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spk02: Good morning, ladies and gentlemen, and thank you for standing by for DADA's Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Caroline Tong, Head of Investor Relations for DADA. Please proceed, Caroline.
spk03: Thank you, operator. Hello, everyone, and thank you for joining us today. Our third quarter 2020 earnings release was distributed earlier today and is available on our IR website, ir.imdata.cn, as well as on Global News Work Services. On the call today from Data, we have Mr. Philip Kwai, Chairman and Chief Executive Officer, Mr. Chun Yang, Co-Founder and the Chief Technology Officer, and Mr. Beck Chen, Chief Financial Officer. Mr. Kwai will talk about our operations and company highlights, followed by Mr. Chen, who will discuss the financials and the guidance. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains follow-up statements as defining the Section 21E of the Security Exchange Act of 1934 and the U.S. Security Litigation Reform Act of 1995. These follow-up statements are based upon management 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 a matter of which are beyond the company's control. These risks may cause the company's actual results or performance to differ materially. Other information regarding these and other risks, uncertainties, or factors is included in the company's filing with the U.S. SEC. The company does not undertake any obligation or to update any forwarding statements as a result of new information, future events, or otherwise, except as required on the applicable law. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Quai. Please go ahead.
spk12: Thank you, Caroline, and thank you all for joining us today. We are pleased to report another strong set of results for the third quarter of 2020. Our total net revenue grew by 85% to $1.3 billion on a year-over-year basis. Our industry-leading position has been further strengthened with market share expansion and a widened gap compared with the second and the following players. According to iResearch, JDDJ maintains as the largest local on-demand retail platform in the China supermarket segment, with 24% market share in the first nine months of 2020. increased from 21% in 2019. DataNow maintains as the largest open on-demand delivery platform in China with 24% market share in the first nine months of 2020, increased from 19% market share in 2019. I'm very encouraged by our progress as we execute our strategy to penetrate into lower tier cities drive synergies between our two platforms, and continue to deliver on our mission to bring people everything on demand. I'll start with exciting highlights from this year's October 20th Supermarket Shopping Festival and Double 11's promotions, and then provide updates on the performance of our two platforms. And then back, we'll go into greater details about our financial and operating results. So let's begin. We hosted our sixth annual October 20th Supermarket Shopping Festival on DDDJ platform with active participation of retailer partners. The number of stores joined in this festival achieved historical records. For example, all stores of Walmart China and 120 stores covering all forms of Yonghui and more than 1,600 stores under the CR Vanguard's umbrella participated in the promotion. We were particularly pleased to see our efforts in lower tier cities pay off. During the October 10th promotions, our sales volume in the lower tier cities was 3.4 times more than that of the same period last year. In terms of our 2011 promotions, our DataNow platform covered more than 2,500 cities and the countries ensuring timely on-demand delivery for omni-channel promotions and it resulted in a new peak daily order volume record of over 10 million. There were over 100,000 stores participating in W11 promotion on CDBJ platform covering more than 1,200 cities and countries. GMV on JDDJ platform more than doubled on November 11th on the year-over-year basis. So both platforms, JDDJ and DataNow, achieved significant breakthroughs in terms of quality of partners, sales volumes, and overall performance. I will now give you some updates on our two platforms, JDDJ and DataNow. Let's start with JDDJ, China's leading local on-demand retail platform. Our fast growth during the quarter was driven by a number of factors. First, we continue to execute our growth strategy in terms of expansion in geographic coverage and category coverage. By leveraging the scale and the strengths of our retail partners and competitive advantages in terms of regional supply chain and branding, we newly entered 200 cities and countries during the quarter. At the end of the quarter, we now cover over 1,200 cities and countries, bringing more and more people everything on demand. In this Q3, GNV from lower-tier cities increased by over 170% year-over-year. We're also expanding our category coverage. For consumer electronics and smartphones, we have established partnerships with dozens of authorized retailers of Apple. and have launched exclusive online stores on DDDJ platform. The first iPhone 12 order on launching day was delivered to consumer within only 14 minutes. We will continue to digitize more smartphone brands, retail stores, and