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spk01: Thank you. Thank you.
spk04: Good evening and good day, everyone. Welcome to JD.com's second quarter and interim 2022 earnings conference call. Let me introduce the management team on the call today. CEO of JD.com, Mr. Lei Xu, will kick off with opening remarks. Our CFO, Ms. Sandy Xu, will discuss the financial highlights. After that, we'll open the call to questions from analysts. I would like to remind you that during this call, our comments and responses to your questions reflect management's view as of today only. and we'll include forward-looking statements. And please refer to our latest Safe Harbor statement in the earnings press release on our IR website, which applies to this call. We'll discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in our press release. Also, please note, unless otherwise stated, all figures mentioned in this call are in RMB. And now, I'd like to turn the call over to Mr. Xu, our CEO. Mr. Xu. Hello, investors.
spk02: Thank you for attending the second quarter of the 2022 Sino-Turkish Economic Forum. In the past two quarters, the pandemic has hit many places across the country. There have been many factors, such as the global economic and external environment, that have caused the retail industry to face a huge challenge. China's GDP has increased by 0.4 percent in the same way as China's, and the share price has dropped by 4.6 percent in the same way. the lowest increase in the past two years. Despite facing many difficulties, Jingdong not only helps users and partners to spend time together, but especially during the time of support for Shanghai, Beijing, and other local anti-epidemic protection in the country, Jingdong accumulated a total of 2 billion yuan, including investment and compensation for merchants. At the same time, it also continues to achieve a good increase in the overall profit margin, and the operating efficiency and return rate steadily improve, showing the resilience and momentum of passing through the economic cycle, China's economy has gone through a very long period of high-speed development, but economic development is bound to exist for a period of time, which will therefore bring institutional challenges to the development of the enterprise. The enterprise needs to have a long-term thinking frame to achieve the necessary based on long-term strategic structure and ability construction, so that it can develop steadily during the period of fluctuation, show greater value, and obtain longer-term opportunities for development. This is a fundamental difference in the business concept of pursuing short-term explosive growth.
spk07: Hello, everyone. This is Shu Lei. Thank you for joining Chase.com's 2022 second quarter earnings call. In the second quarter, a combination of factors has brought unprecedented challenges to the radio and consumer industry in China, such as the COVID resurgence across many regions and the complex macroeconomic and external environment. China's GDP grew 0.4% year-on-year, while total radio sales fell 4.6%. both hitting their lowest levels of the past two years. Despite all that, JD managed to help its users and partners to ride through the difficulties and continue to outpace China's overall retail industry while delivering steady improvements in operating efficiency and margins. This once again demonstrates JD's resilience and healthy momentum through difficult cycles. China's economy has experienced rapid development for a long time, but economic development is about to be cyclical, creating theoretical challenges for businesses. Companies need to have a long-term mindset and proactively build strategies and capabilities that will support growth for the long term. This will enable them to mitigate cyclical fluctuations with resilience, showcase greater value, and lay a stronger foundation for the long-term. This mindset is fundamentally different from that of pursuing explosive short-term growth.
spk02: Today, I would like to share with you the core concept of cost and efficiency around the user experience, to achieve long-term business model and core capabilities. In the second quarter, Jindong maintained the size of the active user. This is mainly due to the healthy growth of active users in the core retail business, with a total increase of more than 10 million, and a growth of double the percentage. Since Jindong's long-term experience, the urgent pursuit of user experience has allowed us to increase the overall user quality on the basis of the growth of the core user size and the overall user quality, including DAU, user shopping frequency, and up, etc. In the second quarter, our DAU ratio increased to 25%. In terms of users, we have the highest sales and annuality of eight users. In the first seven months of this year, the scale has increased by 5 million. The total has exceeded 30 million. At the same time, while the scale is rapidly increasing, the annual sales and annuality of eight users has exceeded the average of ordinary users. We are also happy to see that new users are more recognized and trusted by Jingdong. The up of new users is clearly improved. The shopping frequency has also reached the highest in three years. Now I'd like to share with you why JV remains confident in the future and what we are doing to make a challenging macro environment.
spk07: First, JD has always focused on user experience, cost optimization, and efficiency to build its long-term business model and core competencies. In Q2, our annual active user base remained strong, mainly driven by healthy user growth in our informed JD ratio business, which recorded a substantial net addition of over 10 million users and double the percentage growth on a year-on-year basis. On top of this, Our long-standing pursuit of superior user experience further propels user quality, as evidenced by the increases in DAU user shopping frequency and office. In particular, our DAU achieved a 25% year-on-year growth in Q2, looking at different user segments, JD Plus members, who are among our users with the highest confunction tolerance thickness, further expanded by 5 million in the first seven months, and passed the 30 million user milestone last month. While scaling up, Plus members also maintained high average admin spending, which was eight times that of non-Plus members like you two. We're also pleased to see that our new users have more appreciation and trust in JV with a notable increase in output and record high shopping frequency for the past three years, More females, Gen Z, and elder groups are becoming loyal users of JD, thanks to our efforts over the years to always push consumers at first and sharing everyone's love. This also sets a solid foundation for our users' growth and quality improvement in the second half of the year and the years to come.
