Q1 2021 JD.Com Inc Earnings Call
[music].
Hello, and thank you for standing by for JD Com's first quarter 2021, or the East conference call. At this time all participants are in listen only mode. After management's prepared remarks, there will be of fashion and set by the <unk> session. Today's conference is being recorded.
Any objections you may disconnect at this time I would now like to turn the meeting over to your host for today's conference.
The.
Thank you operator, and welcome to other third quarter.
Earnings Conference call joining me on the call today, unless the Lacey CEO of JD retail and E. P. S.
So for today's agenda of our CEO.
All of the Genie retail like the chute will share his thoughts on the Q1 performance.
All of our CFO Sandy.
Who will discuss the financial highlights for the fourth quarter of 2021 both Lee and the Sandy will join the queue 8 session.
Before we continue I refer you to our safe Harbor statements in the earnings press release, which applies to this call as the way, we'll make forward looking statements of.
Also this call includes discussions of certain non-GAAP non.
Non-GAAP financial measures. Please refer to our earnings release, where did your contents of the constellation of non-GAAP net or to the most directly comparable GAAP measures.
Finally, please note other like unless otherwise stated all fingers mentioned during this conference call.
M. B now I would like to turn the call over to our CEO of JD retail the lake.
Sure.
The other things of that out because you're 1 of them.
Your line is yes.
The army, arguing digital yet.
Thank you Li Hello, everyone. This is ladies shoes C. All of JD retail thank you for joining us.
Cortes, earning call today.
And that's what I'm thinking of you got to me the bottleneck. So about the sort of what's really didn't get watchful of the changing some of the what I'll call. It shouldn't be that well meet needs of many of them will jump out.
As of June Jimbo about all of them.
Sure she of course.
The extra ginger.
Hey, Matt some of your shut ins yourself.
Oh, no contingent of Yorkshire.
I didn't get to the total sorry, that's out of 1 of the blue.
I am not sure element.
For the water.
And the children.
In the box what I'll tell you can you don't you don't really simple a couple of them.
And I couldn't come out of June with yourself and most of it.
What are you spoke of.
The when they're kind of of.
Net debt at the West 1 of the 2.
The old Gen total chart out of insurance.
A couple of countries around the here.
All of them, yet, but I got to Rachel and the only tool that of course.
Without you share loss guidance.
This year marks the 18th anniversary of the Stablish meant of JD Dot com and the path for 18 years at the heart of the deep integration of China's real economy, and digital economy, we have faced in many opportunities and challenges JD has created a unique business model with a core philosophy for success is about providing the C. P.
The early of customer experience cost optimization and operational efficiency. These pursuits also constitute other corn competitive advantages of a lot of helge business principle of doing the right things and all of our unique business model have helped us to win greater trust from our users and partners.
While enabling us to stable regime to stay resilient through economic cycles, and whether all risk as you can see based on this JD business logistic has become increasingly open whereas the housing other capacities to empower others not only rising to the challenges we face, but also seeking opportunities for long term.
Growth here I would like to share. Some key progress is that J D ratio achieved in the past the quarter from the following 3 aspects.
Your line.
Although the ultra orphan of golf.
So the P jewelry box flush all the credit line of golf or the pools, where you can show what are you sort of already.
Of that protect yourself several dozen equally weighted assets.
The 2 Virginia commented, particularly the highlights interdigital.
All of that kind of order for 2 months out on the street.
The total of 1 Charles.
The goal that you don't want to do all of those all without having to pay more for the early the genco of countries at all.
The high quality of growth of business and users JD Retail's revenue maintained high growth in the first of quarter with continued improvement in both operating efficiency and profit margins. Our CFO Sandy will elaborate on this later this laid the solid foundation for all of our businesses in the following quarters.
We are even more encouraged to see that many of our suppliers and partners achieved healthy and sustainable business growth and profitability expansion in the challenging market environment through their partnership with J D.
1 of the little on the say a whole heck of a bundle of ultra now we're going to hold.
Shouldn't you got some guidance.
Jim O'neill Goldman.
All of that I see a year.
But generally even more single zone.
The forward should all up after the argument when the peso.
With.
So it wasn't an issue the law.
Yeah.
Total of them to buttress the lenders.
Thanks Richard.
Do you know what that would put us over the singer of local how the gold. She got the Youll share if I'm in tier 2 debt no move out of.
Human connection of a handful of we got a year ago.
The digitally connect Sheila.
It was really go into conventional bundle you can hold true.
And as usual review of both with.
With a lot of tremendous usual to flow.
They do more of the Youll before production with what you just put that prevent you from Ohio conducted throughout the year, coupled with robust the operating performance. We're also inspired by the growth of our high quality active users by April of the first the number of our annual active users reached the 500 million Mark.
By the end of Q1 annual active users grew by 29% year on year in the past of 12 months. We gained 100 end of 12 million new active users with over 80% coming from lower tier market. Meanwhile, our unique consumer might share for quality products and the superior shopping experience battle net.