home appliance stores in the very near future. In terms of pharmaceuticals, JDDJ established partnership with more than 70 out of the top 100 drugstore chains in China, including all of the top 10 drugstore chains. For the fast-growing pet category, JDDJ covers a variety of subcategories, including food, toys, health care, and body care. We also established partnership with multiple well-known pet brands during the quarter as well. Second. We are enhancing our collaboration with retailers and brand owners. In terms of retailer partners, during the quarter, we established new partnerships with more than 20 leading supermarket chains, including those of the top 100 supermarket chains and original dominant players, such as Oya in Jilin Province, Zhenghua in Shandong Province, and Zhebei in Zhejiang Province. They're all local winners. JDDJ had worked with over two-thirds of the top 100 supermarket chains in China by the end of September, which is a further demonstration of our advantages as a pure platform. We only enable and empower our retailer partners and create value to them as a partner rather than competing with them. The overwhelming number of leading retailers on our JDDJ platform compared with other competitors also presents recognition from retailers. During the quarter, we also extended our strategic partnership with CR Vanguard in relation to omnichannel fulfillment, product assortment management, consumer insights, and marketing. During this quarter, our online marketing service revenue from brands continued to increase significantly by over 400% year-over-year. We extended strategic partnership agreements with leading brand partners, including PepsiCo, Nestle, Mars Weekly, and so on. We also continued to innovate marketing activities to create more values to brand partners. For example, our pioneered one-hour delivery for live streaming program has been very well received by more brands during this quarter. In addition, we partnered with brands to create innovative marketing activities to improve sales and marketing efficiencies. For example, Brand CP Day is a joint marketing promotion with brands. During the Brand CP Day of E. Lee and E. Hyde Carey, the sales doubled on the week-over-week basis. We're constantly developing innovative technology to empower retailers and brand partners. As of October 31st, 2020, Dada's Haibo omni-channel online retail operating system was adopted in over 1,500 large and medium-sized supermarket chain stores in China. We added new modules such as smart picking and a pack to optimize the order picking process, new category expansion assistant, and an open developer ecosystem module, which has been adopted by all merchants. Overall, our Hibor system enables merchants to efficiently integrate their offline systems and supports omnichannel execution while ensuring operation stabilities. Meanwhile, our CRM systems have been adopted by more than 35,000 stores compared to 30,000 stores as of end of Q2. In order to continue to empower our retailer partners and improve consumer satisfaction, we recently launched data cross-forcing picking service, also known as in Chinese. In addition to providing systematically recruiting, managing, and training services, data picking also delivers efficient tracking of picking quality and the personnel working status through the digital management of the entire process. We believe this will significantly improve the efficiencies of picking and the fulfillment process while reducing store personnel costs. We also deepened our collaboration with JD Retail on Woojin Tianzhe, the key omnichannel collaboration program. During the third quarter, the GMV of Woojin Tianzhe increased by over 470% on a quarter-over-quarter basis. Let's now move on to Dalai Now, the largest open on-demand delivery platform in China. First, I will touch on our 10 merchants business. We extended our collaboration with industry-leading catering, supermarkets, pharmaceuticals, and other chain brands, and upgraded our dedicated delivery services. The customized delivery service, also known as , dedicated delivery service served the leading chain restaurants, pharmaceuticals, and the fresh food chain retailers, And the revenue from our key account merchants increased by more than 200% year over year during the third quarter. And turning to the last delivery, we continue to benefit from enhanced synergies with JD Logistics as we further integrate our systems and delivery efficiencies. In addition to collaborating on delivery services with JD Logistics, We also expanded our partnership by launching pick-up service. The premium riders who have passed our training and events will be qualified to provide timely pick-up service for the requests on JD Logistics platforms. This value-add service will not only address challenges of frequent fluctuation of pick-up demands, based on the cross-sourcing model, but also significantly improve the user satisfaction based on the high quality services. So overall, we're very pleased with our progress during the quarter, and we think we have an exciting journey ahead as we execute our growth strategy. With that, I will now pass the call over to Baek Chien to go over our financial support for the quarter. Thank you.