spk02: JD continues to drive forward its long-term strategy based on three pillars, mainly consumer, merchandise, and shopping scenarios.
spk07: As such, we have made a vibrant effort in exploring low-tier markets, building core capabilities in the supply chain needle platform, expanding omnichannel or intercity business, and further strengthening our online marketplace ecosystem. The lower-tier market has also always been an important incremental part of our addressable market, and we have made a long-term commitment to it. In light of the evolving macro and industry environment as shared before, we have shifted our focus to the efficiency of other resource allocation in this area.
spk02: China, China, China. Moving to the supply chain leader platform, we believe that this is far more than a driver to improve our growth margin and cost structure.
spk07: It plays a key role in increasing operating efficiency in the retail industry, boosting breakthroughs and innovations for mature brands, and capitalizing rapid development for emerging brands. JD has integrated and synergized three networks, including a transaction network that covers round-the-clock omnichannel shopping scenarios, a warehousing and distribution network that serves nationwide and extends globally, and a service network that is enabled by intelligent technology. Seamless integration of all three networks overcomes the pain points of a single network. It not only ensures the reliability of JD's own supply chain, but also drives digital transformation and efficient improvement for the up- and downstream industry players, supporting the high-quality development of China's rail economy. In the future, high efficient and flexible supply chain capabilities will be a top priority for the sustainable development of China's retail and other industries. College resurgence and the complex environment has made this even clearer to an increasing number of companies. China has made significant progress in developing supply chain capabilities, but there is still room for improvement JD is well-positioned and determined to provide the industry best of class of my chain solutions.
spk02: The best practice of our supply chain capability is the healthy development of Jingdong物流. During the epidemic prevention and control period, Jingdong物流 has done its best to protect the people's livelihoods. It has become the first supply and control enterprise and has gained widespread recognition from the society. At the same time, Jingdong物流 also utilizes the integrated supply chain service capability to help more and more fast food, home appliances, clothing, 3C, cars, raw materials, and other industries to solve the problem of supply and demand. On this basis, Jindong logistics has not only achieved a steady income growth in the second quarter, but also the outside integrated supply and demand income and the number of customers continues to remain double. At the same time, the outside income ratio is close to 60%. In addition, Jindong logistics is also continuing to steadily promote logistics infrastructure layout within the global scope. By the end of the second quarter, the number of warehouses operated by Jindong logistics is more than 1,400. J.D.
spk07: Logistics' healthy development is a strong testament to our supply chain capabilities, which are empowering this industry. Amidst the COVID resurgence, J.D. Logistics once again spared no effort to protect the people's livelihoods. As one of the first batch of companies working with local cities to ensure supply of daily necessities, we have gained wild recognition throughout society. At the same time, KD Logistics leverages integrated supply chain logistics service capabilities to solve the supply chain disruptions faced by many external customers, such as in FMCG, home appliance, furniture, apparel, 3C, automobile, and fresh produce industries. As a result, GDL achieved a steady growth in total revenues in the quarter and maintained double-digit growth in external revenues and the number of external customers. During the quarter, GDL's external revenues accounted for nearly 60% of its total revenues. In addition, GDL continued to expand its logistic infrastructure globally. By the end of Q2, it operated over 1,400 warehouses and managed to total GFA at approximately 26 million square meters.
spk02: Although the retail industry has been hit by the pandemic, we, the retail industry, have achieved a three-digit rise. The change in the retail consumption industry has verified the strategic judgment of the Jingdong pre-arrangement of all channels. and we have our own difference in understanding and strategy for the retail business in Tongcheng. First, Jingdong has a natural shopping attribute. Developing a retail business in Tongcheng is a deep exploration of the consumer demand in a decentralized environment. Second, Jingdong has a stronger supply chain, B2C sales capacity, and the ability to use and manage all users. It can establish a more comprehensive and three-dimensional cooperation with partners to help its business adapt to market changes effectively, and meet the consumer's needs in multiple scenarios and in time. Our omni-channel business maintained healthy momentum in Q2. Although COVID brought significant challenges to the radio industry,
spk07: our intercity retail business continued to deliver triple-digit year-on-year growth. The evolution of the retail industry validates our early decision to expand into the omnichannel business, and we have formed differentiated perspectives and strategies around this business. First, JD's customers naturally associate us with shopping, and while developing our intercity retail business, we further explored that association. and customer needs in decentralized scenarios. Also, with strong capabilities in supply chain, B2C sales, and user management, JD is also to establish more comprehensive cooperation with partners to help them efficiently adapt to the market changes and meet consumers' instant needs in various scenarios, thus leading the radio industry's cost optimization and improvement in efficiency and user experience. We're also pleased to see that the intra-city retail industry is booming. JD will further leverage its existing core capacities to explore new business models, improve technical capabilities, and expand omni-channels with multiple business forms.
