Q4 2022 JD.Com Inc Earnings Call

March 9, 2023

Speaker 1: Hello, and thank you for standing by for JD.com's fourth quarter and full year 2022 earnings conference call. At this time, all participants are in listen-only mode. Under management's prepared remarks, there will be a question and answer session.

Speaker 1: Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Speaker 2: Thank you, Pei. Hello, everyone. Welcome to GD.com Q4 and full year 2022 results conference call. For today's call, CEO of GD.com, Mr. Xu Lei, will start with his opening remarks and our CFO , Ms. Sandy Xu, will discuss the financial highlights.

Speaker 2: After that, we'll open the call to questions from analysts.

Speaker 2: Let me quickly cover the Safe Harbor. Please be reminded during this call, our comments and responses to your questions reflect management's view as of today only and will include four looking statements. Please refer to our latest Safe Harbor statement in the earnings press release which applies to this call. We'll discuss certain non-GAAP measures. Please also refer to the reconciliation of non-GAAP measures with comparable GAAP measures in the earnings press release.

Speaker 3: Hello everyone, this is Xulai. Thank you for joining JD.com's full quarter and full year 2022 earnings calls.

Speaker 2: For those who want to see more videos like this, please subscribe to our channel.

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Speaker 3: In the year 2022, J.D. State focused on our goals and resolutions throughout in a challenging macro environment. We have been able to play an important role in the industry and China's economic development as we continue to fully leverage our unique business model and supply chain capabilities to provide consumers best in class services.

Speaker 3: and help our up and down stream partners to enhance their operations. At the same time, we have achieved the high quality growth of our own with our full year revenues in 2022 achieving the 1 trillion RMB milestone for the first time.

Speaker 3: This reflects the strategic decision we made in the beginning of the year to focus our energies and resources on JD's core business in line with our analysis and understanding of the predominant industry and the macro trends.

Speaker 3: This has enabled JD to continue to deliver high quality operations with highest ever profitability of the year, despite the external challenges. This once again demonstrates that our business model has a strong potential for a profitable growth.

Speaker 3: Today, the industry and the overall external environment are experiencing profound changes. The coverage over the past three years, the recovering microeconomy and demographic structure changes have all impacted the retail industry.

Speaker 3: In a post-COVID era, customers' lifestyles and preferences have not fully changed. We have seen the polarized trends of consumption patterns and spending power. On the one hand, the number of middle class and household users who attach great importance to the quality and function of goods is expanding. On the other hand, the number of people who are not fully satisfied with the quality and function of goods is increasing.

Speaker 3: consumers have become more meticulous in their spending. Therefore, we see increasing diversification of consumer demand and consumption scenarios. On top of that, internet companies across the world that previously prioritized the growth in traffic, users, and business scale over profitability and cash flow have reformed their approach.

Speaker 3: Not only that, there have been also changes in how to evaluate business health. We see a mix of opportunities and challenges amid these dynamic evolution.

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Speaker 3: J.D. has been able to be the first to adapt to these challenges with agility and determination. Here I would like to give a brief overview of the major adjustments we've been proactively made. First, we initiated the series of strategic realignments in 2022 with the aim of achieving healthy and sustainable...

Speaker 3: we have conducted a comprehensive review of our businesses and decided to pull back those new businesses that either could not develop more efficient business models, had limited synergies with our corn businesses, or could not achieve sufficient economies of scale. That said, we will continue to invest in the new businesses.

Speaker 3: with healthy momentum and exciting future opportunities. I'll share some of the examples shortly. Second, we have been expanding our supply chain capabilities for our core business. We continue to build up our operating capabilities across different categories and lower costs.

Speaker 3: Third, we have reallocated our resources and energies back to the very essence of retail.

Speaker 3: footing consumers' needs first, we have further built upon our commitment to better products, prices and services. In terms of price, our goal is to be known by customers for providing the most consistent, everyday low price. As such, we have gone through numerous bottom-up optimizations, including further streamlining of our promotional programs, and further streamlining of our promotional programs.

Speaker 3: and improving our traffic allocation mechanism. Through these efforts in our supply chain and marketplace ecosystem, we have seen a massive increase of product selection on our platform, operated by both our 1P and facility merchants.

Speaker 3: and user recognition of JD's price competitiveness is gradually being restored. At the same time, we remain highly committed to service quality and user satisfaction. For example, we recently launched a version of our app that caters to the needs of elderly people.

Speaker 3: I'd like to reiterate that all of our adjustments are made out of our deliberate consideration of consumer needs and are executed with careful planning. Our ultimate goal is to satisfy our device buying customer demand and provide a best for everything – nothing less than a living, happy, lasting experience across the board.

Speaker 4: Thank you for your attention.

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Speaker 4: So, we hope you enjoyed this video. If you have any questions, please leave them in the comments. We hope you enjoyed this video.

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Speaker 3: Now, let me review the major progress we made in Q4. As discussed in the past, we have been focusing on user quality and efficiency and sustainability of user acquisition, given the soft deconstruction environment. In the quarter, on top of our largely stable user base, we also recorded double-digit DAU growth year-on-year.

Speaker 3: More encouragingly, we are seeing an upward trend for both user structure and quality. In particular, in our core business J.D. retail, we teach purchasers and the paying members both grew robustly in Q4 and accounted for higher proportions of our total users, which helps to drive up shopping frequency and output.

Speaker 3: JD Plus reached 34 million members in Q4, while flat members continue to spend eight times the average annual amount of non-plus members, reflecting their high shopping frequency and spending power. Moreover, our e-Houdini membership store, which is positioned to serve the middle to high-end market, is a great place to start.

Speaker 3: has also crossed the 1 million paying members milestone. We are continuously improving our user service and operating capabilities so as to better serve our users in first and second tier cities as well as lower tier markets.

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Speaker 3: As we improve our operating quality, we also continue to invest in new growth opportunities and new businesses such as marketplace ecosystem, omnichannel business and supply chain logistics in congrats to companies at source.

Speaker 3: We see great potential in building up an open ecosystem that enables sustainable growth for our merchants. With such efforts, we can further lower merchants' operating costs and optimize our traffic distribution. We can also help merchants to grow with better efficiency and certainty, supported by our strength in supplying chain logistics, technologies and services.

Speaker 3: As a result, in Q4, JD Retail increased its merchant base by over 20% year-on-year for the eighth quarter in a row. Growth in categories like health, support of sports and outdoors, and home goods all outperformed the industry in this quarter.

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Speaker 3: by 29% around year. In particular, ShopNow, our one-hour delivery service, grew 80% in this quota. This not only generates incremental growth for a greater amount of stores, but also provides users with an on-demand shopping experience that combines online ordering, offline shipping, and delivery of spots within a...

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Speaker 3: Despite the impact of COVID, GD Logistics maintained a resilient revenue growth in Q4. More notably, with the continuous improvement of its business, GD Logistics has been profitable for three consecutive quarters and achieved a target of great even on a four-year basis.

Speaker 3: Despite the macro challenges and dynamic competitive landscape, JDL has been able to further strengthen its position in the industry. JDL also continues to draw on the complementary strengths of and create synergies with Qwir-Ui Express and Delfant, particularly in the areas of integrated supply chain services.

Speaker 3: Air Express Network, bulky items delivery and Express Network.

Speaker 3: This has enabled JDL to provide comprehensive supply chain solutions for both up and down stream customers to help them reduce cost and increase efficiency and withstand risks while at the same time building more advanced logistics systems.

