JD.com, Inc.

Hello, and thank you for standing by for JD.com's fourth quarter and full year 2021 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. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Mr. Shawn Zhang, Director of Investor Relations. Please go ahead.

Thank you. Good evening and good morning, everyone. Welcome to our fourth quarter and full year 2021 earnings conference call. Joining us on the call today are Mr. Lei Xu, president of JD.com, and Ms. Sandy Xu, our CFO. For today's call, Lei will kick off with opening remarks, and Sandy will discuss the financial highlights. After that, we'll open the call to questions from analysts. Before we continue, let me remind you of today's call will include forward-looking statements. And please refer to our latest Safe Harbor statement in earnings press release on our IR website, which applies to this call. Also during this call, we'll discuss certain non-GAAP financial measures. Please also refer to our earnings release, which contains a reconciliation of non-GAAP measures to the comparable GAAP measures. Finally, please note unless otherwise stated, All figures mentioned in this call are in RMB. And now, I would like to turn the call over to our president, Mr. Xu.

Hello, investors and analysts. Thank you for attending the 4th quarter and the annual phone call meeting of Jingdong Group in 2021. In the 4th quarter, Jingdong has made a significant improvement in the market, consumption, and industry. In this quarter, Jingdong's total revenue increased by 23% above last year's high-end number. And in 2021, we achieved nearly 28% of the total growth of the year. We continue to achieve a growth rate higher than that of the industry, and continue to promote the consumption expansion system. At the same time, through the continuous improvement of technical driving and efficiency, Jingdong also achieved reasonable and healthy profit growth in this quarter. This success proves that Jingdong is not only responsible for the recognition of consumers and partners in cooperation, but also further verifies that the new real estate industry is an important force for the growth of the entire retail industry and the upstream and downstream real estate industry.

Hello everyone, this is Xu Lei. Thank you for joining JD.com's 2021 Fourth Quarter and Full Year Earnings Call. JD continues to deliver high-quality growth amid the evolving macro, consumption, and industry environment in the fourth quarter. Total revenues recorded at 23% year-on-year growth in Q4 on a high call and grew nearly 28% for the full year of 2021. This shows that we continued to outperform the industry and continued to contribute to the high-quality expansion of China's consumption. At the same time, we achieved a healthy profit growth in this quarter thanks to improvements in efficiency driven by technology. Our progress demonstrates the increasing appreciation JD has earned among consumers and business partners. It also validates that the new type of real economy-based enterprises have become important driving forces for growth in the retail industry and up and downstream entities. JD's business and investment strategies have always centered on users and business partners through different economic cycles, and this is our strategic determination and focus.

First of all, it is about the size and quality of the users. In 2021, the number of active users reached 5.7 billion. In the overall consumer market, we achieved an efficient and healthy growth in the recovery trend. And we are more happy to see that through the economic operation of users and the construction of online and offline channels, our users' shopping frequency, product width, and up have all been significantly improved. Here I would like to reiterate the two points I mentioned earlier. Jindong does not pursue a single indicator of rapid growth, but focuses on the health and sustainability of the overall business growth. Second, the development of the Chinese Internet industry is growing day by day. It will not rely on supplementary and other rough flow-type growth methods, but enter the stage of fine-tuning operations. In such a new environment, Jindong's user growth and operation are facing a long way to go. Time is on our side. There are still a lot of work to do. There are still a lot of user needs that we need to discover, influence, and satisfy.

First, in terms of users, we saw synchronized increases of both user number and quality. In 2021, annual active users reached 570 million, maintaining efficient and healthy growth while the overall consumption industry underwent recovery. More importantly, we saw users' shopping frequency, range of categories purchased, and all meaningful improved in the whole process. This was driven by our stronger user engagement and omnichannel initiatives. Here, I would like to reiterate two points of view that I have shared before. First, J's goal is not to chase high growth in any single operating or financial metric. Instead, we focus on the healthy and sustainable growth of our business as a whole. Second, as China's internet industry develops into a more mature stage, The traffic-driven growth model driven by subsidies is being replaced by a user-quality and operating-efficiency-oriented model. In such a new environment, we believe that JD's user growth and business operations are facing so-called wet, slow, and really fun fields. Time is on our side. We have much to do, but there are so many users who need to be explored and satisfied. We always set higher standards and goals to serve users.