spk02: JD has been working hard to build a healthy and sustainable development ecosystem for businesses, and has already laid a certain foundation. In the second quarter, home, outdoor sports, and cosmetic products maintain a good growth pattern higher than the industry. We are expanding the business environment from small and medium-sized brands to various levels. Businesses are more affected by the epidemic and the pandemic environment. We hope to further cooperate with partners like Jingdong, which can bring certainty and business efficiency. In the second quarter, Jingdong's main station, ABP, has also made a full-scale reform and upgrade, restructuring traffic distribution mechanisms, and providing businesses with more sophisticated and data-based operating tools. JD has been striving to build a healthy and sustainable ecosystem for merchants and has already laid a solid foundation.
spk07: In Q2, a number of categories, including home appliances, sports and outdoor, and cosmetics continue to outperform the industry. We have been expanding our ecosystem for merchants, including both top brands and SMEs, as they are more willing to deepen cooperation with business partners like JD that can help them navigate the impacts from COVID and the macro conditions. In this quarter, we revamped and upgraded JD's main app, reconstructed our traffic allocation mechanism and provided more refined digital tools to build a better operating environment for merchants. During the 618 grant promotion, merchants achieved better growth and contributed a higher proportion of sales compared to a year ago. By building a more open and inclusive ecosystem, JD will continue to leverage its supply chain, logistics, technology, and service capabilities to join hands and grow together with more merchants.
spk02: Finally, I want to go back to what I mentioned at the beginning about the cycle and the long-term thinking. China's economic development must have a cycle, but it does not mean that the power of development will disappear. And the consumer industry has the strong ability to go through the economic cycle. In the face of the adjustment of the current macroeconomic and industry, the main focus is to train the internal workers, improve the efficiency of the economy, and ensure a healthy profit rate and cash flow. At the same time, we continue to firmly invest in long-term innovation and long-term strategic layout. In the future, there may be uncertain factors. But in the long term, we believe that China will become the largest consumer market in the world and the powerful vitality of this market. When we break through the periodic adjustment, we will definitely see the power of industry recovery. Jingdong is building a better opportunity for future development and a broader space for development. That's all for my sharing today. Next, I will hand over the microphone to CFO Sanbing from Jingdong.
spk07: To conclude, I'd like to reiterate our thoughts on the cyclical adjustment of economy and the long-term mindset that companies need to have. Economic development has cycles, but that doesn't mean it loses long-term momentum. And we believe that the retail industry has the power to weather different cycles. In face of the current macro and industrial adjustments, what's important for JD is to further strengthen our core capabilities, increase operating efficiency, and ensure healthy margins and cash flow, while at the same time continuing to invest in innovations and strategies that will position us well for the future. Looking ahead, there may still be uncertainties, but from a long-term perspective, we believe that China's consumer market has strong vitality and will become the world's largest in scale. When coming out of the cyclical adjustment, We expect to see strong recovery momentum. We will continue to build upon our strengths and capabilities to better capture opportunities and prospects for the long term. With that, I'd like to give the floor to Sandy. Vicky has been playing a vital role to serve customers with daily essentials. to help our business partners manage their business efficiently in time of uncertainty and to support many cities in their efforts to boost consumption. Our solid second quarter results continue to demonstrate our ability to serve our customers and business partners while managing our business effectively despite the challenging operating environment. In the second quarter, Our next revenues reached 268 billion RMB, representing a solid 5% year-on-year growth, despite the COVID-related disruptions, particularly in higher tier cities, and the tough times as we lacked the strong recovery from last year. Our GMB, including unpaid and canceled order, came out from the store in April and has seen a gradual improvement in growth. as COVID-related supply chain and logistics disruptions subsided starting from the end of May. Product revenues were up a solid 3% year-on-year, reflecting the outperformance of our online retail business, which helped to secure a stable supply of essential goods for our users. Our annual active user base remained resilient at 581 million, mainly driven by over 10 million net addition of active users in poor JD retail business from the previous quarter, partially offset by the adjustment in our Gen Z business, which I will elaborate later. Service revenue grew by 22% year-on-year to 41.6 billion R&D and exceeded 15% of total net revenue for the first time in history. Many merchants faced operational and logistics bottlenecks during the COVID and increasingly turned to JD's reliable supply chain infrastructure to weather the challenges. As a result, logistics and other services revenues moved by 38% year-on-year in Q2, which I will talk in details later. Our marketplace and marketing revenues grew 9% year-on-year and exceeded the 20 billion RMB mark in Q2. In particular, our advertising revenues reported a healthy double-digit percentage growth, which is faster than our commission revenue as we proactively sold out relief measures for SME merchants. In the quarter, we saw that many business partners and merchants especially those from the electronics and cosmetics category, allocated additional advertising dollars to boost recovery. Moreover, thanks to our improved ecosystem, mid-tier and new merchants on our platform gained more user and sales traction during the June 18th grant promotions, and subsequently contributed more sales than before. Now let's turn to our segment performance. City retail revenue grew 4% year-on-year and reached 242 billion RMB in Q2. I'd like to share three consumption trends that we observed in the second quarter. First, customers