with the booking Harvey you go the okay, though you look and you probably didn't see bush of industrial.
On the principle, we believe in the long term, our electronics will not only be a finish I know it will become a standard operating tour on many platforms not only the video platform, but there's been a tour flow older on sales and marketing tool.
Oh, let me as I couldn't how quick probably true Vicki wasn't true should judge on rates I you switch on though memo.
Good day, you get a really was a critical water before you go little changes, even though on the higher bulk Washington, the father people, whose job it isn't true so.
So it depends on what's going on.
But not a lot of people go to illustrate the super Super topics on a price discount.
Well for the future, we think a lot stream will.
Able to do I'll provide more functions like to give you more detail on the introductions of the products were being the platform for new products movies, So there'll be multiple functions and Kenny force studies on the limits of women Womens shoes that question about cheese Olympics on job, though simple you have to pay we're sure yeah. Yeah. Yeah go ahead.
Good day, she doesn't have to be honest.
Yeah Yeah.
So he could what you're doing it took a little disruption value.
Moving to have people told on most of it and talent ridiculous over pleased for free are harder to was he was on so I go to prison arguable quarter, Fortunately, a greater value which is really.
Good morning.
And what did you like we do see all the luxury they had going very well and the more and more merchants are engaged on this platform. The difference between did 11. Other platform is that just because of over on customers on different destruction customers would like to see more professional content on our platform.
So I'll also reflect growth always advocates more rational I'll come functions. So we want to provide more professional information and nice to see also on the big companies to introduce or products on average if you like platforms. Now so you like those on how much more orders, especially also on certain products too.
Diva well professional introduction.
Anyway.
So I mean are you going to go on.
Good day share I'm not going on.
On the T. goal is the use of your resin coated no generic on the New York I'm a clear.
Free who either on the facilities do loop or do you need to draw on the deepwater and I'm going to leave and go on you favorable toward should on.
The momentum due.
He was saying to you later looking how to show it to other true Sheba The commission simple.
And also there now on increasing our cooperation with other M. C N. Our channels on the artist and one on one other thing I want to share with you on that and orders sales orders on chiefs on the last thing on Ginnie Mae's sites, it's much higher than on third party must win I think this is highly related.
Who are the customers trust and confidence and healthy behaviors on the platform.
Mmm civil or even quicker.
Quit equivalent on the talking about on local girls or you have a mission critical systems and build on something going on there.
Yeah Yeah.
Let me know quite new please.
So we've entered a new don't she will suffer with true.
And just to briefly comment on corporation was quite so I'm quite sure look forward to cooperate with JV, because oh words appirio on supply chain in terms on well that's on.
And also we optimized twice show us a very unique platform that for like on.
Traffic flow to enjoy a very big amounts on the customer cohorts. So this is a very natural supplementary for new so <unk> <unk>.
Moving to new people just given just under about functions you got Paul just on the part of me on Schumacher is considerable room on the highway Bill.
So the growth of all those people are busier Dubai, that's what you put on the teaching.
Operating from Hello, Jason do they pay bundled price. So she's overcome that took on the proportion country are true to lose them to get jobs.
And for the spot price, it's not simply that Sidney will pose a price on price. So offer sales on more there's a lot behind.
On the supply chains and other services to support this corporation. So there's the field on work were doing to further on connect our system and the same time I believe so will provide a better value for these corporations and yeah.
Yes in the moment thank you.
Thank you.
Approaching the end of the conference call on outside.
The call over to Judy Dot Coms Liu.
For growth.
Thank you operator, and that's what's going on today and your opinion could force please feel free to contact.
Uh huh.
[laughter], we look forward to talking with you on the call.
Thank you for your participation on today's conference. This concludes the presentation you now disconnect.
[music].
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[music].
Hello, and thank you for second wife for Jacobs Dot Coms free quadrant.
Okay.
At this time.
On this.
[noise] after management's prepared remarks.
[noise] conference is being recorded he said any objection you may disconnect.
At this time.
Like I.
Good day.
<unk>.
Okay.
Thank you operator, and welcome to our second quarter Twentytwenty earnings Conference call. Joining me today on the call on misplaced you feel on T.V. retail, but they're doing well see you on T.V. logistics and B shoot on our CFO and Mike.
On the on Rcs, all for todays agenda, Andy will discuss highlights for the so called 20 on the other management, we've drawn to <unk> session.
Before we continue I refer you to our Safe Harbor statement no our new press release, which applies to this earnings call as we will make forward looking statements.
Also this call new phones discussions on certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most direct comparable GAAP measure follow.
I don't like cash no that I like on lifesaving. All figures mentioned during this conference call I am now I would like to turn the call over to our CFO on Sunday.
That's true we Hello, everyone. Thank you for joining me on this call today.
We are pleased to report a strong set up initially style [laughter] third quarter on Twentytwenty one.
We delivered a solid performance, yes, seasonally light quarter and that's moving forward.
