JD.com, Inc.

Hello, and thank you for standing by for JD.com's fourth quarter and full year 2022 earnings conference call. At this time, all participants are in 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, Shawn Zhang, Director of Investor Relations. Please go ahead.

Thank you, Kate. Hello, everyone. Welcome to JD.com Q4 and full year 2022 results conference call. For today's call, CEO of JD.com, Mr. Xu Lei, will start with his opening remarks, and our CFO, Ms. Sandy Xu, will discuss the financial highlights. After that, we'll open the call to questions from analysts. Let me quickly cover the safe harbor. Please be reminded during this call, our comments and responses to your questions reflect management's view as of today only, I will include forward-looking statements. Please refer to our latest Steve Harper statement in the earnings press release, which applies to this call. We will discuss certain non-GAAP measures. Please also refer to the reconciliation of non-GAAP measures with comparable GAAP measures in the earnings press release. Also, please note all figures mentioned in this call are in RMB, unless otherwise stated. Now, let me turn the call over to our CEO, Mr. Xu. Xu Zong.

Hello, investors. Hello everyone, this is Xu Lei. Thank you for joining JD.com's 4th Quarter and 4th Year 2022 Earnings Call. It also helps industry commercial oil cooperation partners to improve business certainty. Jingdong's own business has also gained a high quality growth. In 2022, the annual net income will exceed RMB 10,000 billion. At the same time, based on our judgment of the economy and industry at the beginning of the year, Jingdong focuses on core business throughout the year to pay attention to the improvement of business health. This helps Jingdong to face the complex external environment. It can still continue to improve business quality and create the best history at the annual profit level. and once again we can see that the business model of Jingdong has a long-term profit and growth space. Today, we can feel that the external environment and industry are undergoing profound changes. The epidemic of the past three years has just ended, and the public economy is gradually recovering. The change in the population structure has had a huge impact on the retail industry. In the post-epidemic era, the consumer's way of life and consumption are changing. We observed that the structure of consumption and the power of consumption are two-dimensional. On the one hand, the number of products, quality and functions of the middle class and family users is constantly increasing. On the other hand, consumers are becoming more and more popular. The demand for consumption and the consumer scene are becoming more and more diverse. At the same time, the development and management logic of global Internet companies is also changing. Before the epidemic, the first demand of companies was to increase speed, including traffic, users and business size, and then profit and cash flow. Now, not only the management logic of the company itself has changed,

In the year 2022, JD State focused our goals and resolutes throughout in a challenging macro environment. We have been able to play an important role in the industry and China's economic development as we continued to fully leverage our unique business model and supply chain capabilities to provide consumers best-in-class services and help our up-and-downstream partners to enhance their operations. At the same time, we have achieved a high-quality growth of our own, with our full-year revenues in 2022 achieving the 1 trillion RMB milestone for the first time. This reflects the strategic decision we made in the beginning of the year to focus our energies and resources on JD's core business, in line with our analysis and understanding of the predominant industry and macro trends. This has enabled JD to continue to deliver high-quality operations with highest-ever profitability of the year, despite the external challenges. This once again demonstrates that our business model has a strong potential for profitable growth. Today, the industry and the overall external environment are experiencing profound changes. The coverage over the past three years, the recovering microeconomy, and demographic structure changes have all impacted the retail industry. In a post-COVID era, customers' lifestyles and preferences have notably changed. We have seen the polarized trends of consumption patterns and spending power. On the one hand, the number of middle class and household users who attach great importance to the quality and function of goods is expanding. On the other hand, consumers have become more meticulous in their spending. Therefore, we see increasing diversification of consumer demand and consumption scenarios. On top of that, Internet companies across the world that previously prioritized growth in traffic, users, and business scale over profitability and cash flow have reformed their approach. Not only that, there have been also changes in how to evaluate business health. we see a mix of opportunities and challenges amid these dynamic evolutions.

In the midst of a big change in the environment, Jingdong is the fastest and most determined in the industry. Here, I would like to summarize what kind of proactive adjustments Jingdong has made. First of all, around last year, we achieved a healthy and sustainable growth and began to carry out a series of business strategy adjustments. In the past, Jingdong's main business and creative business have had a lot of innovations and have also tolerated a lot of failures. This has caused a certain degree of energy consumption in management, Based on the assessment of the large environment, we have carried out comprehensive processing of the business, the short-term run-through mode, the incompatibility with the core business in the capital, or the operation of the business that is not able to achieve the scale effect. At the same time, we have also retained the investment in many healthy and people-oriented innovation businesses. I will share some such examples below. Second, on the core business, we have promoted the landing of the supply chain center, and we have strengthened the operating capacity and reduced costs by capturing the quality. Third, the logic of business We also insist on the standard of service JD has been able to be the first to adopt these challenges with agility and determination.

Here I would like to give a brief overview of the major adjustments we've been proactively made. First, we initiated the theories of strategic green alignment in 2022 with the aim of achieving healthy and sustainable growth. In the past, we gave more ample room and tolerance to new trials in both our core and new businesses, which diluted management's focus to a certain extent. Based on our analysis of the external environment, we have conducted a comprehensive review of our businesses and decided to pull back those new businesses that either could not develop more efficient business models, had limited synergies with our corn businesses, or could not achieve sufficient economies of scale. That said, we will continue to invest in the new businesses with healthy momentum and exciting future opportunities. I'll share some of the examples shortly. Second, we have been expanding our supply chain capabilities for our corn business. We continue to build up our operating capabilities across different categories and lower costs. Third, we have reallocated our resources and energies back to the very essence of retail, footing consumers' needs first. We have further built upon our commitment to better products, prices, and services. In terms of price, our goal is to be known by customers for providing the most consistent everyday low price. As such, we have gone through numerous bottom-up optimizations, including further streamlining our promotional programs and improving our traffic allocation mechanism. Through these efforts in our supply chain and marketplace ecosystem, we have seen a massive increase of product selection on our platform. offered by both our 1P and the 3P merchants. And user recognition of JD's price competitiveness is gradually being restored. At the same time, we remain highly committed to service quality and user satisfaction. For example, we recently launched a version of our app that caters to the needs of elderly people. I'd like to reiterate that all our adjustments are made out of our deliberate consideration of consumer needs and are executed with careful planning. Our ultimate goal is to satisfy our diversifying customer demand and provide a best-in-class experience across the board.

接下来我跟大家分享一下Q4其他的主要进展。 在消费不景气的环境中, 更能更加关注用户的获取效率和可持续性, 关注用户质量的提升。 在整体用户规模保持相对稳定的基础上, BAU保持同比双位处的增长。 and the structure and quality of the users are significantly improved. The number of paid users and paid members in the sales business is increasing rapidly, and the ratio continues to increase. This has further boosted the growth of the users' shopping frequency and up. The number of members in the JD Plus has reached 34 million. As the number of members increases rapidly, the number of members' annual consumption level remains eight times that of ordinary users, which continues to be high in activity and cost efficiency. In addition, after a period of time of management and polishing, the No. 1 member team in the medium- and high-end market

Now, let me review the major progress we made in Q4. As discussed in the past, we have been focusing on user quality and efficiency and sustainability of user acquisition, given the soft-to-function environment. In the quarter, on top of our largely stable user base, We also recorded double-digit DAU growth year-on-year. More encouragingly, we are seeing an upward trend for both user structure and quality. In particular, in our corn business JD Retail, repeat purchasers and the paying members both grew robustly in Q4 and accounted for higher proportions of our total users, which helped to drive up shopping frequency and upwards. JD Plus reached 34 million members in Q4, while PLUS members continue to spend eight times the average annual amount of non-PLUS members, reflecting their high shopping frequency and spending power. Moreover, our eHaoDian membership store, which is positioned to serve the middle to high-end market, has also crossed the one million paying members milestone. We are continuously improving our user service and operating capabilities so as to better serve our users in first and the second tier cities as well as lower tier markets.

As we improve our operating quality, we also continue to invest in new growth opportunities and new businesses, such as marketplace ecosystem,

omni-channel business, and supply chain logistics service. We see great potential in building up an open ecosystem that enables sustainable growth for our merchants. With such efforts, we can further lower merchants' operating costs and optimize our traffic distribution. We can also help merchants to grow with better efficiency and certainty, supported by our strengths in supply chain, logistics, technologies, and services. As a result, in Q4, JD Retail increased its merchant base by over 20% year-on-year for the eighth quarter in a row. Growth in categories like health, sports and outdoors, and home goods all outperformed the industry in this quarter.

全渠道同城零售业务在第四季度保持快速发展的势头, 继续推进与品牌商和线下商家的合作。 O2O业务同比增长29%, 而京东小石购业务增长更是超过80%。

J.D.' 's intra-city on-demand retail services, which is part of our omni-channel business, maintained a strong growth trajectory in this quarter. As its further stepped-up efforts, collaboration with brands and offline stores, GMB in our O2O business increased by 29% year-on-year. In particular, ShopNow, our one-hour delivery service grew 80% in this quarter. This not only generates incremental growth for brick-and-mortar stores, but also provides users with an on-demand shopping experience that combines online ordering, offline shipping, and delivery as fast as within an hour.

In the face of the challenges of PR and industry competition, Jingdong logistics has not only strengthened its industry status, but also through the location and ability of cross-border Debang, integrated supply and logistics services, aviation fast transport network, building快递 and fast transport network, to achieve various advantages of effective interoperability. We also have companies provide comprehensive supply and logistics solution plans to help companies reduce costs and reduce risks, and further improve the modern logistics system. Despite the impact of COVID, JD Logistics maintained a resilient revenue growth in Q4,

More notably, with the continuous improvement of its business, JDL has been profitable for three consecutive quarters and achieved its target of great evens on a four-year basis. Despite the macro challenges and dynamic competitive landscape, JDL has been able to further strengthen its position in the industry. JDL also continues to draw on the complementary strengths of and create synergies with Hua Yue Express and Durban, particularly in the areas of integrated supply chain services, air express network, bulky item delivery, and express network. This has enabled JDL to provide comprehensive supply chain solutions for both up and downstream customers to help them reduce cost and increase efficiency and withstand risk, while at the same time build a more advanced logistics system. JDL has also won wide recognition from customers for its distinguished service quality. In Q4, JDL continued to expand its logistic infrastructure. Notably, JD Airlines made steady progress in increasing cargo routes in Q4 since its official commenced operation last August, with three all-cargo aircraft in operation by the end of 2022. This allowed JD Airlines to better serve customers in many industries including confunctions and manufacturing and more.

