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spk06: Good morning, ladies and gentlemen, and thank you for standing by for DADA's fourth quarter 2022 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 call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Caroline Dong, Head of Investor Relations for DADA. Please proceed, Caroline.
spk08: Thank you, operators. Hello, everyone, and thank you for joining our Fourth Quarter 2022 Earnings Conference Call. On the call today from Dada, we have Mr. Jeff Huijianhe, President, and Mr. Bak Chen, CFO, and Mr. Jun Yang, Co-Founder and CTO. Mr. He will talk about our operations and company highlights, then Mr. Chen will discuss the financials and guidance, Please kindly note that during the Q&A session, Jeff will answer questions in Chinese and the consecutive translation will be provided. In case of any discrepancy between the original remarks and the translated version, statements in the original remarks should prevail. Before we begin, I'd like to remind you that this conference call contains follow-up statements Please refer to our latest State Harbor Statement in the Earnings Press List on our IR website, which applies to this call. Also, during this call, we will discuss certain non-GAAP financial measures. Please also refer to our Earnings Press List, which contains a consolidation of our non-GAAP measures to the comparable GAAP measures. Finally, please note that, unlike otherwise stated, all figures mentioned during this conference call are in R&B. It is now my pleasure to introduce our President, Mr. He. Jeff, please go ahead.
spk05: Okay. Thank you, Karen. And thank you all for joining us. During the first quarter of 2022, Dada Group once again achieved a strong level growth with significant improvement of operation efficiency. Our total net revenues increased by 32 and just the net margin improved by 17 percentage points year-over-year. In addition, we achieved positive free cash flow in the second half of 2022. I will first provide an update on our dependent cooperation with JD.com. After which, I will take you through the operational highlights from our two platforms. Back, we will then discuss the financial results in detail. We continued to work closely with JD.com on multiple fronts. During the first quarter, GME of Shocknow or Xiaoshigou, the unified brand for all on-demand retail services within GED ecosystem, increased by more than 80 year-over-year. In particular, GME brand nearby of Fujintab increased by more than 300 year-over-year. Thanks to the significant increase in exposure of its entry point, as well as the improved click-through rate driven by the upgrade of its display lane to city lanes, and the freeze-tap function that keeps the tap wizard when users scroll down the home page. On top of the search result exposure and the nearby tap, we continued to roll out our LBS features with more touchpoints within the JD app. During this quarter, we newly implemented the LBS feature among recommendation feeds on JD homepage, which has led to incremental traffic for soft cloud. Turning now to the operation highlights for our two platforms. Starting with JDDJ, the leading local on-demand retail platform in China. In the first quarter, JDDJ maintained robust GM growth and subscription office industry. We remain committed to leading the development of the on-demand retail industry where retailers and the brand are empowerment and the technology innovation in digital transformation. Let's start with our efforts in empowering retailers. In 2022, there were more than 220,000 active retailer stores on JDTJ, up more than 50 year-over-year. This machine partner forms the essential part of JDDJ's ecosystem. And in time, JDDJ provides them with dedicated support to grow online sales. In the first quarter, JDDJ continued to expand and deepen cooperation with the tailors across multiple categories, including including supermarkets, consumer electronics, and home appliances, mom and baby, nickel and others. In the supermarket category, we recently partnered with more top supermarket chains such as Hotmax, Hotermax, and now have established a partnership with 90 out of the top 100 supermarket chains in China. We also onboarded more regional campaigns like Yichuan Xinhua Baihuo to further enrich our local offerings. From the end of December to the end of January, JDTJ launched the Chinese New Year Shopping Festival to boost the sales for supermarket chains. Thanks to our SKU strategy of spotlighting holiday goods such as cherries, liquor, and gift boxes, GME of supermarkets increased by more than 50 year-on-year during the three-week period leading to Chinese New Year events. In addition to large supermarket chains, we have also continued to enrich the chain variety and increase store density through cooperation with convenience store chains. Recently, we