continued to shift purchases from discretionary goods to daily essential items, which has driven our general merchandise revenue up by 8% year-on-year in Q2. Notably, Our largest growth category, supermarket, continues to see its order volume growing over 25% year-on-year as it serves users daily needs anytime and anywhere. We are also encouraged to see revenues for healthcare, home goods, sports and outdoors, cosmetics and MRO recording double-digit growth and outpacing the sector. The trends reflected our expanding user man-share across many of our emerging categories. Electronics and home appliance categories reported a flattish revenue compared to the same quarter last year. Both computer and home appliance maintained solid growth in the quarter, despite the fulfillment bottlenecks in our commitment to prioritizing delivery of life essentials during COVID resurgence. mobile phones experienced a soft performance in the quarter amid a sluggish sector momentum. Meanwhile, we are also encouraged to see that since the logistics bottleneck eased in this week, our electronics category has experienced a nice rebound and has been outperforming the sector again, thanks to our strong consumer man-share and industry leading supply chain capability in this category. Finally, fulfilled growth margin of JD Retail was up by 50 basis points compared to the same quarter last year. Although the COVID resurgence added to the operational complexity as well as our fulfillment cost, the incremental cost was more than offset by an increase in gross profit. Most categories have benefited from increased user traffic as JD topped customers' minds for reliability. And as a result, we experienced savings on marketing and promotion. On top of this, we also enhanced our operating efficiency and focused on ROI of general marketing spending and other OPEX. As a result, GD Retail's operating margin reached 3.4% in Q2, an improvement of 80 basis points from a year ago. TD Logistics or DDL was an important pillar that underlies our ability to navigate the supply chain complexity. Its Q2 revenues grew 10% per year to 31 billion RMBs. With its proprietary logistics network, DDL was one of the few companies that could still work around the challenges and support fulfillment services that many customers and merchants critically needed in an uncertain time. Subsequently, revenues from external customers continue to outgrow internal revenues, further diversifying JBL's revenue stream. More impressively, JBL's ongoing operations and technology optimization and changing cost discipline more than offset the incremental fulfillment cost arising from resulting staff subsidies and protective measures during recent COVID outbreaks. Therefore, the if-not-gap operating margin improved 156 from a year ago and turned positive into two. CBL is well on track of improving its profitability even in this challenging operating environment. Data reported revenues of 2.3 billion R&D and an operating loss of 424 million R&D. During this year's June 18th promotion, Dada further enriched customers' shopping experience through extensive Albany Channel collaboration with 150,000 offline stores across China. As a result, the number of users who placed orders through ShopNow increased by over 400%. compared to the same period last year. Data plays an essential role in executing our important omni-channel or intra-city ratio initiative, which has been growing triple-digit percentage, as Shizhong just mentioned. Finally, due to the evolving macro conditions, we reviewed and rationalized our strategies in different parts of our new business segment. On one hand, we proactively implemented cost-control measures and strategic alignment in our new businesses in face of the challenging external environment, particularly the SINC business. So the operating loss was reduced both sequentially and on a year-on-year basis. On the other hand, we continually pursue long-term growth opportunities through technology, innovation, and new business models, where we may adjust our pace of investments from time to time based on market conditions. Tiki Property recently entered into agreement to set up its third logistics property core fund on top of the two core funds that were successfully launched before, which will bring the total transferred AUM to surpass 27 billion RMB upon the completion. Moving to the consolidated bottom line, in face of the additional cost arising from the macro uncertainties and fulfillment complexity, we effectively managed our capital allocation across businesses to focus more on our core business and further enhance operating efficiency by pulling different levers in cost control. As a result, due to non-GAAP net income attributable to ordinary shareholders worth 6.5 billion RMB with non-GAAP net margin of 2.4%, representing a year-on-year improvement of 60 basis points. On GAAP basis, net income attributable to ordinary shareholders also turned positive to 4.4 billion RMB with GAAP net margin of 1.6%, Our free cash flow for the trading 12 months this quarter sequentially improved to 27.7 billion RMB, mainly driven by robust operating cash flow as a result of healthy market improvements in business and proven cash management in addition to the seasonality factor. By the end of Q2, cash and cash equivalents restricted cash and short-term investments added up to a total of 207 billion RMB, up from 186 billion last quarter. During the quarter, we have returned close to 15 billion RMB in cash to our shareholders through cash dividends and share repurchase. which amounted to over 20% of all our accumulated retained earnings in the last three years. Before I close, I would like to emphasize that while the increased uncertainty in the near term may prove to be challenging for every industry player, including JD, it's also an opportunity for us to strengthen our market position as we are better positioned to grow our business effectively and manage our resources cautiously. We are confident to press ahead with resilient performance, primarily due to two drivers. First, thanks to our proprietary supply chain capability, we are able to quickly adapt to the changing environment and support customers and business partners who were craving for certainty. This enables us to further strengthen our consumer mindshare and continue to outperform the industry. Secondly, the relentless focus of operating efficiency and investing our resources effectively has always been the backdrop of our unique business model, and it is playing a bigger role in securing our long-term, high-quality growth going forward. With that, Let's open the call to the Q&A. Thank you.