Speaker 3: JDL has also won wild recognition from customers for its distinguished service quality. In Q4, JDL continues to expand its logistic infrastructure. Notably, JDL Airlines made steady progress in increasing cargo routes in Q4 since its official commenced operation last August .

Speaker 3: with three all cargo aircraft in operation by the end of 2022. This allows J.D. Airlines to better serve customers in many industries, including consumption and manufacturing and more.

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Speaker 3: Last but not least, we continue to foster the growth of new businesses that resonate with our foreign businesses and capabilities. JD Industries is one of the examples of a successful business that we have incubated internally

Speaker 3: and have gone on to deliver hyper growth. With its focus on industrial manufacturing, an important composition of the real economy, JD Industrial successfully integrates resources across the industrial chain, such as procurement, production, warehouse logistics, and inventory management.

Speaker 3: to achieve superior synergies and economies of scale. Another example is our carbon label brand, Jin Zhao, which translates to, as made by JD. It delivered over 60% year-on-year growth in 2022. The initial purpose of this business is to complement the product categories offered on our platform.

Speaker 3: and to create new value for our suppliers and customers. It also helps JV to further expand throughout the app and downstream of the supply chain.

Speaker 3: We are pleased to see that 25% of class members have become loyal users of Jin Zhao products and the percentage continues to increase. Both JT Industrials and Jin Zhao offer solid proof that we are on the right track as we adjust and focus on our core business and promising new business.

Speaker 4: Thank you for your attention.

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Speaker 3: I hope that today's presentation helps you get a better understanding of the significance of the strategic shift underway at JD. At its core, our intention is to seize the opportunity presented by the profound changes in the external environment and return to our focus on lower costs.

Speaker 3: higher efficiency and superior user experience. Admittedly, we may experience short-term impact to our performance as we further educate users, reinvigorate JE's reputation for providing the best prices, optimize our product mix, and improve our performance.

Speaker 3: and streamline internal mechanism and procedures. All of these aspects require time and effort, especially as both the macro economy and consumption are still in recovery stage. That said, I want to stress that our long term strategy has not changed. We believe that adjustments we are making will solidify our strength.

Speaker 3: as we have faith in our own business model and strategic direction, as well as the resilience and the long-term growth trajectory of China's economy and consumption trends. In the long term, J.D. is committed to playing an important role in people's daily lives and the country's economic development. We will work to ensure healthy and sustainable business development.

Speaker 3: along the way to create long-term value for our users, business partners, and shareholders. With that, I'd like to pass the floor to our CFO , Sandy.

Speaker 3: Thank you Sizong and hello everyone. Looking back at 2022, we successfully executed our strategy to achieve high quality growth with stronger margins.

Speaker 3: along with our long-term goals despite the many terminal complexities and challenges.

Speaker 3: We delivered again and even exceeded our target, which was especially demonstrated by our strong profitability and cash flow at year-end.

Speaker 3: Our 1 billion US dollar cash dividends program further demonstrates our confidence for the long term.

Speaker 3: With our resilient business model, we are confident to embrace the new opportunities and challenges in 2023 as Shizhu just laid out.

Speaker 3: Now let me walk you through our financial results in Q4 and the full year of 2022.

Speaker 3: Our net revenue grew by 7% year-on-year to 295 billion RIB into four. For your visit, net revenue grew by 10% and surpassed the one treating RIB milestone for the first time in our history.

Speaker 3: As we continue to focus on user quality and building deeper user engagement, we are encouraged to see that in Q4, JD Retail, LTM, average GMB per user, and shopping frequency continue to increase year on year for five competitive quarters.

Speaker 3: mainly driven by the expansion of our core user base.

Speaker 3: by the expansion of our core user base.iy

Speaker 3: Product revenues were up 1% year-on-year in Q4 and 6% in the full year of 2022. Service revenues grew by 40% year-on-year in Q4 and accounted for a new high of 20% of our total revenue.

Speaker 3: up from 15% a year ago, showcasing the further diversification of our revenue streams.

Speaker 3: On a full year basis, service revenues were up 33% in 2022.

Speaker 3: Logistics and other services revenues grew by 75% year-on-year in Q4 and 55% in the full year of 2022.

Speaker 3: I will elaborate more on the underlying drivers in the segment analysis section later on. Marketplace and marketing revenues go by 11% year-on-year in Q4 and 14% year-on-year in the full year of 2022.

Speaker 3: a notable outperformance compared to the industry. Thanks to our commitment to supporting merchants, particularly the RMEs, we saw a healthy expansion of our merchant base.

Speaker 3: and they have been investing additional advertising budget on our platform.

Speaker 3: This bodes well for our continued progress in strengthening our marketplace ecosystem.

Speaker 3: Now let's turn to our segment performance.

Speaker 3: DC Retail continues to see resilient revenue growth with encouraging expansion of both fulfilled growth margin and operating margin, especially during a quarter that was heavily disrupted by COVID dynamics.

Speaker 3: In terms of revenue, Disney retail recorded 3.6% year-on-year growth in Q4 and 7.3% in the full year of 2022.

Speaker 3: By category, electronics and home appliance revenues were largely stable year-on-year in Q4 and up 5% for the full year.

Speaker 3: Thanks to our strong supply chain capabilities, user man-share and expanding intra-CG on-demand retail services during a very challenging quarter for durable goods.

Speaker 3: Central merchandise revenues were up 2% in year into fall and 8% for full year.

Speaker 3: Consumers remained relatively conservative on spending on discretionary products, such as apparel and cosmetics. Meanwhile, as we shared last time, our supermarket category is going through a transition towards a healthier product mix.

Speaker 3: As a result, the supermarket category saw its largest margin improvement over the last two years.

Speaker 3: Checking well on a more sustainable growth trajectory for the long run.

Speaker 3: emerging categories such as healthcare and sports and outdoors continued to deliver double-digit top-line growth in the quarter, demonstrating our broad-based user-man-share across categories.

Speaker 3: I want to highlight that GD Retail's profitability improvement is a strong testament to our continued commitment and ability to deliver against our goal of sustained long-term margin improvement.

Speaker 3: DHE retail's fulfilled growth margin was up 53 basis points year-on-year to 8.2% into 4, the highest level achieved in all our promotion seasons since the inception.

Speaker 3: mainly driven by our efforts to optimize cost and efficiency.

Speaker 3: and the improving economy of Brazil.

Speaker 3: This also boosted JV retail's operating margin to 3.0%.

Speaker 3: of 90 basis points from a year ago.

Speaker 3: For the full year of 2022, daily victims for field growth margin was up 42 business points to 8.2%.

Speaker 3: And operating margin was up 68 basis points to 3.7%

Speaker 3: both are record high levels on an annual basis. Our long term margin trajectory remains well on track.

Speaker 3: BIDI logistics made solid progress in both pipeline growth and profitability in Q4 and the full year of 2022.

Speaker 3: Each revenue grew by 31% year-on-year in Q4 and 31% for the full year of 2022.

Speaker 3: including the impact of consolidation of the power. The growth rate was 13% and 17% respectively.

Speaker 3: This is mainly contributable to the receiving growth in revenues from external customers.

Speaker 3: The proportion of reach continued to increase to about 70% in Q4.

Speaker 3: Notably, DDL has been profitable on a non-GAAP operating income basis for three quarters in a row, and is outputting margin rising to 2.1% in Q4.

Speaker 3: On a full year basis, GTL's operating margin reached 0.4% in 2022, achieving its great human target for this year despite the unfavorable impact from the external environment, including additional COVID-19 coughs and operating delays.

Speaker 3: JPDJ and Shafna have expanded to cooperate with over 200,000 business partners in the quarter and provided more than 2,000 cities and counties with on-demand retail services that cover a wide range of categories.