spk11: Thank you, Philip. We are pleased to deliver another quarter of strong revenue growth with significant improvement of operating margin in the third quarter as we continue to improve operating efficiency and take advantage of economies of scale across our venues. Before we go over the numbers, just a few housekeeping items in advance. We believe year-over-year comparisons are the most useful way to judge our performance. All percentage changes I'm going to give will be on year-over-year basis, and all figures are in RMB, unless otherwise noted. The total net revenues increased by 85% to $1.3 billion. Net revenue from DataNow increased by 81% to $719 million. mainly driven by the increase in ordered volume of last mile delivery services to logistic companies and the interest to deliver services to chain merchants. The total net revenues from JDJ increased by 91% to 583 million, mainly due to over 90% increase in GME from the same quarter last year, which was driven by increases in average order value and the number of active consumers. The number of active consumers for the past 12 months ended this Q3 increased by 77% to over 37 million. Online marketing services revenues from brands continue to increase significantly by over 400% year-over-year as a result of increasing promotion activities from brand owners. Moving over to the expenses side. Corporation support expenses increased to $1 billion mainly due to an increase in rider cost as a result of increasing all the volume of our last mile and interest rate delivery services that we provided to logistic companies and the various chain merchants on Tananao platform and retailers on VDDJ platform. Selling and marketing standards goes to about 500 million mainly due to an increase in incentives to JDBJ consumers on higher GME while the rate of incentives as a percentage of GME declined. Second, an increase in advertising and marketing expenses which was primarily attributable to increasing referral fees that we pay to the staff and to the staff at retail stores for their efforts to attract new consumers to the JDBJ platform. And the third, an increase in personal cost in connection with our growing business and increase the share-based compensation expenses. GMA expenses rose to $120 million mainly due to increased share-based compensation expenses and also because of increases we are a listed company now. R&D expenses rose to 100 million, meaning because of an increase in R&D staff as we continue to strengthen our technology capabilities and increase the share-based compensation expenses. The non-GAAP loss from operations narrowed by 22% to $339 million. The non-GAAP operating margin was minus 26%, which was a great improvement from minus 62% in the same quarter of last year. Improvement in our operating efficiencies mainly comes from two areas. First, we were able to improve our delivery efficiencies because of an increase in order density and optimization of our automatic order pricing mechanism algorithm. The ratio of operations and supporting expenses and percentage of our total net revenue decreased to 78% this quarter from 94% in the third quarter last year, operating and the supporting expenses mainly include fulfillment expenses. Second, the ratio of adjusted selling and marketing expenses as percentage of total net revenue decreased significantly to 37% this quarter from 53% in Q3 last year. This was mainly thanks to the saving of consumer incentives because our platform becomes more attractive and the consumers become more loyal. In Q3, our non-GAAP net loss narrowed by 21% to $324 million. Non-GAAP net margin was minus 25%, which was an improvement from minus 60% in the same quarter of last year. The non-GAAP net loss attributable to ordinary shareholders was $324 million versus $621 million in Q3 last year. Nungap diluted net loss per share was $0.36 compared with $1.70 for the third quarter of last year. As of September 30, 2020, we had $3.7 billion in cash and cash equivalents, restricted cash, and short-term investments. In terms of the outlook for the fourth quarter of 2020, we expect total net revenue to be between $2 billion and $2.1 billion. With a strong growth momentum, and we are confident that JDDJ revenue will grow by 100% year-over-year in the second half of 2020. So this concludes our prepared remarks, and operator, we are now ready to begin the Q&A session. Thank you.
spk02: Thank you so much. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, you will need to press star and 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Again, it's star and 1 if you wish to ask a question. And our first question comes from the line of Ronald Kuhn from Goldman Sachs. Ronald, your line is now open.
spk10: Thank you. Thank you, Philip, Bec, and Caroline. Maybe I have two questions this time. Firstly, on natural selection, Wu Jingqianzi, and the second one on your lower tier city strategy. So for natural selection, I think, Philip, you mentioned about 400 plus Q1Q increase in GMBs. I just want to know how the cohort's ticket sizes or, say, subsidy levels for these new orders from Wu Jingqianzi are And how do we see that kind of fourth quarter and expect you guys at a acceleration in JD DJs? How much would that be coming from this Mu Jing Tian's natural selection? And longer term, how much do we see kind of our sales that will be driven from this Phase 2 channel which are kind of users going in directly from the JD main app searching and having this natural selection? So for a bit of a long question, second would be just our lower tier strategy, lower tier city strategy. Do we see, I know we're starting to kind of group orders for delivery, so to keep that density, and just how are we doing there, and do we see kind of self-pickup from supermarkets, sort of a possibility as well, given the different kind of self-pickup options for consumers now in lower tier cities? Thank you.