In addition, our own brand, Jingdong Jingzao, continues to gain more than 60% of the high growth in 2022. Jingzao's original intention is to supplement the supply of products on the Jingdong platform, create new value for manufacturers and consumers, and achieve the gradual landing of Jingdong Shijie Gan Zhe Li Lun. After a few years of health development, one-fourth of the PLUS members have now become loyal users of Jingdong products, and the reach rate in Jingdong users is also increasing.

Last but not least, we continue to foster the growth of new businesses that resonate with our core businesses and capabilities. JD Industrials is one of the examples of a successful business that we have incubated internally and have gone on to deliver hyper-growth. With its focus on industrial manufacturing, an important composition of the real economy, JD Industrial successfully integrates resources across the industrial chain, such as procurement, production, warehousing and logistics, and inventory management, to achieve superior synergies and economies of scale. Another example is our private label brand Jin Zhao, which translates as made by JD. It delivered over 60% year-on-year growth in 2022, The initial purpose of this business is to complement the product categories offered on our platform and to create new value for our suppliers and customers. It also helps JD to further expand throughout the up and downstream of the supply chain. We are pleased to see that 25% of PLUS members have become loyal users of GeneVal products, and the percentage continues to increase. Both JD Industrials and Jingzao offer solid proof that we are on the right track as we adjust and focus on our core business and promising new businesses.

In the course of these changes, because of the new construction of the user, the adjustment of the product structure, the optimization of the internal process, the economy and consumption are still recovering. It may affect our business performance in the short term, but the long-term strategic direction of Jingdong has not changed. Our approach to these adjustments will help to improve our core operations. We are confident in our own business model and strategic direction. We are also very confident in the trend of China's economy and long-term consumption. I hope that today's presentation helps you get a better understanding of the significance of the strategic shift underway at JD.

At its core, our intention is to seize the opportunity presented by the profound changes in an external environment and return to our focus on lower cost, higher efficiency, and superior user experience. Admittedly, we may experience short-term impact on our performance as we further educate users, reinvigorate JD's reputation for providing the best prices, optimize our products and mix, and to streamline internal mechanism and procedures. All of these aspects require time and effort, especially as both the macroeconomy and consumption are still in recovery stage. That said, I want to stress that our long-term strategy has not changed. We believe that adjustments we are making will solidify our strength as we have faith in our own business model and the strategic direction. as well as the resilience and the long-term growth trajectory of China's economy and consumption trends. In the long term, JD is committed to playing an important role in people's daily lives and the country's economic development. We will work to ensure healthy and sustainable business development along the way to create long-term value for our users, business partners, and shareholders. With that, I'd like to pass the floor to our CFO, Sandy. Thank you, Xizong, and hello, everyone. Looking back at 2022, we successfully executed our strategy to achieve high-quality growth with stronger margins, in line with our long-term goals, despite the many external complexities and challenges. We delivered against and even exceeded our target, which was especially demonstrated by our strong profitability and cash flow at the year-end, Our $1 billion cash dividend program further demonstrates our confidence for the long term. With our resilient business model, we are confident to embrace the new opportunities and challenges in 2023 as Xu Zong just laid out. Now let me walk you through our financial results in Q4 and the full year of 2022. Our net revenues grew by 7% year-on-year to 295 billion R&D in Q4. On a full year basis, net revenues grew by 10% and surpassed the 1 trillion R&D milestone for the first time in our history. As we continue to focus on user quality and building deeper user engagement, we are encouraged to see that in Q4, JD Retail, LTM, average GMB per user, and shopping frequency continued to increase year on year for five consecutive quarters, mainly driven by the expansion of our core user base. Breaking down the revenue mix, product revenues were up 1% year on year in Q4 and 6% in the full year of 2022. Service revenues grew by 40% year on year in Q4 and accounted for a new high of 20% of our total revenue. up from 15% a year ago, showcasing the further diversification of our revenue streams. On a full-year basis, service revenues were up 33% in 2022. Logistics and other services revenues grew by 75% year-on-year in Q4 and 55% in the full year of 2022. I will elaborate more on the underlying drivers in the segment analysis section later on. Marketplace and marketing revenues grew by 11% year-on-year in Q4 and 14% year-on-year in the full year of 2022, a notable outperformance compared to the industry. Thanks to our commitment to supporting merchants, particularly the IFMEs, we saw a healthy expansion of our merchant base and they have been investing additional advertising budget on our platform. This bodes well for our continued progress in strengthening our marketplace ecosystem. Now let's turn to our segment performance. Didi Retail continues to see resilient revenue growth with encouraging expansion of both for field growth margin and operating margin, especially during a quarter that was heavily disrupted by COVID dynamics. In terms of revenues, city retail recorded 3.6% year-on-year growth in Q4 and 7.3% in the full year of 2022. By category, electronics and home appliance revenues were largely stable year-on-year in Q4 and up 5% for the full year. Thanks to our strong supply chain capability, loser man-share, and expanding intra-city on-demand retail services during a very challenging quarter for durable goods, general merchandise revenues were up 2% year-into-year and 8% for the full year. Consumers remained relatively conservative on spending on these questionary products. such as apparel and cosmetics. Meanwhile, as we shared last time, our supermarket category is going through a transition toward a healthier product mix. As a result, the supermarket category saw its largest margin improvement over the last two years, tracking well on a more sustainable growth trajectory for the long run. Emerging categories such as healthcare and sports and outdoors, continued to deliver double-digit top-line growth in the quarter, demonstrating our broad-based user man-share across categories. I want to highlight that JD Retail's profitability improvement is a strong testament to our continued commitment and ability to deliver against our goal of sustained long-term margin improvement JD Retail's fulfilled gross margin was up 53 basis points year-on-year to 8.2% in Q4, the highest level achieved in all our promotion seasons since inception, mainly driven by our efforts to optimize cost and efficiency and the improving economy of shale. This also boosted JD Retail's operating margin to 3.0% up 90 basis points from a year ago. For the full year of 2022, TD Retail's fulfilled growth margin was up 42 basis points to 8.2%, and operating margin was up 68 basis points to 3.7%. Both are record high levels on annual basis. Our long-term margin trajectory remains well on track. TD Logistics made solid progress in both top-line growth and profitability in Q4 and the full year of 2022. Its revenue grew by 41% year-on-year in Q4 and 31% for the full year of 2022. Including the impact of consolidation of DuPont, the growth rate was 13% and 17%, respectively, This is mainly contributable to the resilient growth in revenues from external customers, the proportion of which continue to increase to about 70% in Q4. Notably, JDL has been profitable on a non-GAAP operating income basis for three quarters in a row, and its operating margin rising to 2.1% in Q4. On a full year basis, JDL's operating margin reached 0.4% in 2022, achieving its break-even target for this year despite the unfavorable impact from the external environment, including additional COVID-related costs and operating deleverage. Dada reported revenues of 2.7 billion RMB before, and its non-GAAP operating loss narrowed sequentially to 207 million RMB for the quarter. JDDJ and ShopNow has expanded to cooperate with over 200,000 business partners in the quarter and provided more than 2,000 cities and counties with on-demand retail services that cover a wide range of categories. As a result, our intra-city on-demand retail business maintained its robust momentum particularly ShopNow that recorded a year-on-year GMV growth of over 80% in Q4. Finally, our new business revenues scaled back to 4.8 billion RMB in Q4 and 21.8 billion RMB in the full year of 2022. As we continue to adjust strategies in both CNC and international businesses, while JD Property maintained a strong growth momentum. For international businesses, we've decided to case operations of e-commerce business in Southeast Asia markets for now, as we believe that it would continue to require heavy investment over a prolonged period to build an efficient and scalable B2C e-commerce business. Based on the current economic and infrastructure development in the local markets, Instead, we continue to invest in building global logistics infrastructure that better leverage our core capabilities and explore online retail business opportunities in other markets. In terms of profitability, new business operating laws narrowed substantially year on year in Q4 and in the full year of 2022. Looking ahead, we continue to explore new initiatives and encourage innovation that create better synergies with our core businesses and capabilities. We believe this strategy will validate itself in the coming quarters as we pursue high-quality development. Moving on to our consolidated bottom line, as we firmly executed our strategy to improve operating efficiency and focused on high quality growth that we set at the beginning of last year. We ended the year on a strong footing with 7.7 billion RMB non-GAAP net income attributable to ordinary shareholders in Q4. Our non-GAAP net margin was 2.6% in Q4, which represented an impressive expansion of 130 basis points compared to a year ago. Full year basis. Non-GAAP-line income attributable to ordinary shareholders was 28.2 billion RMB, which grew at a three-year CAGR of 38%. Non-GAAP-line margin for the full year of 2022 increased by 90 basis points year-on-year to 2.7%, hitting a historic high on an annual basis. Finally, our IOTM free cash flow as of Q4 reached a historical high of 35.6 billion RMB. By the end of Q4, cash and cash equivalents, restricted cash, and short-term investments added up to a total of 226 billion RMB, up from 218 billion RMB last quarter. This team has a stronger than ever position to support business development and again return value to shareholders in the form of a cash dividend. This was mainly driven by both our improved profitability and strong balance sheet. Furthermore, we plan to adopt an annual dividend policy going forward as a way to sustainably return value to shareholders at an amount to be determined by the board. based on our financial performance in the previous fiscal year and other factors. In March 2023, JD Industrials, our consolidated subsidiary and the leading industrial supply chain technology and service provider in China, entered into a definitive agreement for its non-redeemable Series B financing. JD remains the majority shareholder of JD Industrials after this transaction. To conclude my remarks, the year of 2022 tested all of us on many fronts. What sets JD.com apart is our unique resilience to navigate the complex environment and to continue to make headway against our goals and long-term strategies, both financially and operationally. Looking at 2023, we have emerged stronger and more prepared and will continue to relentlessly pursue the very essence of retail, cost, efficiency, and experience. We believe this business philosophy has been proven successful across many cycles over the 20 years since our founding and will remain the right way to enable us to create value for our customers, business partners, and shareholders. With that, Let's open the call to the Q&A. Thank you.