Speaker 3: As a result, our intrastity on-demand retail business maintained its robust momentum.

Speaker 3: particularly, sharp now that recorded a year-on-year GMV growth of over 80% in Q4.

Speaker 3: Finally, our new business revenues scaled back to 4.8 billion RMB in Q4 and 21.8 billion RMB in the full year of 2022.

Speaker 3: As we continue to adjust strategies in both Jinshi and international businesses, we will see if Jinshi's properties maintain a strong growth momentum.

Speaker 3: For international businesses, we've decided to case operations of e-commerce business in Southeast Asia market for now, as we believe that it would continue to require heavy investment over a prolonged period to build an efficient and scalable e-commerce business.

Speaker 3: more online retail business opportunities in other markets.

Speaker 3: In terms of profitability, new business operating logs narrowed substantially year on year in Q4 and in the full year of 2022.

Speaker 3: Looking ahead, we continue to explore new initiatives and encourage innovation.

Speaker 3: that create better synergies with our core businesses and capabilities.

Speaker 3: We believe this tragedy will validate itself in the coming quarters as we pursue high quality development.

Speaker 3: Moving on to our consolidated bottom line, as we firmly executed our strategy to improve operating efficiency and focus on high quality growth that we set at the beginning of last year, we ended the year on a strong footing with 7.7 billion RMB non-cap-net income attributable to ordinary shareholders in Q4.

Speaker 3: Our Nagatma margin was 2.6% in Q4, which represented an impressive expansion of 130 basis points compared to a year ago.

Speaker 3: On a full year basis, now gap net income attributable to ordinary shareholders was 28.2 billion RMB, which grew at a 3-year KGOC of 38%.

Speaker 3: Now gap net margin for the full year of 2022 increased by 90 basis points year on year to 2.7%.

Speaker 3: hitting a historic high on an annual basis. Finally, our IoTM3 cash flow, Sf24, reached a historical high of 35.6 billion R&D.

Speaker 3: By the end of Q4, cash and cash equivalents with strictly cash and short-term investments added up to a total of 226 billion RMB, up from 218 billion RMB last quarter.

Speaker 3: This gives us a stronger-than-ever position to support business development and, again, return value to shareholders in the form of a cash dividend.

Speaker 3: This was mainly driven by both our improved profitability and strong balance sheet.

Speaker 3: Furthermore, we plan to adopt an annual dividend policy going forward as a way to sustainably return value to shareholders at an amount to be determined by the board based on our financial performance in the previous fiscal year and other factors.

Speaker 3: In March 2023, J.D. Industries, our consolidated subsidiary and the leading industrial supply chain technology and service provider in China, entered into definitive agreements for its non-regimable theory of speed financing.

Speaker 3: GD remains the majority shareholder of GD Industries after this transaction. To conclude my remarks, the year of 2022 tested all of us on many fronts. What's best for GD.com apart is our unique resilience.

Speaker 3: to navigate the complex environment and to continue to make headway against our goals and long-term strategies, both financially and operationally. Looking at 2023, we have emerged stronger and more prepared.

Speaker 3: and will continue to relentlessly pursue the very essence of retail cost, efficiency and experience.

Speaker 3: We believe this business philosophy has been proven successful across many cycles over the 20 years since our founding and will remain the right way to enable us to create value for our customers, business partners and shareholders. With that, let's open the call to the Q&A. Thank you.

Speaker 1: The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed.

Speaker 1: The first question is from Eddie Wong of Morgan Stanley . Please go ahead. Thanks.

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Speaker 2: Thank you for taking my question. My question is about the 10 billion subsidy program we just launched.

Speaker 2: We understand that JD is trying to rebuild the low-cost mind share on customers through this 10 billion subsidy program. So just want to check if there's any matrix that we can follow to test whether or not this program is successful.

Speaker 2: And if our competitors are trying to follow and add the investment in this subsidy program as well, so how should we expect the template subsidy programs financial impact in the short term and the long term on JD? Thank you.

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Speaker 3: Thank you for the question. J.D.'s discount program has recently drawn a lot of attention and I believe a lot of our analysts want to know more. So I will just take out this question.

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Speaker 4: The most important thing is to make sure that you are not in the wrong place. You are not in the wrong place. You are not in the wrong place. You are not in the wrong place. You are not in the wrong place. First I want to stress that JEE's business philosophy in our 20 years of development.

Speaker 4: centers on cost, efficiency, and user experience. By continuously optimizing cost and efficiency, we are able to create superior products, services. This principle remains unchanged.

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Speaker 4: The price is very important element in user experience. In the past, all e-commerce players, including JD.com, focused our resources on grant promotion.

Speaker 3: which created a phenomenon of no promotions, no buying or no promotions, no sales. This is by no means an ideal situation for anyone, also unstable for the better coordination and efficiency of the product supply chain. What we hope to do is to transform our marketing strategy from...

Speaker 3: contribute to more stable development of the supply chain of the industry and more orderly growth of brands and merchants.

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Speaker 3: So you've noticed that several channels and services have already been launched online, including the compensation for higher prices, free shipping above 9.9 grand, and the Price Guarantee Program, as well as the highly noticeable One Billing Subsidies Program.

Speaker 3: And for this program, it's one of the many programs in our aim to better our pricing strategies. And all these different programs are not merely slogans. We would like to provide genuine and tangible benefits to our customers. Now we've climbed 1 billion RMB worth benefits for the first month.

Speaker 1: which is a collective marketing investment put together with our brand partners and merchants on our platform. We understand that only by providing users with true benefits can we make them stay and attract more brands and merchants. And in the same way, only by better serving the users can we better serve the merchants.

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Speaker 1: To create our low price image, we have been doing several things. First, from the supply side, we continue to improve our open ecosystem to provide more choices, more diversity for prices and categories, including products from industrial belts.

Speaker 1: and the white label products for our customers. And at the same time, we continue to enhance our supply chain efficiency to generate the scale effects and to produce more money savings for our customers. And also through our different kinds of marketing activities.

Speaker 1: We want to let our customers have a very tangible and true feeling about the highly cost effective products offering our platform both from our first party and the third party.

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Speaker 1: exceeded our expectations in terms of driving, activating more users, existing users, new users, and bringing more traffic, etc. And for all these, we are still making internal adjustments and we'll also see how our partners

Speaker 1: and our consumers receive on it. So overall, we believe this is a meaningful thing for JD and also for this industry.

Speaker 4: Re now that is a bey, the highire where want to to you sure. Question gy Hydro, very So when you energy show ort that to more you for the trans elimment to Co the of you, not local to be local wheilo, you were seeing the symptom.

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Speaker 1: In terms of the indicators for the success of the program, we will continue to focus on the users' performance through these programs, such as the activities of the existing users and their returning, and the new users' acquisitions, the users' app, and their healthy activities.

Speaker 1: shopping behaviors on our platform. There are many around users.

Speaker 4: Although we your channels turn on the. So that's what we are you con vative of. two of looking down government on the Jack or the loveuly ersusure posation on the con and omy. You should had a con jam con omy, howy o sho, because you, the team the, So what, what you change ableabout the the? You here, you got the jge.

Speaker 1: And last, I want to stress that China's largest supply chain based technology and service provider, JD's capabilities and competitiveness exist in our years accumulation of our supply chain capabilities, our joint efforts built together and a winning situation with our business and....

Speaker 5: Valley.

Speaker 6: Thank you.

