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spk10: Good morning, ladies and gentlemen, and thank you for standing by for DADA first quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the management prepare remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I'll now turn the meeting over to your host for today's call, Ms. Caroline Dong, Head of Investor Relations for DADA. Please proceed, Caroline.
spk06: Thank you, operators. Hello, everyone, and thank you for joining our first quarter 2022 earnings conference call. On the call today from DADA, we have Mr. Philip Kwai, Chairman and CEO, Mr. Back Chen, CFO, and Mr. Jun Yang, Co-Founder and CTO. Mr. Kwai will talk about our operations and company highlights. Then Mr. Chen will discuss the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I'd like to remind you that this conference call contains follow-up statements. Please refer to our latest specific proper statement in the earnings price list on our IR website. Also, during this call, we will discuss certain non-GAAP financial measures. Please also refer to our earnings price list, which contains a reconciliation of non-GAAP measures to the comparable GAAP measures. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. It's now my pleasure to introduce our chairman and CEO, Mr. Kwai. Philip, please go ahead.
spk03: Thank you, Caroline, and thank you all very much for joining us today. We're pleased to announce another strong quarter and an excellent start to the year. During the first quarter of 2022, Data Group delivered revenue growth of 74% year-over-year on a comparable net basis, fully demonstrating our resilient business model despite pressures from the current macro environment. So as usual, I will first go through some key observations and highlights of our recent progress before moving on to updates on our two platforms. Back-end will then go through our financial results in greater details. In terms of the regulatory environment, The Political Bureau of the CPC Central Committee has recently held a meeting to analyze the current economic situation, where leadership emphasized the necessity to promote the healthy development of the platform economy, including completing the special rectification, implementing regular supervision, and introducing specific measures to support the robust development of the platform economy in compliance with laws and regulations. So under the overall guidance of the CPC and the government, Data Group adheres to compliance operations while driving sustainable business growth. We have been growing our business rapidly while actively fulfilling our responsibility as a platform, making every effort to elevate the platform economy to a new level. Since the beginning of the year, the COVID-19 outbreak in some cities, including Shenzhen, Shanghai and Beijing, have led to the initiation of containment measures, including temporary close-off or lockdown. As an approved enterprise by local governments to maintain the supply of daily necessities, Dada Group has been involved in anti-pandemic support initiatives. For merchants, we strive to provide delivery capabilities to support their online operations. For consumers, we ensure price stability of products on our platforms. For riders, we help eligible riders obtain COVID travel passes and provide special subsidies. For local governments, we donate personal protection equipment, help government agencies with the distribution of supply packages to residents, and engage in public welfare activities for pandemic control. Now I would like to provide updates on our deepened cooperation with JD.com. Since JD.com's increased investment in data group has been completed at the end of February, our omnichannel business cooperation with JD.com has further strengthened. In the first quarter, the GMV of ShopNow or Xiaozhi Gold The unified brand for all on-demand retail services within the JD ecosystem increased by more than three times year-over-year. During the first quarter, we further expanded the geographic coverage of the nearby, or 附近频道, which is one of the major entry points of ShopNow. As a result, nearby gained more exposure among JD users. In addition, we continue to improve the click-through rates and conversion rates by upgrading app design and operations. Now, let's spend some time on JDDJ, the leading local on-demand retail platform in China. Since March, China's consumption growth has been under pressure due to the pandemic resurgence. However, the national policy directive towards building a large national unified market and unlocking the full potential of internal circulation is very clear, and the overall trend towards domestic consumption recovery will not change. The promotion of the deep integration of online-offline consumption to encourage the development of new consumption formats is one of the most important drivers of continuous recovery and also the growth of consumption. JDDJ has always been committed to meeting the diverse needs of consumers through innovative models. April 15th marks the 7th anniversary of JDDJ. This year, for the first time, we launched the April 15th Intracity Shopping Festival together with JD.com on both JDDJ and ShopNow. During the festival, the average daily GNV of categories such as FMCG and fresh food exceeded that of last year's W11 shopping festival, while the GNV of consumer electronics, home appliance, and many other categories more than doubled year-over-year. At the end of March 2022, the number of annual active users on JDDJ increased