signed up Bien Nih Fung and other leading convenience stores. Moving to the fresh product category, We recently launched a dedicated entry point of JD Grocery to further improve consumers' mass share for fresh products on JD DJ. In the first quarter, not only did the penetration rate of fresh products in supermarkets, others increased remarkably But GME of fresh product stores also see significant growth. For example, GME of online operators for fruit and vegetable markets like and increased by several times year on year. We also made further progress progress in the consumer electronics and home appliance category. In the first quarter, the smartphone subcategory maintained rapid growth driven by the 2011 Shopping Festival, while the home appliance subcategory also made further breakthroughs. As we further depend depend on cooperation with partners such as Xiaomi Home Appliance. GME or Home Price in the first quarter increased by more than 400 year-on-year. In the mom and baby category, we continued to work closely with top-chain retailers and engaged with stores to jointly serve their private domain users. GME of mom and baby stores saw accelerated growth of more than 300 year-on-year in the first quarter. In the labor category, we depend on partnerships with leading labor distributors such as Jusheng Wang and initiate new cooperation with region distributors such as We cooperated with merchants to further optimize the supply of key SKUs such as multi-products. As a result, GME in the first quarter more than tripled year-on-year. Turning to JDG's efforts to empower brands, in 2022, More than 280 brands partnered with JDTJ in online marketing and the increase of more than 30 OEF or leading position in on-demand retail and our pioneering capability in auto digital market make us the most trusted auto platform for brands. In the first quarter, the year-on-year long growth of our online marketing services exceeded 70, driven by further broad and dependent brand partnerships. We continued to work closely with EDF MCG brands, and we have recently signed our new such as flu brand Jawa, dye brand Yuluo, and liquor brand Jiangxiaobai. Together with our brand partners, we keep innovating new market campaigns to attract and convert consumers. During the Dabo 11 Shopping Festival in 2022, JD.DJ and JD.com co-launched the first intercity marketing theme on JD's drop-down page. The target is Generation 3, whose main share of intercity retail we intend to boast. Ten brands, including Unideliver, Proto, and Gamble, participated in the event. And the total GME of participating brands on the campaign day increased by 170 all year. Next, I will touch on our technology innovation in driving the digital transformation for both the telos and the brands. Firstly, on Hibor. our M-Li-Chan auto-operating system for retailers. As the end of December, our Haigou system has been deployed in more than 9,200 retailer chain stores. While we continue to penetrate the supermarkets and convenience stores, we also have recently successfully expanded high growth services to machines in mom and baby and pet caregivers. Driven by continuous expansion in machine base, GME Pro set by high growth system more than double on a year-on-year base in 2022. In the first quarter, We continue to upgrade HYBROS features to have the chance to improve auto-operating efficiency. For example, we newly introduced the intelligent auto-dispatching function in the model. This new function enables The chance to engage the multiple delivery services provides to reduce their delivery costs and enhance the time of all the pick-up by riders. The chance to have tested this upgraded module saw a 75% improvement in operating efficiency, enhancement in order taking time, and our 3% saving in deal cost. Moving on to our digitized use, store picking services for retailers. Data picking. We continue to provide steady support to leading supermarkets, including Walmart, Yuhui, and SunFlash. and the total number of orders fulfilled by data picking more than doubled year-on-year in the first quarter. Meanwhile, we have been further improving our digital capabilities. We aim to provide the machines with a comprehensive set of digital picking management tools spanning five functions, which include the picking staff recruitment, onboarding and management, picking process management, data aggregation and analysis, and services quality monitoring. We also made progress in providing digital insights and solutions to brands. Qunche, our S-Grid system, enables Brand to digitize channel inventories management. Well, Cloud Store project helps brands optimize customer value. Based on greater level sales data and process management tool, JDTJ launched the perfect store solution to help brands amplify online present and optimize O2O supply. Following our pilot program in the third