Q4 2021 Dada Nexus Ltd Earnings Call
Yes.
Good morning, ladies and gentlemen, and thank you for standing by for <unk> fourth quarter, 'twenty or 'twenty, One earnings conference call.
At this time, all participants serving up the scent I limit.
After the managements prepared remarks, there will be a question and answer session.
As a reminder, today's conference is being recorded.
I'd now like to turn the meeting over to your host for today's call Ms. Caroline Dong head of Investor Relations split data. Please proceed Caroline.
Thank you operator, Hello, everyone and thank you for joining us today, our fourth quarter 2021 our NASA list was distributed earlier today and is available on our IR website at IR I'm that Dusty and.
As well as on global Newswire services on the call today from data, we have Mr. <unk>, <unk>, Chairman and Chief Executive Officer, Mr. Chen Chief Financial Officer and Mrs.
Mr Jin Yan co founder and the Chief Technology Officer.
Mr. <unk> will talk about our operations and company highlights followed by Mr. Chen who will discuss the financials and guidance. They will all be available to answer your questions. During the Q&A session that follows.
Before we begin I'd like to remind you that this conference call contains forward looking statements as defined in section 21 E of the Securities Exchange Act of 1934, and the U S. Private Securities Litigation Reform Act of 90.
Why.
These forward looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks uncertainties and other factors all of which are difficult to predict and Emmanuel hei beyond the Companys control.
These risks may cause the company's actual results or performance to differ materially.
Information regarding these and other risks uncertainties or factors is included in the company's filings with the U S. SEC.
Company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise, except as required under applicable law.
Please note that unless otherwise stated all figures mentioned during the conference call RMB.
It is now my pleasure to introduce our chairman and Chief Executive Officer, Mr. Clyde Phillips. Please go ahead.
Thank you Caroline and.
Thank you all for joining us today we're.
We're pleased to announce another excellent quarter and a strong finish to the year.
Despite macro weakness in the fourth quarter, although group deliver the revenue growth on a comparable net basis.
83% year over year.
The strong revenue growth was achieved while operating efficiency is greatly improved.
To highlight our recent progress and provide updates on our two platforms.
Doug will go through our financial results in greater details.
The Chinese Central government has recently stated that leveraging the advantages in massive data and the rich application scenarios, China show promotes the deep integration of digital technology in the real economy.
Power's traditional industries to transform and upgrade.
New industries, new formats, new models to continue strengthen optimize and scale is digital economy.
In this regard that are working hard and are striving to be a digital economy enabler.
Continue to leverage our strong digital technology capabilities.
Empower the real economy.
Promote the integrated development of the digital economy, and the real economy.
Forward the application of digital technology in the new development roadmap with China.
The Central government has also proposed to establish a comprehensive cross departmental supervision system and improve the coordinators supervision of markets policy on the safety to anticipate issues as well as provides controls and the supervision.
During and after the event.
Absolutely supports the government's policies and develop our business in full compliance with regulations.
So before jumping into our business update I'm pleased to announce that JD com's investment things that are of tense regulatory approvals in late February this year and the worst completed on February 28.
We're looking forward to further deepened.
Strategic cooperation with <unk>.
Okay.
The mutually beneficial cooperation with JD com and it's always been.
<unk> priority for us.
This officially launched shelf now or shall should go the unified brand for or on demand on the retail services within the JD ecosystem in October 2021 we have been leveraging the collaborator synergies to support the development of the real economy, and then jointly lead the development.
Of the <unk> industry.
During the fourth quarter, the <unk> off the shelf now starts to go.
Strong growth momentum and increase several times year over year.
As of the end of 'twenty to 'twenty, one more than 70% of the act.
Stores onto the DJ we're available on shop now.
So going forward, we will further deepen the omnichannel cooperation with JD com improved JD users measure for on the retail and jointly expand the product categories of on demand retail longevity.
Now, let's talk deeper about J D D J, the leading local on demand retail platform in China.
Despite a challenging macro environments steady DJ still managed to grow its revenue by 80% year over year in the fourth quarter.
Significantly outpacing the overall consumption growth.
The government has been encouraging the platform of our economy.
The support for high quality economic development and high quality of life.
Fighting the platform economy to be more open innovative and empowering.
<unk> has consistently positioned as an open platform and commit to empower the retail industry through technology and the service innovation.
During the fourth quarter to the DJ continued to digitize retail industry with respect to enabling retailers and brands and technology apartments.
Firstly <unk>.
Empowering more retailers and a regeneration product supplies.
With a continuous optimization on the supply side, we strive to provide industry as one stop shopping experience for consumers in the us.
On demand retail space.
Internet only one.
The number of active users on <unk> increased 51% year over year to $62 3 million.