by 47% year-over-year to 67.9 million. During the first quarter, JDDJ continued to expand category and merchant coverage, deepen strategic cooperation with brands, and innovate in digital solutions, so as to empower our partners and better serve more and more users. Firstly, we continued to expand category and merchant coverage. I will start with our supermarket category. So far, we have established partnerships with 86 out of the top 100 supermarket chains in China. During the quarter, we also established new partnerships with regional winners such as Pangdong Line in Henan Province. Driven by the Chinese New Year shopping festival and the March 8th campaign, as well as enhanced user mindshare, the year-over-year GMV growth of supermarkets on JDDJ accelerated in the first quarter. In addition, the GMV of leading regional supermarket chains such as Zhongbai Warehousing and Rainbow Tianhong more than doubled on a sequential basis during the quarter. Let's move on to the consumer electronics and home appliance category. In the smartphone subcategory, we newly launched smartphone trading program, which enhanced our capability to serve the full lifecycle needs of smartphone buyers and improves conversion rates. In the PC and digital products subcategory, we further expanded offerings and established new partnerships with leading brands, including iFlytech, Kodak, Shunfei, and Nintendo. In the home appliance subcategory, total GMV maintained rapid growth on a sequential basis, driven by our one city, one flagship local home appliance chain strategy and enrichment of both major and small home appliance supplies. In the mom and baby category, we have deepened our cooperation with leading chains such as KidsWant, HaiZiWang, Le You and Baby Room , and strengthen the synergy with ShopNow. As a result, the GMV of mom and baby chains on JDDJ increased by more than eight times year-over-year in the first quarter. Secondly, we further deepen the strategic cooperation with brands. In the first quarter, the year-over-year revenue growth of our online marketing service was around 180%. During the quarter, we have signed several new partnerships with packaged food brands such as CP Food , Three to Curl , and Good Farmer . At the same time, as more and more brands from new categories generate meaningful sales on GDDJ, The categories of brands that we directly partner with also keep expanding. For example, in addition to the brands mentioned above, we have recently established cooperation with household product brands, including ASD, Aishda. The innovation is at the core of our partnership with brands. In this quarter, we launched a new marketing campaign named Deliver the Best to Your Home, or Haowu Daojia. which features a monthly selection of products based on the prevailing consumption trends and help brands promote trendy bestsellers. In March, the theme of our Haowu Daojia series is organic foods. During the campaign, the sales of milk, milk powder, and other products from brands including Yili Immunio Waste and Jinlebao more than doubled on a year-on-year basis. Thirdly, we continue to innovate in digital solutions to empower retailers and brands. Excuse me. So for who is not speaking, could you please just mute yourself, please? Thank you. So thirdly, we continue to innovate in digital solutions to empower retailers and brands. Haibo, our omnichannel operating systems for retailers, continue to empower more merchants to carry out O2O operations across multiple channels efficiently. As of the end of March, the Hibo system has been deployed in more than 6,700 retail chain stores, including about 3,000 stores of around 50 top 100 supermarket chains in China. To help improve our brand partners' sales efficiency, we have recently launched the Earth Grid System, or Kun Ce system, which visualizes brands' online inventory down to a 3 x 3 km grid level, helping brands to optimize point-of-sales coverage and gain regional sales share. As of now, More than 30 brands in food and beverage, grain and oil, mom and baby care products, and other categories have adopted the Quinto system. The effectiveness of Quinto system to help brands identify sales opportunities and grow sales has been tested. Since Kimberly Clark's adoption of Quinto system, the point of sales coverage of code text, One of its core products sold in CR Vanguard supermarkets increased by more than 20% points during the March 8th campaign, and the sales increased by more than 20 times on a sequential basis. Regarding our digitized in-store picking service, Datapicking, it has been fully rolled out to all of the Walmart stores nationwide by the end of March. In addition, we have established partnerships with Care4 and helped it increase picking fulfillment rate by 20% points. Data picking's empowerment in helping address labor shortage and digitize the picking process is highly valued by retailers. As a result, order volume maintains strong growth momentum. In the first quarter, the number of orders fulfilled by data picking increased by more than three times year-over-year. Moving on to DataNow, the leading local on-demand delivery platform in China. Recently, the CPC Central Committee and the State Council proposed in the opinions on accelerating the construction of a national unified market to promote innovation of technology and business model in the third-party logistics industry, so as to improve logistics efficiency for the entire society. As you know, technology-driven intra-city on-demand delivery plays a key role in the