Normally with other customers as we see higher engagement from them in the first of quarter. We have seen all around improvement in terms of existing and new users retention rate shopping frequency purchases from the wider range of product categories as well as average spending per user. This shows the both the number of users.
And the lifetime value of the JD platform are expanding we still have much room to grow.
Commercial that Joshua instead of a day.
What are you kind of do any of the kind of up to an idea flow issue.
The pulse and high yield of Batesville quite the preview for free.
Maybe the function that those will go through the other suddenly of single.
Okay.
Good idea of fruitful.
Put index, how many of you know John Schroeder tells the Gimbal challenge. Other hope is okay. So he can lead to EBITDA.
That makes up the other 2 that you end up hole confirmatory of the Johnson window. So it all of it because I don't have the direction of sugar should resemble the judgment.
The second.
All of my marketplace ecosystem.
Retail online marketplace business also made meaningful progress during the call.
The growth rate of other online market places exceeded all of our <unk> business.
Our online marketplace ecosystem also becomes increasingly abundant in particular the growth rate of apparel and beauty categories reached a 3 year high. Moreover, not only have we made significant progress in the long tail categories, but also categories, such as home appliances and FMC G that are.
J D. 1 P. Advantaged categories also showed accelerated 3 people with the development of other online marketplace ecosystem. Its positioning in the consumers' mind share it will continue to be enhanced.
Well, it's all of the golf weight off jump off a couple of them that he does the do more high of about why they're coming out of the washer.
If you net all of a single by the way so that your carrier jaw the congrats on the edges.
So I've got the street's revenue when we adopt the deferral because all of them.
The 2 types of what do we immediately zone.
In total the language.
1 of them what do you the pool, which are part of course of the Australia to more closely but what you'll get the homes in backlog because of low.
English at all because of all the universe.
Shadow the looks if either of them.
As I mentioned all of our last earnings call. The online marketplace ecosystem has always been the area of huge potential for J D. With several years of continued efforts. We have now established a solid foundation since the beginning of the year, we have seen meaningful improvement in existing merchants renewable rates and the.
Engagement level as well as significantly increased the variety of brands of merchants available on the platform. This year, we have will come more and more of leading brands and merchants from home abroad to jd's platform, including Georgetown Starbucks, the Kaplan and a future of fashion brands entered best of seller group.
And more.
Many of whom are what are the most countries go a little bit of impact of alcohol.
We think the old people across enough, where they can get off of them water, which only without all of you go out you won't see much at all so ex U.
Something that theyre done presenting for the cold weather instead of us over the you know Tanya gene, which is all of your name and what we're sort of.
As Jojo Solvay, that's yet to go with the world sort of the high end of 2000.
We also continue to collaborate with more brand partners through innovative models for example, J D and the Louis Vuitton launched an innovative collaboration in April with the groundbreaking online luxury shopping models that provide consumers with the direct access to the brand's latest the collections it's suddenly.
The luxury consumption scenarios currently available on line helps to further enhance JD users of luxury shopping experience and promote support of innovation of the luxury industry in China.
To all of you don't want single joint venture with other things like.
Gotcha or the anti Tau more sugar zone.
The morning.
Now comes out of the old too much risk of product.
We've got a mobile computer the pin political comes out what we need to do.
You know you can go into all of our gold all of the Chicago and the true.
Do you have all of a part of a third of the challenge of that.
Please go back the other tranches, because you're kind of wash of what you know come on some kind of putting it.
All of the successful cases demonstrates jbt's ability to provide unique value for our brands and merchants and service great. Examples for more business partners with China's Rachel industry, continuing to develop in the more beneficial direction, we expect more and more brands of merchants in all categories will come to Jd's platform.
The upcoming June the 18th Grant promotion marks the 18th anniversary of J P. Dot Com, we plan to help more than 230 brands of cheap over 100 million RMB in sales.
Looking ahead with the continued to innovate and explore their risk models. The best proceed with J P. S online marketplace ecosystem.
The change at all kind of do that.
As of the viable clinical do you know the hotel.
And when you go to those countries outside of it.
Thanks, Richard you called out the middle of this crisis.
Sure sure the documenting talks of the Youll most of the using the other toilets retrofit to pay.
The third quarter.
The cause of a chunk of it out on the charts.
Towards all of them extending of going out 1 of the only for the likelihood of them.
The total autonomy and all the talk.
The 1 that you're looking at all the political back.
And then he will show you that.
Therefore, the go zone bonds, which obviously catch.
There's a bunch of hunting boy up of physical virtual or fees or the ideal moisture.
Well the that cause either of you don't you.
The triple dose cohort.
The second boiler autonomy within the 1 of the deal.
A little bit of actual performance coming out of the corner at the time.
First of all of you got out of that she wanted to change the items you're of course, right you're going to lose without running the flow.
The reporting great moments of Joy.
The other until higher interest you have a whole slew of your call.
Once we got hold of showing of who you would hear enough.
The third omni channel continues to advance the challenge is coming from the external environment and competitors. These days all of <unk>.
Validated the JD Retail's forward looking omni channel strategy in fact, JD radios current business model has already evolved the far beyond and unlikely to see E. Commerce model. Therefore is uniquely positioned in exploring the omni channel field leveraging of our state of the art the supply chain management digital offer.