Speaker 3: Yeah, this is Sandy. Let me add some additional points on the P&L impact. So in terms of the budget for this program, first of all, the discount to consumers will be real discounts. But as Chih-Ho said, we will work together with our suppliers and the merchants.

Speaker 3: and leverage our supply chain capabilities. So not all the discounts will directly fit our gross margin or marketing expenses. Second, our target is to smooth out the operation pressure from the two major promotion seasons to improve operating efficiency for the entire supply chain.

Speaker 3: the ROI of each initiative. So overall we do not intend to significantly change our overall marketing budget for the year. Bearing in mind all the marketing spending is discretionary. It's all flexible costs so we could always manage through dynamic adjustments.

Speaker 3: So overall, we do not intend to significantly change our overall marketing budget for the year. Bear in mind, all the marketing spending is discretionary. It's all flexible costs. So we could always manage through dynamic adjustments. Thank you.

Speaker 7: Thank you.

Speaker 4: Okay, next question, please. The next question is from Ronald Keung of Goldman Sachs. Please go ahead. Rest of yourfor pa Graansna de

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Speaker 8: you think about the China consumption or how retail sales may trend this year after this reopening and in our kind of 10 billion subsidy program and this background how will

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Speaker 4: So with the cognitive control measures out of sight, we've seen the macro economy is recovering momentum from the consumption side. We see in the short term the social contact related to consumption is recovering quicker. So with the cognitive control measures out of sight, we've seen the macro economy is

Speaker 1: including restaurants and tourism. We've seen some pandoc shopping this month. But overall, for essential or like a recovery in full, it will come from the recovery of people's confidence. It's very important now to rebuild consumers' confidence. And their confidence will recovery means the recovery of their income which requires a recovery of their income.

Speaker 1: And all these factors will take some time to pass on to the resident's income and for the recovery of consumption, confidence and spending power. So for now we see the recovery of consumption is underway and there are invalid pays here and there.

Speaker 1: So, I still need some time for recovery in full. At the same time, I want to add that we're talking with different brands and we have a more consistent view on that. We continue to keep our cautious optimism on the recovery, and we believe in the second half of the year, the recovery speed will be better. Thank you. We'll continue to keep our cautious optimism on the recovery.

Speaker 4: La P we, the more may to T you down town that you were car actually you were who came on the West. The J probabia each doary is.

Speaker 4: and the government is not the only government that is responsible for the development of the government. We are not the only government that is responsible for the development of the government.

Speaker 9: Thank you for your attention.

Speaker 9: The methaddo car qu shallthey, or the comoma no 2, two you actually looks. They don't car know.

Speaker 1: And sharing a little bit on the relationship between 1P and 3P, I see it as competition relations and this will be triggered by the needs of the users. And which modes will eventually prevail depends on their prices and the products and services will better meet the needs of our customers. So this is a very open competition.

Speaker 9: We are very happy to have you here. We are very happy to have you here. We are very happy to have you here. We are very happy to have you here.

Speaker 1: Our 1P business has quite strong advantages in several categories based on our years of accumulation and understanding our supply chain. We've been limited the selections of the products. We try to pursue the best of consumers' experience.

Speaker 9: We are very happy to have you here. We hope to see you again in the next video. Thank you very much. Thank you for your time. We hope you have a wonderful day.

Speaker 4: As there are increasing number of users and they are diversifying demand shopping on JIRA's platform, we need to expand and enrich our supplies of products on our platform.

Speaker 9: Im doing clear my D opportunities of to fumpact should our daughters to Jo out only VE for strong. Call you all you for the B number of Min. So we will boy on part or sho.

Speaker 1: So you've also noticed that in the past couple of quarters, there's a strong increase of merchants number on our platform. And also we wrote out a so-called Spring Dam project, which faced individual merchants to welcome them on our platform.

Speaker 1: These are all the efforts we made, a sort of JD's supply side reform to meet the diversifying needs of our customers.

Speaker 9: High all four they new happ that. So since DI che out, the momentum that pressure clo, one bulks to become here.

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Speaker 1: And also including our efforts made on our traffic allocations and our algorithm upgrading, as well as the One-Box program. Maybe you've already heard about it in the beta stage now. And all of this effort is made to improve user experience and to center on their need to make all our adjustments. So this is for this year the biggest and the determined actions.

Speaker 3: we will carry on. Of course, this also needs time to pan out. On the margin impact, if we look at by GMB, I would say it doesn't make a significant difference, either 1P or 3P. I think we always try to maintain reasonable tech rate. We never try to over monetize our users or business partners in any particular way.

Next question. The next one. The next one.

The next question is from Ellie of Macquarie. Please go ahead. Of

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And let me just go to too much detail with the algorithm. I want to share with you where are our traffic fields. Our traffic fields include our main sites, our JD's app, and our Genesys app, and our channels on WeChat, and a lot of our offline sales networks. And all these different fields are facing different kinds of our customers. The structures are different.

And so definitely for our existing high quality users in the first tier and the second tier cities, they can also navigate their ways to go to the other channels and pages. So at the same time I think...

The search suggestion function is playing a big role in these aspects. And for now we are doing a lot of events on our algorithm to make sure it's in a fair way and then to target different groups of customers with their different preferences to recommend them with the product. Some may prefer price. Some may prefer other things. But the field algorithm will be more targeted.

Of course, there are some challenges internally for us to do all these overhauls, but through the years of our accumulation, technically and technologically, we are ready for that. What's more important for our shift on this move is to shift our concept to...

double down on our ideas to serve the consumers, especially given the size of kitty.com with nearly 600 million users on our platform, we would like to shift our attention more to better serve our consumers. Thank you.

Next question is from Alicia Yap of Citigroup. Please go ahead. Thank you.

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the on-demand retail business. If these businesses actually continue to grow very quickly, can management share a little bit in terms of the current GMB contribution? Because if it's growing faster, would that actually be diluted our 1P revenue growth to some extent? Thank you.

Thanks, Alicia, for your question. I believe at this stage the interest on demand sales is still a very small percentage of our total GMV for a daily group.

If we look at a longer time period, I wouldn't think this business will dilute the impact of our 1P business because really they are providing our customers very different shopping experiences. So the reason for us to expand to this business model was because we realized that some of our customers do have on-demand shopping opportunities.

our one key business model because of the scale of the economy, we have very unique and very strong competitive advantage in terms of the lower cost, lower fulfillment cost.

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It's not purely depends on its growth rate. We will be basing on the demands of our users. We do see there are on-demand shopping users and shopping demand on the platform. If we don't do that, this will be a loss and insufficient services from JD.

Corona throw to me the lining up over the detail for you and also when we talk to our brand partners,

We also received their demand to work with JD to help them to optimize their business based on the on-demand business model and leveraging JD's platform, our user base, and our big data, etc., to provide them better support on the marketing side and the efficiency of product supplies.

During the interview, he said he would like to speak to people like theives someone really important about the Nweather Ned defin cease learning. uh...

But in terms of one and more regional issues, the whole human rights CORPSation is not something embedded inside to a higher standard of process. This leads us to the traditional decisions made by European Union emphasized in a way

And thirdly, it's from our supply chain perspective. As we all know that JD has a very strong B2C 1P model for supply chain and we do a good job on it, but with the time goes by, we're diversifying our supply chain models, including our warehouse and the production zones and more. And for the under-manded retail, it's a new type of supply chain.

I hope you enjoyed this video. If you have any questions, please leave them in the comments. Also, please subscribe to our channel. Thank you for watching.