spk12: Thank you, Rana. So we'll start and perhaps back with something to add. So first of all, with the natural selection, we're quite excited to see that the collaboration with JD has been doing pretty well. So internally, we have streamlined our process and our technology backbones together with JD, so it's much more efficient and streamlined compared to a couple of quarters ago. And it's a much easier integration with the retailer partners. So at the same time, we're also happy to see that our category has now expanded from supermarket that we originally started with and now to more and more categories including but not limited to consumer electronics, smartphones, healthcare, cosmetics and so on. So it's a much broader coverage on the categories. as of this quarter. And we anticipate this extension on category will expand as well. And third, the product of Woojin Pienza has been improved quite significantly over the quarter as well. If you have noticed on the JD app, you have seen that on the search result page, there's a one-hour delivery tab already. The product innovations around this tab and also the improvements for the entire search result page has been quite significant over the last quarter. At the same time, we're also very happy to see that I think just released yesterday on JD app, you can now see recently, I'm not sure if it's yesterday, but very recently on the JD app homepage, there's a entry points called local merchants, which is also an extension of this natural selection. So overall, we're pleased to see that the improvement of this in terms of natural selection has been pretty well. So that is the result, that is the reason why we can achieve 470% of GMV growth in Q3 on Wu Jingtianzhe. We believe that the growth on Wu Jingtianzhe will continue to be strong, but it's still at a very early stage as we have now just entered into this collaboration for a few quarters. It's still very new. For us, I think we will continue to improve and to grow the business.
spk11: Yes, so for the first question, I just want to add more color on Felix's comment. So first, for the subsidy or consumer incentive level, generally the subsidy level is less than the level on Baby DJ's own platform, because generally we believe For JD, it's really a large traffic cell, so we don't need to see a lot for consumers to like forming the shopping habits for the one hour delivery. And in the long term, we believe it could be even lower because it's just like the startup stage, so we need to like to expose more customers to the consumers, so there will be some subsidies. In the longer term, we don't think the subsidy is necessary. And for the cohort, or like for the outlook of Q4 at least, because we have discussed in the previous course that for Wooden Tender is still in the early stage, and we expect to ramp up quarter by quarter. So Q4, we still believe that Q4's GME could be still growing by multiple times compared to Q3. So it's still a very fast growing stage and a similar stage. So this is for the first question.
spk12: Yeah, and in terms of the lower tier cities, we have been growing pretty quickly in perhaps all of the lower tier cities we have entered. And we have been doing a few things in lower tier cities. First of all, we continue to expand our geographic expansion coverage. And the second, so we work with more and more local winners. Those are the dominant players in each city or each province. And we are particularly happy to see this collaboration with the local dominant players have been pretty good. The progress has been pretty good in the last quarter as well. At the same time, we have been experimenting various models in lower tier cities. In general, we are seeing that the buying power from lower tier cities is as strong as the tier one cities. We're not seeing them, for example, having a much lower ticket size or much lower willingness to pay. We're not seeing that. We're seeing quite strong buying power from the consumers in lower tier cities. At the same time, we are experimenting, as you mentioned, like a self-pickup. and other bundled delivery to lower the delivery cost, and so on. All those tests that we have been testing in various cities, and I think it's still at the early stage, but we are very excited to see the growth. And, yeah, if that can have anything to add.
spk10: Yeah, nothing to add from my side. Thank you, Ronald. Thank you. Very useful. Thank you.
spk02: Thank you so much. And your next question comes from the line of Ed Ling from Bank of America, Maryland. Your line is now open.
spk01: Good morning, guys. Thank you for taking our questions. Just wondering if you could give us an update of your thought on the various business models hindering these fast-growing grocery slash fresh produce category. For example, we have seen more players getting into the so-called community group by business model. And we have also seen other business models from deals are growing pretty rapidly versus on demand. Obviously, you guys are growing at triple digits. So I'm wondering any thought on expansion of business models or continuously focusing on our instant on demand model and why? And then secondly, just a housekeeping question. I remember back I mentioned that the average order size I think improved a bit in the third quarter. So just wondering on JDDJ, what's the average order size in the third quarter? and how should we think about the trend going forward? Thank you.