<unk> operating and financial metrics.
Taking these bikes simple in contributing to the society and supporting the recovery of really common.
We have opened up our retail ecosystem.
That will be able to supply chain infrastructure and technology capacity, we empower our suppliers, our merchants and our business partners.
We love our business with a long term philosophy and pursue new long term sustainable growth.
Our mission is to improve operating efficiency for the supply chain through technology innovation.
And we shared growth opportunities and economic benefit with our style business home and society.
Our Oh, we moving effort in supporting Society, and our users continued to gain positive recognition and wage huh from more and more consumers.
This has been reflected in our solid growth of active users and improvement in new thing catchment.
Across different tier cities.
Our new active customers in the past 12 months reached 442 meeting I'd be more than 100 moving customers.
I'm, 32% from a year ago, the highest growth rate in the past three years.
We often momentum before many net additional customer cash.
Compared to last quarter, the largest expansion in the seasonally light September quarter in our history.
They once again validates our long term operating philosophy to grow our business with a customer centric focus.
We continue to generate traction on the lower tier cities.
Which contributed about 80% of our new users this quarter.
We are also inspired by the full day has consumer loyalty and engagement of our coal users.
Who appreciate the consistency of products and service called on how we deliver every day.
Oh coal users are buying products for more categories from us and more frequently.
We have become a part of many new those daily life.
It's worth highlighting that our DD perks members exceeded 10, he meaning in October.
An important milestone for our paid membership program.
Good day, plus what's the first to pay the E Commerce membership program in China designed to better serve our core yields on.
Besides the benefits offered on TV app, such cash Shopkins looping and free shipping Kupol TB plot has partnered with over 600 industry, leading glad to provide our members with comprehensive privileges insecticide that test movie PK travel.
Hotel booking Phoenix education dining and entertainment.
Our data shows that Didnt, Todd has effectively improved the engagement and retention of our coal users.
As our class members shop more frequently we the ARPU average revenue per user that he's multiple times higher than that helps non class members.
They usually channel with the resources of our Brent Hamann.
TD plot has also created an industry benchmark in the pay the E commerce membership.
[noise], our Q3 financial results, especially with life to our coal P Super Bowl with enhanced user engagement.
We reported net revenue.
Hi, Jason its feeling.
Feeling on me for the third quarter, a year over year growth of 29.2% maybe.
Maintaining strong growth momentum even on the back of Q2 be peak season and over last year's Heidi.
Then on merchandise revenue grew by 35% year over year led by the supermarket and health care categories.
Net service revenue on a school, 43% year over year led by the accelerated growth of Tiki logistics and strong performance of our advertising business.
Our net service revenue contributed to over 13% of total net revenue.
Maybe another two political revenue.
I think harmony gradually return to normal from the peak of Coleen NTM Optik TV logistics continued to gauge hot from business partner and it delivered accelerating revenue growth.
Besides our solid news and it helps on Coke.
There are few notable operating and financial performance it we want to highlight.
First on TV.
TV sales operating margin reached 3.9% in Q3, a record in our history and an improvement of 56 basis points compared to the same quarter last year.
What's notable is that our operating efficiency continues to improve even as our product mix shift from the large ticket size, but the low frequency categories, such as Tracy and home appliance.
To the small P side, but high frequency consumer staple categories.
Oh, there volume for the supermarkets categories grew by over 48% year over year in Q3 another.
Another key metric illustrating our operating efficiency improvement is our inventory told her day.
We should further they feel free to 34.3 sales in the last 12 months.
This is one of the lowest among the top global retailers and our own kids kids pellicle debt.
Despite the total number of asking you managed by US continue to increase with our technically expansion.
[noise] once a day this validates the power of our scale driven business model and our long term margin trajectory.
Secondly, our free C. and home appliance categories continue to outperform the industry tremendously and we continue to gain market share.
Our unparalleled supply chain capabilities I took official.
In particular amidst the absence of new flagship products from the leading electronics that starting Q3.
As we mentioned before our swiftly and home appliance categories have significant operating and cost structure advantage over our peers.
Enabling us to provide the best value and service to cost consumer.
We continue to expand our supply chain capability further see bringing more customized products to different consumer and create value for our business partners.
Certainly.
On the logistics is another problem that example of our long term investment new users centric experience and supply chain infrastructure.
Since we opened our service to third parties in 2017 day de logistics has made notable progress.
On providing its customers with equally test logistic services to improve their warehouse management and fulfillment efficiency.
I see logistics gain more consumer customer recognition drug.
Revenue generated from third party customers contributed nearly half day deal logistics total revenue growth in September.
TV logistics also supports the growth of our three P. Much on.
On our E commerce platform.
So thats mark to ask delivered by day, the logistics costs.
Along with more trustworthy and the more reliable services.
Therefore on open to preferred shopping choice of customers and helped generate more organic traffic.
Moving down the line also feel gross margin improved to 8.7% this quarter compared to 8.4% in Q3 last year. This.
