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spk00: Hello, and thank you for standing by for JD.com's first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Mr. Shawn Jeng, Director of Investor Relations. Please go ahead.
spk04: Thank you, Michelle. Good evening and good morning, everyone. Welcome to our first quarter 2022 earnings conference call. Joining us on the call today are Mr. Lei Xu, our CEO, 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, today's call will include forward-looking statements. And please refer to our latest safe harbors statement in the 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 press 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. I would like to turn the call over to Mr. Lei Xu, our CEO, Mr. Xu.
spk07: Hello, investors. Thank you for attending the first quarter of 2022.
spk06: Hello, everyone. This is Xu Lei. Thank you for joining Citi.com's 2022 first quarter earnings call.
spk07: Since 2022, we have been facing multiple challenges, such as recurrence of supply chain, lack of consumer confidence, and many other challenges. Since the start of 2022, we have seen many challenges arise in our external environment, including the COVID resurgence,
spk06: supply chain disruptions, and soft consumer sentiment, among others. As a supply chain-based technology and service provider, JD is strongly committed to social responsibility, corporate citizenship, and thanks to the supply chain that we build over the years, we are able to take concrete action to help ensure supplies of daily necessities and to mitigate the impact of the pandemic on society and economy.
spk07: At present, there are many challenges and uncertainties in the external environment. Our challenges are short-term. Jingdong also has the ability to respond because we have a more solid business foundation. With the ability of the supply chain and a more resilient business model, Jingdong has once again delivered high-quality performance in the first quarter. Revenue has increased by 18%. This not only reflects our more trust in consumers and partners, but also shows Jingdong's stronger control over its own business and supply chain. When the external environment changes, JD's business performance is more stable than that of the industry. At the same time, JD's business performance is more stable than that of the industry.
spk06: JD's solid business foundation permissions us to navigate the current challenges, which we believe are short-term in nature. In the first quarter, we once again delivered high-quality results thanks to our supply chain capabilities and resilient business models. Our total revenue saw a solid year-on-year growth of 18%. This reflects the increasing trust we have gained from our consumers and business partners. It also demonstrates that we have better control across our entire business process and supply chain. Therefore, we possess greater visibility than the overall sector during times of change. Moreover, We also recorded steady profitability in this course driven by better operating efficiency and more focused on business strategies.
spk07: In the face of the challenges of the epidemic, Jingdong has always been in the lead, not in the lead, not in the account. When the COVID-19 outbreak broke out in January 2020, Jingdong was the first to launch a special transport guarantee in Hubei, Chiyuan, the key area of public health insurance, protection and medical supplies, donations, and support for platform partners. Now, to fight against Omicron, which is more transmissive. Jingdong once again relies on its own supply chain capability to mobilize all the power of the group and invest its full power in the protection of the land in the whole country. For example, in Shanghai, Jingdong Sales, Jingdong logistics, Jingdong Health, Dada and other business blocks have been used to promote the distribution, transportation, logistics and delivery of goods, including rice flour, grain oil, medicine, breast milk, and other tens of thousands of supplies from all over the country to Shanghai. We have recruited more than 4,000 couriers from all over the country to support the operation and delivery of goods to the first line of Shanghai. On behalf of Jingdong, I would like to express my sincere gratitude and respect to our employees, especially those who are struggling to protect the first line of Shanghai. At the same time, as a new 10-level enterprise that persists in the service of the physical economy, Jingdong is ready to help businesses and small and medium-sized enterprises affected by the epidemic. In the face of COVID, JD has always fought at the front lines and spared no effort.
spk06: When the coronavirus first broke out in January 2020, we mobilized quickly to establish a special line for Hubei to ensure its transport capacity provided essential to affected regions, donated protection and medical materials that were in urgent need, and launched a set of supportive measures for our merchants and suppliers. This time, facing the more transmissible Omicron virus, JD once again fully leveraged our supply chain and mobilized all of the group's forces to fight the epidemic and ensure supply of daily necessities across China. Taking Shanghai as an example, daily retail, logistics, health, data, and other business segments have sourced goods, allocated transport and logistics resources, and delivered tens of thousands of tons of supplies to Shanghai, including staple foods, medicines, daily care products, and more. We have also recruited and deployed over 4,000 frontline employees fully support operations and deliveries in Shanghai. On behalf of JD, I'd like to express our most sincere gratitude and respect to our employees, especially those working on the front lines, for their selfless devotion and dedication. In addition, as a new type of real economy enterprise, JD has also introduced a series of relief and assistance initiatives for merchants and SMEs that have suffered from the epidemic. in order to lower their operating costs and help them gradually resume construction. JD Supermarket also works together with JDBJ to help radio stores in Shanghai to resume online operations and provide its delivery manpower in a timely manner by leveraging data-solving solutions. We hope to join hands with all of our partners to tackle these challenges and difficulties. and together contribute to stabilizing people's livelihoods and the economy.