At the same time, around the cooperation partners, Jingdong has been working hard to build an open and integrated ecosystem to the maximum extent to serve the diversification needs of self-sufficiency suppliers and third-party merchants. In the Jingdong ecosystem, brands do self-sufficiency and POP at the same time, which is normal and common. Different modes have different values. We are also very happy to see the concept of self-sufficiency and supply chain becoming the most popular in the industry in the past two years. More and more companies are developing this mode. We are willing to share our experience. And for our business partners,

we have been striving to build an open and integrated ecosystem to meet the diversified needs of both suppliers and third-party merchants. In JD's ecosystem, it is very common for brands to run both 1P and 3P businesses at the same time, as different models bring them different values. We are glad to see that 1P and supply chain have become mainstream topics in this industry in recent years, with more companies working on such initiatives We are willing to share our experience to contribute to the industry's healthy development. However, we have to point out that we don't think 1P merely means product procurement or even advancing payment for securing inventories. We believe 1P is about building a comprehensive system of supply chain management. The strength of the 1P model is to provide high-quality shopping experience to users and raise operating efficiency along the supply chain so that business partners can enjoy better capital and inventory turnover.

In an uncertain environment, Jindong helps partners to better deal with the impact of external factors, improve business efficiency, reduce business costs, and thus achieve business certainty and stability. Therefore, different types of partners are continuously improving their recognition of Jindong. In the fourth quarter, the number and type of partners serving Jindong continues to grow. One of them is that the suppliers of Jingdong Self-Supply Co., Ltd. have achieved a deeper coverage of their products. The number of suppliers continues to increase in double-digit numbers. The number of businessmen of Jingdong Third Party is also increasing rapidly. Q4, the number of businessmen of Jingdong Third Party has exceeded the total of the previous three seasons, and has reached the highest increase in the past three years. We believe that the number of future partner partners will continue to grow healthily. At the same time, the level of service that Jingdong has created for partner partners is also constantly improving. In a time of uncertainty,

JD has helped our business partners to cope with external changes with better operating efficiency and lower costs, sharing stability and certainty with them. As a result, JD has gained increasing recognition from all kinds of business partners. In the fourth quarter, both the types and number of business partners in our ecosystem continued to expand. In particular, the number of One Piece suppliers achieved a double-digit percentage growth, while further expanding coverage across all categories. The growth of third-party merchants also accelerated to the highest level in the past three years, as we added more new merchants in Q4 than we did in the previous three quarters combined. We believe that the number of our business partners will continue to grow healthily in the future. Meanwhile, we have been constantly strengthening our win-win cooperation with our business partners We further shortened inventory turnover days to the lowest level in the industry, despite the number of SKUs that we managed is now close to 10 million. Our accounts payable days also shortened, which helped improve business partners' capital turnover efficiency. As such, JD has helped millions of online and offline suppliers and SMEs to gain their fair growth opportunities and a reasonable profit in support of the real economy. Going forward, We will cooperate with more partners, generate mutual benefits, and facilitate each other's growth.

The healthy growth momentum of our foreign retail businesses will further enhance

Supply chain capabilities and operational efficiency have put us in a strong footing to firmly execute our long-term strategy. Now let's take a closer look at the recent development of JD Logistics and new businesses.

In 2021, JD Logistics achieved a series of key milestones. First, JD Logistics' total revenue in 2021 achieved rapid growth and broke the $1 billion milestone. At the same time, JD Logistics is successfully building a long-term investment-driven integrated The service capacity of logistics continues to grow and expand the space of the foreign market, which also brings structural optimization of the income of Jingdong logistics. The income increase from foreign customers is faster and the annual ratio is also more than 50% for the first time. The integrated supply chain logistics service provided by Jingdong logistics also allows our partners to focus more on their core business and benefit from the comprehensive efficiency and competitiveness brought by the upgrade of the supply chain and the comprehensive improvement of high-quality growth. In 2021, the income contribution of Jingdong logistics from integrated supply chain customers is more than 70%. At the same time, with the increase in business-scale rapid growth and refined operational capabilities since this year, the overall profit and loss of Jingdong logistics is gradually improving. In the future, Jingdong logistics will continue to invest and upgrade its basic capabilities and resources to provide more diversified supply chain products and services for larger domestic and international partners, to consolidate our industry leading position and further expand our market share.

JDL achieved a series of milestones in 2021. Firstly, its total revenue grew rapidly and exceeded the 100 billion RMB mark for the full year. Second, the long-term investment in JDL made in establishing integrated supply chain logistics services started to bear fruit as it served more external customers and expanded its total addressable market. This also led to better revenue structure for JDL as revenues from external customers grew at a faster pace and accounted for over 50% of total revenue for the first time on a full-year basis. Our business partners can better focus on their core operations and achieve high-quality growth as JDL's integrated supply chain logistics services helped to drive their overall efficiency and competitiveness We are proud to see that revenues from customers using JDL's integrated supply chain logistics services contributed over 70% of its total revenues for the full year. Moreover, driven by the expanding economies of scale and operation optimization, JDL achieved sequential margin improvement in 2021. In the future, JDL will continue to invest and upgrade its infrastructure capabilities and resources to provide larger-scale and more diversified supply chain-based products and services to our business partners in China and abroad, and further strengthen its industry-leading position as well as expand market share.