The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. The first question is from Eddie Wong of Morgan Stanley. Please go ahead.

I would like to ask if we have any indicators to see whether the success of the low-cost new technology of Baiyi Supply and Supply is from short-term and long-term. If our competitors also increase their own supply and supply during Baiyi Supply and Supply, 我不知道从我们的角度来说, 对我们短期的财务的影响, 我们有没有一些准备, 不管是短期还是长期的? 我自己翻一下我的问题。 Thank you for taking my question. My question is about the 10 billion subsidy program we just launched. We understand that JD is trying to rebuild the low-cost mindshare on customers through this 10 billion subsidy program. So just want to check if there's any matrix that we can follow to test whether or not this program is successful. And if our competitor is trying to, you know, follow and add the investment in this subsidy program as well, so how should we expect, you know, the template subsidy program's financial impact in the short term and the long term on JD? Thank you.

Thank you for the question. JD's discount program has recently drawn a lot of attention, and I believe a lot of our analysts want to know more, so I will take on this question. Chris, I want to stress that J's business philosophy in our 20 years of development centers on cost efficiency and user experience.

By continuously optimizing cost and efficiency, we are able to create superior products, price, and services. This principle remains unchanged.

The price is indeed a very important factor in the entire user experience. In the past, all the prices in the e-commerce industry, including in the Jindong area, have been concentrated on large prices. There will be a phenomenon in the entire industry called non-price, non-sale. or the habit of consumers not buying. But in fact, from the perspective of the efficiency of the commercial users and the public chain, it is not the best solution, and it is also not sustainable. So we hope that through adjusting this marketing strategy, to guide users to gradually change this shopping habit, from large-scale stockpiling to any day-to-day low-price business concept, to pull the previous relatively relatively low daily sales, Price is a very important element in user experience. In the past, all e-commerce players, including JD.com, focused our resources on grant promotion.

which created a phenomenon of no promotions, no buying, or no promotions, no sales. This is by no means an ideal situation for anyone, also unstable for a better coordination and efficiency of the product supply chain. What we hope to do is to transform our marketing strategy from focusing on big sales to creating an environment of everyday low price, gradually shifting people's shopping behaviors and driving up consumption activities on a daily basis. To return to the fundamentals of retail, we want to contribute to more stable development of the supply chain of the industry and more orderly growth of brands and merchants.

You can see on our platform that there are many channels or services, such as buying and selling, 9.9 bags of oil, price insurance services, and of course, the high-price white-collar subsidies. In fact, the white-collar subsidies are one of our price strategies. Of course, this has also received a lot of attention recently. So the white-collar subsidies are not a slogan for us. We still hope to make the entire consumer feel the real advantage. The total investment of the first month of the plan is about 1 billion. Of course, these 10 billion is our entire project. It is us and the brand, including the brand and the business, we have invested in the marketing resources. We believe that only the users who are really willing to give can attract users. At the same time, it is to form a brand and business to serve the users together. In terms of the influence of the green, we think it is very, very low. We are sure to be able to control the influence of the general public. After that, we will also do some detailed sharing with you.

So you've noticed that several channels and services have already been launched to these online, including the compensation for higher prices, free shipping above 9.9 yuan, and price guarantee programs, as well as the highly notable one billion subsidies program. And for this program, it's one of the many programs in our aim to better our pricing strategies. And all these discount programs are not merely slogans. we would like to provide genuine and tangible benefits to our customers. Now we've planned 1 billion RMB worth benefits for the first month, which is a collective marketing investment put together with our brand partners and merchants on our platform. We understand that only by providing users with true benefits can we make them stay and attract more brands and merchants. And in the same vein, Only by better serving the users can we better serve the merchants. And these programs will have a limited impact on our margins, and we will keep it in a controllable level, and Sandy can share with you more on that.

From the first frame of mind of DINGDONG, we want to divide it into several aspects. The first one is the supply side. We still hope to provide a richer price range and a richer category through continuous And to create our low price image,

we have been doing several things. First, from the supply side, we continue to improve our open ecosystem to provide more choices, more diversities of our prices and categories, also including the products from the industrial belt and the white label products for our customers. And at the same time, we continue to enhance our supply chain efficiency to generate the scale effect and to produce more money savings for our customers. And also through our different kinds of marketing activities, we want to let our customers have a very tangible and a true feeling about the highly cost-effective products offering our platform, both from our first party and the third party. 您们上线的时间还比较短,但是目前来看的话,这几天取得了还是不错的效果。

There are even some aspects that are beyond our expectations, because not only do we attract the return and consumption of our old users, but also bring in new users and more traffic. Of course, we also need a lot of systems, including the adjustment and improvement of operating rules, including the support of production cooperation partners, as well as the understanding and acceptance of consumers. But in general, we think it is valuable for the entire business and industry.

So these programs are still in their very early stage and have already generated some fruitful results and in certain aspects have already exceeded our expectations in terms of driving, activating more users, existing users, new users, and bringing more traffic, et cetera. And for all these, we are still making internal adjustments and we'll also see how our partners and our consumers receive on it. So overall, we believe this is a meaningful thing for JD and also for this industry. And in terms of the indicators for the success of the program, we will continue to focus on the users, on the users' performance through these programs, such as the activities of the existing users and their returning, and the new users' acquisitions, the users' output, and their healthy shopping behaviors on our platform. There are many around users.

What I would like to emphasize is that as the largest public chain-based infrastructure and service company in China, Jingdong, our competitiveness is not necessarily the price tolerance on the surface, but the ability of our long-standing public chain and the ability to build and win with the brand.

And last, I want to stress that China's largest supply chain-based technology and service provider, JD's capabilities and competitiveness exist in our years' accumulation of our supply chain capabilities, our joint efforts built together, and a winning situation with our business and brand partners. and our long-term user-focused business philosophies instead of just providing, giving some benefits on the superficial level. So we remain very confident to continue to enhance our users' experience and their value. Thank you. Yeah. This is Sandy. Let me add some additional points on the P&L impact. So in terms of the budget for this program, first of all, the discount to consumers will be real discount. But as Chih-Tung said, we will work together with our suppliers and the merchants and leverage our supply chain capabilities. So not all the discount will directly fit our gross margin or marketing expenses. Second, our target is to smooth out the operation pressure from the two major promotion seasons to improve operating efficiency for the entire supply chain and also to attract new users or wake up our existing users. So we expect to receive some efficiency gain, and we may reallocate our marketing budget for big promotions or user acquisition cost, depending on the ROI of each initiative. So overall, we do not intend to significantly change our overall marketing budget for the year, bearing in mind All the marketing spending is discretionary. It's all flexible cost. So we could always manage through dynamic adjustments.

Thank you.

Okay, next question please.

The next question is from Ronald Keung of Goldman Sachs. Please go ahead.

Thank you, Mr. Xi, Sandy, and Shawn. I would like to ask how the management has seen the recovery of the Chinese consumer market this year. You just mentioned low-cost gold and 100 billion subsidies. How do we balance the growth of 1P and 3P POP and the impact of the two profits? Thank you. Let me translate it. Can management first hear how you think about the China consumption or how retail sales may trend this year after this reopening? And in our $10 billion subsidy program and this background, how will we balance 1P, which is our self-operated business, versus marketplace growth and the implications to margins, given the different margin profile for these two segments of the business? Thank you.

As of now, with the cancellation of the epidemic prevention measures, the whole Hongwan economy is still in a state of recovery. In terms of consumption, it seems that the short-term and contact-based consumption will recover faster, including travel and travel. During the epidemic, it is relatively suppressed in terms of short-term consumption. But if we look at it from the perspective of actual recovery, we think it still depends on the recovery of consumer confidence. But at present, it should be very important to rebuild consumer confidence. The recovery of consumer confidence is actually the core of the recovery of consumer income. This depends on the recovery of the investment in the production of the company, especially in a large number of companies. So after this cycle, the cycle should be relatively long. We see that the government is now in the middle of all kinds of policies, and the industrial production industry is now in the process of stabilizing, but it really has to be transmitted to the consumption and consumer confidence of the residents. We think it still needs time. So at present, we think that consumption is still in a recovery period. In the short term, there will still be problems with the recovery of consumption and the unbalanced rhythm. It will take time to fully recover from the pandemic. In addition, I would like to add one more point. So with the COVID control measures out of sight, we've seen the macro economy is on the recovering momentum from the consumption side. We see in the short term, the social contact related to consumption is recovering quicker.

including like restaurants and tourism, we've seen some pent-up shopping demand. But overall, for essential or like a recovery in full, it will come from the recovery of people's confidence. It's very important now to rebuild consumers' confidence. And their confidence recovery means the recovery of their income, which requires the resumption of production of many enterprises, especially the massive amount of SMEs. And currently, we have seen the government has thrown out a lot of economic stimulus measures and policies, and many enterprises have resumed their production. And all these factors will take some time to pass on to the residents' income and for the recovery of consumption confidence and spending power. So for now, we see the recovery of consumption is on the way, and there are imbalanced pays here and there. So it still needs some time for recovery in full. At the same time, I want to add that we're talking with different brands, and we have a more consistent view on that. We continue to keep our cautious optimism on the recovery, and we believe in the second half of the year, the recovery speed will be better. And sharing a little bit on the relationship between 1P and the 3P, I see it as competition relations, and it will be triggered by the needs of the users. And which modes will eventually prevail depends on their prices and the products and services will better meet the needs of our customers. So this is a very open competition.

And our 1P business have

quite strong advantages in several categories based on our years of accumulation and understanding our supply chain. And within limited selections of the products, we try to pursue the best consumer's experience. 当然随着京东的消费者的用户数和用户的购买需求的多样性越来越丰富, And as there are increasing number of users and they're diversifying demand shopping on JD's platform, we need to expand and enrich our supplies of products on our platform.