spk12: Thank you. I have to handle the question of the second one, average SK size, and I will share some thoughts on the first one in terms of the business model and community group buying. So first of all, I would like to start with a brief comparison between the community group buying model with our model. So first of all, if you compare our average SK size, which is over 130 RMB in the supermarket category, with around like 10 RMB of community group buying average backseat size. So this is a very significant difference. The few reasons behind it, why there's a huge difference. First of all, the community group buying, they typically just rely on a few so-called HOTS of all class, HOTS SKUs. And so it's not a broad selection of SKUs, so therefore the consumers just cannot buy much. At the same time, if the community group buying would like to increase their basket size, they will have to very significantly expand their supply chain, and therefore their supply chain and other fulfillment costs will grow exponentially. So this is a very key difference. At the same time, we enjoy the very broad product selection from the two markets we partner with already. Each of them has over tens of thousands of very competitive SKUs. And therefore, we can offer a much broader selection to the consumers. And with our much higher basket size, the probability potential is also much higher. So this is number one in terms of the size and the logic. In a second, we noticed that the product quality and also the customer satisfaction from community group buying has been pretty inconsistent. And it's also very difficult, actually, for them to keep the quality and customer experience. But at the same time, because we work with the premium leading supermarkets, so the product quality and customer satisfaction are ensured. And also the order of fulfillment can be also guaranteed. I think this is another key difference between our model and the community group buying. And as a result, so the lower tier city growth on GCDJ, in Q3, we grew by 170% year-over-year. And take Hunan province, for example, because Hunan is one of the most competitive province that community group buying has been like all of them are there and compete very brutally. Even our growth in Hunan province maintains a 100% year-over-year and 40% quarter-over-quarter. So as a result, we can continue to keep a very strong growth momentum in even the most competitive area. At the same time, we also enjoy some of the benefits from the competition and the pressure from the community group buying. For example, especially in the lower tier cities, the leading supermarkets are now more and more willing or eager to work with us. And that's why recently we have signed up with a few dozens of top 100 or the local dominant supermarkets recently. So I think this is one of the reasons why we can sign up with so many dominant players so quickly, because of this pressure from community group buying. And at the same time, we're also happy to see that our hybrid omnichannel operating system has been very quickly adopted by those local dominant players. And because of the pressure and because of the eagerness to work with us. And in terms of the business model, we believe that our business model has very significant competitive edge. And there is still a lot of room to improve. For example, the digitization of the entire process and also to empower our retail partners with our technology, including but not limited to high-growth system. I think the growth potential there and the room for efficiency improvement is very significant. At the same time, Pick and packing has become a major... Pick and packing is very important for the entire process. That's why last quarter we introduced the data picking system for our partners. And we're very happy to see that leading retailers including Walmart and and CR Vanguard, all of them has very quickly adopted our data picking services. in order to improve their picking efficiencies, lower their picking costs, and improve the customer satisfaction. I think overall, there are a lot more to improve around our current business model. And we're very confident with that. At the same time, some of the learnings from the community group buying will also take advantage of that. For example, DOSA group buying has been very focusing on leveraging the community, leveraging the WeChat group ecosystem, and also to experimenting the self-pickup model in order to lower the delivery costs and so on. So those are the things we have been learning from them and we will apply in our future accrual strategy as well.
spk11: Okay, for the second question about average order value, so in Q3, our overall average order value on the platform is 150 RMB, which is a further increase compared to Q2 because, you know, the consumer electronics revenue is generally growing very fast. I would like to emphasize that for the supermarket category, just like Philip discussed minutes ago, fuel and AOV is around 130 RMB. And we expect 130 RMB is very healthy and will be stable going forward. So this is AOV information. Thank you, Eddie.
spk01: Thank you, Beck and Philip. Very helpful.
spk02: Thank you so much. And your next question comes from the line of Thomas Chung from Jefferies. Thomas, your line is now open.
spk08: Hi, good morning. Thanks, management, for taking my questions. My question is about the monetization trend on JDDJ. Can you comment about the commission advertising and other monetization models in the upcoming quarters, as well as how we should think about the tech rate in 2021. And on that front, how should we think about the cost side? In particular, the subsidies ratio that we are seeing it continue to trend down on a year-on-year basis. So given the business trend, should we expect our profitability timing to remain unchanged? in next year. Thank you.