And here I just want to repeat again. Even though the three criteria mentioned above are all mapped, we still go back to the point in my remarks at the beginning of the call. We'll still consider if this business model has a good job.

can improve cost and efficiency and goods for user experience. In terms of user experience, whether we can provide differentiated services in terms of client products and services. So by meeting all these service criteria, we will make our position to enter this market.

Okay, next question please.

The next question is from Thomas Chung of Jefferies. Please go ahead. Hello, everyone. My name is Thomas Chung. I'm a professor at the University of China at the University of China.

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The standard high-speed, we will always try to be more objective than the standard. Thanks management for taking my questions. My question is more about the future competitive landscape. Given that we have been seeing peers also spending

aggressively in a different sort of a marketing campaign. I just want to get a sense about from our strategic perspective. Will we also set up our marketing spending if our competitors are spending aggressively?

or will we still stick to our balanced approach on our pipeline and profitability? And I just want to get a sense on how we should think about our growth strategies in light of the dynamic landscape. Thank you.

Do we still stick to our balanced approach on pop line and profitability? I just want to get a sense on how we should think about our growth strategies in light of the dynamic landscape. Thank you.

I frequently answer questions of the government, particularly?n from North China. The travel reaches its skill and potential trust. That's honor for us. We are the students. Our quarantine training is successful. Fluently the practice and supplies are going on to mobilize the members.

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I try to answer some part of your question, it's not very clear. So I just want to share that the differentiator of JD's business model exists in our scalable supply chain and the certainty we can provide in the product supply chain. And we have been building, develop our core capabilities in supply chain and use our experience in providing more...

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So for JD per se, we are not a traffic driven e-commerce company and on essence we are a company based on our

whole categories and we're transforming to retailers that will be developed based on branding our users on our platform and to enhance the overall their lifecycle value on our platform.

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So I believe at different times in economic and consumption cycles, different companies of different models will review their different values.

For JD's business model, besides, our business will take a long-term view, and then it's heavier in terms of our investment in logistics and user experience. While we face external competition, we're confident that we have been...

in the short term.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to JB.com's Sean Chung for closing remarks.

Thank you for joining us on the call today and for your questions. If you have further questions, please contact me and our team. We appreciate your interest in JT.com and really looking forward to talking to you again next quarter. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. Good day.

I have.

At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Thank you, Kate. Hello, everyone. Welcome to GD.com Q4 and full year 2022 results conference call. For today's call, CEO of GD.com, Mr. Xu Lei, will start with his opening remarks, and our CFO , Ms. Sandy Xu, will discuss the financial highlights. After that, we'll open the call to a question from an analyst.

Let me quickly cover the Safe Harbor. Please be reminded during this call, our comments and responses to your questions reflect management's view as of today only and will include four looking statements. Please refer to our latest Safe Harbor statement in the earnings press release which applies to this call. We'll discuss certain non-GAAP measures. Please also refer to the reconciliation of non-GAAP measures with comparable GAAP measures

Hello everyone, this is Julie. Thank you for joining Julie.com's fourth party and full year 2020-2022 earnings call.

I would ask you to take the call to lean on the emergency screens, and ask them to dishes that might behow for them to move. The tappingKERchief just opened up my door. Thank you.

Please see the complete disclaimer at the end of the video.

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In the year 2022, J.D. states forward our goals and resolutions throughout.

in a challenging macro environment. We have been able to play an important role in the industry and China's economic development as we continue to fully leverage our unique business model and supply chain capabilities to provide consumers best-in-class services and help our up and down stream partners to enhance their operations.

At the same time, we have achieved a high quality growth of our own, with our full year revenues in 2022 achieving the RMB 1 trillion for the first time. This reflects the strategic decision we made in the beginning of the year to focus our energies and resources on JD's core business, in line with our analysis and understanding of the predominant industry and the macro trends.

This has enabled JD to continue to deliver high quality operations with highest ever profitability of the year, despite the external challenges. This once again demonstrates that our business model has a strong potential for a profitable growth.

Today, the industry and the overall external environment are experiencing profound changes. The coverage over the past three years, the recovering micro-economy and demographics structure changes have all impacted the retail industry. In a post-to-covid era, customers' lifestyles and preferences have not fully changed.

We have seen the polarized trends of consumption patterns and spending power. On the one hand, the number of middle class and household users who attach great importance to the quality and function of goods is expanding. On the other hand, consumers have become more meticulous in their spending. Therefore, we see increasing diversification of consumer demand and consumption scenarios.

we see a mixed of opportunities and challenges amid this dynamic evolution.

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Thank you for your attention.

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and the determination. Here I would like to give a brief overview of the major adjustments we've been proactively made.

First, we initiated the theories of strategic realignment in 2022 with the aim of achieving healthy and sustainable growth. In the past, we gave more ample room and tolerance to new trials in both our core and new businesses, which diluted management focus to a certain extent. Based on our analysis of the external environment, we have conducted a comprehensive review of our businesses.

and decided to pull back those new businesses that either could not develop more efficient business models, had limited synergies with our corn businesses, or could not achieve sufficient economies of scale. That said, we will continue to invest in the new businesses with healthy momentum and exciting future opportunities. I'll share some of the examples shortly. Second.

We have been expanding our supply chain capabilities for our corn business. We continue to build up our operating capabilities across different categories and lower costs. Third, we have reallocated our resources and energies back to the very essence of retail. Footing consumers' needs first, we have further built upon our commitment to better products, prices and services.

In terms of price, our goal is to be known by cost customers for providing the most consistent everyday low price. As such, we have go through numerous bottom-mount optimizations, including further screenlining of a promotional program and improving our traffic allocation mechanism. Through this effort in our supply chain and the marketplace ecosystem, we have seen a massive increase of product selection of

that all of our adjustments are made out of our deliberate consideration of consumer needs and are executed with careful planning. Our ultimate goal is to satisfy our device-buying customer demand and provide a best-in-class experience across the board.

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Now, let me review the major progress we made in Q4 as discussed in the past. We have been focusing on user quality and efficiency and sustainability of user acquisition given the soft deconstruction environment. In the quarter, on top of our largely stable user base, we also recorded double-digit DAU growth year on year. More encouragingly, we are seeing an upward trend for both user structure and quality.

In particular, in our core business JD Retail, repeat purchasers and the paying members both grew robustly in Q4 and accounted for higher proportions of our total users, which helped to drive up shopping frequency and output. JD Plus reached 34 million members in Q4, while flat members continued to spend eight times the average annual amount of non-plus members, reflecting their high shopping frequency and spending power.

Moreover, our e-Howdian membership store, which is positioned to serve the middle to high-end market, has also crossed the 1 million paying members' milestone. We are continuously improving our user service and operating capabilities so as to better serve our users in first and second-tier cities as well as lower-tier markets.

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As we improve our operating quality, we also continue to invest in new growth opportunities and new businesses such as marketplace ecosystem, omnichannel business and supply chain logistics.

We see great potential in building up an open ecosystem that enables sustainable growth for our merchants. With such efforts, we can further lower merchants' operating costs and optimize our traffic distribution. We can also help merchants to grow with better efficiency and certainty, supported by our strength in supply chain, logistics, technologies, and services. As a result, in Q4, JD Retail increased its merchant base by over 20% in 2019.

We hope you will enjoy this video. Please subscribe to our channel. Thank you for watching. We hope you will enjoy this video. Thank you for watching.

JD's interest in the on-demand ratio services, which is part of our omnichannel business, maintained strong growth trajectory in this quarter. As its further stepped-up efforts, collaboration with brands and offline stores, GMB in our O2O business increased by 29% around year.