third-party logistics industry. It also serves as an important infrastructure to support new consumption formats. improve consumer convenience, and improve overall logistic efficiency. Leveraging our technology advantages and on-demand delivery network coverage, DataNow serves a wide range of customers, including chain merchants, SME merchants, individual users, express delivery companies, and on-demand delivery agencies. providing them with diversified and high-quality intra-city on-demand delivery services. In terms of business progress, I will start with our KA or key merchant chains business. Based on the expansion of cooperating merchants and stores, the increase in the average delivery order per store, revenue of our on-demand delivery service to KA merchants maintained rapid growth, increasing by about 50% year-over-year after hypergrowth for multiple quarters in the past. In restaurant KA category, we continued to sign up new restaurant chains such as Daikos, Dekoshi, and revenue generated from tea beverage KAs increased by more than 100% year-over-year. In addition, pharmaceutical KAs maintained impressive performance with revenue increasing by more than 100% year-over-year. So moving on to the SME and the C2C business, orders for food increased by more than 40% year-over-year, while unit economies keep improving significantly. For last mile service, during the recent pandemic outbreak in Shanghai, we quickly recruited and activated last mile delivery riders, leveraging our flexible cross-sourcing network. These riders played a key supplementary role in restoring JD Logistics' delivery capability while it faced shortage of in-house delivery personnel. Our efforts also helped serve the bottlenecks of the last 100-meter delivery within communities, which ensured door-to-door delivery even during the pandemic while staying compliant with the containment measures. So to wrap up, despite pressures from the broader macroenvironment and ongoing pandemic, we have continued to make encouraging progress and deliver strong results. We will continue to execute our strategy to drive substantive returns for shareholders. With that, I will now pass the call over to Baek Chen to go over our financials for the quarter. Thank you.
spk02: Thank you, Philip. Before we go over the numbers, just a few housekeeping items in advance. We believe, first, We believe year-over-year comparisons are the most useful way to judge our performance. Therefore, all percentage changes I'm going to give will be on that basis. And all figures are in renminbi unless otherwise noted. Total net revenue in the first quarter increased to $2 billion, aligning the revenue recognition method of DataNow's last-mile delivery services to a comparable net basis. Performer revenue growth would have been 74% year-over-year. Net revenue from DataNow was $623 million. The performer revenue growth rate was 62% year-over-year, mainly driven by the increase in all the volume of intra-city delivery service to chain merchants and the last mile delivery services to logistic companies. Net revenues from JDDJ increased by 80% to $1.4 billion, mainly due to the increase in GME, which was driven by increases in the number of active consumers and average order size. The increase in online marketing services revenue as a result of the increasing promotional activities also contributed to the revenue growth of JDDJ. Moving over to the expenses side, operation and supporting costs were $1.3 billion. The decrease was primarily due to the decrease of rider-related costs incurred by business upgrades of our last-mile delivery services, partially offset by an increase in rider costs as a result of increasing order volume for intercity delivery services. Selling and marketing expenses were $1.1 billion. The increase was primarily due to, firstly, the growing absolute dollar amount of incentives to JDDJ consumers. Secondly, an increase in advertising and marketing expenses to attract new consumers to JDDJ platform. And thirdly, the amortization of the business cooperation agreement arising from the share subscription transaction with JD.com in February this year. GNA expenses. decreased to $101 million, primarily due to decreased share-based compensation expenses. R&D expenses rose to $165 million, mainly attributable to the increase in research and development personal costs as the company continues to strengthen its technology capabilities. Non-GAAP net loss attributable to ordinary shareholders of Dada was $481 million, Non-GAAP net loss margin was 24%. On a comparable basis, net loss margin improved by about 30% percentage points year over year. As of March 31, 2022, the company had $4.6 billion in cash equivalents, restricted cash, and short-term investments. As well to our a $70 million share repurchase authorization announced in March. As of April 30, 2022, we had repurchased approximately $17 million of ADAs under this repurchase program. In terms of the outlook for the second quarter of 2022, we expect total revenue to be between 2.5 $25 billion and $2.35 billion, representing a pro-forma growth rate of 59% to 66%, adjusting 21Q2 and 22Q2 standard-loss last-mile revenue to be a comparable net basis. In addition, we expect the pro-forma net loss margin based on comparable net basis revenue in the second quarter of 2022 to continue to significantly narrow year-over-year and achieve sequential improvement for the fifth consecutive quarter. This concludes our prepared remarks. Operator, we are now ready to begin the Q&A session. Thank you.