spk07: In the face of challenges, Jingdong continues to start from scratch, actively seeking strategies to break through. First of all, we made active adjustments around the user strategy. While the user size is steadily expanding, we are more concerned about the improvement of user quality. In the first quarter of 2022, Jingdong's annual active user size reached 5.8 billion. And we think more importantly, users' recognition and trust in Jingdong are clearly In addition, these two indicators have reached and are close to a historical high. Our user growth quality is constantly improving. In the past few years, the high growth of users, as well as the development of the Chinese Internet industry, is the result that we value and expect more. With the improvement of our economic operation capability, the construction of multi-stage ecosystems across the entire channel,
spk06: In times of challenges, JD always looks to harness our advantages and find solutions that move the needle. Firstly, we have made proactive adjustments to our user strategy. With a steady expansion of our user scale, we have been increasingly focused on improving user quality. In Q1, our annual active history reached 580 million, and more importantly, user purchasing frequency and approval so accelerated growth, both of which were at or near record highs. This nearly reflects the increasing recognition and trust that users are placing in JD. The improving user quality reflects our evolving focus. We have experienced high user growth for the past few years. and China's Internet industry is entering a more mature development stage. Going forward, as we optimize and expand our omni-channel ecosystem, and we continue to understand and meet the diverse needs of our users, creating long-term user value.
spk07: We are also prepared for the challenges faced by the PR and industry, and have taken active action to optimize and adjust the investment rhythm for innovative business. In the first quarter, on the surprise business, We will further carry out regional strategic focus, focusing our resources on the regional market, which continues to improve in terms of scale and efficiency, and at the same time is more compatible with core retail businesses. In the focus market, Jingxi continues to surround user experience, channels, and local supply chain ability construction, digital transport, and other aspects. The effect of strategy adjustment is gradually being manifested. In the epidemic prevention and control, Jingxi's supply chain ability and business model have also been verified. Since the end of April, Beijing, which has been affected by the epidemic, We are also proactively optimizing and adjusting the investment pace in our new businesses based on our analysis of the macro and industrial landscape.
spk06: In Q1, we further shifted focus to the regions where we saw improving scale and efficiency, as well as better synergies with our core retail business. In such regions, Kinsey's efforts to improve user experience, sales channels, local supply chain, as well as digital operations have began to bear fruit. We are proud that Kinsey's supply chain capabilities and business model have proven themselves valuable in the fight against the epidemic. For example, since Beijing's COVID resurgence starting at the end of April, our community group purchase business has seen average daily GMV and new users nearly double, with better operating efficiency and VUE. In the future, we will continue to optimize overall operating efficiency and drive a sustainable high-quality flow with healthy cash flow and profitability.