This was mainly driven by the margin improvement until the day TV to educate the logistics.
With our continuous improvement in operating efficiency, our marketing R&D NTM expense ratios in the third quarter improved across the board by 16 basis points.
30 basis points and eight basis points, respectively cash.
Compared to the same quarter last year.
As a result, our non-GAAP operating income grew 77%.
Three day, the RMB and non-GAAP operating margin was 3.8% up 82 basis points from the same quarter last year.
The highest level in our history.
Moving to the bottom line, our non-GAAP net income attributable to ordinary shareholders in Q3 gross at 80% year over year to 5.6 billion RMB from 3.1 billion on and be in the same period last year non.
Non-GAAP net margin was 3.2% up 90 basis points from a year ago and again a historical record.
Excluding the temporary relief on the social security benefits. The Mckee improvements we recorded in the first three quarters have clearly demonstrated the snowball effect that we continue to generate with our scale to the business model.
We the all healthy profitability as GAAP basis.
The plan to come back in faster growing businesses.
Specifically the supermarket technically it's a key growth area that we are very committed to continuing our investment [noise].
So for the strength in our consumer immense share and market leadership.
Our online to see supermarket population continues to generate growth momentum.
We have been exploring various new business models in different markets to better capture the growth opportunity in this category.
Our aim is always to better serve the diversity of our customer with called P products and services.
Logistics infrastructure is another strategic area, we will continue to invest and to expand our integrated service capacity for the long term growth.
We will also continue to invest in our users and our people.
All of these investments truly reflect our long term operating fees on [laughter] [noise].
Free cash flow for the quarter improved to 7.5 bidding on being as compared to 63 million RMB in the same quarter last year.
Free cash flow for the last 12 months reached over 30, beating on D grew by 93% year over year.
As of September 30, Twentytwenty cash and cash equivalents.
<unk> cash and short tell me last minute I did [noise] <unk> of 127, beating on being.
We have a strong liquidity position.
In conclusion [noise].
He showed remarkable than Sidney again, excuse me as China emerges from the pandemic we.
We delivered both robust topline growth and year over year improvement of profitability, we're always investing in our capabilities in strategic areas.
It's quite clear that these achievements were driven by our unique business model and operating philosophy, but more importantly day. These three cities you end up paying by hours and then placed focus on offering to balance for our consumers.
On the empowerment of our business partners.
Our technology and infrastructure.
Many users I still shifting from offline to online and on the ecommerce penetration is real acceleration in my new catch please.
He is well prepared to capture the secular trend and we will continue to invest on her.
This concludes my prepared remarks.
Let's open the call for questions Becky.
[noise] [noise], ladies and gentlemen.
A question and answer session of this conference call will start in a moment in order to be fair to all callers force.
<unk>.
[laughter].
If you have more than one question. Please request to join the question P. Again after your first question.
And if you have questions. Please fresh Simon.
<unk>.
And to cancer the request.
Once again it is.
Hi ones.
Yeah.
First question comes from Tonight.
Goldman Sachs. Please go on.
Thank you. Thank you Richard I don't Oh ones.
On Dong Sandy Radiant P M and congratulations on a very strong results. My question was around New York supermarket strategies on do you just mentioned about the investments into supermarkets could you just share how how are we sort of thinking about the strategy on you'll make a white house just thoughts on home well.
On the progress of natural selection initiatives and would you be able to share. Some many folks on the emerging models like <unk> like to be on during next day, So pick up model, where most people talk I mentioned that the community groups such as how do we think about these given weak we do have a lot of strong usage.
On the supply chain capabilities sick.
[noise] [noise] [noise] [noise] [noise].
Thanks, John that on your Oh, Youre concerned regarding supermarkets and fresh on I think first of all on this is a huge market and we have seen a structural opportunity for this category.
So so this will definitely be a strategic eye on T. for all day and.
And we we have as I mentioned, just now we have demonstrated or close to the business model for our traditional b to C. O patients and now we are we have we have experimenting and we are also exploring different business models or new mission.
In this area covering a PSC piece on the lower tier market.
So so because this is a huge market we understand that there are on many companies entering into the market, but we believe by end of that they are there will be quite a feel player.
And we don't have to compete head to head at this stage. So so the fact is on you know fresh produce these even more on top of catch great athlete commerce operate on retail due to the loans ticket size and higher loss ratios are doing the production and fulfillment force that so.
You know, we we don't believe a subsidy if the competitive advantage on the key to.
Find a way or solution to improve the L. P efficiency of the existing business processes and reduce operating costs. So they see exactly our mission on our operating philosophy. So we will continue to invest in infrastructure and our supply chain capability a tool.
Our core advantages in this category or this area.
Thank you so I'm just a supplement for for the various new business models. We are experimenting on that would include you know the seventh fresh a store warehouse business model on the the coming on.
Well purchase model all the distribution warehouse models.
[noise].