spk11: Okay. Thank you so much. I'll take the question. So for the monetization ratio, basically we had multiple revenue streams from merchants, consumers, and the brands. So first of all, we believe that for the online marketing revenues and it will be continuing to grow year-over-year basis. So for year 2020, the monetization rate for online marketing is growing very much, almost doubled year over year, or more than doubled year over year. But for the next year, we believe that we still just want to keep it stably growing instead of doubling every year. So we believe it will be healthy for the platform's long-term growth. And for the delivery services revenues, we believe that for this year, especially for the Q2 and the Q3, we have some we have some incentives to encourage the consumers to purchase. Like we said in the previous earnings call last quarter, starting from Q3, late Q3 stage, we are already increasing a little bit about the freight expenses, freight revenues. So we believe that in the next several years, our freight expenses will be increased compared to year 2020. So we may have some, you know, the consumer electronics category is growing fast, so it may have some jack factor to the commission rate, but because every year, usually we will increase a little bit for the merchants, standardized tick rate. So we believe that it will be offset. So the commission rate will be a little bit like flat for the next two years. Overall, with the increase of delivery service and online marketing revenues, we believe that in the flat of the commission rate, because of the contribution from consumer electronics category, so we believe the ADDJ overall monetization rate will continue to grow by 30 bps each year, year over year, for the next two years. And for the director margin level, we are still on the track to break even for the JDDJ director margin level in 2021, next year. So on a year-over-year basis, like for the second half of this year, on a year-over-year basis, our consumer incentives still decreased compared to Q3 and Q4 last year. So for the overall profitability of the company, we believe that it will be a year later after the JDDJ direct margin break-even next year.
spk08: Thank you.
spk02: Thank you so much. And your next question comes from the line of Billy Leung from High Tone International. Your line is now open.
spk06: Hi. Hi, management. Thanks for taking my question. I just have one, I guess, sort of high-level question. We mentioned in our prepared remarks that we gained market share for Bertha. JDDJ and Dada. Now could I just get a, can you help me understand where the market share gain has come from? Is it from these local smaller players or is it from relatively larger players? I just want to understand where the market share gain is from. That's my question. Thank you.
spk11: Okay, so the market share we are gaining as per the statistics is mainly coming from smaller players and also like you know, the players within Alibaba ecosystem. Hello, Billy?
spk06: Okay, okay, great, thanks. And just to follow up, I think it's just a housekeeping question is, For JDDJ, correct me if I'm wrong, but I realized that our take rate was just slightly down from quarter two, just slightly. So I was wondering if there's any reason for that. I mean, is it because the advertising has been growing faster or whatever reason? It's just slightly down. I think it's 9.2 from 9.3. Just any color on that would be great. Thank you.
spk11: Yeah, so it's mainly because the online marketing revenue at percentage of GME is like 2.5% in Q2, while it was 2.2% in Q3. The online marketing revenue is still growing very fast, and even on a Q2 basis, it's still growing, but for Q2, there's a lot of packed up demand from the brand. They just want to spend GME. huge amounts of money in the June 18th next year campaign, while in Q3 there's no such kind of P1 campaign, P0 campaign, big campaign in the quarter. So that's why overall the spending is bigger in Q3, but there's no big campaign Q3 so that's why at the percentage of the GMV it seems that the brand online marketing percentage has decreased. Just like we said or discussed in the previous course that we believe that the absolute dollar amount will be still flat and a little bit increased, but the percentage of revenues, because the overall JDDJ revenue is increasing very fast, and the GME is increasing faster, so the percentage is not necessarily going up so quickly every quarter. Still, looking at on a year-over-year basis, for the last year, the monetization rate of online marketing is below 1% in Q3. For this quarter, it's like over 2.2% in Q3. Okay.
spk06: Okay, great. Thanks. That was helpful. I'll get back into Q. Thank you.
spk02: Thank you so much. Again, ladies and gentlemen, it's Star N1. if you wish to ask a question. And your next question comes from the line of Alicia Yap from Citigroup. Alicia, your line is now open.