spk01: 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. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your question, please press star then 2. If you are on a speakerphone, please pick up your handset to ask your question. Our first question will come from Ronald Keung with Goldman Sachs. You may now go ahead.
spk06: Thank you, Mr. Keung, Sandy, Sean, and Tim, I would like to ask if you can share some of your views on the growth of the second half of the year. In July and August, have we seen any recovery of consumer confidence? And last year, the second half of the year and the first half of the year, we actually performed very well, far higher than the increase in the industry. So I would like to hear about our user experience in terms of quality and travel this year, as well as the new strategies for live broadcasts. Thank you, management team. I would love to hear whether you could share how your expectations for second half growth. Have you seen any further consumer confidence improvement through July and August? And I can see that second half last year and during Singles Day, your performance was very strong, much, much outpaced the industry. So for this year's, do we have any strategic strategy on categories, delivery formats, and shopping formats, even live streaming, any of those strategies that we are planning to drive this second half growth? Thank you.
spk02: I'm Su Lai. Thank you.
spk07: And Sheila, let me take a question.
spk02: And we need to see that for this quarter, we're facing a lot of challenges. Actually, the most challenging quarter in things we're listing.
spk07: And I don't need to elaborate a lot on the reasons, and there are different impacts of the microeconomics and the cost insurgents, but leveraging on JD's supply chain capabilities and our sound user qualities were less effective compared with all industries.
spk02: In terms of products, we can see that the increase is relatively good. It is still a product of the private sector, such as consumer products, health products, and building products, as well as our all-channel business and commuter business. These business growth should be good. At the same time, because we have been doing online and offline layout, so that we get rid of the previous one, which is just online, this kind of growth trajectory. So relatively speaking, we have achieved a healthy and stable growth.
spk07: And on the different categories, they are reflecting different conditions. For those categories that are closely related to those essential products for the livelihood, such as consumer products, home appliances, and health-related categories, as well as J.D.' 's omni-channel business and or intra-city retail business, they're seeing a quick growth. And also, JD has been deploying our online and offline development. This also helps us to maintain a healthy and stable growth. 相对来说表现较弱的应该还是长尾的非刚需的品类,比如像服装这个需求比较低迷,包括酒水,酒类吧,酒类的这个场景因为疫情的受限原因。
spk02: And for some other categories that are long tail and are not essential, such as apparel, they're having weeks and months. Those are the alcohol categories because their shopping scenarios are limited.
spk07: However, on these categories, JD continues to expand our market share. Also worth mentioning is the mobile phone industry. As we see, they are facing multiple challenges, and we see the consumers, they are prolonging their phone changing cycles.
spk02: We can see the short-term outlook of the mobile phone industry. In the short term, some of the problems will still occur, and there will be great challenges and impacts. But as I said before, we still have a lot of confidence in the long-term trend of Chinese public relations and consumption. And we have been achieving this year's capacity, so it should be relatively strong to support us in this special situation. At the same time, we also feel obliged to provide help for the entire industry. So we are, and we are in operation, we are still more concerned about the growth of oil and gas. And for the short term, admittedly, we will continue to face some headwinds. But for the long term, as you just shared, we can continue to be confident to the long term China's macroeconomy and consumption trend.
spk07: And since day one of JD, we start to build our supply chain capabilities and we do have things and see the value of these capabilities. And we think we have also, we have the responsibility to use our supply chain capabilities to support the productive development of the whole industry. So in the coming time, we will continue to focus on quality growth and continue to enhance our market share among our consumers, expand our market share and be mindful to our margins and healthy cash flow.
spk02: Regarding the new strategy, I believe a lot of friends are concerned about it. But I want to tell everyone here that the strategy we have in mind should not have any adjustments or changes in the near future. From our point of view, there are a few things that we have been doing for a long time, whether it is before, now, or in the future. For example, the first is the experience of extremely paying attention to users. The second is the supply chain. And a lot of people are paying much attention to our strategies and our efforts back here. So the strategies, it won't change.
spk07: It will stay for a long time. And for the following aspects, it will continue. It will always continue to be our main focus. First is user experience. And second, our building of the supply chain capabilities. And third, there's a lot of space for us to continue to improve our cost and efficiency. And fourth is our investment in technology. And fifth, we continue to develop innovation business in a disciplined approach?