<unk> and integrated marketing capacities in various consumption scenarios JD retail is collaborating with the suppliers and partners to build an adaptive model that can efficiently serve various types of consumer demand in any scenarios anywhere and anytime for instance, we're actively collaborating with leading interest.
Eco systems, such as Sony quite show 2 who are more in diversified unlike consumption scenarios and provides our business partners with our strong supply chain Mito platform capacities omni channel marketing and across the board user assets management solution. In this process, we achieved the unification of products.
And people in the increasingly diversified the retail industry propelling further optimization of cost efficiency and user experience.
But the moon everybody's out for months.
The other Coco true, but they've got Michael J.
J D. Rachel's ambition is to sell goods from all of the world and to sell all kinds of growth to the world.
It's gonna be lateral flow regime.
Ill give you a number of lives.
Yeah of course.
Most of the union issues of Douglas Lindahl.
Okay.
As 1 of the country the pool of kind of weird.
But the goal of the Chilean peso with yoga team of oil.
Moving toward young children with the already of our Union of Junior box of Gogo channel called of the electrical the communities in Nevada, you won't see the deferrals.
To conclude despite all the challenges facing us right now the accelerated growth we achieved the last year and the long term investments, we are making to expand the total addressable market J D. Rachel of the core business of JD Dot Com will continue to strive for high end healthy growth in 2021 and start of the car.
The stone for Gd Dotcoms Overwrote development.
Oh sure jingles of dialogue.
Some of all of the Hudson the Java, the George about the airport or the.
This concludes my remarks, I'll now give the floor to our CFO Sandy <unk>.
Hello, everyone. We are expecting to get off of a flying start in 2021 with a robust operating and financial performance in the first quarter as Les pointed out our unique business philosophy and model allow us to embrace innovation and take advantage of structural changes.
That are taking place in China.
Before going through the financial results I will touch upon a few highlights from the first quarter.
This year marks the 18th year since the launch of J P. Dot com along the way we have been able to build a comprehensive set of supply chain fulfillment and technology capabilities to serve customers and business partners.
Our business model has evolved from being the largest the retail company in China.
Venue towards supply chain based technology and service provider. We are building a snowball are very long slope and continue to gain momentum.
Some of this capacity that we have been building for years are turning into promising growth opportunities and achieving important milestones.
And the number of our younger businesses are seeing exciting developments and rapid iteration.
At this stage the most notable amount of them include but did your logistics, which has published his perspectives on may the 17th and expects to list on the Hong Kong stock exchange on May the 28.
2021 second to the property, which completed its series a preferred share of financing by the end of Q1.
Third our international businesses that grew triple digits in Q1, and fourth our P&C business, which aims to synchronize our efforts and resources in lower tier markets.
To help the investors better understand the different growth trajectories of our expanding business line and how they are evaluating from the management perspective.
Moving from Q1, 2021, we restructured our segment presentation.
The changes in segment reporting mainly include first pick of logistics is presented as a standalone segment. Its revenues include revenue generated from both JD retail and external customers from JT group's perspective.
The eliminations at the group level are presented presented in the line of net revenue interest segment.
Second I'll take the results of JD property and since the business, which includes our social ecommerce platform since the convenience store business things at home and community purchase business. Since the campaign has been carved out from the day the retail segment and are reported under the new businesses.
Segment.
I thought the thought of these changes we now report 3 main segments, namely G. P retail did the logistics and new businesses.
The new businesses segment, primarily include the JV property since the business International business, TD cloud and AI business.
The prior period segment information has been retrospectively the revised to conform to the current period presentation.
And these changes have no impact on our consolidated results.
On another note as the transaction with JD technology, formerly known as JD digits was completed on March 31, 2021, we'd be consolidated the cloud and AI business starting from March 31st 2021.
The updated segment presentation reflects not only our current organization structure, but also the different development stages of various business lines.
TD retails revenue grew 35% year on year to 186 billion RMB. In Q1. This is in your best growth on top of our relatively higher base compared to the industry. In Q1 2020, as we largely maintained operations during the COVID-19 outbreak.
That said internally, we evaluate our retail business performance by looking at the 2 year kick up.
E. The compound growth rate of our businesses in Q1, 2021 over Q1, 2019, which smoothes out the disruption caused by the pandemic. Therefore, I took the picks the underlying growth momentum of our business at.
Our core to the retail business clearly remains you know volume growth trajectory. After 18 years of operation with the 27% 2 year kicker of revenues in Q1, nearly doubled the growth rate of China's total online retail sales of goods over the same period.
We continue to see successful category expansion general merchandise revenues recorded 36 year on year growth and the 2 year kicker of 37% in Q1, 2021 continuing the strong momentum on top of the high growth in Q1 last year boosted.
By the structure of pickup in demand and enhance the consumer mind share of J P general merchandise categories.
This was led by our supermarket health care home product and cosmetics categories.
All of our electronics and home appliance revenues increased 34% year on year end of 2 year CAGR of 21% during Q1 of <unk>.