In particular, ShopNow, our one-hour delivery service grew 80% in this quota. This not only generates incremental growth for brick-and-mortar stores, but also provides users with an on-demand shopping experience that combines online ordering, offline shipping, and delivery as fast as within an hour.

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Despite the impact of COVID, J.D. logistics maintained a resilient revenue growth in Q4. More notably, with the continuous improvement of its business, J.D.L. has been profitable for three consecutive quarters and achieved a target of great even on a four-year basis. Despite the macro challenges and the dynamic competitive landscape, J.D.L. has been able to further strengthen its position in the industry. J.D.L. also continues to draw on the complementary strengths of the digital world and create synergies with Q4, both at the U.S. and the global, particularly in the areas of integrated supply chain services.

Air Express Network, bulky item delivery and Express Network. This has enabled JDL to provide comprehensive supply chain solutions for both up and downstream customers to help them reduce cost and increase efficiency and withstand risks, while at the same time building more advanced logistics systems.

JDL has also won wild recognition from customers for its distinguished service quality. In Q4, JDL continues to expand its logistic infrastructure. Notably, J-Airline made steady progress in increasing cargo routes in Q4 since its official commenced operation last August , with three all-cargo aircraft in operation by the end of 2020.

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Last but not least, we continue to foster the growth of new businesses that resonate with our foreign businesses and capabilities. JD Industries is one of the examples of a successful business that we have incubated internally.

and has gone on to deliver hyper growth. With its focus on industrial manufacturing, an important composition of the real economy, JD Industrial successfully integrates resources across the industrial chain, such as procurement, production, warehousing, logistics, and inventory management to achieve superior synergies and economies of scale. Another example is our private label brand, Jin Zhao, which translates to as the Made by JD.

It delivered over 60% year-on-year growth in 2022. The initial purpose of this business is to complement the product categories offered on our platform and to create new value for our suppliers and customers. It also helps JD to further expand throughout the app and downstream of the supply chain. We are pleased to see that 25% of class members have become loyal users of Jin Zao products.

and the percentage continues to increase. Both JD Industries and Jinza offer solid proof that we are on the right track as we adjust and focus on our core business and promising new businesses.

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We hope to see you again soon. Thank you for your attention. We hope to see you again soon. We hope to see you again soon.

I hope that today's presentation helps you get a better understanding of the significance of the strategic shift underway at JD. At its core, our intention is to seize the opportunity presented by the profound changes in an external environment and return to our focus on lower cost, higher efficiency, and the superior user experience. Admittedly, I would like to thank you for your time today. I hope you will be able to join us in the next session. Thank you.

We may experience short-term impact on our performance as we further educate users, reinvigorate JEE's reputation for providing the best prices, optimize our products and mix, and streamline internal mechanism and procedures. All of these aspects require time and effort, especially as both the macroeconomy and consumption are still in recovery stage. That said, I want to stress that our long-term strategy has not changed.

We believe that the adjustments we are making will solidify our strengths as we have faith in our own business model and strategic direction, as well as the resilience and the long-term growth trajectory of China's economy and consumption trends. In the long term, J.D. is committed to playing an important role in people's daily lives and the country.

Looking back at 2022, we successfully executed our strategy to achieve high quality growth with stronger margins, along with our long-term goals despite the many external complexities and challenges. We delivered again and even exceeded our target, which was especially demonstrated by our strong profitability.

and cash flow at year end. Our 1 billion USD cash dividends program further demonstrates our confidence for the long term. With our resilient business model, we are confident to embrace the new opportunities and challenges in 2023 as Shizhu just laid out. Now let me walk you through our financial results in Q4 and the full year of 2022.

Our net revenue grew by 7% year-on-year to 295 billion R&D into four. On a four-year basis, net revenue grew by 10% and surpassed the one treating R&D milestone for the first time in our history. As we continue to focus on user quality and building deeper user engagement,

We are encouraged to see that in Q4, JD Retail, LTM, average GMB per user and shopping frequency continue to increase year on year for five competitive quarters.

mainly driven by the expansion of our core user base. Breaking down the revenue mix.

Product revenues were up 1% year-on-year in Q4 and 6% in the full year of 2022. Service revenues grew by 40% year-on-year in Q4 and accounted for a new high of 20% of our total revenue, up from 15% a year ago.

showcasing the further diversification of our revenue streams. On a full year basis service revenues were up 33% in 2022.

Logistics and other services revenues grew by 75% year on year in Q4 and 55% in the full year of 2022. I will elaborate more on the underlying drivers in the segment analysis section later on. Marketplace and marketing revenues grew by 11% year on year in Q4.

of our merchant base and they have been investing additional advertising budget on our platform.

This bodes well for our continued progress in strengthening our marketplace ecosystem. Now let's turn to our settlement performance.

DC Retail continues to see resilient revenue growth with encouraging expansion of both fulfilled growth margin and operating margin, especially during a quarter that was heavily disrupted by COVID dynamics.

In terms of revenue, D.E. retail recorded 3.6% year-on-year growth in Q4 and 7.3% in the full year of 2022. That category, electronics and home appliance revenues were largely stable year-on-year in Q4 and up 5% for the full year. Thanks to our strong supply chain capabilities, loser man share and expanding intra-situ...

last time, our supermarket category is going through a transition towards a healthier product mix.

As a result, the supermarket category saw its largest margin improvement over the last two years.

tracking well on a more sustainable growth trajectory for the long run. Emerging categories such as healthcare, in sports and outdoors continued to deliver double-digit top-line growth in the quarter, demonstrating our broad-based user-manship across categories. I want to highlight that the original profitability improvement

is a strong testament to our continued commitment and ability to deliver against our goal of sustained long-term margin improvement. DDC retail's fulfilled gross margin was up 53 basis points year-on-year to 8.2% into 4, the highest level achieved in all our promotion seasons since the inception.

mainly driven by our efforts to optimize cost and efficiency, and the improving economy of shale. This also boosted JGVtales operating margin to 3.0%.

up 90 basis points from a year ago. For the full year of 2022, daily victims for field growth margin was up 42 basis points to 8.2%, and operating margin was up 68 basis points to 3.7%.

Both are record high levels on an annual basis. Our long-term margin trajectory remains well on track. Baby logistics made solid progress in both top-line growth and profitability in Q4 and the full year of 2022. Its revenues are well on track.

grew by 31% year-on-year in Q4 and 31% for the full year of 2022. Excluding the impact of consolidation of the power, the growth rate was 13% and 17% respectively. This is mainly contributed to the receiving growth in revenues.

from external customers, the proportion of which continued to increase to about 70% in Q4. Notably, JBL has been profitable on a non-GAAP operating income basis for three quarters in a row, and its operating margin rising to 2.1% in Q4 on a full year basis.

GCL's operating margin reached 0.4% in 2022, achieving its great human target for this year despite the unfavorable impact from the external environment, including additional COVID-related cuts and operating deleverage. That added point of revenue of 2.7 billion RMB in 2014.

and its NAGAP operating loss narrowed sequentially to 270 million RMB for the quarter. JDDJ and Shafna have expanded to cooperate with over 200,000 business partners in the quarter and provided more than 2,000 cities and counties with on-demand retail services that cover a wide range of categories.

As a result, our intrastity on-demand retail business maintained its robust momentum, particularly shop now that recorded a year-on-year GMV growth of over 80% in Q4. Finally, our new business revenue scaled back to 4.8 billion RMB in Q4 and 21.8 billion RMB in the full year of 2022.

As we continue to adjust strategies in both CNC and international businesses, while GE property maintains a strong growth momentum, for international businesses, we've decided to case operations of e-commerce business in Southeast Asia market for now, as we believe that it would continue to require heavy investment over a prolonged period to build an efficient and scalable B2C e-commerce business, based on the current economic and infrastructure development in the local markets.