spk10: Thank you. At this time, we would like to begin the Q&A session. If you would like to ask questions, please press star 1 on your telephone and wait for a name to be announced. If you'd like to cancel requests, please press the pound or hash key. There'll be a short silence while questions are being corrected. First question comes from the line of Ronald Keung of Goldman Sachs. Please go ahead.
spk08: Thank you. Thank you, Philip, Bec, June, and Caroline. And congratulations on the solid results in the first quarter. So I want to ask about the recent COVID impact. If you could give us any anecdotes in Shanghai, in Beijing, and overall, just looking at our second quarter guidance, which underlying implies a 59% to 66% growth, is there any specific growth rates that we're expecting for JDDJ? And how have we adjusted our business models or products or availability of inventory in this COVID season? Thank you.
spk03: Sure. Hi, Ronald. So I will give you my answer and see if Beth have anything to add. So yes, you have already seen that in Shanghai, Beijing, Shenzhen, among others are having COVID outbreak in the last few months. And we have been approved by the local governments in almost every city as a key companies for daily supplies under the COVID situations. And we see our social responsibility and very, I think the huge social responsibility as well as the business opportunities. There are cities under different level of lockdown and we are seeing different impacts. I will give you examples. In Shanghai, for example, Shanghai is having an extreme lockdown. So by the end of March, the supply chain of the merchants are pretty much shut down. And most of the supermarket stores are offline. And also, under the requirements from the government, the eligible riders are also in extreme shortage for at least a few weeks. So certainly there are a lot of challenges for our business. But then with the supply chain improvement and also the COVID situation is getting better, so our business is also recovering quickly. So we are seeing that in the next few weeks, our business will return to normal. And I think that's a very extreme case, certainly the most extreme case in the last three years we have ever seen. For the other cities, for example, Beijing. In Beijing, although we are also seeing some COVID outbreaks, But the logistics and supply chain are rather stable and has not impacted too much. So in cities like Beijing, our business grew very quickly in the initial phase and then it got down to a rather normal phase. And some other cities, once we see some random COVID cases, I think the city governments are controlling pretty well and our business has not been much impact. So that's the business impact. At the same time, in order to provide more protection and also to encourage the riders to work, so there's some additional COVID-related subsidies or expense for the riders. I think those are also temporary. And I think in the long term, this kind of COVID situation is helping us for customer education. So now, I think literally in most of the cities, customers are familiar with On-demand delivery and home delivery business and e-commerce business.
spk02: So I think in the long term you will have positive impact given this kind of customer education Yeah, let's see if back have anything to Yeah, so yeah in consideration of all those Challenges right now, you know facing in China. We still believe our two platforms both that are now in the JDJ and will experience higher than the market average growth rate of the vintages. And for example, for the guidance we've been giving for the second quarter of 2022, we already consider all those impactors and factors during this quarter. So it's a fair assessment expectation right now.
spk08: Thank you. And any specific on the JDDJ growth expectation?
spk02: Yeah, so JDDJ in second quarter, we believe that it will still grow very quickly compared to the right now, the market average, as you can see, you know, the, the national, uh, the, the statistics released data released by the national bureau yesterday. So, uh, there are a lot of challenges in China right now, but still we believe that EDJ is experienced higher than, uh, average growth rate. And, uh, for the second quarter, we believe that it will still grow like the same, a similar speed, uh, about, uh, total net revenue growth rate of data.
spk08: Great. Thank you, Philip. Thank you, Ben.
spk10: Thank you for the questions. Next question comes from the line of Eddie Leung of Bank of America Merrill Lynch. Please go ahead.
spk04: Good morning, guys. Just a follow-up question on the longer-term outlook after this COVID lockdown. You guys mentioned about potential better education of our consumers. So could you talk a little bit about how you think about the competitive landscape might change after the recent lockdowns and the potential impact on the ticket size that you guys have been seeing? And then a separate quick question on the cooperation with J.D., Could you remind us the contribution of the JD channels to your GMV in the first quarter? Thank you.