So you've also noticed that in the past couple of quarters,

there's a strong increase of merchant number on our platform. Also, we wrote out a so-called Spring Down project, which faced individual merchants to welcome them on our platform. These are all the efforts we made, a sort of JD's supply-side reform to meet the diversifying needs of our customers. 还有包括我们的流量分发算法,

Even what you may have heard, we are currently testing and searching for a product called One Box. It has not been fully released yet. All of these, in fact, all indicate that for us, we are still focusing on consumers and satisfying the consumer's needs. This is the biggest and most strict change we have made this year compared to the past. Of course, it takes time to cooperate.

And also including our efforts made on our traffic allocations and our algorithm upgrading as well as the one box program. Maybe you've already heard about it in the beta stage now. And all of this effort is made to improve user experience and to center on their need to make all our adjustments. So this is, for this year, the biggest and the determined actions we will carry on. Of course, this also needs time to pan out. On the margin impact, actually, so Rona, on the margin impact, if we look at by GMV, I would say it doesn't make significant difference, either 1P or 3P. As JB always tried to maintain reasonable take rate, we never try to over-monetize our users or business partners in any particular category or models. Of course, the change of 1P3P mix will affect our accounting margin. If our strategy of improving the 3P system can be proved to be successful, it will definitely be positive to our accounting margin improvement. Thank you.

Thank you, Julie. Thank you, Sandy.

Next question.

Yes, the next question is from Ellie Tian of Macquarie. Please go ahead.

Thank you for answering my question. I have a question to follow up on what you just said. I just want to ask, in fact, for Jindong, we have always had a very strong user interest in our quality and service. Now, as we are gradually making more cost-effective products, 我想问一下就是从流量分配机制的角度来讲,就是从公司上是怎么去做抉择的? Let me translate myself really quick. How do we really go around and allocate multiple pillars of a retail business, mostly importantly, kind of keeping a balance between the more higher quality, more premium services, as opposed to the more price cautious, you know, merchandises in general? Thank you.

Well, that's it. Because today we have a specific algorithm. So we have a lot of things to do with the entire traffic area of Jingdong. For example, you can see the main station of Jingdong. But at the same time, we will also have a surprise long chain of apps. And then, including the channels we have in WeChat, and Jingdong also has an offline business area. In fact, in addition to the category, the structure of the user is different. This is the first. Second, even in the main station in the capital, in fact, you can also see that we have reached several channels that should be said to be strong. For example, some are in terms of price and some are in terms of category. In fact, it is necessary to satisfy the price sensitive users. For example, customers who like to shop in this area in the morning. But at the same time, Dingdong also does have some first and second-tier customers who like to make sure they buy directly. In fact, they can also use other ways of browsing. Of course, the most important thing in this may be that everyone will also feel that the biggest traffic is actually in the search and recommendation field. Apart from the specific algorithm I just talked about, in fact, the algorithm can do some uh uh uh

And let me don't go to too much detail with the algorithm. I want to share with you where are our traffic fields. Our traffic field includes our main site, our JDs app, and our Genesys app, and our channels on WeChat, and a lot of our offline sales networks. And all these different fields are facing different kinds of our The structures are different. And secondly, I want to say that our site, our main site, there are different channels and different programs and providing price-driven or category-driven or diversified offerings to different groups of consumers. So this program is also targeted to meet the demands of users who are more sensitive with prices. And so definitely for our existing high-quality users in the first tier and the second tier cities, they can also navigate their ways to go to the other channels and pages. So at the same time, I think the search suggestion function is playing a big role in this aspect. And for now, we are doing a lot of revamp our algorithm to make sure it's in a fair way and then to target different groups of customers with their different preferences to recommend them with the product. Some may prefer price, some may prefer other things, so the algorithm will be more targeted. Of course, there are some challenges internally for us to do all this overhaul, but through the years of our accumulations, technically and technologically, we are ready for that. And what's more important for our shift on this move is to shift our concept to double down on our ideas to serve the consumers, especially given the size of Chidi.com with nearly 600 million users on our platform. We would like to shift our attention more to better serve our consumers. Thank you.

The next question is from Alicia Yap of Citigroup.

Please go ahead. Thank you. 我的問題是關於我們的這個同城零售,能不能就是管理層可以分享一下, 比如說現在同城零售占比整個公司集團的GME的一個初步的一個百分比, 因為我想知道就是說如果同城零售持續增長更快的話呢, Thanks for taking my questions. My question is related to the on-demand retail market. you know, business, if these business actually continue to grow very quickly, can management share a little bit in terms of the current GMB contribution? Because if it's growing faster, would that actually be diluted our 1P revenue growth to some extent? Thank you.

Thanks, Alicia, for your question. I believe at this stage the intra-city on-demand sales is still a very small percentage of our total GMV for JD Group. If we look at a longer time period, I wouldn't think this business will dilute the impact of our 1P business because really they are providing our customers very different shopping experiences. So the reason for us to expand to this business model was because we realized that some of our customers, they do have the on-demand shopping requirements. Even though this business model may not be as efficient as our traditional B2C commerce business model in terms of financial model, that means when comparing the price, the value for many products, So the pricing may not be as great as our B2C business model, but when the users, they do have this immediate purchase request, then we can also satisfy their shopping demands. So really, it's to improve our customers' shopping experience. competitiveness of our 1T business model, I still believe our 1T business model, because of the scale of the economy, will have very unique and very strong competitive advantage in terms of the lower cost, lower fulfillment cost.

Thank you. In fact, when we are considering co-op business, I said before, in fact, we are going to do co-op business, not because the co-op business is now increasing rapidly in the entire industry. In fact, in determining whether we are involved in one thing, we will have several standards, but among them, it is the most important to meet the needs of the user's experience or the needs of shopping. This is the first one. If we can see that many users on our platform actually have timely sales,

And we want to add that when we enter the market, it's not purely depends on its growth rate. We will be basing on the demands of our users. We do see there are undemanded shopping users that are shopping demand on the platform. If we don't do that, this will be a loss and insufficient services from JD.

Another one is that when we were communicating with the brand, we found that the brand is in need of the same-sex retail. At the same time, we also hope that JD.com can use JD.com's platform, users, and big data to help them improve or optimize their business, including in terms of marketing cost and in terms of the efficiency of the goods. This is the feedback of many brand owners.

And also when we talk to our brand partners, we also receive their demand to work with JD to help them to optimize their business based on the on-demand business model and leveraging JD's platform, our user base, and our big data, et cetera, to provide them better support on the marketing side and the efficiency of our product supplies. 第三呢,我们更多的是从供应链的角度。

As you all know, Jindong's private supply chain is mostly based on B2C supply chain. It's quite good in this respect. But with the development of the times and the change of the world, in fact, we will also increase, for example, such as the production warehouse, which is all over the country. Of course, this is a new supply chain. So we will judge from the perspective of the supply chain, And thirdly, from our supply chain perspective, as we all know that JD has a very strong B2C

1P model for supply chain, and we do a good job on it, but with the time goes by, we're diversifying our supply chain models, including our warehouse and the production zones and more, and for the on-demand retail, it's a new type of supply chain, and we believe this is a necessary thing we need to do, and this is our criteria when we decide whether we want to do this model, and whether we need to step up efforts on this model.

Finally, I would like to repeat that even if these three points are satisfied, we will return to the first question that I answered before, that is, we have to judge our cost-effectiveness experience. In the experience, our product price service can form a differentiated competitiveness. Finally, in the end, we decided to invest in a business.

And here I just want to repeat again, even though the three criteria are mentioned above and on that, and we still go back to the point I mentioned in my remarks at the beginning of the call, we will still consider if this business model has a good, can improve cost and efficiency and good for user experience. In terms of user experience, whether we can provide differentiated the service days in terms of price, products, and services. So by meeting all these criteria, we will make our decision to enter this market or not.

Okay. Next question, please.

The next question is from Thomas Chung of Jefferies. Please go ahead.

Good evening. Thank you for accepting my question. I have a question about the future of this competition. In the beginning, the management team also shared a lot about our short-term and long-term strategy. My main question is, if in the future, our opponents make a big investment in Bitcoin or other promotions, what kind of strategy will we adopt? 我们会看重就是对我们收入增长还有盈利增长采取一个比较平衡的战略,还是我们都会参与这个比较aggressive的那种marketing的战略的。 Thanks management for taking my... My question is more about the future competitive landscape. Given that we have been seeing our peers also spending aggressively in a recency in a different sort of a marketing campaign, I just want to get a sense about from our strategic perspective Will we also step up our marketing spending if our competitors are spending aggressively? Or will we still stick to our balanced approach on top line and profitability? I just want to get a sense on how we should think about our growth strategies in light of the dynamic landscape.

Thank you.

I'll try to answer it because it may not be very clear. Let me introduce the business model of Jindong. Compared to other companies, we think our difference is mainly in the scale and certainty of the supply chain. There will be more advantages in the certainty of the purchase. Because Jindong has always been around the supply chain and user experience to continue to achieve profit and loss. What we provide is also relatively more certainty and quality of this kind of purchase experience. I mean quality is the overall quality. I try to answer your question if some part of your question is not very clear.

So I just want to share that the differentiator of JD's business model exists in our scalable supply chain and the certainties we can provide in the product supply chain. And we have been building, develop our core capabilities of supply chain and users' experience and provide more certain and quality shopping experience by quality and overall quality of shopping with JD.com. So we see a relatively lower ratio of users coming to our platform to do this kind of impulsive shopping. And most of our users come here to do planned shopping or shop for their family.

ZHANG ZHANG ZHANG ZHANG ZHANG And so for JD Per Se, we are not a traffic-driven e-commerce company. And in essence, we are a company based on our whole categories, and we're transforming to

retailers that will be developed based on running our users on our platform and to enhance the overall their lifecycle value on our platform.

I believe that different types of companies will have their own uh uh uh Our internal growth and training, in fact, our entire business planning, financial planning, business efficiency, should be improved from before. So in the market competition, in fact, everything will happen. I think maybe the long-term goal is what, and in the short term, the method is smarter. I think it should be more effective to combine.

So I believe at different times and economic and function cycles, different companies of different models will review their different values. For JD's business model design, our business will take a long-term view and then it's heavier in terms of our investment in logistics and users' experience. And while we face external competition, we're confident that We have been growing and being better with internal planning and our operating efficiency continue to grow. The market competitions will always be there. The more important question is what is your long-term goal and how you can do this business smartly in the short term.