quarter, we partnered with several leading food brands in December to roll out the perfect store solution nationwide. Our partner brands adopting the solution saw a more than five percentage point increase in the online availability data of the key SKUs, which translated into incremental sales of more than 10 percentage points. In addition, JDTJ launched the Cloud Store project to adjust brand standpoints in offline user operations. leverage in WeChat and our on-demand tech platform. The project enables brands to improve the conversion efficiency of offline promoters and maximize customer value. Pilot brand in the cloud store project, so the average number of orders facilitated by each promoter increased by and seven day customer retention rate increased by 150. Moving on to DataNow, the leading local on demand delivery platform in China. In 2022, the new active riders on DataNow platform reached one million. up more than 40 year-over-year. Thanks to increasing order warning and our flexible crowdsourcing network, we have provided a meaningful flexible empowerment opportunities for a wide range of workers. In the first quarter, Data loss, order volume, and revenue both maintained rapid growth, while pricing efficiency continued to improve. In terms of our K-Machines business in the first quarter, the revenue of our on-demand delivery services to K-Machines increased by more than 40% year-over-year. Meanwhile, we continued to improve delivery efficiency and customer experience through measures such as optimizing dispatching . In the supermarket category, we continued to consolidate our leading position, with revenue increasing by more than 40 year-over-year. During the quarter, while we worked closely with partners such as Walmart, Sam's Club, Yung Hui, and SunFresh, we also continued to deepen cooperation with other supermarket case such as CR and Metro. In the restaurant and beverage category, our revenue increased by more than 50 year-on-year. We set up new partnerships with restaurant cafes such as Burger King. We also changed our cooperation with beverage brands such as Knocking Coffee and Hattie. with revenue from balance accounts increased by more than 150 year-on-year during the quarter. In addition, in early December, we officially became one of the first on-demand delivery partners for Douyin Local Life Services, offering the level of fulfillment services to food delivery machines on Douyin platform. Currently, Douyin's food delivery services is being piloted in Beijing, Shanghai, and Chengdu. Leveraging data allows chance and nationwide coverage. Like dispatching flexibility and high fulfillment efficiency, we believe our care business will serve Douyin well. when its food delivery services scales up. In our SME and C2C business, we continue to expand our network to serve more SMEs, while our C2C business serves the searching and service needs of individual consumers during the pandemic. As a result, orders fulfilled by our SME and the C2C business increased by more than 40 year-on-year in the first quarter. Meanwhile, driven by optimization of pricing and the incentive mechanism, we saw an accelerated improvement in UEs. For last-mile services, we continue to leverage our flexible crowdsourcing network to provide steady support to JD Logistics by complementing its in-house delivery fleet, especially during the 2011 shopping festival and the period when COVID case spiked. Lastly, an update on DataLoud's autonomous delivery services. At the end of January, our autonomous delivery open platform had fulfilled more than 80,000 on-demand delivery orders for supermarkets through cooperation with autonomous vehicle manufacturers. This has made DataLoud the largest autonomous delivery platform for supermarkets in China. Moving on to ESG. With continuously improving ESG practice and disclosures, our ratings by leading third-party agencies have been notably improved. In November, MSCI upgraded our ESG rating from WB to BBB. On the strength of higher scores across all three dimensions of environment, social and governance, also in November, we improved our ESG score in S&P Corporate Substantivity Assessment, CSA, to 32, placing us among the top 11% in the global Italian sector. This is still significant for improvement and we will further integrate ESG philosophy into our daily operations to enhance our ESG practice. That covers our operational updates for the two platforms. To wrap up, we continue to explore the main macro-challenges in the past year. Looking ahead, as on demand penetration steadily progress in every single local retail category. We believe our chat record of enabling retailers and brands, as well as the synergy unleashed from our dependent cooperation with JD.com, will position us well to capture opportunities in the coming years. I will now pass the code back to our financiers. Thank you.