In terms of innovative business, we focus on the surprise business of Xia Chen Market in 2021, and continue to treat and optimize it, improving Xia Chen Market, business supply chain and business efficiency, reduce the cost of product circulation, better serve the general consumer, and reduce the cost-effectiveness of local businesses, and increase income. Since the second half of 2021, Jingqi's business has been focusing on strategic focus in the industry, around efficiency and experience, to make clear adjustments to the underlying ability of local supply chain construction and the advantage model, and to improve user experience as the core goal. In the core area covered by Jingqi, the efficiency and cost structure of the supply chain of Jingqi continues to be optimized, On the new business KC,

which focuses on lower-tier markets and took a series of iterations and optimization measures in 2021. By improving supply chain and fulfillment efficiency in lower-tier markets, particularly for fresh produce and general merchandise, as well as lowering merchandise circulation costs, Jinxi provided better services to customers and helped local merchants generate more revenue with higher efficiency and cost savings. Since the second half of 2021, JINXI has led the industry in proactively focusing on selected markets as well as on efficiency and user experience to drive local supply chain capabilities and refinement of the UE model. As a result, we are seeing better supply chain efficiency and cost structure in our selected markets. In particular, fulfillment cost per order continues to come down. while net promoter scores and merchant satisfaction levels further improved. We believe this is the sector that requires a long-term commitment over the next 5 to 10 years in order to build up supply chain infrastructure and gain consumer mindshare. The inflated scale expansion driven by short-term marketing expenses are not sustainable. The recent industry trend also validates our view.

In 2021, Jingdong's various businesses achieved sustainable development. Also, through the opening of public chain and service capabilities, we have combined with our partners, provided a stable support and service to our partners and consumers in a challenging environment, and provided a new momentum for the growth of the industry and created greater value for society. 2022 is the third year of the pandemic. We are still in a lot of changes and uncertainties. At the same time, China's commercial competition is constantly changing, sometimes even cruel. Companies need to grasp the core business logic and stick to long-term strategic principles. 2022 is also the 19th year of Jindong. In the 19-year business history, Jindong has never looked down on a momentary loss. Jindong's core business logic is very clear. The business model and strategic choices are always around users and partner partners. In the past, Jindong's business model's stubbornness has been constantly proven. We also believe that Jindong's core capabilities have more differentiated advantages, which can support us to be healthier and more sustainable in the long run in the future. The results of 2021's business also keep Jindong Shady achieved healthy and sustainable growth across all business lines in 2021. We also opened up our supply chain and service capability to provide reliable and steady support to our business partners and consumers amid a challenging macro environment.

JD has and will continue to develop new growth drivers for the industry and create greater value for the society. 2022 is the third year since the pandemic broke out. We are still in the midst of many changes and uncertainties, and the competitive landscape in China is ever-evolving and sometimes can be intense. Companies must grasp the core business logic and persistently deliver on their long-term strategies. in 2022 and also 2022 is the 19th year since JD's inception. Throughout our history, we have never dwelt long on short-term and local gains and losses. Our core business logic is clear. Our business model and strategic positioning have always revolved around consumers and business partners. The resilience of our business model has been proven many times in the past. we believe we have a highly differentiated core competence that will lead us to a healthier and more sustainable growth trajectory in the long run. The results we achieved in 2021 have also set a strong foundation for our growth and market share expansion in 2022. We truly appreciate all your trust and support along the way. This concludes my remarks.