Looking to different verticals in the supermarket category. We have now established partnership with 85 out of the top 100 supermarket chains in China.
According to our research the market share of the DJ in the supermarket auto sector increased to 27% in 'twenty or 'twenty one.
GAAP between the DJ and the second and third players remained wide.
11, and 18 percentage points respectfully.
With continuous expansion of merchant partners and product offerings deepening cooperation with JD com and improving delivery fulfillment capability TDD Jay continues to win more users and become a primary on the retail channel for more users.
For our supermarket partners, we are committed to helping them create incremental sales through innovative tools and the competence.
Recall that in the last earning call I introduced the three England coupons.
That helps improve self efficiencies for retailers' brands and platforms.
The early December J D. D. J further extend the coverage of three one coupons and the partner with around 20 original leading players, including <unk> in the year.
To launch the first shopping carnival campaign, covering more than 10000 stores in over 100 cities.
The GMB of participating stores increased by more than 200% over regular weekends in November .
Meanwhile, the conversion rates increased by over 10 percentage points.
In addition to cementing the leadership.
In the supermarket category.
D J continue to grow his influence in the three C. The consumer electronics category.
The GMB of the series C category increased by more than three times year over year.
And the smartphone sub category by the end of December we had on boarded more than 12000 stores onto the data.
In the fourth quarter, we strengthened our partnership with J D Vitale.
R J D buy now and pay later service.
To further enhance the experience for consumers purchasing smartphones on our platform.
In the PC and accessories.
Category, we established new partnerships with more well known brands, including Jamie Logitech and the reserve.
In the home appliance sub sector.
Total <unk> continued to grow by more than 100% on a.
Sequential basis in the fourth quarter.
In addition, we launched a strategic partnership with <unk> and we are gradually onboarding more than 800 licensed stores on <unk> across China.
Suddenly.
<unk> continues to drive marketing efficiencies for brands.
In the first quarter, our online marketing service revenue increased by more than 140% year over year.
For full year 2021 online marketing revenue growth was over 130%.
JD DJ onboard more brand partners and capture a larger share of their marketing spending.
In addition to deepening cooperation with more.
<unk> brands.
<unk> started to collaborate with the cosmetics business of major international brands, such as L'oreal P&G and the Johnson <unk> Johnson.
Our innovative marketing campaigns have always been well columned by our brand partners.
In January 2022.
<unk> launched the Super lice compare.
Help brand partners achieve explosive growth.
Influence customer traffic and sales.
This campaign integrators current affairs.
Engage with consumers across multiple social media channels.
Just ahead of the 22 winter Olympic games.
<unk> rollout the first Super lice compete together with P&G Coca Cola.
Sneakers and Ely.
The JV during the campaign increased by approximately 200% year over year.
Moving onto our technology empowerment.
As of the end of January and listen to our Omnichannel operating system Highball.
Hovers around 6000 retail chain stores.
I've lost value in boosting retailers itself, while improving cost efficiency not only help us continue to acquire new merchants, but also enable us to maintain a very high retention rate.
In 2021.
Renewal rates of the merchants using hydro system with more than 80.
98%.
In terms of strategic feature iteration and optimization, we upgraded the fulfillment module or high book in the fourth quarter to improve other picking efficiency and optimize labor costs.
The module enables stores to pick items in different zones based on.
Skewed distribution.
Heat map and the labor capacity.
And then aggregate others efficiently.
With the launch of the upgraded the module the picking time at stores can be reduced by an average of 40%.
At present.
More than 80% of the merchants using hybrid system have adopt this module.
Regarding our digitized in store picking service at our picking.
The number of stores covered by that are taking continue to expand it is increasingly recognized by merchants.
As of the end of 2021 and are picking covered around 500 stores of supermarket shelves with number of orders fulfilled in the fourth quarter growing more than eight times year over year.
Let's now move on to the rollout.
The leading local on demand delivery platform in China.
In early 2022.
The State Council.
Issue to the development plan for a modern comprehensive transportation system during the 14th year plan to clarify the major task for the transportation industry.
Well the important task set out in the plan is to expand the supply of high quality transport services, including supporting the development of new modules like on demand delivery.
With a leading local delivery network that provides service nationalized.
Now as always committed to meeting People's needs for a better life with higher quality higher efficiency at a lower cost service.
In addition to supporting domestic consumption with solid logistics infrastructure.
Now also continues to take measures to safeguard to riders interest.
In January we attended the administrative guidance meetings held by the Ministry of human resources, and the social security and others and the three other ministries.
During the meeting our efforts and achievements in protecting the rights and interests of workers engaging in a new form of employment.
And improving wider experience were fully recognized by the government.