spk07: In the face of challenges, we also see some opportunities and positive trends. First of all, the contribution made by Jingdong in the prevention and control of the epidemic takes the initiative to take on corporate and social responsibility, allowing us to use action to build Jingdong's concept of not giving up every love. It also greatly improves the trust and brand beauty of our consumers and partners. This has a historical meaning to our long-term development. Second, we are We face the COVID-19 pandemic, which has made it difficult for the government and the organization to monitor the situation. We have further strengthened the situation. Third, in an uncertain and heavy environment, Jindong continues to adhere to strategic定力 and long-term policy, and continues to build the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform of the government and the central platform Compared to the impact of external factors to achieve the certainty of business, and thus in the special period of the impact of the epidemic, Jindong received greater recognition from partners, especially in the preparation process of this year's Jindong 618 Dacu. We see that the participation of business registration and Dacu is significantly higher than the previous year, which makes us very encouraged. Fourth, the complex and severe epidemic and economic situation make many companies begin to re-examine their own sales and public chain contract system. More and more companies have realized the important value of integrated supply chain logistics services. This has also further promoted the income of external clients in the capital logistics sector to continue to grow rapidly in the first quarter. The external revenue contribution is close to 60% of the total revenue and has reached a historical high, prompting the overall revenue structure of logistics to continue to optimize, and continue to improve through the improvement of precision operation capabilities and customer structure. The profit and loss situation of capital logistics is also improving. The current challenges also provided JD with outside opportunities. Firstly, our efforts and commitment to social responsibility during COVID
spk06: enabled us to fulfill society's trust and resulted in stronger reputation and appreciation among our users and business partners. This is highly significant for our long-term development. Secondly, JD's supply chain, as well as our organizing and coordinating capabilities, have withstood the pressure of the epidemic and become stronger. Thirdly, despite increasing uncertainties, we have persistently exercised our long-term strategies and built up core competencies, such as our supply chain middle platform, marketplace ecosystem, and omni-channel and infrastructure capabilities. In pursuit of more disciplined invest-pay and higher efficiency, GIDI also helps business partners to generate higher efficiency and more cost-efficiency. without external disruption. As such, we have gained full recognition from our business partners during the epidemic. We are encouraged to see that merchants' participation and engagement has reached a higher level than previous years in the preparation for the upcoming 618 grant promotion. Fourth, the complex epidemic situation and macroeconomy have caused companies to re-examine their sales and supply chain and fulfillment systems. Many of them have realized the irreplaceable value of integrated supply chain logistics services. This helped to drive the growth of JDL logistics revenue from external customers, which accounted for a record high of near percent of total revenue in Q1, further optimizing JDL's revenue structure. Moreover, in this quarter, JDL's profitability improves year-on-year thanks to its optimized operation and better customer structure. JDL also makes steady progress in building up its logistic capacity. By the end of Q1, it operated approximately 1,400 warehouses with a total gross floor area of over 25 nm2 under management. All of these advantages constitute a solid foundation for JDL to further expand in its industry leading position and market share over the long term?
spk07: Cheng Ran, the first half of 2022 is full of challenges and uncertainties for many industries and many companies. I believe that at this time, companies should have a long-term thinking frame, stick to long-term strategic principles and combine short-term tactical dynamic adjustments. The 19 years since the establishment of JDL have been full of challenges, but every challenge have brought Jingdong new growth and development opportunities. Today, Jingdong is very clear about the core business logic of supply chain. The core competitiveness is significantly differentiated. The stubbornness of the business model is constantly being proven and strengthened. As a new and solid enterprise that has always insisted on serving the physical and economic. Today's Jingdong is more solid than ever before. We are constantly accumulating energy for the long-term development of the future. Looking forward to the future, we are full of confidence and determination. We believe that Jingdong will achieve a healthier and higher-quality development in the long term.
spk06: It is evident that the first half of 2022 has brought many challenges and uncertainties. At this time, I believe it is important for companies to have a long-term mindset, remain a revering strategic priority, while maintaining flexibility to adapt to short-term dynamics. JD has experienced many challenges over the past 19 years, but has taken each one an opportunity for the company's further development. Today, our business logic that puts the supply chain at the core is very clear. Our core competency is highly differentiated, and the resilience of our business model has been proven many times and continues to evolve. As a new type of enterprise that is based on and always serves the real economy, JD today is an ever more solid ground. Looking ahead, we will continue to build upon our strength. We remain confident and determined to achieve healthy, high-quality, long-term development. Thank you all for your support and trust. This concludes my remarks. Now I'd like to give the floor to Sandy.