Now I'll give the floor to Sandy. Thank you, Lei. Hello, everyone. We are pleased to finish 2021 with another strong set of results in the fourth quarter. Well, 2021 brought many uncertainties in the macro environment, supply chain, and the consumption industry. We executed and delivered on our strategic priorities, continued to gain market share with a robust top-line growth, and achieved a solid bottom line. The results speak volumes about the strengths of our supply chain-based business model in creating value for both our users and business partners and driving long-term sustainable growth of our business in 2022 and beyond. Our net revenues achieved 23% year-on-year growth to R276 billion in the fourth quarter and 28% year-on-year growth to $952 billion for the full year of 2021. We continue to demonstrate notable resilience in our business and persistently outperformed industry growth, despite the relatively soft consumption trend in recent quarters. Our solid top-line growth comes alongside our proactive strategic priority of improving user engagement and lifetime value Our annual active user base reached a total of 570 million by the end of 2021, adding nearly 100 million users from a year ago. In particular, our quarterly average DAU grew over 25% year-on-year and hit an all-time high in Q4. This reflects the results of our strategic focus on improving user man-share and engagement. We are also gaining more wallet share from our expanding user base. As we increasingly become the go-to destination for consumers' regular shopping, LTMJMV per user has been steadily changing up over time and increased year-over-year in every quarter in 2021, even as we continue to expand our total user base. Furthermore, our JDplus members surpassed 25 million in the quarter and average member spending increased by double-digit percentage points from a year ago. By end of Q4, the average annual spending of plus members was 10 times as much as that of non-plus members. The encouraging progress in high-quality user growth and improving user engagement validate our relentless focus on superior customer experience over the years. Our revenue base so further diversification. In Q4, our net product revenues grew at a solid 22% year-on-year, while net service revenues grew faster at 28% year-on-year, against a high comparable base. Over a two-year period, contribution from net service revenues increased from 12% to 15% of total revenue. Our marketplace and marketing revenues exceeded the 20 billion RMB mark in a single quarter for the first time in our history in Q4, growing at 27% year-on-year. This is a testament to our ongoing improvement in our platform ecosystem. Logistics and other services revenues grew by 30% year-on-year in Q4, maintaining hyper-growth momentum. Now let's turn to our segment performance. First, in Q4, our core business JD Retail delivered both solid top-line growth and healthy margin improvement. JD Retail's revenues reached 250 billion RMB in Q4, growing at 21% year-on-year in the quarter. For the full year of 2021, JD Retail revenues grew 25% year-on-year to 866 billion RMB. Category-wise, we continue to see resilience in electronics and home appliance category with 22% revenue growth year-on-year in Q4. The power of JD's supply chain capability has been on full display against the global supply chain disruption. Our general merchandise revenues grew 23% year-on-year in Q4 outperforming the market amidst a challenging consumption environment. Order volume in our supermarket category has been consistently growing at around 30% two-year CAGR in every quarter in 2021. The strong growth of our supermarket category has helped drive more frequent user engagement and continued the greatest number of new users. Our 3P ecosystem also saw encouraging progress. As more merchants appreciate the increased value adds delivered by our ecosystem, we are pleased to see higher engagement and spending from our existing merchants. It's worth mentioning that we added more merchants to our marketplace business in Q4 than we did in the first three quarters combined. Our omnichannel business has been growing rapidly, as our offline stores and business partners, including home appliance franchise stores, 5 Star and 7 Fresh, as well as our O2O initiatives, achieved close to 80% year-on-year GMV growth in the full year of 2021. The exciting progress in our omnichannel business further demonstrates JD's position as a new type of real economy-based enterprise. It also bodes well for our growth in the coming years. Moving on to JD Retail's profitability, operating margin increased to 2.1% this quarter, up from 1.9 a year ago, thanks to the expansion in fulfilled gross margin. On a full year basis, JD Retail's operating margin reached 3.1%, a 10 basis points improvement from a year ago. and 32-bit improvement from two years ago. Our core business is well on track to realize sustainable margin improvement while optimizing for a healthy category mix and exploring new business strategies to expand our time in the long run. JD Logistics, or JDL, achieved remarkable milestones in 2021 and concluded the year with strong top-line growth and sequential margin improvement. Its Q4 revenues grew by 28% year-on-year to 30 billion RMB. On a full-year basis, JDL's revenues grew 43% year-on-year to 105 billion RMB. This was mainly driven by the growth in the number of external integrated supply chain logistics customers, as well as their increasing output. Contribution of external revenues reached a historic high and accounted for 57% of JDL's total revenues for the full year of 2021. We are proud to see JDL deliver a margin improvement while quickly ramping up its external business. JDL achieved positive operating margin in both Q4 and the second half of 2021. These results also demonstrate JDL's ability to boost infrastructure utilization and improve operating efficiency while maintaining robust top-line growth. Revenues of our new business segment accelerated its growth pace sequentially to 45% year-on-year to reach 8.2 billion RMB in Q4 and grew 48% to 26 billion RMB on a full-year basis. grew over 40% quarter-on-quarter in Q4, mainly led by the Jingxi Pingping business, which re-engaged growth momentum after we proactively focused resources in selected markets in Q3 last year. We are committed to better allocating resources to improve our local supply chain capabilities to empower a broader spectrum of business partners, many of which are local SMEs, and to serve new and existing customers. We will continuously drive innovation and improvement in the supply chain infrastructure while firmly committing to better UE for our new business. Moving to the consolidated bottom line, our Q4 non-GAAP line income attributable to ordinary shareholders was 3.6 billion RIB with non-GAAP line margin of 1.3%. up from 1.1 in the same period last year. Our full year non-GAAP net income attributable to ordinary shareholders was 17.2 billion RMB, up from 16.8 billion a year ago. While we continued to deliver solid operational and financial results, we also increased support to our business partners in a time of uncertainty. We have consistently kept our inventory turnover well below 35 days, despite that the number of SKUs under our management continue to expand. We continue to share our efficiency gains with our business partners as we shortened the LTM account payable turnover days from 47 days a year ago to 45 days at the end of 2021. Our business partners highly appreciate the increased supply chain efficiency and faster turnover of cash and goods from their collaboration with us. As we are getting stronger, we are creating greater value for everyone along the supply chain. Our free cash flow for trailing 12 months this quarter remained healthy at 36.2 billion RMB. By the end of Q4, Cash, cash equivalents, restricted cash, and short-term investments added up to a sum of R191 billion. In summary, JD passed off a year of increased uncertainties and micro-high winds with remarkably resilient performance. This is an accumulated result of our 19 years of unwavering efforts in building our core competence. and committing to our Right Way to Success business philosophy. I truly believe we have set a solid foundation for long-term sustainable growth. Looking ahead to 2022, while we remain mindful about the near-term macro volatility, we aim to continue to gain market share with a set of proactive, sustainable, and high-quality growth strategies. and at the same time remain on track of our long-term margin improvement trajectory. I would also like to take this chance to welcome our new shareholders, many of whom are old friends, to join the journey with us soon. This concludes my prepared remarks. We can now move to the Q&A. Thank you.

Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. And our first question comes from Ronald Keung from Goldman Sachs. Your line is open.

Thank you. Thank you, and Sean and team. So we've seen the recent macro weakness, as you talked about that, and COVID disruptions, higher oil price. Just one management, could you share just how do you see JD Retail growth this year, whether given some moderation in general merchandise revenue that we've seen in the fourth quarter? What are the strategies for JD Supermarket and your marketplace? and with these in mind, any potential implications for margins this year? Thank you.

I would like to answer the question. Regarding the overall global economy of 2022, there are many uncertainties, In the face of the uncertainty of the industry, our core business logic and strategic positioning are mainly in three aspects.

And this is Julie. To answer a question on the macro environment, we do face a slowdown. Macro environment with a lot of uncertainties, such as the macroeconomic conditions and the weak consumption demands and the rising price of raw materials on the supply chain and fierce industry competitions and the COVID disruption. And all this odd has posed pressures on China's retail industries. And in face of all these uncertainties, we continue to stick to our business logic and our strategies. and this will be carried out in the following three ways.

First, JD's development has always been centered on creating unique value for our customers' matters and product services and users' experience.

And this help helped us to enhance the mind share among our customers and deliver the sustained development, the sustained growth.

The other thing is that Jingdong has always been more concerned about cooperating partners. So in this uncertain environment, the skills we have gained over the years can actually bring better funds and goods to our suppliers and brand partners.

And second, we pay high attention to our business partners. And in the time of uncertainty, we are making full use of our capacities on supply chain to support our business brands and merchants, to help them on the financial and the goods inventory turnover. So by all this support, they're able to deliver predictable and stable growth under all these external changes.

Third, in the face of the COVID-19 pandemic, the stability and reliability of the public chain and the basic capacity of the warehouse can make our sales trend in the affected areas of the pandemic overall stable. We have also actively participated in ensuring the local people's livelihood, playing a key social responsibility, and getting government and people's approval. In this way, we will form a positive business sustainable system.

And thirdly, in face of those COVID challenges, by leveraging JB's fundamental capabilities on supply chains and the warehousing, et cetera, we can maintain a stable sales momentum in those COVID hit areas. At the same time, we are supporting the government and the people to provide the living necessities to the people in need. and to fulfill our social responsibilities. And all these efforts have been widely recognized by the people and by the government and further enhance our brand or our JD's reputation in the society.

We believe that with our more resilient business model and core public chain capabilities, in the past, we have continuously proven that we can run to the top. In the future, we will continue to maintain a relatively optimistic attitude.

So we are confident in our resilient business model and our core capacities on supply chains and all this has proven to be viable in the past and it will also help us to outperform the market and for the outlook in the future we will continue an optimistic attitude and to achieve sustainable and healthy growth on each different categories and the different each business and also gain a greater market share. And also, I want to share my feelings and the facts as we pay a lot of visits to our business partners by the end of last year and early this year. They've all expressed that they will pay great attention and attach great importance to the collaboration with JD, and I have a high expectation on the collaboration with JD in the year 2022.

Regarding the category of commercial products, indeed, there has been a major change in this industry, including the transfer of price factors, which is making us understand that many brands are under pressure, including the needs of consumers are also rapidly changing. So the traditional sales channels have received a relatively large

And a few words on the supermarket category. A lot of changes are taking place. And our brand partners, they are feeling the pressures from the rising price from the upstream and also a fast-changing consumption demand. And in the past few years, the traditional sales channel has been affected by various factors. And all this has brought a lot of uncertainty for the manufacturer's operation.

So we're going to address these categories in four aspects. First, to the consumers.

We will focus on bringing new products and new categories to the new consumers and bring them quality products and build up their mindshare as JD Super is their go-to place to buy super market category products.