spk02: In terms of strategy, we haven't changed much in the past few years. First, we will continue to expand the market. We will have a lot of detailed strategies that we will develop in the future. Second, we will set up retail stores to meet the needs of the users. Third, we will continue to expand our industrial capacity. We believe that even though And from the tactical perspective, number one, we will continue to deepen our lower-tier market to expand our reach to consumers. And second, we will deploy intercity retail business
spk07: working on the shopping scenarios to deepen our understandings and insights on consumers' needs. And thirdly, we will continue to build our supply chain capabilities and fix it from a merchandise perspective. Even though we are in a leading position in terms of the supply chain, we see ourselves there is still a lot of room to improve. And fourth, we will continue to build an open platform ecosystem. And these four aspects will remain a long-term tactic Thank you.
spk02: Thank you.
spk06: Next question.
spk01: Our next question will come from Kenneth Fong with Credit Suisse. You may now go ahead.
spk00: Now, with the Internet companies working together, how should we think about the room for optimization of our energy efficiency? Especially, the efficiency under our operation is already very high. I will translate it myself. Congrats on the strong results and thanks for taking my question. We saw a very meaningful uplift in operating efficiency in the second quarter. As Internet companies continue to go through cost optimization, how should we think about the margin upside for our business? especially we are already very efficient. Thank you.
spk07: Thanks for the question. This is Sandy. Let me take this one. Overall, looking ahead, as mentioned before, given the increased micro uncertainties and fulfillment complexity due to COVID resurgence, we are more focused on the effectiveness of our capital allocation across different business units. and the improvement of operating efficiency this year to ensure our company, our group, is in healthy cash flow and balance sheet positions, well prepared for the next booming cycle. Specifically for J.D. Retail, we expect that the fulfilled growth margin of most core categories to continue to improve in Q3 year over year and quarter over quarter, especially the supermarket category. And the profitability improvement actually comes from a better marketing and operating efficiency and our expanding economies of scale. Retail fundamentally is a business of scale. And we believe that JD Retail's long-term marketing improvement trajectory will continue to be demonstrated. For JD Logistics, even though we still expect to incur some additional cost due to various types of COVID cuts here and there. So far, the maximum yield is not as significant as that in Q2. So JBL continues to demonstrate the value they could bring to their customers, i.e., the efficiency savings and the better service quality, which are reflected in JBL's improving gross margin. we will try to maintain the full year bottom line target for JDL. And then for new business, as you all know, we started to adjust our investment pace in new business since the end of Q1. Management team are more focused on cash flow and profitability. We expect that our investment scale in new business will be trying both year on year and quarter over quarter. So for the group as a whole, we have better control over and confidence in the bottom line performance. We expect the near-term profitability at the group level to improve meaningfully year over year. And we will continue to focus on quality growth and creating value for our shareholders. We'll continue to gain market share in our core businesses, maintaining our commitment to invest for the long term. Thank you.
spk02: Thank you. And just add a few words on the blockchain.
spk07: I think many people think that JD, the blockchain capability, is in a living position in China.
spk02: Even though we also think so, but we also see that there are plenty of space for us to improve on these aspects.
spk07: So we have been reiterating a lot our mission to improve our supply chain capabilities.
spk02: For example, in the past, we are thinking about the supply chain from our own perspective. But for now, we are more taking a more holistic approach and thinking about our partners, so both internal and external collaboration is more important in supply chain building. So from internally, we have seen the supply chain capabilities on different categories are different. So we're improving those and making a high standard for the overall capabilities on the supply chains across all categories. So before, we think more mainly focus on the online supply chain. With our development with the other offline business and collaboration with external partners, we will also see both online and offline externally. For example, in the past, our supply chain was more standardized. So the impact of this epidemic is that we are in a special situation. Although we are less affected by other companies, our performance will be relatively better. But we feel that we have to build up our supply chain ability in this special situation.
spk07: And in the past, we think we operate in the normal situation. But given the outbreak of the COVID in the special situation, even though we're less affected, we're thinking we're taking into consideration of how we can better perform in extreme or special situations to run our supply chain.
spk02: The last thing I would like to express is that although I know that many companies are now insisting on strengthening the learning and ability of the public sector,
spk07: I also want to say that even though I hear a lot of companies are talking a lot about improving their capabilities on supply chain these days, But I want to point out that JV has been developing our supply chain and building unswervingly in this field in about 20 years of our development. We have been investing in it and evolving our understanding of this field for a very long time. So I want to just say that we will unswervingly continue to develop supply chain according to our own understanding in our own direction and will not follow
spk01: Our next question will come from Thomas Chong with Jefferies. You may now go ahead.
spk03: Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Thank you, management, for taking my questions. Congratulations on a very strong set of results. I have a few questions. The first question is more about the macro headwinds as well as what happens to the property sector together with the hot red these days. How should we think about the outlook for the consumer electronics in the second half? And my second question is about our omnichannel strategies. Given our solid execution in omnichannels, may I ask about the revenue contribution and the key focus areas in coming years? And the third one is about our past membership. Given the solid progress that we have made, can we talk about our strategies as well as what we are seeing in terms of the consumer behavior for existing and new members, new users? Thank you.