spk05: Thank you, Lei. Hello, everyone. The latest Omicron outbreak across several regions in China in the past several months has been challenging for everyone. So I would like to echo what they said and add my thanks to our colleagues, especially the frontline workers, for their heroic efforts in serving our customers and providing with essential supplies during this critical time. In the first quarter, net revenues reached 240 billion RMB, representing solid 18% year-on-year growth against the high base from last year. In face of various uncertainties, we have been increasingly focusing on serving our users well, and this by increasing user lifetime value. Our annual active user base reached a total of 580.5 million, while average GMV per user in the last 12 months continued to increase. We are also glad to see improvements in other user quality metrics, for example, average orders per user recorded a healthy increase for both new and repeat customers. Our quarterly average DAU has been trending up and growing over 20% year-on-year, reflecting deepening user engagement. Not only did we see a spike in DAU growth during the Spring Festival Gala, effectively promoting JD plans nationwide, we were also inspired to live up to our users' interest chart when we saw a notable increase in DAU during COVID's resurgence in March and April. As our revenue base continued to diversify, we also saw the varying impact of COVID on different segments in Q1. Our net product revenues, which mainly consist of our 1P retail business, grew at a solid 17% year-on-year, demonstrating remarkable resilience. underpinned by our proprietary supply chain infrastructure. Net service revenues continue to grow faster at 26% year-on-year, further diversifying our revenue base. While marketplace and marketing revenues grew at 25% year-on-year, our advertising revenues still grew at nearly 30% year-on-year in line with the improving ROI of our advertising services. Our marketplace ecosystem continued to optimize as JD Retail continued to grow third-party merchant base by over 20% year-on-year in Q1. This showed that the support and value creation offered by JD are resonating with more and more third-party merchants who are struggling in a time of uncertainties. Logistics and other services revenues grew by 28% year-on-year in Q1, as JDL continued to gain traction from external customers with its inter-interrupted supply chain services during the Chinese New Year. I will discuss more about it later. Now let's turn to our segment performance. JD Retail continued to deliver a resilient top-line growth amid the latest COVID development. City retail's revenue reached 218 billion RMB in Q1, growing at 17% year-on-year in the quarter. The COVID impact began to appear across the performance of our categories. General merchandise revenues grew 21% year-on-year in Q1, outperforming the electronics and home appliance category growth of 14% year-on-year. Since the latest outbreak, customers notably shifted their purchases from non-essential products to essential items. Our supermarket category saw stronger demand with its order volume outgrowing JD Retail's in Q1 and in the first half of Q2, and attracted the most number of first-time buyers among all categories. Although our supply chain was heavily disrupted in certain regions, JD Retail and JD Logistics quickly worked together to source and dispatch essential products by utilizing our nationwide warehouse and delivery networks. Once again, this demonstrated our customer-first operating philosophy and our unique business model that enables us to quickly respond to unexpected changes. and mobilize our proprietary supply chain capabilities in upholding customer service. We even went beyond our traditional B2C simple warehouse model to address pricing customer needs. Growth of our omnichannel supermarket, including 7Fresh, accelerated in Q1 as they provided our customers with timely omnichannel fulfillment for grocery and household staples. in this critical time window. Moving on to JD Retail's profitability. Operating margin was 3.6% this quarter, compared with 4% a year ago, primarily due to the marketing expenses in relation to the Spring Festival Gala sponsorship, and to a lesser extent, the softer fulfilled gross margin during the outbreak. That said, we expect to see additional COVID-related costs and expenses, particularly in fulfillment, as well as margin impact caused by product mix shift due to the uneven performance of our different product categories in the short term. JD Logistics or JDL maintained a healthy top-line growth with an improved revenue mix and continued year-on-year margin improvement. Its Q1 revenues grew 22% year-on-year to 27 billion RMB. Revenues from external customers maintained growth momentum, driven by both the number and approval of external customers, and once again achieved a record high revenue contribution of 58%. GDL acted quickly and spared no effort to ensure continued fulfillment of essential products to customers. and support our business partners in the COVID-affected areas. As a result, it incurred additional costs and expenses due to the operational difficulties and disruptions, particularly as it mobilized workforce and resources across different regions where some of our warehouses and delivery stations were under lockdown restrictions in certain affected areas. However, we still found some silver linings the customer awareness of the unique advantages of JDL's integrated supply chain logistics services has meaningfully increased, boding well for the future customer conversion and total addressable market expansion. And thanks to the growth of external business and continuous improvement in operating efficiency driven by technology, JDL was able to absorb the additional costs to a certain extent and continued to improve its margin in Q1. Its non-GAAP operating loss narrowed by more than 55% from a year ago. JDL has once again improved the design and efficiency of its nationwide supply chain network in this challenging market situation. Since we received all required regulatory approvals and completed the additional investment in Dada Group by the end of February, we consolidated the financial results of Dada in our segment reporting starting from March this year. During the consolidation period, Dada reported revenues of 688 million RMB and an operating loss of 191 million RMB. Dada is an indispensable part of our