Clear recovery from last year, and the continuing to significantly outperform the industry.
More notably the faster revenue growth of our core retail business, what's the accompanied by even faster profit growth there.
The operating profit of JD retail grew 45% year on year and a 2 year CAGR of 46% in Q1 considerably outpacing revenue growth during the same periods in spite of of intense competition.
Operating margin of JD retail improved by 27 basis points year on year and reached the 4 zero percent in Q1, driven by increased fulfilled gross margin and technology like operating leverage.
This was the second highest operating margin level of debt is retail in our history.
Only slightly below 4 2% achieved in Q3 2020.
The social security benefit.
Once again, we continue to maintain margin improvement, even as our product mix shift towards the high frequency, but small ticket size of consumer staple categories that are yet to fully realize the earnings potential.
All in all while maintaining healthy growth our core retail business is well on track to expand margins over the long term.
Our JD logistics business day. The L is at the high secular growth stage well it continues to invest in infrastructure and capacity to expand its the total addressable market and drive future growth D.
See the Els revenue reached 22 billion RMB in Q1 with year on year growth accelerated towards historical high of 64% from 34% in Q1 2020, and the 2 year CAGR was 48%.
Starting second half of 2020, TD al started to reinvest the benefits from social security reduction and other supportive measures by the government each received in logistics infrastructure and technologies to expand market potential I thought.
The thought is the operating loss ratio widened to 6 6% in Q1 from 3 1% in the same quarter last year.
Sidney Logistics currently operates over 1000 warehouses with the aggregate gross floor area of over 21 million square meters.
And are the new businesses segment, we recorded fast growth across the board from all subjects the sub business line during the quarter.
Total revenue of new businesses grew 56% year on year to 5 billing RMB in Q1, IPO typo comparable basis with the 2 year kicker of 42%.
We are seeing many exciting developments our new businesses are in very early stage of incubating that require investments.
In Q1, we invested and incurred $2 3 billion operating loss of the new businesses.
Tagged to an operating loss of $1 4 billion RMB in the same period last year, mainly.
Mainly due to our investments in the newly formed since the business group.
Since the business as they will mention is to surf price sensitive consumers and business partners in lower tier markets and create value to the society through leveraging <unk> technology and supply chain capacity.
As well as fulfillment infrastructure that sat in the first quarter of operation, you'll see Pumpkins services have covered 17 processing provinces, the accordion rapid order volume growth by offering differentiated user experiences.
We are committed to driving forward our strategies to serve the lower tier markets enters into the brand.
Now turning to our traditional the view of our financial performance.
Total net revenue grew 39% year on year, and 29, 5% 2 year kick up to total 200 of 3 billion RMB in Q1. It is worth highlighting that our net service revenues grew growth reached 73% of year on year highest growth.
Right in the last 5 years, the 2 year CAGR of net service revenues in Q1 was 50% significantly outpacing the 27 2 year CAGR of net product revenue during the same period.
This is mainly driven by the triple digit year on year growth of JD logistics external revenue and over 60% year on year of growth of our advertising revenue in Q1.
As a result net service revenue contributed 13, 7% of our total revenues in Q1 up from 11% of a year ago and 10, 3% in Q1 2019.
Boding, well for our diversifying the revenue growth potential.
Our non-GAAP operating margin was 1 7% in Q1, the 50 basis points lower year on year. This was largely a result of our continued investments in new capacities of JD logistics and to a lesser extent, our investment in new businesses, namely <unk>.
Cloud and AI.
Non-GAAP net income attributable to ordinary shareholders was 4.0 billion RMB with non-GAAP net margin remained stable year over year at 2.2, 0.0%, even as we resumed the marketing efforts and increased investments in our logistics and the new business opportunities.
Position for the long term.
It's worth highlighting that we continue to generate operating efficiency and the further shorten our inventory at all of our days to 31 2 per 2 tanks in the last of Max well, we expand the total number of X P used directly managed by us and through the 1 P model, which exceeded 8.
Mainly in Q1 2021.
As of March 31, cash cash equivalents restricted cash and short term investments added up to a total of 139 billion RMB.
Our fish free cash flow for Q1 was an outflow of 9 7 billion RMB as compared to an outflow of 3.0 billion RMB a year ago.
Besides the seasonality factor decreased the quarterly free cash flow was also due to our early payments of prepayments to certain suppliers to secure some sort of after merchandize, especially of made a global shortage of supply of consumer electronics components and increase of Capex.
In the quarter.
And free cash flow for trailing 12 months was 28 billion RMB up from 15 be the RMB a year ago.
Lastly, we repurchased approximately 10 million a P. S. 4 of approximately 800 million U S. Dollar year to date under the 2 billion of U S. Dollar share repurchase program approved by the board in March 2020.
In summary, we managed to continue our strong user and top line growth momentum with diversified growth drivers maintained solid bottom line performance.
Of all continuing to invest for the long term once again, we demonstrated the resilience of our unique business model with the robust performance of our core business and our long term approach of building core competence with new businesses.
<unk> is at the precision of the China.