In terms of the business progresses.
Our revenue from on demand delivery services to key accounts or merchants.
Increased 100% year over year in the first quarter.
In full year 2021 .
Revenue growth was over 120%.
This was the third consecutive year that our payer revenue grew at 100%.
And above.
The strong growth momentum is a result of our enhancing service offerings and expanding customer basis.
While maintaining revenues revenue growth, we continued to improve our service quality and operational efficiencies for the merchants.
In the first quarter, we achieved higher delivery fulfillment rates, while reducing procurement cost by strengthening satirize regiments.
And in cooperation with merchants and optimizing operational strategies.
Moving on to Smes.
Other so food for SME merchants in the first quarter increased 100% year over year.
Fast growth of SME others also that's.
The increase of overall other density of that on our delivery network contributing to deliver efficiency improvement.
For last mile service with improving service capabilities delivery, others experienced steady growth in our pick up others instead of rapid growth.
In addition to offering pickup services to individual consumers and small businesses. We have also made significant progress in onsite pick up services for large customers.
Apprehensive Lee catering to the needs of JD logistics.
Lastly at the mall autonomous.
Autonomous delivery.
Since the open platform was officially launched in July 2021 .
We continue to empower our upstream and downstream partners in the amended delivery value chain through strong technology and operational support.
At present, the platform has delivered over 30000, others for supermarket hunters.
Meanwhile, our delivery fulfillment rates.
And stable at over 95%, even during heavy promotional periods and bad weather.
While we've made encouraging progresses.
G efforts are integrated across our businesses.
Recently in recognition of our socially responsible practices such as anti epidemic assistance in the poverty poverty relief, we were named as a charity star of Shanghai in the 10th edition of the awards.
Being the only internet and online new economy enterprise awarded.
In January this year <unk> was among the first batch of applications and pass the agent friendly and a very a free assessments launched by the ministry of industry and information technology.
Another group will continue to stick to our ESG strategy and.
Drive sustainable value creation.
With that I will now pass the call over to action took over our financials for the quarter and the full year.
Hey.
Thanks.
Before we go over the numbers just a few housekeeping items seen events, we believe year over year comparisons are the most useful ways to judge our performance therefore.
Vintage changes I am going to dip will be year over year basis, and all figures are in renminbi unless otherwise noted.
I'll start with the Q4 numbers.
The total net revenue increased to $2 3 billion aligning the revenue recognition method.
Our last mile delivery service to a comparable net basis.
<unk> revenue growth.
There have been 83% year over year.
Net revenues from debt and now were $718 million pro forma revenue growth rate with 85% year over year, mainly driven by the increase in order volume of interested delivery service to chamber team.
Net revenues from <unk> increased by 81% to $1 3 billion.
Mainly due to the increase in <unk>, which was driven by increases in the number of active consumer and average order size increase.
The increase in online marketing services revenue as a result of the increasing promotional activities also contributed to the revenue growth of J D. D J.
Moving over to the expenses side appreciate the supporting expense expenses were $1 4 billion.
The decrease was primarily due to the decrease of rider related costs incurred by Venus upgrade of last mile delivery services.
Partially offset by an increasing rider cost as a result of increasing order volume for intra city delivery services provided to various Cheng merchants on the.
Now platform and our retailers.
J D D J platform.
Selling and marketing expenses were one.
Zero.
The increase was primarily due to the growing absolute dollar amount of incentives to J D to consumers and an increase in.
Personnel costs in connection with the company's growing businesses.
G&A expenses decreased to 19 9 million, primarily due to the decreased share based compensation expenses.
R&D expenses rose to 169 million, mainly attributable to the increase in research and development personnel costs as the company continues to.
<unk> technology.
Yes.
non-GAAP net loss attributable to ordinary shareholders of <unk>.
$485 million.
I will now quickly run through a few key full year 2021 financial results and further details can be found in the earnings release.
Total net revenue for the full year was $6 9 billion pro forma revenue growth rate was 78%.
Operations in the supporting costs were $5 1 billion compared with $4 7 billion in 2020.
Selling and marketing expenses was $3 4 billion compared with one 8 billion in 2020.
G&A expenses were.
400 million compared with $499 million in 2020.
R&D expenses were $574 million compared with $429 million.
2020.
GAAP net loss attributable to ordinary shareholders.
With $2 1 billion.
So Ed as of December 31st 2021, the company had $1 8 billion in cash cash equivalents restricted cash and short term investments.
As mentioned earlier JV account investment in data has been completed last week, which further boosted our cash position by $546 million.
Our strong cash reserves gives us great confidence in our ability to execute long term sustainable strategy, which we believe will create value for both investors and society.