omni-channel strategy. The on-demand retail brand that we launched together on JD's main app has been expanding at a triple-digit growth rate year-on-year in Q1 and now made its service available to users in over 400 cities. We are excited to further expand our supply chain service network in the fast-growing on-demand consumption with Dada. Finally, turning to our new business segment. where we took proactive optimization measures to improve operating efficiency, particularly in D&C business. We further focused our resources in a fewer number of selected markets to strengthen local supply chain capabilities and improve the UE model. These measures resulted in the moderation of revenue growth to 12% year-on-year but a meaningful reduction in operating loss of nearly 1 billion RMB sequentially in Q1. Our JD property business remained a profitable business in a hyper-gold stage. It has successfully acquired a controlling stake in China Logistics Property Holdings, or CNLP, further enhancing its logistics infrastructure. JDP has also entered into definitive agreements with approximately $800 million non-redeemable Series B financing in the quarter. So far, you can tell that JD's unique supply chain-based business model not only ensured our capabilities in navigating different economic cycles, it also allowed us to proactively and quickly adjust our business strategies for better sustainability. Moving to the consolidated bottom line, total expense ratios in Q1 declined by 63 bps year on year. As a result, Q1 non-GAAP land income attributable to ordinary shareholders was 4 billion RMB with non-GAAP land margin of 1.7%. Our free cash flow for the trailing customer this quarter was healthy at 27.2 billion RMB. By the end of Q1, Cash, cash income, restricted cash, and short-term investments grew to 186 billion RMB, thanks to the stable cash flow contributed by our core businesses in the past few years. Earlier this month, we also announced a special cash dividend of $0.63 per ordinary share, or $1.26 per ADS. which reflects our confidence in JD's long-term growth trajectory and strong balance sheet. While we continue to explore the high-tech and exciting investment opportunities, we constantly take a holistic view and consider different measures as appropriate to give back to our shareholders in the long term. Looking ahead, the Omicron situation remains very fluid, and add a lot of variables to our business. The magnitude and duration of the COVID impact will present many uncertainties to the overall consumer behavior, supply chain, and our fulfillment infrastructure. But one thing for certain, after 19 years of efforts in building our core supply chain competencies and differentiated business model, We are uniquely positioned to swiftly adjust and respond to any dynamic situation and able to be among the first to help our customers, partners, and communities during this chill time. When the COVID disruption subsides, we are confident that JD will emerge stronger with expanded consumer man-share, more trusted partnerships, and deeper ties with our communities and users. All of these will reinforce our Me Too long-term growth prospects. This concludes my prepared remarks, and we can now move to the Q&A.
spk00: 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 queue again after your first question has been addressed. Our first question comes from Ronald Kuhn with Goldman Sachs. Your line is open.
spk03: Thank you. Congratulations on the very stable first quarter performance. This time I want to ask, if we look at the first quarter of two years ago, at that time, our supply chain motivated us to grow better than the industry. Because we recently saw the situation of the entire industry in April of the Bureau of Statistics is relatively difficult. So I want to ask the management level about the impact of this epidemic on our Jindong retail. Thank you, management. My question would be on when we compare with two years ago that we gained a lot of share and grew much faster than industry during the first quarter in the COVID outbreak. we've seen some of the industry numbers for April were relatively weak. So I want to know how are we doing in retail business compared with the industry, some of the differences that we see versus two years ago, and our targets, and how we see the second quarter and second half growth as a result. Thank you.
spk07: I'm Xu Liu. I want to answer this question.
spk06: This is Xu Lei. Let me answer your question.
spk07: From the beginning of March, the epidemic in Shanghai and Jilin, including the epidemic in Beijing, had a big impact on China's retail and investment.
spk06: And we have this round of the COVID outbreak that affected Shanghai and other regions also posed a huge challenge to China's retail industry as well as JD.com.
spk07: Let me share with you some observations of the difference between the outbreak now and two years ago.
spk06: The first one is that the transmission of Omicron is relatively strong, and the transmission speed is relatively fast.
spk07: The R0 value has reached 9.5, which should be twice as much as the Delta variant. The curfew is only 2.83 days, so during the whole transmission process, there is a certain proportion of infected people without symptoms. Therefore, its transmission is not only fast but also difficult to detect. Under the overall control of the government, the strategy of epidemic prevention and control is not in place. We found that there are a lot of cities and consumers affected by the epidemic. The supply chain also has a very big impact on 2020 and 2021. For the Omicron virus, it's highly contagious and spreads rapidly. Its R0 value is 9.5, twice that of that Delta.
spk06: while its generation time is only 2.83 days. Also, a certain proportion of the infected people have no symptoms, and making it more difficult to track and detect. So as the overall virus perception and control policies remain unchanged, there are more cities and consumers affected by the epidemic, and the supply chain is under much bigger impact than that in 2021. In the past two years, the impact of COVID actually brought some positive effects to the internet and e-commerce sector, as there were only limited number of regions affected for a limited time. During that time period, some offline businesses have been shifted online at an accelerated pace. But this time around, both the online and offline enterprises are heavily affected.