That concludes my prepared remarks, let's now move onto Q&A. Thank you.
The pressure then answer session of this conference call will start in the moment in order to be fair to all callers who wish to ask questions. We will take 1 question at the time from each caller. If you have more than 1 question. Please request to join the question queue. After your first Richard has been addressed.
At this time, if you wish to ask the question you will need to press star 1.
The majority of freshman please press the H P.
Please stand by while we compile the Q&A roster.
Yeah.
Yeah.
Okay.
Yeah.
Your first question comes from Eddie Leung from Bank of America Merrill Lynch. Please ask your question.
Good evening.
Uh huh.
Within the tumor Gung Ho will come of that in terms.
No and no.
When you tell them the quantity to Andre.
The eagle for tons of <unk>.
In the <unk>.
So he is the only you wouldn't the ton mile demand.
Yeah, and you make the mechanics of it goes away.
1 football Wuxi goes away.
So the guns. They go see coupons go the you got to jump on the team.
The hope ensure women thing Don Shula, how somebody the other bouchey of legal opinion.
The option why young.
The new young the yugo.
So some of the cool young.
You should be the 1 to the 1 you go to shoot zone.
Of course P.
Oh sure you said, he's all parts of our P and ease of Peter.
Got you the timetable.
How does 1 zone.
Because the only Maggie Bombay Mcdonald.
The F N P. G. I told you, sometimes the easier way of small ticket items that'd be up here.
You see the patenting yes.
Quite some time.
When you want the <unk> you can see to women.
The bonds.
The Guy you know somebody young.
In the country.
Yeah, we see a barbell.
The other time in terms of my require we share it all day E. The other time be items.
So I have 2 questions. The first 1 is about omni channel strength, so we'd like to hear.
From the management team about the fourth on the competitive environment.
I always thought of it.
Reconciliations of J D.
In the community group buy and non <unk>.
And then secondly, just wanted to get the sense on the average over the fine because we know that the first order the.
Growth of our large ticket items, such as home appliances, all had very strong growth.
We continue to see the <unk>.
All of our small ticket items like that to the supermarket and the grocery.
Also other these are my 2 questions. Thank.
Thank you.
Yeah.
That's the Ivy. This is sandeep, maybe let me take the things the related question first and so they can comment on the omni channel strategy.
So until the tragedy of first of all are we believe are the social of purchase model is definitely a long term initiative.
There is a structure of opportunity for J D to further penetrate down to the lower tier markets to provide the price sensitive consumers with more product selections and services in particular the products within the relatively low price range.
And we have strong commitment and desire to explore the huge addressable market opportunity with our since the brand as I just mentioned.
Even though the existing player players in the market focus more on traffic operation at this stage, we believe by the end of the day the key to win the game would be the supply chain capability and the logistic infrastructure driven by technology.
Because the only the coffee with this core capabilities, we can provide our users with better shopping experience and quality products with better pricing. These are the areas, where we have unique advantages and experiences through our <unk> business and our logistics business.
The business.
On 1 hand, we could leverage our existing supply chain network through our <unk> E Commerce business, our long term relationship with the brands to provide our users with more at Ku selection.
On another hand, we see this is a business heavily rely on local supply chain.
Specially for the fresh produce product it is possible that our platform can quickly build up of nationwide service network, but.
If it cannot provide the users with competitive pricing and good shopping experience. It can easily be replaced by other platforms as well.
So as the supply chain driven platform, we would not compete upbeat with other platforms, but taking a long term approach to investing in infrastructure focusing on building our own teams and supply chain only the traffic driven platforms would compete on speed through heavy subsidy.
So we really enhanced our collaboration with J P is within the <unk> various business lines to satisfy our users' different shopping demands and the different scenarios, leveraging our existing technology and infrastructure as much as possible.
Or the other way towards you don't show with you could you share that view.
The other.
Yes.
And this is true I will comment on the omni channel business and of our Oh.
Thanks D G and some high value I'm proud.
Products.
The other Colorado.
Do you go about loading so the challenge of consulting revenue.
Hello.
As you can see from the government released that the online radio and we will take it will take a greater part of the overall social Rachel.
Sure how much of anything 1 of the most.
And the other.
As of yet.
And the new downtown down at all.
All of their lawyers, so sure the food.
All of the genome check off of going forward for the volume.
And we have all seen that of the distance decentralize the trend continue to grow online and are more and more traffic platforms are being more active online and also we see the digital transformation is happening quickly for our for the offline businesses.
Or the moving Joel on the woman.
The all children Joseph true.
Total $2 and good morning.
Awesome.
For the girl of JD retail is to integrate in these trends and continue to promote the overall development of Chinas radio industry.
What are you looking at all of women through revenue.
Changing the owners.
For the other.
How much of the portal.
Sure.
Geneva, So what's your total bill.
Rather you go.
Uh huh.
Sure.
And in terms of all of our Omnichannel businesses are the.
Leveraging our strong capacities in supply chain, our digital digitalization capacities and our integrated marketing capacities, we will put all of these capacities and the use of different consumption scenarios to give support to other merchants and partners to help them to adapt to the changing the market in <unk>.