Secondly, in terms of the brand, we are very concerned about the deep coordination and construction of the brand in the supply chain, marketing, and goods and equipment service.

And on the cooperation with our brand partners, we will strengthen synergies with them on supply chains, on marketing, and warehousing, et cetera, to deepen our cooperation and synergies on all aspects. 全渠道是京东零售的战略重点之一,那么其中大商超应该是京东全渠道的战略里面渗透最好的品牌。 And also, GD Super is a very important category in our omni-channel strategies. It has the highest penetration rate across all the categories, and in the future, we'll continue to collaborate with more and more business partners to develop omni-channel strategies in diversified

And for the supermarket categories, we continue to improve its supply chains and made a lot of innovations.

in this aspect, such as our warehouse stores and other methods and other new innovations. And for this category, its profitability continues to improve and we are close to the break-even point.

Regarding the bubble platform, we are mainly doing these works. The first one is the detailed operation of the item. The second one is to reduce the cost of business operation. We will reduce a lot of And also, our marketplace and the 3P

ecosystem we have done the following four efforts and first is to is that we continue to do the refined management of our third-party merchants and third and second we make efforts to help them to lower down their operating cost and alleviate their burdens to run on our platform and thirdly we provide those two keys to help them to do better operations on our platform. And at the same time, we are also exploring more and more ways to support those small and medium-sized companies and brands to thrive on our POP or the marketplace ecosystem.

Finally, you can see that the new growth of the fourth group of business owners in last year should reach the third group.

And I've mentioned that in this quarter, for the 3P merchants, their overall number is even more than the Q1 to Q3 combined, and they have demonstrated very high engagement during the single-state grant promotion. Thank you.

So this is Sandy. I can add some cover on outlook for JD Retail. So first, in terms of the macro environment and consumption so far, we see that the overall consumption in Q1, or even first half year 2022, to be relatively conservative. And then secondly, category-wise, we expect that the supermarket, home products, health care products, corporate business, including MRO, will generate higher growth compared to our overall average. And then third, omni-channel business, as Lei mentioned, will continue to be one of our strategic focuses and deliver hyper-growth in 2022. And fourth, we also expect that 3P to grow faster than 1P, as we have been optimizing our 3P ecosystem and tools for merchants, as Lei just mentioned. So we expect JD Retail to continue to deliver quality growth in terms of user base, user engagement and business, which is a long-term growth driver for our retail business. Overall, although the retail consumption is currently under pressure to a certain extent, we are confident that we will deliver higher growth than the industry average.

Thank you. Thank you. Next question. Thank you, Ronald.

Thank you. Our next question comes from Eddie Leung from Bank of America. Your line is open.

Good evening, guys. Just a question on competition. Could you guys share your thoughts with us on the growing market share of the e-commerce broadcasting platforms? How do you think about the impact on your business and how are you going to deal with their growing market share? Thank you.

In terms of live broadcasts and short videos, we believe that the e-commerce business of these streaming platforms is developing rapidly, which is in line with our previous expectations. Live broadcast e-commerce has indeed attracted some people based on interest and some demand for sales. Therefore, we believe that it is still in a state of growth under the current trend. Because of its business model nature,

About the e-commerce, the e-commerce by livestream and short video platforms, they are still undergoing a fast development period, which is in line with our previous prediction. For these business models, they can attract and satisfy some shopping demands of some people based on their interests, and they are still developing fast thanks to the traffic dividend. And given their business models and the people's recognition of this platform, we believe this live streaming e-commerce will generate a long-term impact to those platform e-commerce players.

At the same time, we see many structural opportunities and opportunities for cooperation. There are three main points.

While we see some challenges at the same time, we do see there's opportunities and space to collaborate with these traffic platforms.

Even consumers' shopping demands are diversified.

For JD.com, we see most people come to our platform for planned shopping or shopping for their families. So we are less affected by their emergence.

And second, we see that branded merchants, while they enter these traffic fields to do operations, in their operating efficiencies,

they're encountering quite a lot of difficulties and they also need some help.

And thirdly, we believe that for all kinds of new business models, after they pass their dividend period,

They all need to come down to the work and serve their customers and better provide a win-win collaboration with their business partners.

And Jingdong has always been able to use the basic facilities of the supply chain, such as booking, customer service, platform management, and other core capabilities. Compared to these platform e-commerce, we can effectively reduce the cost of circulation of the supply chain and have a greater advantage of this differentiation.

So compared with platform e-commerce players, for JD.com, we have complete supply chain infrastructures and the fulfillment capabilities, customer services, and the skills for the platform governance and so on. All this can help us to reduce the supply chain circulation cost, which puts us at a very unique and differentiated competitiveness.