spk07: The second is that the lockdown of the core area this year has caused difficulties in the entire logistics contract. The entry and exit of goods has been greatly affected. The overall contract period has become longer. Because of this, we found that the cancel rate of orders in April has increased significantly. The situation in May has improved, but it is still higher than last year.
spk06: The lockdowns of our warehouses and delivery stations in certain key regions have led to fulfillment challenges, as both inbound and outbound shipping of merchandises from warehouses are affected. Fulfillment requires much longer time. This has resulted from order cancellation rate increase in April, and the situation is getting better in May, but the cancellation rate remains a high level year on year.
spk07: The third one is that the four major first-tier cities in Beijing, Shanghai, Guangzhou and Shenzhen should have been affected to a different extent since March. The time between Guangzhou and Shenzhen is relatively short, but the time between Shanghai and Beijing is relatively long. And the sales ratio of the four cities in the Middle East is also higher than that of the rest of the country.
spk06: So this year, for China's four big cities, the first-tier cities ranging Shanghai, Guangzhou, and Shenzhen, have all been affected, while Guangzhou and Shenzhen were only affected for a short period of time, and Beijing and Shanghai have been affected for a longer period of time. And the sales contribution of the four cities account for a higher proportion of JD than the city's contribution in total retail sales in China.
spk07: Also, at the beginning of this year, when we communicated with most of the major brands, we found that their budget for this year's economic situation has been reduced significantly. Many brands focus on saving profits as the main business theme this year, so from a commercial point of view, they do not support this kind of rapid growth.
spk06: So a majority of brands and merchants lowered budgets at the beginning of the year, considering this year's economic situation. They focused more on profitability. Therefore, the business environment also does not support a high growth from the supply perspective.
spk07: In terms of product types, we see that in addition to the large commercial and health products, there are relatively high increases.
spk06: So in terms of the categories, besides the supermarket and health-related categories, which continue to enjoy some high growth, for the markets of electronics and home appliances and apparel categories, the market has been changing dramatically.
spk07: So let me introduce a few representative categories. The first one is the IT category. In the past two years, the global supply chain has been relatively tense. So take the IT and electronic categories, for example. In the past two years, due to the global supply shortage and JD's strong supply chain capabilities, we've performed relatively well.
spk06: And this year, this category is faced with overall insufficient price and the price level is going down.
spk07: And for the telecommunications or the mobile phone category, due to the price rise and the cheap shortage,
spk06: consumers are willing to replace their devices. The cycle has been expanded.
spk07: And for the apparel category, due to the epidemic and the sluggish consumption, there is high level of inventory backlog of spring collection.
spk06: And as a result, many factories are considering skipping the production plan for the summer collection.
spk07: Sixth, due to the epidemic, consumers' income and confidence are insufficient. The overall consumption is low. You can see the statistics from the Bureau of Statistics in April. What we observed is that the consumption of high-end items is not strong. After that, in the case of positive growth of traffic and users, the price of items in April and May are all declining.
spk06: The epidemic has affected consumers' income and confidence. The overall consumption is depressed, as you can see from the April statistics. And this especially affected the sales of some large ticket size items. And even user stress has recorded in April. We have seen the ticket size is dropping year on year in April and May.
spk07: I have introduced the overall situation of this year and the previous two years. Next, I will introduce the current situation of our Yingdui. In addition to the work we have done on the cost reduction effect, there are two points that I can share with you. The first point is that we are continuously communicating with local governments, and Jingdong has also become the list of local government protection companies. Any response to the above-mentioned situation?
spk06: Here are two aspects we have been doing. First, we have been conducting active communications with the local government and getting on a wide list of enterprises for essential supply of more regions. and also to ensure the normal operations of our warehouses and the fulfillment facilities. And the situation is getting improved now.
spk07: The second is about the preparation of 618. I know that many investors are also concerned about 618 today. Indeed, because of the epidemic and other reasons, the sales pressure of brands and merchants is very high. So we see that this year, the brands and merchants participating in JD618 will be more active.
spk06: And on the preparation of the 618 grant promotion, we have seen that the majority of brands and merchants are under pressure this year. Therefore, they have been more proactive in participating in JD's 618 grant promotion than in previous years. And we hope that these events we can support them to boost their sales and the QRQ2 performance provided the COVID situation is getting better. Finally, I just want to share a little bit more of the relationship between the blockchain and the epidemic.