Governments and to help them to achieve all kinds of shuttling scenarios to satisfy the needs of the customers anytime and anywhere.
So the 2 bedrooms.
The argument.
Yeah.
Got it.
The goal.
Partial dental for the other boards.
No.
From the sort of interest.
Sure.
All the way.
First of all of our unparalleled capacities in supply chain and fulfillment, we can better serve other partners in this very complicated industry environment to help them to enter more emerging new traffic traffic platforms. So these have already been welcomed.
By more and more of our kind of our partners.
She was out of a phenomena.
So some of them down.
Most of the.
The lavazza.
We'll go the volume the downstream.
The.
The answer to my shoulder to shoulder you go, especially in the water.
And for our offline partners.
Also we welcome other methods to empower them with other capacities in the resources rather than just taking advantage of the traffic. So in this way we can better serve our business partners and also other consumers in more diversified shopping scenarios.
Our new App with ICR you May go.
Sure.
But all of them.
True.
The.
Moving onto the notion of the love of course with the Dol.
None of the Virginia.
The only.
Hello.
True.
And the comment on the FMC G categories. We can see that these category achieved accelerated faster growth lots of year due to the pandemic. Thanks to the strong supply chain of JD com and this year. It continued a steady growth, especially during the Chinese new year.
<unk> promotion.
All of the member of Yodlee.
But all of them.
Conservative.
The solution sales.
On the beat out some of all of them.
The question Jonathan.
During much of the Washington.
And in this category of FMC G in the supermarket related categories J.
<unk> Dot com has become the of.
The go to where the number 1.
Image and branding in consumers consumers' mindshare.
All in all of them.
Your line.
You're attempting the turbo the Chongqing, which over 20 of issues of people who are selling.
The windows.
At the same time, we also reelect the trends of constant consumption upgrade and the the penetration of <unk>.
The sales channels, especially for categories like baby and maternity products.
Sure.
The majority of them.
Good day.
1 of the journey, which makes it all the way.
Okay.
The other central hubs $3 per dollar.
And for this quarter.
Due to the.
Chinese new year shopping festival, the alcohol products the P.
1 of the sales performance of alcohol products has been very outstanding and based on all of our very close collaboration with our brand partners and reputations of trustworthy and authentic product we have in built in consumers' mindshare.
<unk> has become 1 of the largest the sales channel for most of the alcohol brands on the Chinese market.
The generically what portion of English of Wichita.
All of the junior debt.
Can you start out just a huge amount of social change anything.
She was available.
Hum.
The good news.
And also this year, we will pay attention.
2.
To help the development of a new emerging brands and high quality Chinese brands and to recruit more new brands on our platform to meet the needs of our more and more young consumers.
But when you take all of the but the adoption of labor you guys. What does all of the Geneva.
Most of the maturity of the showing of the truth.
And in the electronics and digital products. These days all of our advantaged of categories. H has keeps a very steady growth in Q1.
The origin of that engine medical guidance.
Yeah.
J J for the triple the footprint.
In terms of opportunities.
On the whole range of sugar.
The goal here.
Some of you could flow to us.
For any of you much of an idea of Joseph.
Yeah.
And for the electronics products categories and the key the.
The key strategies for this year is to help the industry and more partners to embrace the omni channel expansion to improve the consumer shopping experience and also to support of our to support our offline partners in their digital transformation through our Premier services.
And our upgrades and towards some of the transformation of our sales channel.
Virtually none of them see the answer for what may or could you kind of the other shirt.
You should get all of it.
To ensure the Shanghai.
In the center of the bloodstream with others.
Chuck Lipson of quarters reported and without the topped out of China.
Also I just want to.
With the deal.
Observation that some of the.
The personal computers and mobile phones. These industries it might be affected by the shortage of the chip supply this year.
It might be a bottleneck for the supply chain for these categories.
Particularly with long term growth.
The reserves.
Guangdong.
All of the drone.
Net journey through other going down accordingly.
Actual results may need them.
So I want to share 3 points of upon that first if that's based on all of our close collaboration with our suppliers and our outstanding supply chain management of capacities J D will be less affected our platform.
Because of the supply chain bottleneck this year.
The woman go show of England.
For the compute compute right on its future growth.
Of course in that sort of toward the clinic channel.
Finally, the general.
On the drones.
And second of all have made very precise predictions on the supply chain projections. So we can join hands with our partners to address the supply of tension together and in this process, we even strengthen our collaborations and the <unk>.
Supply chain with all of our partners.
The home, you'll get kind of the vehicle.
The total.
That's where the restructure.
And thirdly, we also see the consumption is on the upward trend for those consumer electronics and home appliances.
Great.
Yep. Thank you.
And I need to respond to your question regarding the average order value. This is not a key operating <unk>.
Arctic that we manage on a daily basis, but in Q1 hour of total order.
Number actually increased slightly up faster than our top line.
Our GMB growth. So so that means the average order value.
<unk> remained largely stable.
Fair to say temporary loss last year.
Thank you very much.
Yeah.
Yeah.