In terms of the outlook for the first quarter of 2022, we expect total revenue to be between $2 billion in the $2 5 billion.
<unk> pro forma growth rate of 72% to 76%.
<unk> 21, Q1 to Q1, I don't know last mile revenue to a comparable basis.
In addition, we expect pro forma net loss margin based on comparable net.
Net basis revenue to continue to experience significant year over year improvement in the first quarter of 2022.
So this concludes our prepared remarks, operator, we're now ready to begin the Q&A session. Thank you.
Thank you.
We will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
If you need to cancel your request please press the pound or hash key.
Our first question comes from Ronald Keung Goldman Sachs. Please go ahead.
Thank you. Thank you.
Jim Jim Paul and Caroline.
Congratulations on the solid growth in the fourth quarter and annual.
Guidance.
Want to ask two questions. One is just I think we have delivered strong growth since listing and.
Three.
Really on track.
Very fast growth, but on the subsidy levels and all that kind of order loss basis I wonder.
Fourth quarter kind of apples to apples basis, and how olive we tracked in subsidy rates in the fourth quarter and I think investors to do want to see a track of continuing reducing in subsidy rates, while maintaining very strong growth. So I want to hear what is management's expectations on the subsidy levels.
And also a unit economic basis, how that will look.
For 2022.
And then my second question would be.
On the J D cooperation if we kind of further split that unit economics could you share how the shop now channel and the different J D channels.
We've seen improved economics, and those JD specific channels versus our traditional app and agility Jay Mini program, just what I see as our mix of <unk> increases to the JD channel would that be one of the drivers about improving economics ahead. Thank you.
Okay. Thank you Ronald let me take the.
Hector.
Two questions and see whether or not Philipp has anything too.
To add so first of all yes, so in the past several quarters.
2020 was we continuously.
Our subsea ratio wishes.
Like consumer incentives given to the consumers so.
For example in Q4.
Our consumer incentive is decreased by.
120.
On a year over year basis, and also decreased by 20 per.
Basis points.
On the Q on Q.
<unk>. So so this is the major.
Uh huh.
The major factor.
And for us to.
Further optimize our double digit direct margin. So in Q4, our dedicate their commodity is further optimized by 20% bps.
Compared to Q3 and also going forward in 2022, we believe that we will further.
Our priority is to further.
Optimize the consumer incentives, which is also mentioned in the prepared remarks that.
Some of which are driven by like the <unk>.
Promotion of the <unk> <unk> when coupon so with more than most.
Swinging one coupon.
Hi.
Platform.
Our profit level will be further improved.
And also the other factor is to further.
The integrated with J D J D, especially at retail so we believe that.
Like you mentioned, so with more <unk>.
Revenues in <unk> contributed through the J D.
Our retail and our overall gross margin level and the profit level will be improved as well so.
So we foresee that.
In the last earnings call.
We mentioned that we believe in Q2 2022 .
We can achieve the breakeven of J E J durkin margin level and the right now we believe that we can achieve positive.
At the margin level.
<unk> in Q2 this year and in Q1, we believe is very close to.
Breakeven for the steady digital margin on the quarterly basis and may be for some of the months is already positive.
This is.
Yes. This is.
The uncertainties.
I will just add some.
Some more color.
So.
You can see that during the last few quarters, our profitability have been greatly improves continuously improving and we will continue to improve that.
We're very confident.
At the same time we.
Grew our topline very fast at the same time, we improve the past profitability as we can see that the on demand and retail.
The whole industry is still at a relatively early stage with the entire industry growing fast. So we believe is.
Quite important too.
<unk> the scale growing and to strengthen our market leadership.
So we will do both things right.
Also regarding the JD cooperation.
And how that can help us to improve our profitability.
So.
One of the key cost us to acquire customers.
Acquired users.
And we have shifted our user acquisition strategy.
Since our deepening cooperation with JD, so before most of the.
Our costs are spent.
Acquire user to the TDD J F.
Now as we have.
But the open shop now and.
Lots of J D.
Horses.
To do business. So we are shifting our focus.
To acquire users within the JV.
User base.
I can also save a lot of.
User acquisition cost.
So.
Others, there are a lot of.
Positive.
The values can be generated.
Through the cooperation with JD I just want to mention.
That acquisition will help us.
Thank you.
Our next question comes from Eddie Leung Bank of America. Please go ahead.
Good morning, guys two questions if I may.
First one is about different retail category.
Given the current consumption environment.
Really.
Heading into 2022 could you talk a little bit about the relative strength and weakness.
Thoughts you have seen.
From your different client segments, both J D T J and that they are now and then just a quick follow up on <unk> comment on user acquisition could you also talk a little bit about your strategy on.
J D D J.
Because you mentioned that.