spk03: Sure, Eddie. Again, I will give you my answer and see if Beck has anything to add. So for the long-term outlook after COVID, you mentioned the ticket size. We are seeing our back ticket size keep growing for the last few quarters. the trend has been pretty stable and due to a few reasons. One is the product varieties keep improving and also the customer experience improving. So we are seeing that the basket size has been continued to grow. In terms of the competition, I think after this COVID outbreaks, a lot of smaller competitors or smaller companies will have serious challenges. And the overall competition I think will be reasonably reduced. In other words, I don't think the subsidy wars or anything like that will happen in the foreseeable future. I think people in the market will be more reasonable or even conservative in terms of burning cash for unreasonable competition. At the same time, I do believe that the strong players in the market will take the advantages and grow the business well, partially due to the customer education. and also the entire market being more rational. I would like to give you some of the updates regarding our cooperation with JD. After the further investment from JD completed, there are a few key initiatives we have been working on with JD. Firstly, from the product and technology side, we've been working very closely to improve the product performance of this shelf now, especially the search engine improvements and also the nearby tab improvement. So we're happy to see that we're getting more traffic and improving the conversion rates. At the same time, it's the first time that we are working with JD Group for brand marketing and some advertising together, especially during the important festivals. For example, like the April 15th, our anniversary, and also in the upcoming June 18th festival, things like that, we will work closely with JD for brand promotion. therefore to improve our mind share for the customers regarding the on-demand retail. At the same time, we are opening up more cities on nearby TAP in Q1, and we will continue to push this in the foreseeable future and to cover the entire country as much as possible. Yeah, that's the key initiatives, and see if Beth has anything to add.
spk02: Yeah, so in terms of the GME contribution, so for the JD channel, in Q1, it contributes a little bit more than 50%, 5-0, 50%. And I believe there is some seasonality there. So in Q2, In Q2 and going forward, we believe that the contribution will keep to grow.
spk04: Thank you, Phillip, and I'll be back.
spk10: Thank you for the questions. Our next question comes from the line of Thomas Chong from Jefferies. Please go ahead.
spk07: Hi, good morning. Thanks, management, for taking my questions. I have a question regarding the unique economics for JDDJ. Can management comment about how we should think about the Q2 sequential trend for the different parts for the revenue and expenses side? And on the other hand, can you also get more color about the competitive landscape for DataNow, in particular the key accounts of the KA side? Thank you.
spk02: Okay, Thomas, so let me take the first question and I believe Philip can take the second question very well. So for JDJ-UE, or we call it like JDJ direct margin, we believe that in Q2 we can achieve the positive direct margin as we have expected in previous quarters. And actually in March, I think for monthly, the direct margin level of JDDJ is already breakeven. So in Q2, we are on the track to achieve a positive direct margin. And going forward, we believe that it will keep to be positive.
spk03: Yeah, and for our K business, We're happy to see that our K business has been growing very fast in the last couple of years. At the same time, improving the delivery qualities and the customer satisfaction, and to strengthen our market leadership. As a result, we are getting more and more the recognition from the leading customers. And this year, the whole year, we anticipate that our KA business will grow 40% year-over-year for the whole year. At the same time, because of the COVID impact, the cost and expense around the riders might have some incremental cost, partially preventing us from the further improvement of the margin. While we anticipate by the second half of this year, while the COVID impacts are slowing down and the cave business will improve from the increased density of the orders, as well as all the technology-driven operations, technology-driven improvement and operation improvement we have been doing. So we are confident with both revenue growth and margin improvement. Thank you.
spk10: Thank you for the questions. Next question comes from the line of Alicia Yap from Citigroup. Please go ahead.
spk01: Hi, thank you. Good morning, management. Thanks for taking my questions. Also, congrats on the very solid results despite the challenges. I have a couple questions. One is, can management elaborate a little bit the mix of the FMCG versus the non-FMCG for JDDJ in the first quarter, and also your expectation for the second quarter? and also the AOV difference, do you expect a material change to the mix due to the COVID lockdowns and some of the consumption behavior shifted? And I think, can you remind us the 1Q first quarter JDDJ direct margins? I think you mentioned second quarter is still on track for profitability. And then follow-up questions on your second quarter guidance. I know management mentioned you have factor in the impact from the COVID. So is the second quarter guidance assuming the second half of May will be recovering and not getting worse, and then June will be normal? Thank you.