Your next question comes from Ron Mills.
From Goldman Sachs.
Question.
Thank you. Thank you management. Thank you.
Randy and team.
My question is mostly on our investments and how we see the <unk>.
Balancing between kind of growth profitability and the investments given quite a lot of our peers have been saying reinvesting a lot of the.
Profit all of the profit incremental profit so in other.
So we've seen of very good balance in the first quarter.
We have delivered.
The still growth in EBIT.
Quite the investments into logistics and new businesses that kind of give notice.
Separately, so how should we think about that trend say into the next few quarters.
How should we how do we think about the talents.
And maybe for logistics and new businesses and knitting C.
The business unit of management could share some of the those strategies and likely the true.
Friends in the investment in kind of how do we think about the thank you.
That's shown up let me take this question.
I think first of all are we prioritize growth above the importance of profitability because across all of our business lines. We are still in high growth stage.
But you'll know each segment of each business line is actually in different the development stage. So we have kind of a differentiated investment strategy.
The JD retail.
We still you know.
You can see that for the first quarter and in the past couple of quarters.
The continued to maintain a high growth rate and we as I mentioned at the call last quarter, we expect that in 2021, our retail business will largely maintained the strong growth momentum from 2020.
That's the way that because of the scale benefits and operating leverage that we are gradually realizing from our core retail business.
You know with Li our our expectations for the longer term margin expectations for retail I remain unchanged. So so that means we still expect over a longer term period, our JD retail's and the margin will maintain a steady growth.
Chad.
So so really the underlying margin driver for JD retail are the scale economy.
Well as the improvement of our 3 P ecosystems.
I remember I discussed this before our procurement costs for many products within the supermarket category still 3% to 5% higher than the offline retailers. So there is great potential for margin improvement as we grow our scale.
For this particular category and we actually have similar situation in many other categories and our 3 P business as everyone knows our apparel category was under abnormal competitive pressure in the past few years. So if the marketplace business performed better than that.
We'll definitely be of driver for margin improvement.
But having.
Having said that the longer term profitability will be affected by the category mix and service revenue contribution.
And when you when Youll build of our financial model for the 2021 retail margin you should also take into consideration that the disruptive factors last year, including the social security benefit right as well as the lack of marketing and promotional activities in the first half of 2020.
So this is for JD retail and therefore JD logistics.
As you can see that the logistics is still in a hyper growth stage and the continuing to invest in infrastructure and networks to expand their service offerings and growth potential.
So similar to the largest e-commerce platform in the U S and other industry peers, the logistic logistic capacity needs to be expanded periodically to support the growth of transaction volume and our JD logistics is not only building infrastructure to support our 1 P businesses, but also expand.
The on their service scope and capabilities for external customers, where the external revenue actually grew much faster compared to our internal revenue.
So the but if you look at the margin trend.
Should also consider that the logistics industry has relatively higher fixed cost compared to our other business lines. So their profitability would present, the stronger seasonality due to the promotion of our 1 key end it.
There are other retail customers.
And then last on the new businesses.
I still see campaign is still in early development stage is quite difficult to depict a accurate investment of expectation, but we will focus on building core capabilities and infrastructure, rather than gaining short term traffic to subsidy.
Based on our existing supply chain and logistic infrastructure will require our business teams to deliver a better financial model than the competitors.
They were in the similar scale or development stage.
Far on our books of business has been growing as planned.
The footprint in over 17 provinces, and we are satisfied with the overall ROI.
The filter the investment will depend on the progress of building the capabilities, we need for this business and whether we can provide our users with adequate level of customer experience.
So for the reasons that we can deliver good cosmetics parents, we will invest more resources and further expanded the scale and for the regions, where the customer experience can now meet our minimum requirement.
We'll be more focused on improving the product and service quality before we invest additional resources. So it's very dynamic and we actually.
Assess the budget for spending on a monthly basis. Because this is such a new business model and it's very different from the matured business line, where we can no no relative the manage the profitability.
On a longer term period.
Okay.
Okay.
So let's move onto the next question.
Your next question comes from Thomas Chong from Jefferies. Please ask your question.
Hi, Thanks management for taking my questions. My question is more about you said no.
As well as the penetration into lower tier cities.
Can management share about our strategy is on how to further grow our users off of it.
The year.
After reaching the 500 million milestone and the debt funds can you comment our strategies in lower tier cities penetration this year.
Thank you.
Okay.
The.
But the yocum format of the.
And do you know what the government chino shouldn't be the on the Florida.
The work during the bulk of the regulation.
Sure the J Goldman.
The.
Washington, the trade off of function.
The way you go through the <unk>.
The impact the quarter.
Throughout the day.
And this is Julie to answer your questions on the users we will adopt the more flexible approach this year from 2 aspects first.
We'll increase our we will diversify.
The channels and the the approaches for our new user acquisition at the same time, we will manage more high quality, we will manage our cost.
Cost and the cash.
Quality of the cost of in the new users acquisition.
On the bogey the June quarter.
Sundar, you just sort of the statute over the over the holiday.
Yeah.
What are you doing.