At the same time, we are also open-minded. Through the strategic layout of the entire channel, and the constant creation and enhancement of the public chain's medium capacity, we are exploring these multi-channel, multi-scene users. So we continue to strengthen our cooperation with these content platforms. At the same time, our brand will also use us to carry out

So we continue to have an open attitude towards all these emerging new business models. And by building our capacities on omnichannel and the supply chain, we are exploring diversified touchpoints to reach our customers in diversified shopping channels and user cases. And we will also continue to collaborate with these content platforms and support merchant partners to operate on this traffic field.

And I also want to add that besides JD Retail, for our JD Logistics,

They also have collaborations with both live stream and short video platforms to provide a both way transportation and logistics support which also presents a huge opportunity for JD Logistics. Thank you. Thank you.

Thank you. Next question.

Thank you. Our next question comes from Thomas Chong from Jeffrey. Your line is open.

Good evening. Thank you for accepting my question. My first question is, in 2022, what are our expectations for the growth of our customers? Because we are in the lower PSP penetration, can you share more about the future strategies? The second question is about the three major platforms. Can you share with us about the future spending of OPEX and the margin? If we add them up, how should we look at the margin profile this year? Thank you.

Let me answer the question about the users. In the fourth quarter, from the perspective of the industry, we can see that the demand for consumption is relatively weak. The development of the entire industry, whether it is the overall retail or online retail, is actually in a good state overall. But we are always around providing the best user experience. So when we were in Q4, we achieved a healthy user growth, which completed our year-round growth goal.

And let me answer a question about the users' growth. In this quarter, and on the overall industries, we have seen a weak growth, no matter on the general, on the online side. But for GD.com, we continue to build our business surrounding our users' experience, and we achieved healthy growth and hit our yearly target.

ZHANG ZHANGZHANG ZHANGZHANG ZHANGZHANG ZHANGZHANG ZHANGZHANG The life logic of Jingdong is to hope for sustainable growth in quality. This is a very, very important principle for us. So last year, we can see that the number of new customers, the number of new customers, the number of new customers, the number of new customers, the number of new customers, the number of new customers, the number of new customers, the number of new customers,

So here I just want to emphasize again that our business principle is to deliver sustainable and quality growth. So in terms of the new users acquisition in Q4, we have seen their up has been improved by 11%. And for our existing customers, their shopping frequencies have been improved by 3% and their up has been increased by 4.5%. And all this has demonstrated again our principles for sustainability and quality growth.

And for 2022, we will continue to focus on

the users' growth quality and refined users' management, and also make dynamic policy adjustments during this process. We see our users' growth ceiling is still very high, and we expect healthy users' growth in the following years. 增长点主要是两方面,第一方面是在品类上,

The expansion of our successful products will continue to drive the growth of users. For example, the high-end products such as large-scale shopping malls are still one of our main products. As well as the 3C building products that are relatively successful in occupying the hearts of consumers. In the current shortage of supply and demand, our consumers' hearts are still constantly strengthening to be able to continue to obtain the wallet of users.

And the users' growth are mainly coming from two aspects. First, it's our categories. As we are successfully expanding our categories, this will continue to drive our users' acquisition. For example, for the JD Super, supermarket categories with FMCGs continue to be the engine for the new user acquisition. And for the other category, it's consumer electronics. we have a very strong mindshare among our consumers. Even though we are under this supply shortage at this moment, we continue to see more and more consumers' mindshare is building up in this category, and we continue to gain larger wallet share in this category. 第二个主要增长点来自于前面不断强调的全渠道的泡沫平台生态的建设,那么它会使我们用户的来源更加多元化, And second part of the users' growth opportunity comes from our marketplace ecosystem and our omni-channel business. And this will bring us diversified channels and diversified approaches to reach new consumers, new users. And the ecosystem we co-build with our merchants and brands, as well as our offline ecosystem, will also contribute to the growth of new users.