spk02: Okay. Okay. So, yeah, let me take the questions about the numbers. So first about the... So most of the supermarket categories right now is consisting of FMCG products. So for supermarket categories, it contributes about 60% of the total GME in Q1. And we believe that the overall FMCG percentage will slightly going down in Q2 because the non-supermarket, non-assisted CG products will grow more quickly. And for the AOV, first of all, for our overall marketplace, AOV still keeps at more than 210 RMB for Q1. And specifically for supermarket categories, AOB, it's increasing to over 160 RMB. So it's growing year over year. And we believe that all of those impacts around the COVID things will also contribute to the increase of the AOV in the longer term. And also our diversification of newer categories will also contribute to the growth of AOV as well. So in terms of the direct margin, Q1 is slightly like minus 0.1% for the whole quarter, but in March, we believe we already achieved breakeven. And for The Q2 guidance, Alicia, you mentioned. So basically, right now, we think we are considering all those factors already, you know, which already happened in the first half of this quarter. And we actually, we are considering that it will not deteriorate as like what happened in April in Shanghai.
spk01: Yeah, that's all. Okay. Thank you, Bec. Thank you.
spk10: Thank you for the questions. Our next question comes from the line of Wei Xiong from UBS. Please go ahead.
spk05: Hi, management. Thank you for taking my questions. I wanted to follow up on the COVID impact that you mentioned. I wonder, compared to what we experienced in 2020, could you guys comment on how this round of COVID could affect maybe consumer behaviors longer term, and how are we positioned differently this time to be better accommodated to the situation? And another question from me is on the upcoming 6-18 shopping season. how do we see the participation from merchants this year and any promotion strategy or campaigns that we want to highlight that you guys can share would be appreciated. Thank you.
spk03: Sure, yeah. I'll have my answer and see if I have anything to add. So the consumer behaviors from the COVID, I think the overall government's measures against COVID has been continued to optimize. And we are now having more and more frequent COVID tests and also the other measures. One of the things we observe is that customers might go to restaurants less frequently than before. even after COVID. As you may have noticed, in many cities, including Beijing and others, once there's COVID cases, the government will ask the restaurant to stop having the dining service and has to do the takeaway mode. And we're also noticing that more and more customers are now cooking at home. So I think all of those will have positive impact on the supermarket, FMCG, and the fresh food categories. And more customers will be used to use the home delivery service rather than go to restaurants or go to the offline supermarket. That's our observation. And in terms of the June 18th, I think, first of all, the macro environment slowdown might have some impact on the willingness to spend for the customers. But at the same time, I think customers have been, like in Shanghai and other cities, customers have been locked down for quite a while, and they really like to spend some money and to get some pleasure. So we are conservative, but positively conservative about the June 18th. And we are working very closely with JD.com together to do our best in June 18th. And another thing, collaboration with JD is that During this Shanghai lockdown and other city outbreak, JD, among other e-commerce players, noticed that the warehouse model during the extreme situations might have some challenges, especially during the extreme lockdown. JDDJ, because we are decentralized and all the inventory locates in each city and it's a local e-commerce, so it's more resilient and it's easier to respond to those challenges. So we are working very closely with JD to develop new strategies and initiatives to react to the situation. And I think this June 18th, we are quite looking forward to it.
spk10: Thank you. Very clear. Thank you for the questions. Next question comes from the line of Andre Zhang from JP Morgan. Please go ahead.
spk11: Thank you, Benjamin, for taking my question. My question is on the merchant side. So with all the macro headwinds and the COVID impact, we also see some merchants being more cautious about spending for the year. So I wonder if the company is also seeing this kind of trend, and if so, any measures to mitigate that. And if we take this a little bit at a higher level, Are we seeing all monetization models across marketing riders because of all these extra expenses for riders, et cetera? The monetization mix changing? Thanks.
spk03: Sure. Yeah, I'll have my answer first. So our observation and our interaction with the supermarkets told us that most of the supermarkets are having some challenges. But many of them are actually having a better time for the business comparing to the last couple of years. One of the reasons we read from the situation is that the community group buying, the unrational competition and the subsidy wars from the community group buying has been slowing down significantly. So this actually helped to improve the life of supermarkets. At the same time, based on our interaction with the consumer brands, I think overall they're doing fine. They're not having too much challenges at the moment. I think overall the foundation of the business is quite solid. At the same time, people are looking for more effective channels to do business. for the like brands and the merchants are looking for effective channels and we are the effective channel so that's why we're happy to see that both the brands and the merchants are willing to spend more on our platform and they are expecting like a Greater growth and the contribution from our platform. So we are quite positive about that Yes, and also
spk02: In terms of the direction of the monetization, so we believe that the marketing revenues, marketing fees, is still the most important one to help us to increase the overall monetization rate, just like before we mentioned. And so during this year, we believe that Still, the online marketing revenues on a year-over-year basis will grow very quickly, significantly. So it doesn't impact our methodology of the growth of JDDJ's revenue.