spk07: First of all, in terms of the overall situation of the pandemic and the impact of the pandemic, we can see the importance of the modern supply chain.
spk06: And first, given the current macro environment coupled with the impact of the pandemic, it has led the governments and industries have a very high recognition on the importance of the modernized supply chain, and this has been a very positive and clear signal.
spk07: Secondly, the supply chain capability of Jingdong is not only what we usually see, such as our warehouse, delivery, booking, network, etc. In fact, there is also the computing capability and know-how of our industry that we have presented for 19 years, and even the coordination of supply chains with some major brand companies. And second, when JD talks about our supply chain capabilities, it does not only refer to those tangible things people know about, about our logistics, logistics warehouses, vehicles,
spk06: It is also our algorithm and the industry know-how that we have accumulated over the years, as well as our synergy capabilities with some key brands. And all of this is a combination of the tools, the expertise, the know-how, and our collaboration with our brands. And all of these cannot be immediately achieved through some excessive subsidies or cash procurement.
spk07: The last point is that And thirdly, the key points for the supply chain is stability and certainty.
spk06: Under the extreme circumstances of the COVID situation, Didi will continue to leverage our professional expertise and our infrastructure capabilities to reach some innovative and new solutions in this difficult situation. And so far, we have gained recognitions among our partners and users and delivered some satisfying performance so far. Thank you.
spk07: Thank you.
spk06: Thank you, Ms.
spk03: Lidong.
spk00: Our next question comes from Thomas Chong with Jeffrey. Your line is open.
spk02: Will there be any changes in spending? And will there be any changes in our KPI this year? The second question I would like to ask is that the current pandemic is still uncertain and the economy is not very bright. Will we make more adjustments to our new users and our future new business? Thanks, management, for taking my questions. My first question is relating to the upcoming June 18th marketing campaign. Can management comment about how we should think about the logistics situation, the consumer sentiment, and how we doing it differently compared to previous years and our API? And my second question is regarding to our spending, in particular on user acquisitions as well as the investment in the new business. Would we adjust our investment strategies given the dynamic situation right now? And finally, on Omnichannel, can management comment about our long-term strategies as well as the revenue contribution that we should expect? Thank you.
spk07: Let me answer this question. Regarding 618, up to now, we have seen that in addition to the Shanghai area, the rest of the country's quarantine situation is basically normal. Although there are some new cases due to the epidemic every day, it does not have a big impact on the overall situation. In the Shanghai area, due to the curfew a while ago, we still have some orders that have not been quarantined. And just a more few words from Ashley on the 618.
spk06: We have seen so far that except Shanghai and overall in China, the fulfillment is coming back to a normal operation level. So every day there's some sporadic situations due to the COVID situations, but overall it maintained a normal operation. And in Shanghai, there are still a few orders continue to be fulfilled. But overall, for the good preparation, it's on the right track.
spk07: And for the participating and engagement,
spk06: of brands and merchants to this year's grant promotion they're very active and this is outside our expectations and everything is going on the right track uh And in terms of the KPI, I think you are thinking of the sales target, because we are still facing uncertainties on the COVID situation and the confunction weatherness, so we don't have a very clear number to share. However, we continue to focus on improving users' experience and our fulfillment efficiency is the most important thing. we will safeguard this shopping festival.
spk07: And so for our new business development, we will focus on the priorities, our strategies, and focus on efficiency and sustainable development. In fact, since the end of last year, we have found that the growth of the entire user is indeed very large. And we found that we should pay more attention to the quality of the new users and the detailed operation of the old users. This is more important to us. So in the first quarter, you can see that some of our user quality indicators are constantly improving.
spk06: And for the users' growth, there are certain pressures, but we will continue to focus on the operations of the existing users and also the quality growth of the new users. And we have seen a positive trend on both sides.
spk07: Regarding the new business, we have made adjustments in the first quarter. We have shut down some short-term commercialization, which is not good for commercialization.
spk06: And some adjustments and optimization of some new businesses. We have done a series of adjustments on those business that are unable to deliver results after a certain period of time of investment.
spk07: So in the coming
spk06: In the coming period of time, we'll continue to advertise on our core businesses, and some more optimization and adjustment work will be done.