OK. Let me take the question on OPEX and margins. On the bottom line of JD Retail, we need to take into consideration a few changes in our business model and category makeshift. First, the supermarket category will continue to outgrow our overall retail business. Well, its operating margin is on the track of steady improvement, but still lower than our average margin level. And second, 3P business will grow faster than 1P. That somehow mitigates the impact from the category mix shift. And third, omnichannel grows faster than online retail. As this business model is still in relatively early stage, It is currently still in a slight loss-making position, but will again improve their OE year over year. Overall, we are facing dynamic internal microenvironment changes, which will affect our bottom-line performance. The management team will adjust our investment strategy from time to time. For Q1, I want to remind everyone that as the sponsorship fee for the CCTV Spring Festival Gala as well as the related promotion expenses were all reported in one single quarter, our marketing expense ratio and operating margin will be slightly affected in the short term. but we will adjust our pace of annual marketing spending and the impact to our marketing spending for the whole year 2022 is manageable. So I want to emphasize again that for JD Retail, we pursue sustainable quality growth and we are well on track of our long-term margin trajectory. And for JD Logistics, I believe their management team also shared some color in their earnings call. For the margin performance, if you remember, we made heavy investments in capacity in the second half of 2020 and gradually ramped up the utilization in 2021. In 2022, the investments in capacity will be largely in line with the business development. So the utilization of capacity is expected to be further optimized. At the same time, we will continue to improve the operating efficiency So the UE for JG Logistics will also improve compared to 2021. For our new business, we see that the competitors in this recently now become more rational. Companies, you know, compete on the core capabilities rather than burning capital. So we see that the competitive environment is more healthy. JG has been pursuing sustainable growth, and we will continue to do so. So we always balance investments in new initiatives and our profitability of core business. So for new business initiatives, we are always very cautious in investments to ensure the investments can generate adequate ROI for our investors and create true value for the supply chain and business partners. So we never pursue short-term KPI through subsidies. We will evaluate the market situation and make adjustments from time to time to our investments again. So overall, given the uncertainties in external microenvironment, we would put more weight on profitability this year on the management's KPI than growth. So for new business initiatives, we expect them to deliver hypergrowth while controlling investment. to improve the UAE, and annual investment will not exceed what we incurred in 2021. Finally, at the group level, as a reminder, we completed the acquisition of CNLP and Dada in Q1, and we will start to consolidate them for March this year. While we don't expect them to have a significant material impact on the top line and bottom but due to we previously reported investments in data as an equity method investment. So the P&L presentation or last pick up from data will be changed to different line items.

Got it. Thank you. Thank you, Thomas. Can we have the last question, please?

Thank you. Our last question comes from James Lee from Mizuho. Your line is open.

Great. Thanks for taking my questions. Just wondering if you can share maybe some of the new learnings of JDDJ as you integrate more of this omnichannel delivery on your platform. Just curious what you've seen in terms of cross-selling rate. Any key reasons people are buying omnichannel versus not buying? And how should we think about the demand in general? Is it more incremental or substitutional versus your core e-commerce offering? Thank you.

First of all, I would like to share with you the changes in demand based on the current demand of consumers. Our supply chain actually has a variety of modes of supply chain construction. Among them, the same-sex retail or the so-called in-time retail should be the fastest-growing

On the questions on the on-demand retail, I explained, I shared with you in a previous call that JD are building different kinds of supply chains based on the changing demands of our consumers. And for the on-demand retail, it's one of the fast-growing competition fields.

We think that the on-demand ratio does not help us to break the ceiling for our long-term ratio sales growth, but it also helps us to create a deep connection

with the real economy-based offline retail ecosystem and to support the overall retail industry's digital transformation.

First of all, as an important part of the whole-channel strategy, in-person retail is now an extension of the existing retail scene in Beijing. It is also a multi-billion-dollar market, so its potential is very large. We rely on the existing capabilities of the entire Jindong Group. We also hope to be able to provide users

Un-demand retail is an important part of JD's omnichannel strategies, and it's an important extension for our existing shopping scenario. And itself, it's a trillion-dollar market with a lot of potential. And we also want to fully use our current capacities on supply chain to use this business model to provide richer choices of quality products, to serve our customers in a more timely manner.

And also for some heavyweights,

products or those products that require cold chain or higher standard transportation like fresh foods and other cold chain products. We will leverage the LBS-based local delivery services, which has a better users' experience for our customers compared with our B2C model because they have a lower cost and will be more time sensitive to reach our customers.

And ShopNow program, which is our on-demand retail service, can help us to expand our

good resources to connect with the market resources and supplement to our online inventories, so we can collaborate with more offline stores to create more traffic and a win-win cooperation.

In 2021, based on the logic of Jingdong's supply chain, we did some real-time sales search and trial around the needs of users. Thousands of users experienced

And in 2021, based on JD's supply chain logic, we have made some explorations attempts on the on-demand retail based on our users' demands. And tens of millions of users on JD has experienced that. And for this business, it has achieved a $10 billion scale at this moment.

Just one correction for this JD's online retail, it has achieved

10 billion RMB, not dollars, market scale at this moment. And for 2022, we will continue to build our supply chains and fulfillment capabilities and strengthen consumers' mindshare on this business. And also, we will continue to construct our capabilities on this business surrounding our local community resources and our O2O operating system to further empower our merchants and partners and to enable them on more retail, on-demand retail services. And also the on-demand retail will help JD to increase the stickiness and engagement on the up value of JD users. There's a lot of work for us to do. Thank you. Thank you.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com's Shawn Vang for closing remarks.

Thanks for joining us on the call today and for your questions. If you have any further questions, please contact us and our team. We appreciate your interest in JD.com and look forward to talking to you next quarter. Thank you.

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