spk03: Thanks, Jeff. 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. Therefore, all percentage changes I'm going to give will be on year-over-year basis, and all figures are in RMB unless otherwise noted. So I'll start with Q4 numbers first. The total net revenues in the fourth quarter increased by 32% to $2.7 billion. Net revenues from data now increased by 23%. to $883 million, mainly driven by the increases in all the volume of intra-city delivery service to chain merchants. Net revenues from JDDJ increased by 37% to $1.8 billion, mainly due to the increase in GME, which was driven by increases in the number of active consumers and average order value. The increase in online marketing services revenue also contributed to the revenue growth of JDDJ. Next, moving over to the expenses side. The operations and supporting costs were $1.6 billion. The increase was primarily due to an increase in rider costs as a result of increasing order volume for intercity delivery services provided to various chain merchants on the DataNow platform and the retailers on the JDDJ platform. Selling and marketing expenses were $1.3 billion increase was primarily due to the growing absolute dollar amount of incentives to JD.DJ consumers, an increase in advertising and marketing expenses to attract new consumers to JD.DJ platform, and the amortization of the business cooperation agreement arising from shared subscription transaction with JD.com back in February 2022. G&A expenses remained flat at 101 million, mainly attributable to our expenses control measures. R&D expenses decreased to 126 million, mainly due to lowered R&D personal costs as we enhanced operating efficiencies. Non-GAF net loss attributable to ordinary shareholders of Dada was 179 million, Net non-GAAP net loss margin was 6.7%, improving by more than 17 percentage points year over year and 5 percentage points quarter over quarter. In addition, As Jeff mentioned in the beginning, driven by the significantly narrowed loss and efficient working capital measurement, we are pleased to report a positive free cash flow in the second half of 2022. As of December 31st, 2022, the company had $4.4 billion in cash, cash equivalents, restricted cash, and short-term investments. Pursuant to our $70 million share repurchase program announced in March 2022, as of December 31st, 2022, we had repurchased approximately $60 million of ADSs under this repurchase program. I will now quickly run through a few key full-year 2022 financial results. Further details can be found in our earnings release. The total net revenues was $9.4 billion. Aligning the revenue recognition method of dead and now last mile delivery services to a comparable net basis, the pro forma revenue growth rate was 49%. Operations and the supporting costs were $5.7 billion compared with $5.1 billion in 2021. Selling and marketing expenses were $4.7 billion compared with $3.4 billion in 2021. G&A expenses were $409 million compared with $400 million in 2021. R&D expenses were $631 million compared with $574 million in 2021. The gap net loss attributable to ordinary shareholders of Dada was $1.3 billion compared with $2.1 billion in 2021. In terms of outlook for the first quarter of 2023, we expect total net revenues to be between $2.57 billion to $2.77 billion. representing a year-over-year growth rate of 27% to 37%. Heading into 2023, we are confident in further improving profitability while sustaining revenue growth momentum. So this concludes our prepared remarks. Operator, we are now ready to begin the Q&A session. Thank you.
spk06: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ronald Kung with Goldman Sachs. Please go ahead. And me, Ronald, your line is now live. Please ask your question.
spk01: Thank you. Can you hear me?
spk03: Yes, Ronald.
spk01: Hey. What do you think about the target of UE and Profit Turnaround this year? Are they still on track? Secondly, I'd like to ask about our collaboration with Tiktok on Dada Now. In terms of this collaboration, Thank you, management team. I have two questions. First is I want to hear about the outlook for JDBJ, some of the strategies for this year, given pretty healthy growth that you've guided. How should we think about the profit side on the unit economic side? And are we on track to for-profit turnaround for the business this year? And my second question would be on some of the food delivery and announcements on your cooperation with Douyin. Just if this business grows, do we have sufficient rider capacity? How are we thinking about the cooperation there and the opportunities? Thank you.
spk05: Thank you. I'll answer first and then you can add to it.
spk03: No problem, Jeff.
spk05: Regarding this year's outlook, we are relatively optimistic about this year. If some extreme circumstances do not occur, we look forward to the recovery of consumer confidence and economic activity in the first half of the year. In terms of business outlook for this year, we are cautiously optimistic about an extreme situation.
spk09: And we expect that consumer confidence and economic activities to gradually recover in the first half of this year. And in that case, we expect our JDDG revenue to gradually accelerate quarter by quarter and reach about 40% in the second half of this year.