They don't nature of the true.
And the overall, both the number of users and the.
Users operating efficiency continued to grow and users conversion rate is also better compared with the performance in 2019 and 2020.
Long of who the.
We cannot share all digital.
True because you've got that shutdown for the hurdles of Needham.
Sure.
With the upgrade of statute of though.
And on the new users, we see the quality of the new user continues to be improved in terms of their repurchase repurchase rates and retention rates as well as the average spending all of our platform.
Although the growth.
Option for tomato bundle all of those when you go back to yourself well known.
Of course tissue cheese all of them.
All of the boiler.
And for our existing OTA use of their performance is on the right track and with the across the board. Good performance in terms of their shopping frequency is the variety of the product. They chose our platform their average spending and retention rates, we will continue to improve their shopping experience on JD dot com true.
Improve there put the engagement with us.
Okay.
But all of the children quite shoulder hips, the issue wasn't around the corner because they don't need.
So if you go jogging the.
All of the shale blah blah blah, the shadow of a younger age.
Okay.
But the bulk of Guangdong.
Particularly of the other relocation and.
In terms of the categories contribution to new customers acquisition other consumer goods such as the food.
FMC geez, they made the biggest of contribution to new user acquisition and for mobile and home appliances also.
And the more new users this quarter and for our makeup beauty and clothing categories, which has a lot of.
A weaker appeal in the past the also did a better job in acquiring new users this quarter.
Sorry, Richard.
The woman, who we are the channel for the Libra.
Are you of the centers.
Channel will be the though.
The vessels without all of the deposit.
For the larger market.
To be the main source of our new users in this quarter, the new users coming from the lower to the market, but the first time reached 81%.
The Oh on the tool.
The type of children of true although on the water.
1 of the Chicago.
Tangible net without machine.
The Chinese of whether you will walk through video.
With the local people.
Well the continued to expand other touch points with the customers in the lower tier markets by leveraging our various.
Our sales channels and interfaces with our customers.
To reach the new users and also to providing more tailored supply chain and the product mix.
You happen to offer more precise matching of our products to the lower tier markets of users.
The music, arguing juncture here, which are the to go we're going on the future and we are we estimate that the new user growth.
Trends will continue in the following time of 2021.
Yeah.
Thank you.
The next question please.
Your next question comes from Richard Young from Citigroup. Please ask your question.
<unk>.
Hi, Thank you good evening management, Thanks for taking my questions. Congrats on the strong results.
I have of questions regarding how should we be thinking about for the second.
Quarter trend.
Believe I think Sandy you previously mentioned.
We should look at on the first half growth rate is comparable to the first half loss share. So given such a strong performance in first quarter.
Are we still implying the first half the show will be similar to last year if.
If that's the case then it will be implying second quarter only growing at 20% year over year.
But then given your upcoming 18 years anniversary of the June 18 promotion. It's also it doesn't sound unreasonable. So any color you can give us in terms of the the second quarter a trend that we should be thinking about.
Thanks Felicia.
During the call the outbreak had very significant and very different impact on the performance of our various categories last year, so think of them.
Paul if you'll remember that the home appliance category was the extremely weak in Q1 last year of Baidu was extremely strong in Q2, when the pent up demands were released in April and the main so you know.
While we manage our business internally or think about the trend of our retail business as I. Just mentioned, we would either look at the 2 year kicker all look at the year over year of growth for the entire of first half of them.
Of course, there was also the impact from the non recurring sales of the COVID-19 related protection.
Products, such as face masks and thermometers last year.
So so.
So.
I think the understanding is largely correct.
The whole year for retail business to largely maintain the of growth momentum from 2020.
So this includes well at both of the low cash from the 2 year CAGR perspective, and low capex from the first half year perspective, we expect to see that the category shift the category mix shift of will continue general merchandise category to grow faster than the electronics and home appliance.
And in particular, the supermarket and health care categories of advertising revenue will also grow faster than product sales.
And but this is the only for the retail business. If you look at our group has a whole of the other business lines are less affected by the.
By the COVID-19 impact last year. So so you should also consider the growth of our services revenues.
In particular, the luxury of services now contribute a significant portion of our total revenue.
Yeah.
We are now approaching the end of the conference call I will now turn the call over to Judy Stockholm.
The need for closing remarks.
Thank you operator, and thank you for joining us on today's conference call. Please feel free to contact us if you have any further questions.
Yeah.
Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.
[music].
Okay.
[music].
Okay.
[music].
Yes.
[music].
Okay.
[music].
Okay.
Yeah.
[music].
Yes.
[music].
Yes.
[music].
Yes.
Yeah.
[music].
Sure.
[music].
Yes.
Yes.
Okay.
Okay.
Okay.
Sure.
Yes.
Yes.
Hum.
[music].
Okay.
[music].
This growth.
Yeah.
[music].
Okay.
[music].
Okay.
Yes.
Okay.
Yes.
[music].
Thanks.
Thank you.
Yeah.
Okay.
[music].
Okay.
[music].
Okay.
Okay.
Okay.
[music].
Okay.
[music].
Yeah.
Yes.