spk04: Hi, thank you. Good morning, management. Thanks for taking my questions. Congrats on the solid results. I have two questions. One is the GMB for JD-DJ was really strong this quarter. and given these record singles days, any color we could expect in terms of the GMV growth into the fourth quarter, and also category mix within the GMV, if you can share some color, what we have achieved in the third quarter, and how would you envision GMV mix into next year, given we are increasingly getting more and more of the electronics and the pharmaceutical So any colors on the GMB mix into next year will be helpful. And then just another question is, not sure whether I'm thinking it correctly, but just thinking about more the conflicts of interest in terms of the whole industry dynamic between the on-demand delivery versus the increasing availability of the self-pickup model. So would some of these self-pickup models that could potentially cannibalize the on-demand delivery, so any colorful management view in terms of how this industry dynamic could pan out and how it would impact us, that would be great. Thank you.
spk11: Okay, thank you, Alicia. Let me take the first question. So for the Q4 and for next year, so first of all, for Q3, the consumer electronics growing fast and it contributes to almost 10% of the total GME amount, and it's also... have to lift up the overall average order value of the platform as well. So going to the Q4 next year, we believe that it's reasonable to estimate that consumer electronics or other new categories we will introduce will continue to contribute 10% of the total GME. And in terms of, for example, the revenues of JDDJ platform Q4, we believe that compared to Q3, the growth rate of the revenue will be exaggerated and it should be able to grow in by over 100%. And for the second question on the comparison. Yeah, I passed it to Philip.
spk12: Right, so the self-pick-up model I'm assuming you're mostly referring to the community group buying. So self-pickup and delivery, I think there will be two major different models going forward. I think each one of them will continue to exist, but I believe the delivery model will continue to be the demand model because of the much better customer satisfaction And this has been also demonstrated in the food delivery business already. So restaurant food delivery also have the self-pickup model in restaurants. But as you have already seen, the delivery model is the dominant. At the same time, we believe that self-pickup is an added service for the stores. And therefore, we also are providing, in fact, we also provide the self-pickup, this option for the stores and for the consumers as well. And we may experiment more models around this self-pickup, but I think in the foreseeable future, a delivery model will continue to be the mainstream.
spk04: Okay, great. Thank you.
spk02: Thank you so much. And your next question comes from the line of from Morgan Stanley. Your line is now open.
spk09: Good morning. Thanks for taking my question. I have two questions. The first is could you please kindly share with us some information about the stickiness of the customer? For example, we have around 21 million active users at the end of last year, September. And for these 21 million users, how much have they purchased on average during the past 12 months or past quarter? Are they higher than the new users or lower than new users? This is my first question.
spk11: Okay, so for the thickness, I don't right now have the exact answer for the question, but just like a little bit like the color to share with you is like the existing customer in 2017. in the year 2017, there is like over 77%, if I remember it correctly, 77% they still purchase place order in the first nine months. So this is like a thickness for some cohort analysis of the consumer's attention.
spk12: Just one quick thing to add on that. So we introduced the membership program for the retailers and helped the retailers like Walmart and Vanguard and many others to establish the membership programs on the JDDJ, which also helped to increase the stiffness and also the frequencies of those members on each retailer.
spk09: Okay, thank you. And maybe a brief follow-up on this. I thought I had read some numbers saying that the old users, or maybe two or three years old users, and on average they purchase something like slightly above 1,000 RMB per year. That number seems like if your AOV is at 130, it's basically just $10 per year, which is one order per month, basically. So I think that is not a very high-frequency behavior. So is that number true? Is that number I read, the 1,000 per year purchase, is that correct?
spk11: OK. So first of all, so for our The GME purchase, I think right now it should have increased to like 1,300 only for the first nine months of this year. Generally, for new customers, because we do like to acquire new customers online and offline, so they are maybe purchased only one time a month, but for existing or like those repeating purchase, I usually purchase like two to three times in one month, which is like more than one week or two weeks a time.
spk09: Okay, I see. Thank you very much. And maybe my second question is a follow-up on the Wu Jing cancer part. I'm just wondering if, for example, I purchased something from the JD platform and I used the one-hour delivery tab in the JD results search result I purchased from it, are those goods sold, the commissions are charged by the JD platform or it's charged by us. I don't know whether it's charged by JD or if the data provides the delivery service, we also charge the commission.
spk11: Okay, so, you know, JDJ is a platform to integrate with, like, hundreds of thousands of schools offline. So it's like we are still, like, the platform hosting the businesses, and we will charge the commission revenues to the merchants listed in the one-hour tab on JD account. So this is the revenue stream. And in the same time, we may pay some nominal check expenses to JD.com for the order. It's much less than the commission rate. Yeah, so this is the flow.