spk05: Let's talk a little bit about the impact of COVID-19 on the economy after the pandemic. First of all, let's take a look at the changes in consumer habits. During the pandemic, the consumer's shopping routes and activities have been limited. Therefore, they are more inclined to use platforms such as Jilin Daojia to shop. Of course, after the lockdown, the consumer will have more choices to choose from. The consumption of offline shopping and services will therefore have a certain recovery. Yes, please come to the attention stage.
spk09: So now I'd like to share some color on the impact on JDDJ since the reopening. During the pandemic, due to mobility restrictions and limited choices, consumers preferred on-demand shopping. Since the reopening, with more shopping options available to consumers, offline spending for goods and services have somewhat recovered.
spk05: Yes, please.
spk09: Based on our experience of several rounds of resurgence in the last three years, users who have formed shopping habits during the outbreaks have maintained a healthy retention rate, even as the COVID situation abates. Since the reopening late last year, the retention of our users has not significantly changed.
spk05: The main reason for this is that consumers have already experienced the convenience of this time sale and the practical requirements for various shopping products are improving day by day. Therefore, even if there are other shopping channels, we are willing to continue to use it to allow everyone to consume. Therefore, we are confident in the fact that we have long-term support for the fast food industry.
spk09: The reason behind that is consumers have become used to the convenience of on-demand shopping and are increasingly demanding faster delivery of all product categories. Therefore, they've remained on our platform even as other shopping channels now become available. So we feel confident about maintaining a long-term growth rate that significantly outpaces the industry.
spk05: Let's see if you have anything to add.
spk03: Jeff, you can answer the question that was asked by Ronald earlier. Okay.
spk05: I'd like to share my cooperation with Douyin. In early December last year, Dada Express has become the first batch of delivery service providers for Douyin. We provide delivery services for Douyin's delivery providers.
spk09: So to address your second question on our cooperation with Douyin, in early December, we officially became one of the first on-demand delivery partners for Douyin local life services, offering fulfillment services to food delivery merchants on Douyin's platform. The fact that we were among the first on-demand delivery partners of Douyin speaks of its recognition of our brand and service quality.
spk05: Our way of cooperation is that Douyin, as a Ka customer of Dada Express, sends delivery orders to Dada Express and other cooperation delivery platforms. Dada Express sends delivery orders to complete the delivery. specifically as one of DataMail's key accounts.
spk09: So it will aggregate all of its food delivery orders on the platform and distribute them to the delivery partners. Once we receive the orders, the dispatch riders to fulfill them delivering a convenient, premium, on-demand catering experience for consumers.
spk05: In terms of contribution,
spk09: If Douyin's food delivery service experiences significant growth, there will be meaningful incremental revenue for Dadao in the coming years.
spk05: Currently,
spk09: Currently, Douyin's food delivery service is only being piloted in Beijing, Shanghai, and Chengdu with limited order volume.
spk05: Based on the national coverage of the fast-forwarding network and the flexibility and efficiency of the call, I believe that after Douyin's takeover, there will be more orders in the next few years. But my current financial guidance is that
spk09: We believe our KA business will gain significant incremental revenue when Douyin's full delivery service scales up. That said, we have not baked in any contribution from our cooperation with Douyin in our financial guidance.
spk05: In terms of unit economics, as order volume grows, we expect billion orders to be quickly on par with other KA orders. In terms of market share on the Douyin platform, apart from us, Douyin Food Delivery is partnering with
spk09: SF Intracity, and Shansong. We're confident about our long-term market share on Douyin's food delivery platform, given our significant competitive advantages. Compared with short and full-intensity, we enjoy more stable rider supply and cost advantage. Since we serve a broad range of customers, including supermarkets, restaurants, and pharmacies, our orders are spread more evenly throughout the day, whereas the majority of SF orders are full delivery.