You have switched some of the resources.
Acquired users within that JV.
Sure. So I'll give my answer and see if <unk> have anything to add.
So.
I believe the first question, we have is regarding the different retail categories and how that evolves.
Our platform. So we as you know that we start off with the.
Supermarket's category.
Yes.
We keep strengthening our market leadership in that category and then.
<unk>.
We are we have gradually evolved too many other categories.
Electronics for example has been growing really fast and that also benefit a lot from the synergies with JD and <unk>.
Also we are very happy to see that for example, like the parenting.
<unk>.
Sector and cosmetic sectors.
All of those has been growing very fast and.
Because as you may have noticed that the offline.
This are.
Seeing some challenges, especially during the Colgate and.
And that makes slowdown.
So the merchants are more willing than ever before to work with us.
Thats why we are able to acquire a lot of.
Our retail partners from different verticals.
So.
I think going forward, we will.
Eventually achieve our vision to be.
Basically the everything on demand.
We are we will.
We will be there and we're getting close so everything will be on demand.
And in terms of the.
User acquisition so.
So first of all there is to our loyal customers stick to the <unk> App. This app.
Tailor made for on demand at retail and a lot of loyal customers love that.
We will keep our user retention program and to keep this up alive and prior more users at the same time, we're seeing that the J D.
Hum.
Really open the door for us and we were able to acquire.
Acquire.
From the over 500 million JD users.
I think you may have noticed during the last few months, we have now more and more.
Actual client added resources and we have been.
Innovating innovating with steady team trying to improve the conversion rates and to get more access points within the JD app. So we're very confident.
We will be able to.
Grow the user base within JD very quickly.
Same time, it's also very beneficial for J D.
Yeah.
Because now the JD app.
Not only provides a D to C model of E Commerce, but also provide the on demand.
E Commerce so.
<unk> become much more attractive to both new users and existing users. So this will also help to drive the JD user acquisition and J D user retention. This is highly wing.
Yes.
Thank you very much.
Yes.
Our next question comes from Thomas Chong of Jefferies. Please go ahead.
Hi, Good morning, Thank you management for taking my questions.
I'd like to take a step back and looking at the Big picture.
About the space right now.
Kevin you made a comment about how we should think about the competitive landscape in Chile to RBC in the competitive environment is a lot more rational compared to.
Last year and they'll be cutting.
<unk>.
Shouldn't be copper.
Impact on the macro headwinds together with about the recent COVID-19 situation.
Should we think about our business trends.
In subsequent quarters.
My second question is about our <unk>.
Our monetization.
Increasing alumbaugh hospitals are using our software systems, just want to get a sense with <unk>.
To the revenue.
Potential.
Well as <unk>.
Additive landscape on this front thank you.
Sure Thomas.
I'll.
I'll give you my answer and <unk> have anything to add.
So the first one regarding the <unk> the <unk>.
Competition environment.
As you mentioned, we are seeing that.
The players in the markets are now more rational then.
The year before.
People are more cautious in burning.
Cash or improving.
Have more.
Willingness to improve the profitability. So I think overall the competitive environment is more has been more rational.
At the same time, we're seeing that.
The business model it really matters and we are very confident as we have been in the last.
So the three years since we first roadshow for our IPO and for the last two years, we have always been confident.
Our business model, which is first of all we are a.
Platform play so we don't do.
Wholesale inventory so that means we are not competing with any.
Are there any retailers onboard I think this is continued to be very important.
This is very unlike.
Some of other.
Platform play who also too.
To their first party.
The first party business and selling inventory.
Over the last year, we are even more confident about our model and also.
If you compare our motto versus dark warehouse model.
Think over time people or more.
Clear about.
The protocols of different models and.
Again as we have demonstrated is that we are able to grow our topline well.
<unk>.
Ill quickly improving the profitability I think people.
We have been realizing that the model or our model is more.
More benefits and also the community grew by other community grew by the government policy government regulations and.
The macro environment impact I think that is less relevant.
Less competitive than a year ago. So.
Thats, the competition environment, and where our confidence.
About our strengths going forward and in terms of hi, Bob. So first of all we are very happy to see that had was well received by almost all of our merchants partners and the retention rates.
Hi, Bob.
Paying customers is nearly 100% 90.
98%. So it's very very high and people are really loving our features and so and the revenues generated from high ball.
It's about 200% year over year.
So although the hypo revenue itself has not been bad debt, but the growth has really.
Encouraging so we will continue to.
Make highball a more powerful tool.
System for everybody and.
And we will continue to explore other monetization opportunities around hybrid systems.
Also as mentioned earlier.
In terms of the supermarket sector.
In 2020 were in the market share of KCG has increased to 27%.