spk10: Thank you. Do we have a follow-up question? Mr. Cheng, if there are no further questions, I'll move on. Management, I'll take the next questions from Robin Leung of Daiwa. Please go ahead.
spk12: Hi. Thanks, management, for taking my questions. I just have a follow-up question on the COVID impact. Which factors are having the biggest impact on data because I believe there's the first impact would be the supermarket in the offline because of the lockdown measures and also there is some impact on the trucking logistics and also some of the riders cannot fulfill the orders because they could not come out from the residential areas. So if there is another round of lockdown measures, how will data cope with the challenges? And my second question is, compared to the past pandemic cycles, are we observing better user retention this time? Because I think we face less competition from community repurchase versus the last two years. And in terms of the user acquisition cost, should we expect it to be less as we could realize some cost savings from the JD channels? Thank you.
spk03: OK. Okay, so first of all, the COVID lockdown, I think the Shanghai lockdown is very, very extreme. And personally, I don't think we will be seeing that kind of lockdown anytime in the foreseeable future. And I think more and more local governments are now having, especially the frequent COVID tests, and other measures to reduce the total lockdown risk. So we are quite positive about that. And even for Shanghai and some other cities, I think now the government realized that the supply chain for supermarkets are so important. And so also, Personally, I'm quite positive that the supply chain will have less and less impact even during some kind of COVID measures in the future. And for the riders, we have been always working closely with the local governments to improve the rider management and the supervisions in order to follow the the COVID guidance. And I think overall, we are comfortable with our operations and the shortage of riders are rather temporary and not as severe as people might imagine in most of the cities. So we are comfortable with that. And in terms of the active customers, by the end of March, our active customers grow by 47% up to nearly 68 million active customers. We are happy to see this active user base continue to grow. At the same time, for the user acquisition, because we are increasing our entry points on JD.com and strengthening our collaboration with JD.com, I think the user growth, especially in the JD ecosystem, will continue to be improved in the foreseeable future with the cost reduction or relatively stable.
spk12: Can I follow up on the user retention?
spk03: Yeah, so the user retention and also the user retention, the frequency has been keep improving over the quarters. And we are seeing that especially the per user purchase or the dollar amount that user purchase on our platform keep growing. So the wallet share that we have of the users keep improving, and we're comfortable and confident to see that wallet share keep improving in the future as well.
spk10: Thank you very much. Thank you for the question. In the interest of time, the last question comes from Wei Fang of Mizuho. Please go ahead.
spk09: Thank you for taking my question. Can you talk about the advertising yield for the quarter within your total monetization rate? And given the recent lockdowns, are there any changes to your prior 2022 unique economics outlook? And secondly, on the supermarkets, In light of the more rational competition from the CGB business model, how should we think about the impact on your monetization rate? Thank you.
spk02: Okay, so the advertising revenue in Q1 is growing by about 180% year-over-year, and also the the manifestation rate of online marketing is further increased to 3.4% compared to 3.2% in Q4 last year. So it keeps improving and like we have talked in the previous course that we believe for the whole year the monetization rate of online marketing still have the potential room to grow by 20 to 30 basis point and it will be our major driver to grow the overall monetization rate and we believe that for the other two major items including the delivery fees and the packing fees we received from consumers and the commissions we received from the merchants, we can maintain those two commissions or delivery fees at a similar level as last year in consideration of all those multi-category product diversification. So, Like I have said, we are still on track to grow the monetization rate. And in the same time, we will keep to, on a year-over-year basis, and also on a queue-on-queue basis, we will keep to optimize on the cost side, mainly including the consumer incentives and operating and rider costs. So overall, in In Q2, we can achieve a quarterly positive direct margin, and going forward, it will keep to grow in a positive way.
spk10: Thank you for the questions. With that, that concludes today's question and answer session. I would like to hand the call back to Ms. Caroline Dong for our closing remarks.
spk06: Thank you, operators. 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 joining us today. This concludes the call.
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