spk05: And from a cost perspective, we are also more competitive thanks to our flexible crowdsourcing model and higher fulfillment efficiency as a result of more even order distribution. In comparison with flash delivery, we have advantages in area coverage and unit delivery cost. In area coverage, the performance of flash delivery is mainly concentrated in the one-line system. We have covered more than 2,800 city lines in the delivery, which can fully meet the demand of Douyin B1 expansion. In terms of cost, the cost of flash delivery is higher in the one-to-one special delivery mode.
spk09: Compared with Shansong, we offer much broader city coverage and lower unit cost. Shansong's presence is mostly in Tier 1 cities, while our service is available in over 2,800 cities and counties across the country. we can fully support the delivery need as there rose out food delivery services in more regions. In addition, Shansong's delivery model is a point-to-point delivery, where riders typically pick up and deliver only one order at a time. Due to the high cost, this service does not cater to the needs of most food delivery merchants.
spk05: Okay. Back to you, Shansong.
spk03: Ronald, about the first question, let me just share about the UE and the profit turnaround. So yes, we are still confident to maintain our outlook to break even in the middle of the year for the company level and also for So we think the rider supply is sufficient. As we can see right now, back after the Chinese New Year in March, going into March, our active daily riders still increased by 40 to 50% on a year-over-year basis. for the intra-city delivery abilities. So we don't think the right supply is a question for us this year. Thank you, Jack. Back to you.
spk06: Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.
spk04: 早上好,謝謝管理層介紹我的提問。 我有兩個問題。 第一個問題是想問一下在去年我們跟JD的合作都是有一個很成功的一個結果。 我想問一下就是今年的話我們跟JD的合作可以分享一下這個KPI Thanks management for taking my questions. My first question is regarding the cooperation with JD. Given the success in 2022, how should we think about the KPI working with JD for this year And my second question is on the JDDJ. Can you comment about the GMB mix for supermarket and other categories? And how should we think about the trend for the AOV going forward? Thank you.
spk05: Our core KPI is still GMB income and profit.
spk09: Thank you for your question. Core KPI for this year remains GMV, revenue growth, and net income.
spk05: Yes, please.
spk09: So our priorities are twofold. The first is helping JD acquire new customers and the offline channel.
spk05: 同时另外就是我们在这个持续的在京东APP获取更多的曝光来去提升京东现有用户的渗透。
spk09: Meanwhile, we aim to boost our exposure on JD.DJ app to penetrate more users in JD's ecosystem.
spk03: Thomas, for the second question about some numbers, for the category mix, in Q4, our supermarket categories account for 53% of the total, while our consumer electronics and appliances account for 43% of the total GME, while the remaining categories account for like the 6% of the total GME. So consumer market and consumer electronics appliances will still be the major categories in our GME and Q4. And in terms of the average order value, so for the platform-wise, the average order value is further increased to 235 on B, while the supermarket the average order value is also increased to 165 RMB. So for the trend in 2023, we are now forecasting that the AOV of the platform will still go up. very robustly, which was driven by two reasons. Number one is, of course, the mixed contribution from those large ticket size products. The second is, of course, the average order value of supermarket categories is also going up on a year-over-year basis. So just for example, for the Chinese New Year event and the campaign in January and February, so basically our average order value for supermarkets will also be growing very much compared to the same event last year. So that's for the second question.
spk06: Thank you. Your next question comes from Alicia Yap with Citigroup. Please go ahead.
spk07: Hi, thank you. For example, the development trend of Meituan and our business. And our cooperation with Douyin, will there be any conflicts between us and Jindong Daojia? Or for example, will there be any conflicts in terms of consumption? So my question is, can management elaborate or share a little bit of competitive landscape on JDDJ business compared to Meituan? And then would there be any potential conflicts with our partnership on Douyin on their local service versus our JDDJ business in terms of the consumer demands on the grocery category or the food category? And the second question is, can management share with us what is the latest consumption trends that you are seeing in terms of the consumption willingness on the bigger ticket items such as the electronics and appliances and also the supermarket category post the Chinese New Year? Thank you.
spk05: Thank you for your question. Thank you for your question.
spk09: To answer your first question, we remain convinced of the enormous market opportunity as OGO further penetrates the entire retail sector, given the low penetration rate we are seeing now. The industry is large enough to accommodate more than one player who can all enjoy healthy development.