And also the gap team.
<unk> in the second player.
Players remain wide and 11 percentage points.
The gap between <unk> and certain players are even much bigger than the previous year.
18% percentage points, so we believe that.
We will continue to focus on.
Categories, We mentioned.
Repaired remarks for the past several quarters, including the newer categories in three key categories, and cosmetics or those new categories where contribution.
Our further.
Jimmy growth in every store.
Thank you.
Our next question comes from Alicia Yap Citigroup. Please go ahead.
Hi, Good morning management, Thanks for taking my questions I have two questions first.
I guess maybe Philipp.
Back can you guys either appetite.
The major changes that you foresee to happen post the Gd state completion.
Some of the things that data, we'll be able to do.
The collaborative initiatives that Youre planning in the coming months post consolidation.
And then second quickly.
Can you share with US the commission take rate this quarter and also the <unk>.
We've got a fashion.
Noncash pattern.
Also percentage of the order is that coming from.
<unk> versus the non fresh thank you.
Okay.
So our.
Partnership with J D has certainly been further strengthened.
As you may have recall about a year ago.
Firstly announced the.
The investment.
Offer from J D.
And it took about a year for our the regulation three approval. So over the last year. We are now sitting there in ways. We have done a lot of things already for example.
You can see.
<unk> now.
<unk> has already been developed and now.
Quickly outgrowing and also from the organizational perspective.
Over the last year, we have already.
Set up a.
Or within the JD retail ORC.
No.
Both teams has been working very closely already.
And I think going forward.
Since this.
Officially approved and the completion of the transaction I think a few things will happen the first a R. J.
J D. The entire or that we will see Earth S.
A real family and <unk>.
I include <unk> or the operation and the financial planning.
I think this is very important because.
Within a large organization.
While people are setting up their kpis and <unk>, whether we are included or not we'll see.
Significantly.
Helps us too.
Two.
Better collaborate with J D teams and also.
While our TD team is planning on their annual strategy and operation.
Our strategies so.
I think going forward, we will absolutely.
Considered and included in each of the JD retail teams.
So when they're doing their business planning and what they're seeing their clients.
We'll be included.
Example.
As you may have noticed in some of our news release that we are now having more joint business plans.
With JD retail and other.
<unk> brands our retailers for example.
We had.
JD retail Walmart, Chile, J D D J.
Our partnership program.
And.
We are having similar programs to so many other brands as well so I think all of those will improve.
Synergies with.
Australia.
Okay.
The sentiment has changed the commission rate is remaining flat compared to the previous two quarters and the overall <unk>.
<unk> increased to two.
Uh huh.
<unk> hundred 10 RMB.
Mainly contributed contributed by the increase of the.
<unk>.
Richard opinion, and the <unk> of the supermarket category still remain light.
The 45, RMB in Q4, and the overall market categories contributing close to 60% of the total JV, while the electronics is contributing.
30% plus.
As a percentage.
Thank you.
Our next question comes from Ashley <unk> Credit Suisse. Please go ahead.
Thank you management for taking my question.
Related to our business.
Given the current environment is quite password Hudson.
Small.
Merchants in catering business and Thats actually the area, we have been trying to expand into.
So I want to check our progress on this and also the outlook. Thank you.
Yes, sure. So we are happy to see that our.
Listeners in service to the.
Tim merchants of the pay merchants has been growing really fast. So we have for the last three years each year, we grew over 100% year over year and this year, we will continue to grow fast and.
So for each of the K as we have.
Already going to be working with we will expand our penetration in the way of doing that and achieving that at the same time. This year, we will be signing up with more.
<unk> brands.
The reason why we can't continue to grow fast SaaS our.
<unk> level and.
Our brands are more and more recognized by the K K.
<unk>.
Merchants and they really value our service level our.
Our independence's.
And.
Such trust will help us to win more clients.
Okay.
Okay. Thank you.
Our next question comes from Andre Chang at J P. Morgan. Please go ahead.
Thank you management for taking my question My question is about.
10 path to profit.
Finally, we and investors appreciate no quick no.
Progress towards that.
The margin of JD DJ asset management, you mentioned.
<unk>.
Nowadays demanding no that's growing loss, making companies to deliver overall profit.
I don't know.
Current environment cooperation JD et cetera, what's.
What's the latest thought of no.
Management of total overall profit timing and how to balance between the maximize the potential to grow et cetera.
Totally unrelated question, a more short term bonds now even the resurgence of cold across so many cities in China right now have we see some pickup of our demand and we expect that such a thing to improve further.
Concentration further deteriorate. Thank you.
Okay.
So essentially the Android so.
Now the profitability.
The company operating profit level so.