Instead, we continue to invest in building global logistics infrastructure that better leverage our core capabilities and explore online retail business opportunities in other markets. In terms of profitability, new business operating laws narrowed substantially year on year in Q4 and in the full year of 2022. The next 16 months, rates have experienced significant gains over the past year and took watch.

we continue to explore new initiatives and encourage innovations that create better synergies with our core businesses and capabilities. We believe this strategy will validate itself in the coming quarters as we pursue high quality development.

Moving on to our consolidated bottom line, as we firmly executed our strategy to improve operating efficiency and focus on high quality growth that we set at the beginning of last year, we ended the year on a strong footing with 7.7 billion RMB non-cap-net income attributable to ordinary shareholders in Q4.

Our Nagapnad margin was 2.6% in Q4, which represented an impressive expansion of 130 basis points compared to a year ago. Our full year basis, Nagapnad income attributable to ordinary shareholders was 28.2 billion RMB, which grew at a 3-year KGOC of 38%.

Now gap net margin for the full year of 2022 increased by 90 basis points year on year to 2.7% hitting a historic high on an annual basis. Finally, our IOTM free cash flow as of Q4 reached a historical high of 35.6% dealing R&D. By the end of Q4, cash and cash equivalents, restricted cash and short-term investments added up to a total of

226 billion RMB, up from 218 billion RMB last quarter. This gives us a stronger than ever position to support business development and again return value to shareholders in the form of a cash dividend. This was mainly driven by both our improved profitability and strong balance sheet. Furthermore, we plan to adopt an annual dividend policy going forward as a way to sustainably return value to shareholders at an amount to be determined by the board based on our financial performance in the previous fiscal year and other factors. In March 2023, J.D. Industries, our consolidated subsidiary and the leading industrial society technology.

cost, efficiency, and experience. We believe this business philosophy has been proven successful across many cycles over the 20 years since our founding and will remain the right way to enable us to create value for our customers, business partners, and shareholders. With that, let's open the call to the Q&A. Thank you.

The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. The first question is from Eddie Wong of Morgan Stanley . Please go ahead.

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Thank you for taking my question. My question is about the 10 billion subsidy program we just launched. Do you understand that J.D. is trying to rebuild the low cost mine share on customers?

through this 10 billion subsidy program. So just want to check if there's any matrix that we can follow to test whether or not this program is successful. And if our competitor is trying to follow and add the investment in this subsidy programs as well, so how should we expect the template subsidy programs, the financial impact in the short term and the long term on JV? Thank you.

If we go to anotheruttering area, we say that we want to fill them out to prepare a synth in order to reach the Gim Kids for free. We do have an officialendant of our service and we'll try to fill that area with Errors approach. We will be able to try to find a solution but we will also have a therapy program that will help as search images. So non ink-based Thank you for the question. JD's discount program has recently drawn a lot of attention and I believe a lot of our analysts want to know more. So I will take on this question.

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First I want to stress that JE's business philosophy in our 20 years of development centers on cost efficiency and user experience. By continuously optimizing cost and efficiency, we are able to create superior products, clients and services. This principle remains unchanged.

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So, we are very excited to see the new product. Price is a very important element in user experience. In the past, all e-commerce players, including JD.com, focused our resources on grant promotion, which created a phenomenon of no promotions, no buying, or no promotions, no sales. This phenomenon is an ideal situation for anyone.

also are disabled, and stable for the better coordination and efficiency of the product supply chain. What we hope to do is to transform our marketing strategy from focusing on big sales to creating an environment of everyday low price, gradually shifting people's shopping behaviors and driving up consumption activities on a daily basis. To return to the fundamentals of retail, we want to contribute to more stable development of the supply chain of the industry.

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This program is one of the many programs in our aim to better our pricing strategies. And all these different programs are not merely slogans. We would like to provide genuine and tangible benefits to our customers. Now we've climbed 1 billion RMB worth benefits for the first month.

which is a collective marketing investment put together with our brand partners and merchants on our platform. We understand that only by providing users with true benefits can we make them stay and attract more brands and merchants. And in the same way, only by better serving the users can we better serve the merchants. And this program...

will have a limited impact on our margins and we will keep it in a controllable level and Sandy can share with you more on that.

And to create our low price image, we have been doing several things. First, from the supply side, we continue to improve our open ecosystem to provide more choices, more diversity for prices and to categories, including the products from the industrial belt.

and the white label products for our customers. And at the same time, we continue to enhance our supply chain efficiency to generate the scale effects and to produce more money saving for our customers. And also through our different kinds of marketing activities we want to let our customers have a very tangible and true feeling about the highly cost effective products offering our platform both from our first party and the third party.

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So these programs are still in their very early stage and have already generated some fruitful results. And in certain aspects have already exceeded our expectation in terms of driving, activating more users, existing users, new users, and bringing more traffic, et cetera. And for all these we are still making internal adjustments, and we'll also see how our partners...

and our consumers receive on it. So overall, we believe this is a meaningful thing for JD and also for this industry.

And in terms of the indicators for the success of the program, we will continue to focus on the users' performance through these programs, such as the activities of the existing users or resources on campus catalogues.

and the new users' acquisitions, the users are cool, and they are healthy, shocking behaviors on our platform. There are many around users.

And last, I want to stress that China's largest supply chain based technology and service provider, JV's capabilities and competitiveness exist in our years accumulation of our supply chain capabilities, our joint efforts built together and a winning situation with our business and brand partners and our long-term user focused business philosophies instead of just providing, giving some benefits on the superficial level. So we remain very confident to continue to enhance our users' experience and their value.

as China's largest supply chain based technology and service provider, JV's capabilities and competitiveness exist in our years accumulation of our supply chain capabilities, our joint efforts built together, and a winning situation with our business and brand partners, and our long-term user focused business philosophies instead of just providing, giving some benefits on the superficial level. So we remain very confident to continue to enhance our users' experience and their value. Thank you.

This is Sandy. Let me add some additional points on the P&L impact. So in terms of the budget for this program, first of all, the discount to consumers will be real discounts. But as Chitong said, we will work together with our suppliers and the merchants and leverage our supply chain capabilities. So not all the discounts will directly fit our gross margin or marketing expenses. Second, our target is to smooth out the operation pressure from the two major promotion seasons to improve operating efficiency for the entire supply chain and also to attract new users or wake up our existing users. So we expect to receive some efficiency gains.

and we may reallocate our marketing budget for big promotions or user acquisition costs, depending on the ROI of each initiative. So overall, we do not intend to significantly change our overall marketing budget for the year. Bearing in mind, all the marketing spending is discretionary. It's all flexible costs. So we could always manage through dynamic adjustments. Thank you.

we may reallocate our marketing budget for big promotions or user acquisition costs, depending on the ROI of each initiative. So overall, we do not intend to significantly change our overall marketing budget for the year. Bearing in mind, all the marketing spending is discretionary. It's all flexible costs. So we could always manage through dynamic adjustments. Thank you.

our marketing budget for big promotions or user acquisition costs, depending on the ROI of each initiative. So overall, we do not intend to significantly change our overall marketing budget for the year. Bearing in mind, all the marketing spending is discretionary. It's all flexible costs. So we could always manage through dynamic adjustments. Thank you.

Next question is from Ronald of Goldman Sachs. Please go ahead. Sir, it is part of theiser of the chat.