spk05: Specifically, regarding Meituan and Instashopping,
spk09: they and us have differentiated advantages, and both parties will leverage the distinctive strength to cater to the diversified consumer needs.
spk05: From the point of view of supply and demand, our advantage lies in the neutral positioning of Jindong Daojia, as well as the ability of our digitalization in many years, which allows us to cooperate Now I will share with you my thoughts on our advantages on both the supply and demand side.
spk09: On the supply front, our main edge lies in our positioning as a pure play platform and our digitalization capabilities. which has enabled us to work more extensively with leading chain merchants and brands, making us more competitive in the variety, quality, and pricing of product supplies.
spk05: We have always established a neutral platform positioning. We only make platforms, we don't make our own products, and we don't touch goods. We have a cooperative relationship with our customers, not a competitive one. Now, let me explain our advantages in more details. As a pure marketplace, we never engage in retailing ourselves. That's why retailers are more willing to cooperate with us.
spk09: For instance, we've teamed up with 90 out of the top 100 supermarket chains in China, and we are making progress in cooperating with leading local champions.
spk05: We believe that the advantage of this position is that it is sustainable. There are commercial and self-sufficient retail businesses, and it is a competitive relationship with the retail market. Therefore, the cooperation between the retail market and the retail market Now in contrast, Altia has direct sales business which completes directly with retailers. So retailers have concerns and reservations about launching on their platform.
spk09: In the rare case that leading retailers agree to work with the other platform, only a number of stores have actually launched. Unless the other company goes through a fundamental strategic shift, it cannot transform into a pure marketplace as we are. That's why we are confident in maintaining this advantage in the long run.
spk05: In addition, because our platform
spk09: Moving on to our capabilities in digitally empowering our retailers, after years of investments in technology and serving leading retailers, we've accumulated best-in-class know-how and built several well-recognized digital products and solutions, such as Haibo and Datapicking. These products were crucial in helping us maintaining a solid relation with our merchant partners.
spk05: An auto platform not only provides a delivery network to retailers,
spk09: but also needs to digitally empower them to improve operating efficiency. And in terms of potential conflict, as you put it, with Zoyin, Zoyin's main efforts right now are centered around the food delivery business. So there's not been much strategic conflict with our on-demand retail business.
spk05: The second question is about the impact of the macroeconomic environment. The change in the macroeconomic economy and the confidence of consumers will have an impact on the entire forestry industry. For us, it is not an exception. On the other hand, even though the forestry industry is still in the early stage of development, the penetration of local forestry is still individual.
spk09: To answer your second question on macro, the economic cycle and the changes in consumer confidence affects the entire retail industry. And being an on-demand retail platform, we are no exception. On the other hand, on-demand retail is still in the early stage with only single-digit penetration rates. and the local retail sector. So we remain confident in the long-term potential of the industry. So in terms of outlook, we expect faster economic and consumption growth this year versus last year, but there is still some uncertainty in the pace of recovery. So we have higher expectations for the second half than in the first half.
spk05: As the impact of the epidemic gradually subsided, we observed that the life of the elite has gradually returned to normal, and the overall business environment has improved. Therefore, it is expected that this year's macroeconomic growth and consumption will be better than last year.
spk09: Since the pandemic control measures were lifted toward the end of 2022, there were massive infections in multiple regions in December and January, affecting the supply chain and consumer confidence. Now that the shocks from the COVID outbreaks have gradually subsided, people's daily lives and mobility has normalized, and the overall business environment is improving. So we are expecting better economic and consumption growth this year.
spk05: However, we believe that the pace of improvement in the consumer industry this year still has certain uncertainty, especially in H1. The political effect of expanding consumption still needs time to present. The epidemic release is not an easy thing to do for financial input and consumer confidence. Therefore, we expect that the overall consumption of H1 in 2023 will achieve a warm growth. In 2023, H2 will
spk09: That said, we are seeing some uncertainties in the pace of recovery, especially in the first half, given that the pro-consumption policies takes time to bear fruit. and the reopening boost to consumer income and confidence may not manifest itself immediately. So we're seeing, we're expecting modest growth in consumption in the first half and a re-acceleration in the second half as consumer confidence gradually recovers.