So our first of all our target is to achieve the positive direction margin update at <unk> and at the same time for the overall Dell announced and it's right now it's already achieved like politics.
U E.
Especially like the.
The <unk> benefit.
Now in Q2.
Well note that unit enormous economics for the <unk>.
Relatively breakeven.
So for the fast growth of last year. So for this year, we just.
Relatively still a high growth.
Target, while we should.
Achieve productivity unit economics to order. So this is also helping us to.
Improve the profit.
For the company.
Level, we will further steel we will further balance.
The growth rate of the.
Sure.
The two sectors.
Growth of the two sectors and also like the profitability.
So we still maintain that the company will achieve positive operating profit.
Target in 2022.
Maybe starting from the.
First half of next year.
It's about profitability and about the resilience of the Colgate recently in China. So right now we still see relatively stable.
Stable cost we have a very.
Good government to help us to maintain.
The order of the society in each city.
<unk>.
Unless there is anything occurring.
Two years ago.
May see super like demand from from the demand side. So right now we just think the demand side is very stably growing non alike.
Super.
The height of the demand.
Suddenly so right now we think.
It's all under our management level and also for <unk>.
To maintain a very healthy Ryder network.
Thank you Beth.
Our next question comes from Lei Zhang at Morgan Stanley . Please go ahead.
Yeah.
Thank you Felipe.
For taking my question.
I have.
Two small questions about the UK operation centers that are now the first is that we've heard that some of the tea beverage shops.
AG.
They are cutting the retail prices.
Recently, so do we.
<unk> and <unk>.
Pressure in potentially price based competition between the online platforms because the.
The tea shops, we want to pass on.
Lower retail prices to brewery cost do we.
CIB competition intensified.
Due to the price cut.
And second question is about the <unk>.
Improvement or the profitability.
Okay operation.
I mean, if you compare with how to improve.
Improved profitability in the future do you think that it's more easy to improve the UAE also okay delivery or it is more simple to improve the take rates from the tragedy grocery.
It looks like that given your current revenue from operations. It looks like if you can improve the delivery fee.
One RMB per order than the holding company can be breakeven. So is that attributable way to improving our profitability in the future or is it more easier them.
Seeking for higher take rates from PJM grocery operations.
Thank you very much.
Okay. So first of all.
Some of the as you say the tea beverage companies are cutting costs and.
I think overall the merchants are more cautious about the costs.
That's a.
That is the market situation.
I think that is our advantages actually firstly, we do have a very.
Competitive cost base.
Especially for our K versus speakers for historically for our cable business.
The service providers tend to use our full time.
Riders.
Station riders to the stations riders to serve each of the stores. So the cost is really high.
We come to the market with a.
Better solutions so we.
Combined both the station.
Station writers and.
Across our us riders, so and to achieve a better cost base. So that's why our costs are a cost base are more competitive than most of the other players in the market.
And.
At the same time.
Increasing our.
Margins or unit economies.
Our cable business.
For the last few quarters, although we.
English and this improvement will continue in the next few quarters.
Two things one is to continue to improve our cost base, we are improving our efficiencies and lower our costs at the same time, because we are we have a better brand recognition and we are able to penetrate into the higher.
Percentage of the of the market, we're able to enjoy a higher.
Charge as well so we're happy about our.
The <unk> business and how it goes.
And in terms of the.
Sure.
Yes, I think.
That's our.
<unk>.
How we look at the cable space.
And also we will.
Is it managing it actually we will we will.
The.
Take rate enhancement on key accounts and also the take rate enhancement.
Publishing increase of G D J.
No.
Just like you mentioned will not be increased.
Hi, it's too much income in the market. So that's why.
We think we will gradually.
Improve our.
The take rate or at the same time.
Optimize our operational efficiency for the chambers businesses, while we will also put.
Put emphasis.
Two the improvement of the monetization rate of GDP in 2022, and as we mentioned earlier, we were further cut down the subsidy ratios given to the consumer as well.
There are more user to purchasing through <unk> our shop now.
Okay. Thank you very much to the center.
Our next question comes from why Shell UBS. Please go ahead.
Hi, Good morning management. Thank you for taking my question.
Wanted to ask about the online marketing services.
To realize more upside there are there any other innovative marketing services or campaigns that we can expect this year similar to the Jimmy one coupon that you mentioned that can help us to gain more wallet share from the prime partners.
How will that deepened our partnership with J D can help you in this area.
And also maybe just want to get your latest thoughts on what's the level of monetizing right. You can you can realize from other marketing services. This year and also longer term. Thank you.
Sure.
For the sake of time I Hope you will have a brief.
Yes, the online marketing service has been always a very key revenue stream for us and.
One of the key things that.