Can management first hear how you think about the China consumption or how retail sales may trend this year after this reopening? And in our kind of 10 billion subsidy program and this background, how will we balance one key, which is our self-operated business versus marketplace growth and the implications to margins given the different margin profile for these two segments of the business? Thank you.

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So with the COVID control measures out of sight, we've seen the macro economy is recovering momentum from the consumption side. We see in the short term the social contact related to consumption is recovering quicker, including restaurants and tourism. We've seen some panop shopping demand.

But overall, for essential or like a recovery in full, it will come from the recovery of people's confidence. It's very important now to rebuild consumers' confidence. And their confidence will, recovery means the recovery of their income, which requires the resumption of production of many enterprises, especially the massive amount of SMEs. And currently, we have seen the government has rolling out the...

All of the economic stimulus measures and policies and many enterprises have reduced their production and all these factors will take some time to pass on to the resident's income and for the recovery of consuming, a consumption confidence and spending power. So for now we see the recovery of consumption is underway and there are invalid pays. So I still need some time for recovery in full.

At the same time, I want to add that we're talking with different brands, and we have a more consistent view on that. We continue to keep our cautious optimism on the recovery, and we believe in the second half of the year, that the recovery speed will be better. Thank you.

And sharing a little bit on the relationship between 1P and 3P, I see it as competition relations and it will be triggered by the needs of the users. And which modes will eventually prevail depends on their prices and the products and services will better meet the needs of our customers. So this is a very open competition.

And our 1P business has quite strong advantages in several categories based on our years of accumulation and understanding our supply chain. And we've been limited the selections of the products we try to pursue the best consumer experience.

and the global market and the global market and the global market and the global market and the global market As there are increasing number of users and they are diversifying demand shopping on this platform we need to expand and enrich our supply of products on our platform and the global market and the global market and the global market

So you've also noticed that in the past couple of quarters, there's a strong increase of merchants number on our platform. We also rewrote our so-called Spring Dam project, which faced individual merchants to welcome them on our platform. These are all the efforts we made.

a sort of a JV supply side reform to meet the diversifying needs of our customers.

and also including our efforts made on our traffic allocations and our algorithm upgrading as well as the One-Box program, maybe you've already heard about it in the beta stage now, and all of this effort is made to improve users' experience and to center on their need to make all our adjustments.

So this is for this year the biggest and the determined actions we will carry on. Of course, this also needs time to pan out. On the margin impact, actually, so Rana, on the margin impact, if we look at by GMB, I would say it doesn't make significant difference, either 1P or 3P. I think we always try to maintain reasonable tech rate. We never try to over monetize our users or business partners in any particular category or model.

The next question is from Ellie of Macquarie. Please go ahead.

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And let me just go to too much detail with the algorithm. I want to share with you where are our traffic fields. Our traffic fields include our insights, our G fields are facing different kinds of our customers. The structures are different.

And secondly, I want to say that on our main site there are different channels and different programs in providing price driven or category driven or diversified offerings to different groups of consumers. So this program is also targeted to meet the demands of users who are more sensitive with prices. And definitely for our existing high quality users in the first tier and the second tier cities, they can also navigate their ways to go to the other channels and pages.

So at the same time I think the search suggestion function is playing a big role in these aspects. And for now we are doing a lot of events on our algorithm to make sure it's in a fair way, and then to target different groups of customers with their different preferences to recommend them with the product. Some may prefer price. Some may prefer other things. So the algorithm will be more targeted. Of course there are some challenges internally for us to do all this overhaul.

to better serve our consumers. Thank you.

The next question is from Alicia Yap of Citigroup. Please go ahead. Thank you. Thank you.

Thanks for taking my questions. My question is related to the on-demand retail business. If this business actually continues to grow very quickly, can management share a little bit in terms of the current GMB contribution?

I believe at this stage the interest on demand sales is still a very small percentage of our total T&V for JD group. If we look at a longer time period, I wouldn't think this business will dilute the impact of our 1T business because they are providing our customers very different shopping experiences.

So the reason for us to expand to this business model was because we realized that some of our customers, they do have the on-demand shopping requirements. Even though this business model may not be as efficient as our traditional B2C commerce business model in terms of financial model, that means once comparing the price, the value for many products and the...

So the pricing may not be as great as our B2C business model, but when the users do have this immediate purchase request, then we can also satisfy their shopping demands. So really it's to improve our customers' shopping experience. So in terms of competitiveness of our 1T business model, I still believe our 1T business model, because of the scale of the economy, we have very unique and very strong competitive advantage in terms of the lower cost, lower out-of-human cost.

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and we want to add that when we consider entering markets, it's not purely depends on its growth rate. We will be basing on the demands of our users. We do see there are un-demand shopping users and shopping demand on the platform. If we don't do that, this will be a loss and insufficient services from JD.

and also when we talk to our brand partners, we also receive their demand to work with JB to up

onlyom condoer. People think the womenominia, the you never gother the development are all veryigood for the. That is the that the father inial, she or many qu have exam give, have down fact bor the.

And thirdly, from our supply chain perspectives, as we all know, we have a lot of 289 billion staring at that venture on this short-term, forehead of the Peoria Maiight, J.D. has been very strong.

whether we need to step up efforts on this model.

And here I just want to repeat again, even though the three criteria are mentioned above and on that, and we still go back to the points I mentioned in my remarks at the beginning of the call, we will still consider if this business model has a good...

can improve cost and efficiency and goods for user experience. In terms of user experience, whether we can provide differentiated services in terms of client products and services. So by meeting all these certain criteria, we will make our decision to enter this market. Why not? Okay, next question please.

and goods for user experience. In terms of user experience, whether we can provide the differentiated services in terms of client products and services. So by meeting all these certain criteria, we will make our decision to enter this market. Why not? Okay, next question please.

The next question is from Thomas Chung of Jeffrey. Please go ahead. Hello, everyone. I'm Thomas Chung. I'm the CEO of Wanyu. I'm the CEO of Wanyu.

promotion. Jia ba to du du hua le, wu men hui tai tu yi ge, la yi ge fang mein, dei ge zhan le, wu men hui kangzong le, zho shi zui wu men, shou zhu zheng zhang, hai you yang ni zheng zhang, chou yi ge, bie za pen hang ne, zhan le hai shi wu men, du ou wei chan yu, zit gi bie dao, aggressive, that is, digital marketing, zhan le. Thanks, management, for taking my questions. My question is more about the future competitive landscape. Given that we have been seeing our peers are also spending...

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I try to answer some part of your question, it's not very clear. So I just want to share that the differentiator of JD's business model exists in our scalable Sublime Chain and the certainty we can provide in the product Sublime Chain. And we have been building, develop our core capabilities of Sublime Chain and the user's experience and provide more certain and quality shoving experience by quality and mean of all.

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So for JD per se, we are not a traffic driven e-commerce company. And on essence, we are a company based on our whole categories and we're transforming to retailers that will be developed based on...

running our users on our platform and to enhance the overall life cycle value on our platform. We can see that as the users are returning to their account, we know that if users come

Try to allow to of the temple, So should not do know. So this are supposing are to your orjin kal. uh, how T see the MO alsose have not GB But so con swming to question you inv yourselfla.

So I believe at different times and economic and compunction cycles, different companies of different models will review their different values. For JD's business model, our model decides our business will take a long-term view and then it's heavier in terms of our investment in logistics and user experience.

And while we face external competition, we are confident that we have been growing and being better with internal funding and operating efficiency continue to grow. The market competitions will always be there. The more important question is what is your long-term goal and how you can do this business smartly in the short term. Okay, thank you.

Q4 2022 JD.Com Inc Earnings Call

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