Okay. Thank you.

We are now approaching the end of the conference call. I will now turn the call over to JD.com's Sean Chung for closing remarks.

Sure. Thank you for joining us on the call today and for your questions. If you have further questions, please contact me and our team. We appreciate your interest in JD.com and really looking forward to talking to you again next quarter. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. you you Thank you. Thank you. Hello, and thank you for standing by for JD.com's fourth quarter and full year 2022 earnings conference call. At this time, all participants are in 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, Shawn Zhang, Director of Investor Relations. Please go ahead.

Thank you, Kate. Hello, everyone. Welcome to JD.com Q4 and full year 2022 results conference call. For today's call, CEO of JD.com, Mr. Xu Lei, will start with his opening remarks. And our CFO, Ms. Sandy Xu, will discuss the financial highlights. After that, we'll open the call to questions from analysts. Let me quickly cover the safe harbor. Please be reminded during this call, our comments and responses to your questions reflect management's view as of today only. I will include forward-looking statements. Please refer to our latest Steve Harper statement in the earnings press release, which applies to this call. We will discuss certain non-GAAP measures. Please also refer to the reconciliation of non-GAAP measures with comparable GAAP measures in the earnings press release. Also, please note all figures mentioned in this call are in RMB unless otherwise stated. Now, let me turn the call over to our CEO, Mr. Xu.

Xu Zong. Hello, investors. Hello everyone, this is Xu Lei. Thank you for joining JD.com's 4th quarter and 4th year 2022 earnings call. It also helps the industry commercial oil cooperation partners to improve business certainty. Jingdong's own business has also achieved high quality growth. In 2022, the annual net income will break the 10 billion yuan milestone. At the same time, based on our judgment of the economy and industry at the beginning of the year, Jingdong focuses on core business throughout the year. Pay attention to the improvement of business health. This helps Jingdong to face the complex external environment. It can still continue to improve business quality. The annual profit level creates the best history. This is another example of the long-term profit and growth space that we have always emphasized. Today, we can feel that the external environment and industry are undergoing profound changes. The epidemic of the past three years has just ended, and the public health economy is gradually recovering. The population structure has changed, etc., which has had a huge impact on the retail industry. In the post-epidemic era, the way consumers live and their consumption ideas are changing. We observed the characteristics of consumer structure and consumer power in two levels. On the one hand, the number of products, quality and functions of the middle class and family users is constantly increasing. On the other hand, consumers are becoming more and more up-to-date. The demand for consumption and the consumer scene are increasingly diversified. At the same time, the development and management logic of global Internet companies is also changing. Before the epidemic, the first demand of companies was to increase speed, including traffic, users and business scale. After that, it was profit and cash flow. Now, not only the management logic of the company itself has changed,

In the year 2022, JD State focused our goals and resolutes throughout in a challenging macro environment. We have been able to play an important role in the industry and China's economic development as we continued to fully leverage our unique business model and supply chain capabilities to provide consumers best-in-class services and help our up and downstream partners to enhance their operations. At the same time, we have achieved a high-quality growth of our own, with our full-year revenues in 2022 achieving the 1 trillion RMB milestone for the first time. This reflects the strategic decision we made in the beginning of the year to focus our energies and resources on JD's core business, in line with our analysis and understanding of the predominant industry and the macro trends. This has enabled JD to continue to deliver high-quality operations with highest-ever profitability of the year, despite the external challenges. This once again demonstrates that our business model has a strong potential for profitable growth. Today, the industry and the overall external environment are experiencing profound changes. The coverage over the past three years, the recovering microeconomy, and demographic structure changes have all impacted the retail industry. In a post-COVID era, customers' lifestyles and preferences have notably changed. We have seen the polarized trends of consumption patterns and spending power. On the one hand, the number of middle class and household users who attach great importance to the quality and function of goods is expanding. On the other hand, consumers have become more meticulous in their spending. Therefore, we see increasing diversification of consumer demand and consumption scenarios. On top of that, Internet companies across the world that previously prioritized growth in traffic, users, and business scale over profitability and cash flow have reformed their approach. Not only that, there have been also changes in how to evaluate business health. we see a mix of opportunities and challenges amid these dynamic evolutions.

In the midst of a big change in the environment, Jingdong has made the fastest and most decisive adjustments in the industry. Here, I would like to summarize what kind of proactive adjustments Jingdong has made. First of all, around last year, we achieved a healthy and sustainable growth, and began to carry out a series of business strategy adjustments. In the past, Jingdong's main business and cloud business have had a lot of innovations, and also included a lot of mistakes. To a certain extent, this has caused the consumption of management energy, Based on the judgment of the large environment, we have carried out comprehensive processing of the business, the short-term mode cannot run, the core business cannot be coordinated with Jindong, or the scale-effective business cannot be realized. At the same time, it also retains the investment of many healthy and people-oriented innovation businesses. I will share some such examples below. Second, on the core business, we have promoted the landing of the supply chain center, and strengthened the operating capacity and reduced costs in terms of quality. Third, business logic We also insist on the standard of service JD has been able to be the first to adopt these challenges with agility and determination.

Here I would like to give a brief overview of the major adjustments we've been proactively made. First, we initiated the series of strategic realignment in 2022 with the aim of achieving healthy and sustainable growth. In the past, we gave more ample room and tolerance to new trials in both our core and new businesses, which diluted management's focus to a certain extent. Based on our analysis of the external environment, we have conducted a comprehensive review of our businesses and decided to pull back those new businesses that either could not develop more efficient business models, had limited synergies with our corn businesses, or could not achieve sufficient economies of scale. That said, we will continue to invest in the new businesses with healthy momentum and exciting future opportunities. I'll share some of the examples shortly. Second, we have been expanding our supply chain capabilities for our corn business. We continue to build up our operating capabilities across different categories and lower costs. Third, we have reallocated our resources and energies back to the very essence of retail, footing consumers' needs first. We have further built upon our commitment to better products, prices, and services. In terms of price, our goal is to be known by customers for providing the most consistent everyday low price. As such, we have gone through numerous bottom-up optimizations, including further streamlining our promotional programs and improving our traffic allocation mechanism. Through these efforts in our supply chain and marketplace ecosystem, we have seen a massive increase of product selection on our platform, offered by both our 1P and 2P merchants. And user recognition of JD's price competitiveness is gradually being restored. At the same time, we remain highly committed to service quality and user satisfaction. For example, we recently launched a version of our app that caters to the needs of elderly people. I'd like to reiterate that all our adjustments are made out of our deliberate consideration of consumer needs and are executed with careful planning. Our ultimate goal is to satisfy every device buying customer demand and provide a best-in-class experience across the board.

接下来我跟大家分享一下Q4其他的主要进展。 在消费不景气的环境中, 京东更加关注用户的获取效率和可持续性, 关注用户质量的提升。 在整体用户规模保持相对稳定的基础上, BAU保持同比双位处的增长。 and the structure and quality of the users are significantly improved. The size of the resale users and paid members of retail businesses is increasing rapidly, and the ratio continues to increase. This has led to an increase in the number of users' purchase frequency and up. The number of members of Tintoplus has reached 34 million. At the same time, the number of members has increased rapidly, and the number of members' annual consumption has remained eight times that of ordinary users, which has continued to be high-efficiency and high-consumption. In addition, after a period of time of management and polishing, the No. 1 member team located in the high-end market

Now, let me review the major progress we made in Q4. As discussed in the past, we have been focusing on user quality and efficiency and sustainability of user acquisition, given the soft confunction environment. In the quarter, on top of our largely stable user base, We also recorded double-digit DAU growth year-on-year. More encouragingly, we are seeing an upward trend for both user structure and quality. In particular, in our corn business JD Retail, repeat purchasers and the paying members both grew robustly in Q4 and accounted for higher proportions of our total users, which helped to drive up shopping frequency and upwards. JD Plus reached 34 million members in Q4, while flat members continue to spend eight times the average annual amount of non-flat members, reflecting their high shopping frequency and spending power. Moreover, our eHowDN membership store, which is positioned to serve the middle to high-end market, has also crossed the one million paying members milestone. We're continuously improving our user service and operating capabilities so as to better serve our users in first- and second-tier cities as well as lower-tier markets.

At the same time, we continue to invest in the construction of an open and eco-friendly environment, including multi-sector layout, supply chain logistics services, and other new growth trends and new businesses. Jindong has a great potential in the construction of an open and eco-friendly environment. Jindong has been working hard to build an eco-friendly environment that is suitable for commercial use, to reduce commercial business costs, and to optimize traffic distribution and brand rules. At the same time, through the development of Jindong's As we improve our operating quality, we also continue to invest in new growth opportunities and new businesses, such as marketplace ecosystems,

omni-channel business, and supply chain logistics service. We see great potential in building up an open ecosystem that enables sustainable growth for our merchants. With such efforts, we can further lower merchants' operating costs and optimize our traffic distribution. We can also help merchants to grow with better efficiency and certainty, supported by our strengths in supply chain, logistics, technologies, and services. As a result, in Q4, JD Retail increased its merchant base by over 20% year-on-year for the eighth quarter in a row. Growth in categories like health, sports and outdoors, and home goods all outperformed the industry in this quarter.

全渠道同城零售业务在第四季度保持快速发展的势头, 继续推进与品牌商和CTA商家的合作。 O2O业务同比增长29%, 而京东小石购业务增长更是超过80%, 为实体零售伙伴,

J.D.' 's intra-city on-demand retail services, which is part of our omni-channel business, maintain a strong growth trajectory in this quarter. As its further stepped-up efforts, collaboration with brands and offline stores, GNV in our O2O business increased by 29% year-on-year. In particular, ShopNow, our one-hour delivery service, grew 80% in this quarter. This not only generates incremental growth for brick-and-mortar stores, but also provides users with an on-demand shopping experience that combines online ordering, offline shipping, and delivery as fast as within an hour.