We're starting to do some this year is that after the transaction completed with JD, we're now having more and more joint business plans with JD.
This will give us a very good opportunity to provide a more comprehensive service to the brands.
J D.
So jade so brands will see TD, DJ and the JD retail as a more integrated.
Solution and jointly we will be able to generate more value to the to the brands.
So.
And with that I think we will be able to.
Generate more sales for the brands as well as generate more online marketing our value for the brands.
And also for the overall monetization rate.
For the full year base.
We are able to improve by 30 to 40.
Yes.
Also for the corporate side, we think we have.
You know a great potential to greatly improve like I mentioned.
We believe that after.
One year like Q4 next year or two for 2022, the improvement should be like almost 100 ships.
Our year over year basis.
And also for the right for the operating cost, including those rider cost. We believe we still we have great room to improve.
While you're on the density has increased.
Got it thank you Philip Beck.
Our next question comes from Joon Lee at CRC.
Please go ahead.
Hi, good morning. Thank.
Thank you for taking my question.
And I have two questions. The first one and how do you see that market, especially for local e-commerce .
The market size.
Joe Montana, or local e-commerce , and what kind of player we owned JV P. J. Thank here or do we have any California and then the second question as for the cooperation with JD Dot Com Galena, two pace like like commission fee Dot com.
So is it possible to cancel in the future by the way as announcement.
<unk> Dot Com also provides.
Strategy with Oxy and their strategy resulted here, mainly refer to users and active.
Aggravation cordish share more color about it.
First of all the market size I think the on demand retail.
As we explained earlier.
During our road show I think the market size is even bigger than.
Two years ago, when we when we see that so.
The.
I think we're still at a very early stage for for the on demand and retail.
And especially when we are evolving from just supermarkets to more and more sectors consumer electronics and cosmetics.
Beverage.
So there.
Literally.
Yes.
Market size, so we're not worried at all about the market size.
Yes, and in terms of the hour.
Ownership with JD, we will be exploring.
Different.
Opportunities and scenarios.
Previously.
Actually we are still paying commissions to J D regarding the shopping opportunities.
Right now going into March we are still paying.
Of course, we will further like.
We will further improve our operating efficiency, while further in negotiating with J D on that path as well.
And then related to the partnership with J D I think.
It's very much comprehensive is not only related to the user and go. It's also basically choose those like operating efficiently NGO and also integration are cooperating with different vertical.
<unk> of JD like <unk> like cosmetics.
For all these vertical categories under JD retail will be very close partners of <unk>. So in the future the ecosystem will not be just like <unk> it will be lifetime.
If you see plus.
Okay. So may be placed online delivery offline.
Future model and more efficient model of the e-commerce sector.
Thank you very much that's very clear.
Yes.
Our next question comes from Lei Zhang at Mizuho. Please go ahead.
Thank you for taking my question a quick one.
Remember last quarter management highlight a partnership with a 200 brands and the monetization rate of 3% I'm not sure. If you can give an update and also just looking by that one.
<unk> hundred 40% unit growth for two quarters in a row I was just wondering maybe can you help us understand how these brand partnerships typically get started.
Re chartered brands proactively or it's the other way and also I think do they typically sign the annual framework with you guys and if you saw.
22 budget looks like.
Yeah.
No.
So because we are a platform, we're selling like millions of skus on our platform.
So we can see literally.
What brands are how they're doing on our platforms. So we had a very clear picture and.
Therefore.
And also the brands.
Our interest is in how they are doing on our platform because we are the fastest growing channel for most of the brands.
In China, though so.
With that we constantly exchange ideas and.
And the insights and the brands.
Really enjoy working with us to achieve a higher growth. That's how we got started with most of the brands and once we work with some of the brands.
And it got bigger the the scale of the size gets bigger and then we will get into.
Our contracts are annual framework.
For most of the leading brands, we do have annual.
Framework with them and.
With that framework for annual contract, it's just a.
For example, if we grow faster or we have a bigger value generator that we are able to.
To get more revenue even out of the contract as well so I wouldn't see that.
Framework as a ceiling of hour.
<unk> business with the Reds.
And also.
For the brand in <unk> categories cosmetics.
Pat in the future and also in the future of JD retail will help us to acquire more and they will actually introduce more those kind of.
Lines of brand through us.
Help us to negotiated we will adjust.
Uh huh.
Met with those.
Both <unk> and cosmetic brands directly and.
Have them to OTT businesses.
Got it got it thank you very helpful.
Thank you that's all the time, we have for questions I will hand back to Caroline for closing comments.
Thank you operator in closing on behalf of management team, we'd like to thank you for your participation on today's call. If you require any further information please feel free to reach out. Yes. Lastly, thank you for joining US today. This concludes the call.
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