spk02: Let me answer the first and second question. First is about home appliances. And in Q2, for the home appliances industry, they're facing multiple challenges, including a downward economy and a weak consumption demand.
spk07: and the disruptions on the supply chains and the logistics and the service to the door-to-door services.
spk02: From the perspective of the brand, from the perspective of the brand, for the growth of the business, most of the brand owners have a cautious attitude, so they also pay more attention to the certainty of sales. And then, the economic operation and health benefits, the entire construction industry, should be everyone's consensus. So in this case, JD's strategy should be more in line with the brand's demands. And from the brand perspective, they are taking a more cautious attitude and focus on the sales that can bring more certainty, refined operation, and healthy profitability.
spk07: This has been a consensus in this industry. And this also makes JD a more preferred partner to work with them in line with this pursuit. So I believe in this quarter or in the coming months, JD will continue to attach great importance to the collaboration with JD.
spk02: This should be related to the ability of home appliances and the understanding of the industry that we have gained over the years. It also includes the mentality of the consumers, the recognition of the contract, and many other factors. In addition, we should be very disciplined in controlling costs and fees.
spk07: For Q2, JD, the home appliances category, has outperformed the industry. and they have delivered quite outstanding margins on JD.com. I think this is a main contributor to JD's supply chain and also our deep understanding in this industry and our strong market among consumers and our partners' destinations. And this is also a testament of our disciplined approach to our cost control and efficiency improvement.
spk02: Since Q3, we have seen that the price has maintained a good trend. The growth rate will be further improved in June. But overall, because of the impact of the economic environment, the growth rate has slowed down. And in the second half of the year, the pandemic and the uncertainty will still exist. So we will still focus on cost, efficiency and experience. Another thing I would like to share is that our home appliances should be relatively fast in the whole channel. However, we have entered the low-end market of home appliances, including our five-star, multi-form offline appliances. It should be said that they are far higher than the growth of the entire industry. So this also changed the growth of our home appliances. A change in the growth itself, and it forced the whole industry to slow down.
spk07: And in Q3, we see these categories on the two tracks, and it's likely improving this June level. However, overall, the market is still at a low level, and we're still facing some uncertainties from the macro and external environments. So we're looking to focus on cost and efficiency and experiences. And also, I want to point out that Thanks to our development in omni-channels, home appliances category is developing fast on omni-channel sites. This is also thanks to our strategy to going to the lower tier cities and our development on those sort of stores such as our five-star appliances and other formats of physical stores. This also helps this category to outpace the overall market. and bring some new growth opportunities for the home appliances industry.
spk02: 关于用户的话呢,我想分两块, 一个是整个全站的用户来说, 应该大家也可以看到, Q2应该是非常有挑战的这个季度, 因为内外部多种原因吧, 影响了我们用户增长的一个快速增长的一个趋势。 这里面呢,可能有外部 的疫情, 消费力的原因,也有我们
spk07: And about the user growth, Q2 is also a very challenging quarter. And there are various reasons both outside and internally. And outside, we have the COVID and the shopping power lack. And internally, we also take initiative to adjust our user growth strategies.
spk02: I think because of the second stage of our business, And because of the restructuring of our business, in the short term, we might need some users. However, for the active users of our core regional business, we have seen a very high quality growth. And for the users, their shopping frequencies and ARP are all rising. And especially for the new users, their shopping frequency and ARP are rising significantly and reaching three years' time. In the future, from the perspective of the users of the whole debt, we will still divide into layers. The first one is the down market, which is definitely a major market for our user growth. But at the same time, like silver hair, we think it is also very important now, because of the change in the population structure and consumption power of Chinese people. So the silver hair market should also be a very important market.
spk07: And in terms of the different segments of consumers, the lower-tier market consumers is an important shopping group, and also we will attach great importance to the silver group, the elderly group of people, according to China's demographic changes and their shopping power changes.
spk02: The membership system should be completely different from the membership system in China and abroad. It may not be able to be directly targeted from any point of view. We have our own understanding. It is completely based on the characteristics of our own platform, the development and consumption of users, to build a special membership system. Lastly, I want to
spk07: share a little bit more of our JV Plus membership. This is a very unique system we created based on our own understanding and the features of our platform, the shopping behaviors of our users. It's not really comparable with other membership systems in China and outside China. Through years of development, we see this membership, the JV Plus membership is achieving good success and meeting our expectations. and bring about values, and in the future we'll continue to build on this membership system and create more innovative services and benefits for these memberships. Thank you. Thank you. This is Sandy. Let me take the omni-channel revenue contribution question. When we talk about omni-channel strategy internally, that actually includes quite a number of business streams, including our five-star home appliance, business, our home appliance franchise store business, our 7th Fresh, the fresh offline online channel business, as well as the Woojin Hensel initiative for our supermarket category, and the Intra-City Ratio, the Shop Now initiative. business, they contribute the 1p revenue, but some of them, like ShopNow, they contribute GMV and commission revenue. So in terms of the revenue contribution, it didn't change significantly this quarter. It was still around 10% from the online channel business as a whole. To be honest, the offline business was disrupted more seriously compared to online business during the quarter. except for our ShopNow business that is still in early hyper growth stage. Some of the other offline businesses, they did not perform as strong as our online B2C business.