spk05: In the long run, thanks to the rapid rise of audio penetration in retail, the confidence in achieving growth significantly outpaces the e-commerce sector and other players. Thank you.
spk06: Thank you. Your next question comes from Andre Chang with JPMorgan. Please go ahead.
spk02: Thank you, Director Jeff, Director Beck, and Caroline for accepting my question. My question is about the distribution and situation of traffic after the collaboration with JD. Can you please introduce to us, now that we have so many different traffic entrances in the capital, including Shousuo, Xiaoshida, and also nearby, which ones are more likely to be affected? If we look ahead, which ones are more likely to be affected? What is the driving force behind it? Are there more products that are combined with us, or are there some traffic obstacles? Another question is, From last year to this year, there has been a significant change in the strategy of the Jindong Group, which is to strengthen the importance of low-end products, and to consider some infiltration in the downstream market. I don't know if this will affect the distribution of our traffic in the Jindong Group, or if we actually have the opportunity to make our O2O supply chain better, so that we can also provide products with higher price competitiveness. I will translate my question myself. So my questions are related to the traffic allocation from JD. So can management give us an update about the traffic source from multiple entry points in JD, such as by now, nearby, et cetera, and which are the area that provides more gross driver in their view in the future? And second question is about recently how they debated the strategy change of JED Group to give more support on the lower-priced products and the penetration into the lower-tier cities. Will that affect our traffic from JED Group, or will it actually be a chance for opportunity if we can provide competitive prices for our O2O channel? Thank you.
spk05: Thank you very much. Let me answer this question. Currently, if we look at the percentage of sales in JD.com, the core is that there are two channels contributing. One is search and recommendation, the so-called search and recommendation, and the other is nearby channels. Their search and recommendation percentage is about 60-70%, but the number of nearby channels is faster. Thank you for your question. In terms of GMV mix across the multiple entry points on JD, we have two main entry points.
spk09: search or recommendation feed on the JD homepage. That accounts for 60 to 70% of our total DMV on the JD channel, on the JD platform. And the second main entry point is the nearby page. The nearby page is the faster growing entry point. In Q4, the GME from the nearby grew more than 300% year-over-year. OK. There are a few driving forces.
spk05: The first one is the continuous abundance of our supply. This includes the abundance of products and the expansion of products.
spk09: So in terms of the drivers for the GMV growth, the first and most prominent growth driver is the expansion, the continued expansion on the supply front. and continuously expanding our SQ selection in more categories and in more regional grids.
spk05: The second is the continuous delivery of product capabilities, including search for So the second driver is our continuous iteration or upgrade in our project capabilities.
spk09: For example, we are adding, increasing our exposure rate among the repeat customers of ShopNow in the search results.
spk05: The third one is when more and more users have tried the one-hour service through search, we will leave it in the nearby channel.
spk09: And the third driver is the retention of users who have experienced the convenience of on-demand shopping through search results. We will retain them with our nearby shopping channel to increase their consumeristicness. and form the cropping habit.
spk05: The second question is about the impact of low prices in Jindong. For this reason, I maintain a relatively optimistic outlook. The main reason is that some of the products And to answer your second question about the strategic change for more low price offerings, we are relatively
spk09: optimistic about the impact on our platform. The main reason for that is, in some categories, the offline channels is efficient in terms of the supply chain, so we will gain faster growth in these categories.
spk05: We have already obtained double-digit penetration in some categories. In some categories, we've achieved double-digit penetration rate. And our long-term target remains to penetrate 50% of JD users. Thank you.
spk06: Thank you. That's all the time we have for our question and answer session today. I'll now hand back to Caroline Dong for closing remarks.
spk08: 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, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.
spk06: That does conclude our conference for today. Thank you for participating. You may now disconnect.
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