In the face of the challenges of public relations and industry competition, China's logistics has not only strengthened its industry status, but also through the positioning and capability of cross-border Debang, it has realized various advantages in the effective coordination of mutual funds on integrated public chain logistics services, aviation fast-trade networks, building fast-trade and fast-trade networks. We also have companies provide comprehensive public chain solution solutions to help companies reduce costs and reduce risks, and further improve the modern logistics system. Despite the impact of COVID, JD Logistics maintained a resilient revenue growth in Q4,

More notably, with the continuous improvement of its business, JDL has been profitable for three consecutive quarters and achieved its target of great events on a four-year basis. Despite the macro challenges and dynamic competitive landscape, JDL has been able to further strengthen its position in the industry. JDL also continues to draw on the complementary strengths of and create synergies with Hua Yue Express and Durban, particularly in the areas of integrated supply chain services, air express network, bulky item delivery, and express network. This has enabled JDL to provide comprehensive supply chain solutions for both up and downstream customers to help them reduce cost, increase efficiency, and withstand risk, while at the same time, build a more advanced logistics system. JDL has also won wide recognition from customers for its distinguished service quality. In Q4, JDL continued to expand its logistic infrastructure. Notably, JD Airlines made steady progress in increasing cargo routes in Q4 since its official commenced operation last August, with three all-cargo aircraft in operation by the end of 2022. This allowed JD Airlines to better serve customers in many industries, including consumption and manufacturing and more.

We focus more on the development of innovative businesses that can work together with Jindong's core capabilities. Jindong Industries is another business unit that is growing rapidly within us. Jindong Industries focuses on the actual economy, the main ground, and industrial leadership. From the top, middle, and bottom of the industrial chain of purchasing, production, warehouse logistics, and warehouse management, we can better integrate and socialize resources to improve the scale efficiency of industrial integration. In addition, our free brand Jingdong Jingzao continues to gain more than 60% of the high growth in 2022. Jingzao's original intention is to supplement the quality supply on the Jingdong platform, create new value for manufacturers and consumers, and achieve the gradual landing of Jingdong Shijie Gan Zhe Li Gun. After a few years of health development, one-fourth of the PLUS members have now become loyal users of Jingdong products, and the growth rate in Jingdong users is also increasing.

Last but not least, we continue to foster the growth of new businesses that resonate with our core businesses and capabilities. JD Industrials is one of the examples of a successful business that we have incubated internally and have gone on to deliver hyper-growth. With its focus on industrial manufacturing, an important composition of the real economy, JD Industries successfully integrates resources across the industrial chain, such as procurement, production, warehousing and logistics, and inventory management, to achieve superior synergies and economies of scale. Another example is our private label brand Jin Zhao, which translates as made by JD. It delivered over 60% year-on-year growth in 2022, The initial purpose of this business is to complement the product categories offered on our platform and to create new value for our suppliers and customers. It also helps JD to further expand throughout the up and downstream of the supply chain. We are pleased to see that 25% of PLUS members have become loyal users of GeneVal products and the percentage continues to increase. Both JD Industrials and Jingzao offer solid proof that we are on the right track as we adjust and focus on our core business and promising new businesses.

In the course of these changes, because of the new construction of users, the adjustment of product structure, and the optimization of internal processes, the economy and consumption are still recovering. It may affect our business performance in the short term, but the long-term strategic direction of Jingdong has not changed. Our approach to these adjustments helps to improve our core competitiveness. We are confident in our own business model and strategic direction. We are also very confident in the trend of China's economy's resilience and long-term consumption. I hope that today's presentation helps you get a better understanding of the significance of the strategic shift underway at JD.

At its core, our intention is to seize the opportunity presented by the profound changes in an external environment and return to our focus on lower costs, higher efficiency, and superior user experience. Admittedly, we may experience short-term impact on our performance as we further educate users, reinvigorate JD's reputation for providing the best prices, optimize our products and mix, and to streamline internal mechanism and procedures. All of these aspects require time and effort, especially as both the macroeconomy and consumption are still in recovery stage. That said, I want to stress that our long-term strategy has not changed. We believe that adjustments we are making will solidify our strength as we have faith in our own business model and strategic direction. as well as the resilience and the long-term growth trajectory of China's economy and consumption trends. In the long term, JD is committed to playing an important role in people's daily lives and the country's economic development. We will work to ensure healthy and sustainable business development along the way to create long-term value for our users, business partners, and shareholders. With that, I'd like to pass the floor to our CFO, Sandy. Thank you, Xizong, and hello, everyone. Looking back at 2022, we successfully executed our strategy to achieve high-quality growth with stronger margins, along with our long-term goals, despite the many external complexities and challenges. We delivered against and even exceeded our target, which was especially demonstrated by our strong profitability and cash flow at the year-end, Our $1 billion cash dividend program further demonstrates our confidence in the long term. With our resilient business model, we are confident to embrace the new opportunities and challenges in 2023 as Shuzo just laid out. Now let me walk you through our financial results in Q4 and the full year of 2022. Our net revenues grew by 7% year-on-year to 295 billion RMB in Q4. On a full year basis, net revenues grew by 10% and surpassed the 1 trillion RMB milestone for the first time in our history. As we continue to focus on user quality and building deeper user engagement, we are encouraged to see that in Q4, JD Retail, LTM, average GMB per user, and shocking frequency continued to increase year on year for five consecutive quarters, mainly driven by the expansion of our core user base. Breaking down the revenue mix, product revenues were up 1% year on year in Q4 and 6% in the full year of 2022. Service revenues grew by 40% year on year in Q4 and accounted for a new high of 20% of our total revenue. up from 15% a year ago, showcasing the further diversification of our revenue streams. On a full year basis, service revenues were up 33% in 2022. Logistics and other services revenues grew by 75% year-on-year in Q4 and 55% in the full year of 2022. I will elaborate more on the underlying drivers in the segment analysis section later on. Marketplace and marketing revenues grew by 11% year-on-year in Q4 and 14% year-on-year in the full year of 2022, a notable outperformance compared to the industry. Thanks to our commitment to supporting merchants, particularly the IFMEs, we saw a healthy expansion of our merchant base and they have been investing additional advertising budget on our platform. This bodes well for our continued progress in strengthening our marketplace ecosystem. Now let's turn to our segment performance. Didi Retail continues to see resilient revenue growth with encouraging expansion of both for field growth margin and operating margin, especially during a quarter that was heavily disrupted by COVID dynamics. In terms of revenues, city retail recorded 3.6% year-on-year growth in Q4 and 7.3% in the full year of 2022. By category, electronics and home appliance revenues were largely stable year-on-year in Q4 and up 5% for the full year. Thanks to our strong supply chain capabilities, looser man-share, and expanding intra-city on-demand retail services during a very challenging quarter for durable goods, general merchandise revenues were up 2% year-on-year until fall and 8% for the full year. Consumers remained relatively conservative on spending on discretionary products. such as apparel and cosmetics. Meanwhile, as we shared last time, our supermarket category is going through a transition toward a healthier product mix. As a result, the supermarket category saw its largest margin improvement over the last two years, tracking well on a more sustainable growth trajectory for the long run. Emerging categories such as healthcare and sports and outdoors, continued to deliver double-digit top-line growth in the quarter, demonstrating our broad-based user man-share across categories. I want to highlight that JD Retail's profitability improvement is a strong testament to our continued commitment and ability to deliver against our goal of sustained long-term margin improvement JD Retail's fulfilled gross margin was up 53 basis points year-on-year to 8.2% in Q4, the highest level achieved in all our promotion seasons since inception, mainly driven by our efforts to optimize cost and efficiency and the improving economy of shale. This also boosted JD Retail's operating margin to 3.0%, up 90 basis points from a year ago. For the full year of 2022, JD Vitio's fulfilled growth margin was up 42 basis points to 8.2%, and operating margin was up 68 basis points to 3.7%. Both are record high levels on annual basis. Our long-term margin trajectory remains well on track. CD Logistics made solid progress in both top-line growth and profitability in Q4 and the full year of 2022. Its revenue grew by 41% year-on-year in Q4 and 31% for the full year of 2022. Excluding the impact of consolidation of DePaul, the growth rate was 13% and 17%, respectively, This is mainly contributable to the resilient growth in revenues from external customers, the proportion of which continue to increase to about 70% in Q4. Notably, JDL has been profitable on a non-GAAP operating income basis for three quarters in a row, and its operating margin rising to 2.1% in Q4. On a full year basis, JDL's operating margin reached 0.4% in 2022, achieving its break-even target for this year despite the unfavorable impact from the external environment, including additional COVID-related cuts and operating deleverage. Dada reported revenues of 2.7 billion RMB before, and its non-GAAP operating loss narrowed sequentially to 207 million RMB for the quarter. JDDJ and ShopNow has expanded to cooperate with over 200,000 business partners in the quarter and provided more than 2,000 cities and counties with on-demand retail services that cover a wide range of categories. As a result, our intra-city on-demand retail business maintained its robust momentum particularly ShopNow that recorded a year-on-year GMV growth of over 80% in Q4. Finally, our new business revenues scaled back to 4.8 billion RMB in Q4 and 21.8 billion RMB in the full year of 2022. As we continue to adjust strategies in both CNC and international businesses, while JD Property maintained a strong growth momentum. For international businesses, we've decided to case operations of e-commerce business in Southeast Asia markets for now, as we believe that it would continue to require heavy investment over a prolonged period to build an efficient and scalable B2C e-commerce business. Based on the current economic and infrastructure development in the local markets, Instead, we continue to invest in building global logistics infrastructure that better leverage our core capabilities and explore online retail business opportunities in other markets. In terms of profitability, new business operating laws narrowed substantially year on year in Q4 and in the full year of 2022. Looking ahead, we continue to explore new initiatives and encourage innovation that create better synergies with our core businesses and capabilities. We believe this strategy will validate itself in the coming quarters as we pursue high-quality development. Moving on to our consolidated bottom line, as we firmly executed our strategy to improve operating efficiency and focused on high quality growth that we set at the beginning of last year. We ended the year on a strong footing with 7.7 billion RMB non-GAAP net income attributable to ordinary shareholders in Q4. Our non-GAAP net margin was 2.6% in Q4, which represented an impressive expansion of 130 basis points compared to a year ago. Full year basis. Non-GAAP-line income attributable to ordinary shareholders was 28.2 billion RMB, which grew at a three-year CAGR of 38%. Non-GAAP-line margin for the full year of 2022 increased by 90 basis points year-on-year to 2.7%, hitting a historic high on an annual basis. Finally, our IoTM free cash flow as of Q4 reached a historical high of 35.6 billion RMB. By the end of Q4, cash and cash equivalents, restricted cash, and short-term investments added up to a total of 226 billion RMB, up from 218 billion RMB last quarter. This gives us a stronger than ever position to support business development and, again, return value to shareholders in the form of a cash dividend. This was mainly driven by both our improved profitability and strong balance sheet. Furthermore, we plan to adopt an annual dividend policy going forward as a way to sustainably return value to shareholders at an amount to be determined by the board. based on our financial performance in the previous fiscal year and other factors. In March 2023, JD Industrials, our consolidated subsidiary and the leading industrial supply chain technology and service provider in China, entered into a definitive agreement for its non-redeemable Series B financing. JD remains the majority shareholder of JD Industrials, after this transaction. To conclude my remarks, the year of 2022 tested all of us on many fronts. What sets JD.com apart is our unique resilience to navigate the complex environment and to continue to make headway against our goals and long-term strategies, both financially and operationally. Looking at 2023, we have emerged stronger and more prepared and will continue to relentlessly pursue the very essence of retail, cost, efficiency, and experience. We believe this business philosophy has been proven successful across many cycles over the 20 years since our founding and will remain the right way to enable us to create value for our customers, business partners, and shareholders. With that, Let's open the call to the Q&A. Thank you.