spk02: Okay.
spk04: Okay, thank you. Thank you, Thomas. Can we take the next question, please?
spk01: Our next question will come from Eddie Wong with Morgan Stanley. Yiming, now go ahead.
spk05: Thank you, Mr. Xu Lei, Ms. Sandy, and Sean. This is my question. I would also like to congratulate the very strong performance. My question is this. I see that our cooperation with Dada in this quarter has continued to deepen. As Mr. Shih-Chung mentioned, we are at a low level in terms of retail sales. But at the tactical level, we seem to have raised the level of retail sales, including in terms of the tactical delivery. I would like to ask, are we doing such a move at this time to see that Venice may be Thank you, management, for taking my question. My question is about the on-demand retail. So we noticed that we have deepened the relationship between JD and Dada. And do we think JD will increase its investment in the on-demand retailing? And given the overall consumption is slowing down, do we think the on-demand retailing could potentially become the next growth driver for JD? Thank you.
spk02: I'll take your question. Actually, two years ago, when we described O2O, it happened. Actually, two years ago, when we described this was on-demand delivery, we're talking about O2O, online to offline. Of course, O2O is not equal to O2O.
spk07: O2O is just one of the forms of O2O. But at that time, JD was already doing this kind of work.
spk02: One of our initial starting points was to think of a more innovative way to serve users and provide supply of goods based on some of our product types.
spk07: And actually, O2O is now equal to unsummoned deliveries, only one form of that, and we have started on this business by then. And while we're doing this by then, it's more driven by our exploration to see how to better make fulfillment for those categories that will carry a high fulfillment fee.
spk02: Next, we will also find that users in the same-city retail sector And at the same time, we also realized that the use of demand for on-demand delivery is growing rapidly. 但是在这里面还会诞生出一些以前我们线上只是提供商品的供给,但是缺乏服务的供给。 And in the past, when we do online shopping, we are offering more physical products. But also, we have seen that people's demands
spk07: are extending to more services, especially for the past services or the aftermarket of the automobile industry. So we strive now to look at the underlying market to extend our service offering to consumers.
spk02: The other dimension is to see the brand. The brand, in fact, as e-commerce stands higher and higher, in terms of management of the entire sales channel, in terms of members,
spk07: And thirdly, from the perspective of our brand partners, while they're doing more e-commerce, they're facing some difficulties in managing their users and doing their marketing. So there are all new challenges when they do more e-commerce.
spk02: And based on all these perspectives, so this makes us think the on demand ratio is very important services we need to design and create.
spk07: or different parties in terms of when coming up with different products and different services and systems and product categories and all these are in the process of designing and preparation.
spk02: Even though we have seen the whole industry, a lot of players are interested in this field and in joining these competitions. Also, on JD's side, we have seen the orders are growing rapidly.
spk07: But I also need to make some rational judgments.
spk02: First of all, the consumer's mind is very important to us. So we still have a lot of work to do in this regard. Second, the entire supply chain, the construction of the new supply chain, I believe is a big challenge for all companies. Third, the stability and reliability of the service is something we are always more concerned about. Therefore, we are more concerned about the penetration of users in this business, the frequency, the quality of service and appointment, and so on. We hope to achieve rapid growth in this business through this. So in the short term, we actually think of GMV as a result, not a short-term goal. Of course, the current GMV increase should be very ideal.
spk07: And to develop this business, we need to continue to strengthen consumers' mindshare, and we also need to explore new types of supply chains, which is challenging for everybody now. And thirdly, we will also make sure the services, their reliability and stability for our amount of deliveries. So there's a lot of work to do, and we will continue to see the penetration of this business to the consumers and the qualities and the deliveries delivery performance of the new business. So for the short term, we will not look at the short-term GNV as the goal. However, we do see the GNV on JV in the on-demand ratio is growing in a good track.
spk02: Finally, I would like to mention one point. We believe that the profit pool under this business model is not wise to compete with brands and offline enterprises. It will not last long.
spk07: And also, I need to point out, for the profits, it's not the right thing for the e-commerce players now to grab the market in competition with the brand and with our offline merchants. We need a new system or new tactics that both the three parties all can benefit from the new business model.
spk05: Thank you. Thank you. Thank you. Thank you.
spk01: We are now approaching the end of the conference call. And I'll turn the call over to JD.com's Sean Zhang for closing remarks.
spk04: Thank you for joining us today on the call and for your questions. If you have further questions, please contact me and our team. We appreciate you interested to come and looking forward to talking with you again next quarter. Thank you very much.
spk01: Thank you for your participation in today's conference. This concludes the presentation. You may not disconnect. Good day.
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