spk07: As for the whole channel, the whole channel is a long-term strategy of Jingdong. It developed very quickly last year. This year's Q1 business size has also increased significantly, higher than the overall overall level of the group. Then the epidemic will indeed have some impact, but we have made some effective control of the resource investment of Quanqu Dao. The Quanqu Dao business itself includes self-employed and cooperative business. So when it comes to cooperative business, we have solved the difficulties of current enterprises in pouring electricity. It also enriches our supply chain and satisfies consumers. Then the self-built Quanqu Dao business should be affected by the epidemic, but the current volume is not large, so the impact itself is not very big.
spk06: And JD's omni-channel strategy, in the past year, it has delivered very fast growth. And in Q1, this business continued a higher than overall revenue growth rate. And this COVID situation will not affect our long-term strategies in this aspect, but we will make adjustments on the investment, even the microenvironment situation. And the omni-channel business is composed of two parts with both self-operated and our collaboration with external partners. For this letter of business format, we not only help those offline business and the shop to solve the traffic, the user's traffic difficulties given the COVID situation. It also helped JD to enrich our supply chain and product variety to satisfy the needs of our customers. And given the impact of the COVID situation, some self-developed omni-channel were affected But overall, the volume is not big, and it has limited impact so far.
spk07: The overall volume is not big, and it has limited impact so far. The overall volume is not big, and it has limited impact so far. The overall volume is not big, and it has limited impact so far. The overall volume is not big, and it has limited impact so far.
spk06: And for our on-demand retail business as part of our omni-channel business, it achieved three-digit growth in Q1. And so far, our shop now, or the one-hour delivery service, has covered over 1,700 counties across the country and providing various product categories. And it has been connected with over 15,000 15,000 offline stores, and it has experienced a rapid growth during the COVID situation.
spk07: The small-scale shopping business is fully supported by Dada. We have used Dada's current city service station resources and timely delivery of network resources to accelerate the expansion of a variety of offline retail businesses throughout Jingdong. We are currently cooperating with Dada to help brands and offline retailers accelerate the digital transformation. The ShopNow program is supported by Dada's delivery infrastructure. We are using the existing networks and delivery systems of Dada to perform our on-demand deliveries.
spk06: And this has accelerated JD's offline business expansion. And currently, together with Dada, we are supporting the digital transformation of more and more brands and offline retailers. And together we explore the dividends of the omni-channel development. As the trends become more and more clear, JD is committed to bring faster and quicker services and user experience with more certainty to our consumers. Thank you.
spk05: This is Sandy. I'll add on a little bit on the revenue and GMV contribution for our omnichannel business. So in terms of GMV and revenue contribution, they are both at a level of around 10% of our retail business. That includes our O2O on-demand sales, our 7Fresh offline fresh product business, as well as our offline home appliance franchise store business.
spk00: Our last question comes from Kenneth Fong with CreditSuite. Your line is open.
spk01: 谢谢管理员接受我的提问, 也恭喜你们有非常强劲的业绩。 我有一个问题是关于成本端的。 我们看到第一季度高项的运营成本也控制得很好, 我们GDR的主业还有这个新的业务的利润也好于预期。 我们在不同业务线里面还有哪一些成本的控制的方式呢? Congratulations on another strong set of results, and thank you, management, for taking my question. Looking back, we did very well in cost, discipline, and control. Core, GDR, and new business are both with margin better than expected. How much more and what are the ways that we should expect for further cost reduction or optimization over the next two quarters? Thank you.
spk05: Thanks. This is Sandy. Let me take this question. So since May, March, we have been taking strict cost and control, cost and expense control measures to step up financial discipline in face of the challenging internal environment. We focus more on cash flow management. For new businesses that year to show a trend of UE turnaround, as Susan just mentioned, or operating efficiency improvement, we adjusted the investment pace and further focused on fewer selected regions. So as a result of all these measures, you know, despite of additional COVID-related costs and expenses, especially fulfillment, so we expect, you know, overall, our group level bottom line, we will try to manage that to be less impacted by the COVID situation compared to top line or GMV. So as I mentioned, the control measures just started in mid-March, so we will continue that in Q2, and we will manage our profitability and cash flow dynamically based on the overall macro environment.
spk00: We are now approaching the end of the conference call. I will now turn the call over to JD.com's Shawn Zhang for closing remarks.
spk04: Thank you. Thank you for joining us on the call. If you have further questions, please contact me. If you're interested in JD.com, and we look forward to talking to you again next quarter. Thank you very much.
spk00: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
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