The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. The first question is from Eddie Wong of Morgan Stanley. Please go ahead.

I just want to ask, do we have any indicators to see whether the success of the low-cost new system of Baibu Stick is from short-term and long-term? Thank you for taking my question. My question is about the $10 billion subsidy program we just launched. We understand that JD is trying to rebuild the low-cost mindshare on customers through this $10 billion subsidy program. So just want to check if there's any metrics that we can follow to test whether or not this program is successful. And if our competitor is trying to follow and add the investment in these subsidy programs as well, so how shall we expect the template subsidy programs' financial impact in the short term and the long term on JD? Thank you.

HENG ZHUANYI, CFO, XIAOMI TECHNOLOGY, XIAOMI TECHNOLOGY, XIAOMI TECHNOLOGY, XIAOMI TECHNOLOGY, XIAOMI TECHNOLOGY, Thank you for the question.

JD's discount program has recently drawn a lot of attention, and I believe a lot of our analysts want to know more. So I will take on this question. First, I want to stress that J's business philosophy in our 20 years of development centers on cost, efficiency, and user experience. By continuously optimizing cost and efficiency, we're able to create superior products, price, and services. This principle remains unchanged.

The price is indeed a very important factor in the entire user experience. In the past, all the prices in the e-commerce industry, including in Jingdong, have been concentrated in large quantities. The entire industry will have a phenomenon called non-pricing, non-sale, or the consumer's habit of non-pricing, non-buying. But in fact, the efficiency of the customer, the user, and the public chain are not the best. It is also not sustainable. So we hope to adjust the marketing strategy to guide users to gradually change their shopping habits, from large-scale stockpiling to any kind of day-to-day low-price management concept to drive the relatively relatively low-cost day-to-day sales in the past, because this will be more in line with the mindset of day-to-day low-price in the capital city. It will also return to the essence of sales. is a very important element in user experience.

In the past, all e-commerce players, including JD.com, focused our resources on grant promotion, which created a phenomenon of no promotions, no buying, or no promotions, no sales. This is by no means an ideal situation for anyone. Also, unstable, unstable, for a better coordination and efficiency of the product supply chain. What we hope to do is to transform our marketing strategy from focusing on big sales to creating an environment of everyday low price, gradually shifting people's shopping behaviors and driving up consumption activities on a daily basis. To return to the fundamentals of retail, We want to contribute to more stable development of the supply chain of the industry and more orderly growth of brands and merchants.

What you can see on our platform is that there are a lot of channels or services, such as buy and sell, double payment, 9.9-package oil, and price protection services. Of course, there are also white-collar stocks that everyone is paying attention to. So you've noticed that several channels and services have already been launched to these online, including the compensation for higher prices,

and price guarantee programs as well as the highly notable one billion subsidies program. And for this program, it's one of the many programs in our aim to better our pricing strategies. And all these discount programs are not merely slogans. We would like to provide genuine and tangible benefits to our customers. Now we've planned 1 billion RMB worth benefits for the first month, which is a collective marketing investment put together with our brand partners and merchants on our platform. We understand that only by providing users with true benefits can we make them stay and attract more brands and merchants. And in the same way, only by better serving the users can we better serve the merchants. And these programs will have a limited impact on our margins, and we will keep it in a controllable level, and Sandy can share with you more on that.

We will have a limited impact on our margins, and we will keep it in a controllable level, and Sandy can share with you more on that. And to create our low-price image, we have been doing several things. First, from the supply side, we continue to improve our open ecosystem to provide more choices, more diversity of our prices and categories

also including the products from the industrial belt and the white label products for our customers. And at the same time, we continue to enhance our supply chain efficiency to generate the scale effect and to produce more money savings for our customers. And also through our different kinds of marketing activities, we want to increase let our customers have a very tangible and a true feeling about the highly cost-effective products offering our platform, both from our first party and the third party.

Because the time on the line is relatively short, but at present, in the past few days, we have achieved quite a good result. Even some aspects have exceeded our expectations. Because not only did we boost our old users' revenue and consumption, but also brought So these programs are still in their very early stage and have already generated some fruitful results and in certain aspects have already exceeded our expectations

in terms of driving, activating more users, existing users, new users, and bringing more traffic, et cetera. And for all these, we are still making internal adjustments, and we'll also see how our partners and our consumers receive on it. So overall, we believe this is a meaningful thing for JD and also for this industry.

If we look at our indicators, I think our most important indicator is actually the core indicator, which is still around users. All indicators related to users are a standard for us to assess whether this activity is successful or not. Of course, there are more indicators in this, such as the indicator of old users, the return of old users, such as the increase of new users, such as up value, including the health of user consumption, health degree, quality, etc. All these are around users.

And in terms of the indicators for the success of the program, we will continue to focus on the users, on the users' performance through these programs, such as the activities of the existing users and their returning, and the new users' acquisitions, the users' output, and their healthy shopping behaviors on our platform. There are many around users.

And last, I want to stress that China's largest supply chain-based technology and service provider

JD's capabilities and competitiveness exist in our years' accumulation of our supply chain capabilities, our joint efforts built together, and a winning situation with our business and brand partners, and our long-term user-focused business philosophies instead of just providing, giving some benefits on the superficial level. So we remain very confident to continue to enhance our users' experience and their value. Thank you. Yeah, this is Sandy. Let me add some additional points on the P&L impact. So in terms of the budget for this program, first of all, the discount to consumers will be real discount. But as Chih-Tung said, we will work together with our suppliers and the merchants and leverage our supply chain capabilities. So not all the discount will directly fit our gross margin or marketing expenses. Second, our target is to smooth out the operation pressure from the two major promotion seasons to improve operating efficiency for the entire supply chain and also to attract new users or wake up our existing users. So we expect to receive some efficiency gain And we may reallocate our marketing budget for big promotions or user acquisition cost, depending on the ROI of each initiative. So overall, we do not intend to significantly change our overall marketing budget for the year. Bearing in mind, all the marketing spending is discretionary. It's all flexible cost. So we could always manage through dynamic adjustments. Thank you.

Thank you, Chairman Xu.

Thank you. Okay, next question, please.

The next question is from Ronald Keung of Goldman Sachs. Please go ahead.

Thank you, Chairman Xu, Sandy, and Sean. What do you think about the recovery of the Chinese consumer market this year? China Consumption and Retail Sales May Trend This Year After This Reopening And in our kind of 10 billion subsidy program and this background, how will we balance 1P, which is our self-operated business versus marketplace growth and the implications to margins given the different margin profile for these two segments of the business? Thank you. 目前來看的話就是隨著防疫的措施的這種

uh, uh, The trust of the consumers should be very important. The core of the recovery of the consumer confidence is the recovery of the consumers' income. This depends on the company's investment in the recovery of production, especially in a large number of companies. After this cycle, the cycle should be relatively long. We see that the government is now adopting a variety of policies. The company's production and sales are now stabilizing and recovering. China China China China So with the COVID control measures out of sight, we've seen the macro economy is recovering momentum from the consumption side. We see in the short term, the social contact related to consumption is recovering quicker.

including like restaurants and tourism. We've seen some pent-up shopping demand. But overall, for essential or like a recovery in full, it will come from the recovery of people's confidence. It's very important now to rebuild consumers' confidence. And their confidence recovery means the recovery of their income, which requires the resumption of production of many enterprises, especially the massive amount of SMEs. And currently, we have seen the government has thrown out a lot of economic stimulus measures and policies, and many enterprises have resumed their production. And all these factors will take some time to pass on to the residents' income and for the recovery of consumption confidence and spending power. So for now, we see the recovery of consumption is on the way, and there are imbalanced pays here and there. So it still needs some time for recovery in full. And at the same time, I want to add that we're talking with different brands, and we have a more consistent view on that. We continue to keep our cautious optimism on the recovery, and we believe in the second half of the year, the recovery speed will be better. Thank you. And sharing a little bit on the relationship between 1P and the 3P, I see it as competition relations, and it will be triggered by the needs of the users. And which modes will eventually prevail depends on their prices and the products and services will better meet the needs of our customers. So this is a very open competition.

And our 1P business have

quite strong advantages in several categories based on our years of accumulation and understanding our supply chain. And within limited selections of the products, we try to pursue the best consumer's experience. 当然随着京东的消费者的用户数和用户的购买需求的多样性越来越丰富, And as there are increasing number of users and they're diversifying demand shopping on this platform, we need to expand and enrich our supplies of products on our platform.

So you've also noticed that in the past couple of quarters,

there's a strong increase of merchant number on our platform. Also, we wrote out a so-called Spring Down project, which faced individual merchants to welcome them on our platform. These are all the efforts we made, a sort of JD's supply-side reform to meet the diversifying needs of our customers. 还有包括我们的流量分发算法,

Even what you may have heard, we are currently testing and searching for a product called One Box. It has not been fully released yet. All of these, in fact, show that for us, we are still focusing on consumers and satisfying the consumer's needs. This is the biggest and most strict change we have made this year compared to the past. Of course, it takes time and cooperation.