spk09: Okay, so that means if the merchant is simultaneously listed in the JD search result and also a merchant on our JDJ platform, then when the customers search the results on JD and the order will be guided to the JD DJ platform and we will charge the commission.
spk11: So actually it's like a little bit like a mini program on JD.com, JD app. And if you are careful that you can notice that And you know, the store and also the services it provides, the store is hosted by JDDJ as listed on the page. And also, the services or delivery services is delivered by, is fulfilled by DataNow. So this is like the, you know, the flow of the businesses.
spk09: Okay, understood. Thank you very much. Thank you.
spk02: Thank you so much. And your next question comes from the line of Robin Liu from Daiwa. Robin, you may now ask your question.
spk05: Hi, good morning. Thanks management for taking my questions. This quarter the user growth momentum is still very strong. Can management share more on the online traffic source? For example, as we are expanding into the electronic category, are we seeing more users from JD and in 2021 can we maintain the similar growth level next year or should we even see further acceleration when we penetrate more into the lower tier cities as I believe Woojin Tenzer is still mainly launched in higher tier cities at this moment. Thank you.
spk12: Yes, so the Woojin Tenzer certainly helped to increase the online traffic from JD. And as we expand to consumer electronics, smartphones, which are the dominant categories for JD, so most people will buy cell phones on JD. So we certainly benefit from that. And also, as you mentioned, we certainly benefit from entering into more lower tier cities. For example, if you notice on the JD app home page, there's an entry point called JDDJ on the top right side. And every city we entered, we will then open this entry point on JD, because it's location-based. So more cities we entered, and more traffic we will be getting from JD. So this is just JD. And certainly, we are expanding our traffic source to other sources. both from online and offline.
spk10: Thank you.
spk02: Thank you so much. Once again, ladies and gentlemen, it's Star N1 if you wish to ask a question. And your next question comes from the line of Hans Chung from KeyBank Capital. Your line is now open.
spk07: Good morning. Thank you for taking my question and congrats on the strong results. I just have one high-level question. It's about competitive landscape in the longer term. If we look at the e-commerce, it's pretty much the three racehorses. If we look at the food deliveries, only two players with one dominating. And so now if we look at the the so-called offline to online, the supermarket retail as a whole, including the self-pickup or the delivery, this is still in early stage, but it's also become crowded, especially we have seen big guys in the market. So what's your view on the landscape in the long term? Will it be a winner taking majority of share or perhaps the market will evolve into different type of market segments and each segment may have one winner or there could be another different scenario. Thank you.
spk12: Thank you. Yeah, so our vision from day one which is to deliver everything on demand. And we start off with the supermarkets, which is the single largest category for the offline retail. And at the same time, it's also the most difficult one. So we start with supermarkets and then expand from one category to another. I think we are seeing that the competition in this O2O so-called instant retail or on-demand retail I think there are two major models in this market. One model is basically represented by us. We're probably the only major players in this sector. We work with, we support, and we never compete with our partners. So, therefore, we are strongly supported and backed by JD, by Walmart, by Yonghui, by CR Vanguard, by all of the leading retailers because we never compete with them. We only empower them and bring new revenue to them. At the same time, we're also seeing that other players like Alibaba or Meituan, they're retailers themselves. They're more focusing on the first-party business, and they're competing with the retailers head-on-head. And with that, we believe that the platform model and, as a matter of fact, we are collaborating instead of competing with all the leading retailers will eventually win. And one of the key reasons behind this is that China's supply chain is very fragmented. If you look into the entire landscape, even for the strongest retailer in China, grocery sector or supermarket sector, even the strongest, they can only be the winner, the dominant player in a few cities or a few province. Nobody, literally nobody in the last few decades. can ever achieve to become the number one in all province. Therefore, we believe that the best strategy is to really deeply working, collaborating with the dominant players in each province and each city instead of being retailer ourselves. And we believe that this strategy will eventually win the competition.
spk07: Thank you. That's very helpful.
spk02: Thank you so much. There are no further questions at this time. I'd now like to hand the mic over to Constance. Please go ahead.
spk03: Thank you, Operator. In closing, on behalf of the Data Management Team, we'd like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us directly. Thank you for attending today. This concludes the call. And that concludes our conference for today. Thank you for participating.
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