And also including our efforts made on our traffic allocations and our algorithm upgrading, as well as the OneBot program. Maybe you've already heard about it in the beta stage now. And all of this effort is made to improve user experience and to center on their need to make all our adjustments. So this is, for this year, the biggest and the determined actions we will carry on. Of course, this also needs time to pan out. On the margin impact, actually, so Rona, on the margin impact, if we look at by GMV, I would say it doesn't make significant difference, either 1P or 3P. As JV always tries to maintain reasonable take rate, we never try to over-monetize our users or business partners in any particular category or models. Of course, the change of 1p-3p mix will affect our accounting margin. If our strategy of improving the 3p ecosystem can be proved to be successful, it will definitely be positive to our accounting margin improvement. Thank you.

Thank you, Julie. Thank you, Sandy.

Next question.

Yes, the next question is from Ellie Tian of Macquarie. Please go ahead.

Thank you for answering my question. I have a question that follows up on what you just said. I just want to ask, in fact, for Jindong, we have always had a very strong user interest in our quality and service. Now, as we are gradually making more cost-effective products, 我想问一下就是从流量分配机制的角度来讲,就是从公司上是怎么去做抉择的? Let me translate myself really quick. How do we really go around and allocate multiple pillars of a retail business, mostly importantly kind of keeping a balance between the more higher quality, more premium services as opposed to the more price cautious, you know, merchandises in general? Thank you.

Well, we are going to talk about how to calculate the traffic flow in the capital city. There are many kinds of traffic flow in the capital city. For example, you can see the main station of the capital city. At the same time, we will also have a surprise chain of apps. And then, including the channels in our WeChat, and there are also offline business centers in the capital city. In fact, in addition to the category, the structure of the user is different. This is the first. Second, even in the main station in Jingdong, in fact, you can also see that we have reached several channels that should be said to be strong. For example, some are in the price category, some are in the category. In this, it is actually to meet the price sensitive users. For example, consumers who like shopping around here. But at the same time, Dingdong also does have some first and second-tier consumers who like to make sure they buy directly. In fact, they can also use other ways of browsing. Of course, the most important thing here is that everyone will also feel that the biggest traffic is actually in the search and recommendation field. Throw away the specific algorithm I just talked about. In fact, the algorithm can do some

And let me don't go to too much detail with the algorithm. I want to share with you where are our traffic fields. Our traffic field includes our main site, our JDs app, and our Genesys app, and our channels on WeChat, and a lot of our offline sales networks. And all these different fields are facing different kinds of our The structures are different. And secondly, I want to say that our site, our main site, there are different channels and different programs and providing price-driven or category-driven or diversified offerings to different groups of consumers. So this program is also targeted to meet the demands of users who are more sensitive with prices. And so definitely for our existing high-quality users in the first tier and the second tier cities, they can also navigate their ways to go to the other channels and pages. So at the same time, I think the search suggestion function is playing a big role in this aspect. And for now, we are doing a lot of revamp our algorithm to make sure it's in a fair way and then to target different groups of customers with their different preferences to recommend them with the product. Some may prefer price, some may prefer other things, so the algorithm will be more targeted. Of course, there are some challenges internally for us to do all this overhaul, but through the years of our simulations, technically and technologically, we are ready for that. And what's more important for our shift on this move is to shift our concept to double down on our ideas to serve the consumers, especially given the size of JD.com with nearly 600 million users on our platform. We would like to shift our attention more to better serve our consumers. Thank you.

Next question, please.

The next question is from Alicia Yap of Citigroup.

Please go ahead. Thank you. 我的问题是关于我们的这个同城零售,能不能就是管理层可以分享一下,比如说现在同城零售占比整个公司集团的GME的一个初步的一个百分比,因为我想知道就是说如果同城零售持续增长更快的话呢, Thanks for taking my questions. My question is related to the on-demand retail market. you know, business. If these businesses actually continue to grow very quickly, can management share a little bit in terms of the current GMB contribution? Because if it's growing faster, would that actually be diluted our 1P revenue growth to some extent? Thank you.

Thanks, Alicia, for your question. I believe at this stage the intra-city on-demand sales is still a very small percentage of our total GMV for JD Group. If we look at a longer time period, I wouldn't think this business will dilute the impact of our 1P business because really they are providing our customers very different shopping experiences. So the reason for us to expand to this business model was because we realized that some of our customers, they do have the on-demand shopping requirements. Even though this business model may not be as efficient as our traditional B2C commerce business model in terms of financial model, that means when comparing the price, the value for many products, So the pricing may not be as great as our B2C business model, but when the users, they do have this immediate purchase request, then we can also satisfy their shopping demands. So really, it's to improve our customers' shopping experience. competitiveness of our 1P business model, I still believe our 1P business model, because of the scale of the economy, will have very unique and very strong competitive advantage in terms of the lower cost, lower fulfillment cost.

Thank you. In fact, when we are considering co-op business, I have said before, in fact, we are going to do co-op business, not because the co-op business is now very fast in the entire industry. In fact, in determining whether we are involved in one thing, we will have several standards, but one of them is to meet the needs of the user's experience or the needs of shopping is the most important. This is the first one. If we can see that many users on our platform actually have timely sales,

I want to add that when we enter the market, it's not purely depends on its growth rate. We will be basing on the demand of our users. We do see there are on-demand shopping users are shopping demand on the platform. If we don't do that, this will be a loss and like insufficient services. from JD.

Another one is that when we were communicating with the brand, we found that the brand is in need of the same-sex retail. At the same time, we also hope that JD can use JD's platform, users, and data to help them improve or optimize the whole business, including in terms of sales cost, including in terms of product efficiency. This is the feedback of many brands.

And also when we talk to our brand partners, we also receive their demand to work with JD to help them to optimize their business based on the on-demand business model and leveraging JD's platform, our user base, and our big data, et cetera, to provide them better support on the marketing side and the efficiency of our product supplies.

As you all know, the private supply chain in Jingdong is mainly based on B2C supply chain. It should be said that it has achieved a good result in this respect. But with the development and change of the times, in fact, we will also increase, for example, a place like the production warehouse to be distributed all over the country. Of course, this is a new supply chain. So we will judge from the perspective of the supply chain, And thirdly, from our supply chain perspective, as we all know that JD has a very strong B2C

1D model for supply chain, and we do a good job on it, but with the time goes by, we're diversifying our supply chain models, including our warehouse at the production zones and more, and for the on-demand retail, it's a new type of supply chain, and we believe this is a necessary thing we need to do, and this is our criteria while we decide whether we want to do this model, and whether we need to step up efforts on this model.

Finally, I would like to repeat, even if these three points are satisfied, we will return to the first question I answered before, that is, we have to judge our cost-effectiveness experience. In the experience, our product price service, can it form a difference-making competitiveness? Finally, in the end, we decided to do it, to invest in a business.

And here I just want to repeat again, even though the three criteria are mentioned above and on that, and we still go back to the points I mentioned in my remarks at the beginning of the call, we will still consider if this business model has a good, can improve cost and efficiency and good for user experience. In terms of user experience, whether we can provide So, by meeting all these criteria, we will make our decision to enter this market or not.

Okay. Next question, please.

The next question is from Thomas Chung of Jefferies. Please go ahead.

Good evening. Thank you for accepting my question. I have a question about the future of the competition. In the beginning, the management team shared a lot about our short-term and long-term strategy. My main question is, if in the future, our competitors will invest more in 100 billion or other promotions, which strategy will we adopt? 我们会看重就是对我们收入增长还有盈利增长采取一个比较平衡的战略,还是我们都会参与这个比较aggressive的那种marketing的战略的。 Thanks management for taking my... My question is more about the future competitive landscape. Given that we have been seeing our peers also spending aggressively in a recency in a different sort of a marketing campaign, I just want to get a sense about from our strategic perspective Will we also step up our marketing spending if our competitors are spending aggressively? Or will we still stick to our balanced approach on top line and profitability? I just want to get a sense on how we should think about our growth strategies in light of the dynamic landscape.

Thank you.

I'll try to answer it, because it may not be very clear.

Let me introduce the business model of Jindong. Compared to other companies, we think our difference is mainly in the scale and certainty of the supply chain. The certainty of the purchase will have more advantages, because Jindong has always been around the supply chain and user experience, and it continues to reach people. What we provide is also a relatively more certainty and quality of this kind of purchase experience. I mean the quality is the overall quality. I try to answer a question if some part of your question is not very clear.

So I just want to share that the differentiator of JD's business model exists in our scalable supply chain and the certainties we can provide in the product supply chain. And we have been building, develop our core capabilities of supply chain and the user's experience and provide more certain and quality shopping experience by quality and overall quality of shopping with JD.com. So we see a relatively lower ratio of users coming to our platform to do this kind of impulsive shopping. And most of our users come here to do planned shopping or shop for their family.

ZHANG ZHANG ZHANG ZHANG And so for JD Per Se, we are not a traffic-driven e-commerce company. And in essence, we are a company based on our whole categories, and we're transforming to

retailers that will be developed based on running our users on our platform and to enhance the overall their life cycle value on our platform.

I believe that different types of companies will have their own uh, Our internal growth and training, in fact, our entire business planning, financial planning, and business efficiency should have made a lot of progress in the past. So in the market competition, in fact, everything will happen. I think maybe the long-term goal is what, and in the short term, the method is smarter. I think it should be more effective to combine.

So I believe at different times and economic and function cycles, different companies of different models will review their different values. For JD's business model design, our business will take a long-term view and then it's heavier in terms of our investment in logistics and users' experience. And while we face external competition, we're confident that We have been growing and being better with internal planning and our operating efficiency continue to grow. The market competitions will always be there. The more important question is what is your long-term goal and how you can do this business smartly in the short term.

Okay, thank you.

We are now approaching the end of the conference call. I will now turn the call over to JD.com's Sean Chung for closing remarks.

Sure. Thank you for joining us on the call today and for your questions. If you have further questions, please contact me and our team. We appreciate your interest in JD.com and really looking forward to talking to you again next quarter. Thank you very much.

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