JD.com, Inc.

Hello, and thank you for standing by for JD.com's third quarter 2025 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, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com third quarter 2025 earnings conference call. With us today are CEO of JD.com, Ms. Sandy Xu, and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in earnings press release on our IR website, which applies to this call. We'll discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in earnings press release. Please also note all figures mentioned in this call today are in RMB, unless otherwise stated. Now let me turn the call over to our CEO, Sandy. Sandy, please.

Thank you, Sean. Hello, everyone. Thank you for joining our third quarter 2025 earnings conference call. We achieved a set of solid results across our strategic priorities during the third quarter and further enhanced our capabilities to drive better user experience lower cost, and higher efficiency. Our total revenues were up 15% year-on-year, sustaining our double-digit growth momentum. We are delighted to see growth of our general merchandise categories and marketplace and marketing revenues continue to accelerate sequentially. Both are becoming our important growth drivers. Now Gap Net Profit, came in at 5.8 billion RMB in the quarter, with the core retail business margin continue to expand year on year. Our food delivery business also sustained healthy expansion, while its loss narrowed in Q3 from the prior quarter as we continue to optimize operating efficiency and improve unit economics. Overall, our business are making good progress. Along our long-term strategic roadmap, we are confident that our core retail business will steadily expand market share with healthy margin improvement, and new initiatives will create deeper synergies and drive healthier financial models, further strengthening our entire business ecosystem. Among all the encouraging developments, that underpinned these results. I would like to point three most notable highlights for this quarter, which I believe should be the key takeaways from today's call. First, strong momentum in our user base and engagement. Our quarterly active customer number was up over 40% year on year in Q3, sustaining the momentum built in the previous quarters. thanks to both organic growth of JD Retail, as well as contributions from our new businesses, such as JD Food Delivery and Zinzi. The consistent growth has led to our annual active customers exceeding 700 million in October, making a new milestone in our user expansion. In particular, the number of JD Plus members, our highest quality user group, also recorded healthy growth in the quarter. In addition to user scale, user shopping frequency on our platform also increased by over 40% year-on-year in Q3, a pace we've sustained for two consecutive quarters. Notably, we saw meaningful shopping frequency increase across all user groups, including new users, existing users, and JD Plus members. This user momentum is clear proof that we have stayed very focused on providing a better user experience amid evolving user demand. In return, our expanding and more active user pool further improves our engagement with users, deepens our user insights, and enables us to better address their demand. This virtuous cycle ultimately supports our sustainable growth in the long run. Second, our core retail business remained strong in Q3. Retail revenues increased by 11% year-on-year in the quarter to R251 billion. There were a mix of contributors to this. While the high base effect for electronics and home appliances category started to kick in, sales of general merchandise as well as marketplace and marketing revenues continued to accelerate growth this quarter. Profit-wise, both JD Retail's growth margin and operating margin further expanded at a solid pace, demonstrating the continued scale benefits and operating efficiency gains of the business. Looking at the main categories, the electronics and home appliances category has been faced with a high base since the second half of Q3, which has been weighing on its growth momentum. This is an industry-wide challenge, and we are working closely with brands and manufacturers to navigate through it. For example, We've been leveraging our market and user insights to support brands and manufacturers in developing new and customized product models. Meanwhile, we continue to lower the costs for brands and strive to secure the best prices for our customers, thanks to our supply chain capabilities. Although the high base effect is expected to linger the near term, it's clear that the advantages of our business model and market position in these categories remain intact. And we are confident in building on these strengths to unlock new growth potential in this market. General merchandise category recorded 19% year-on-year revenue growth in Q3, an impressive acceleration from a quarter ago. Within this category, Revenues from supermarket, fashion, and health categories maintained double-digit young year growth in the quarter. The strong tailwind is expected to sustain into Q4. This is a result of our efforts in enhancing our product portfolio, price competitiveness, and service quality, which eventually translates to better user experience and stronger user man-share. As we continue to tap into the huge market potential, we believe general merchandise will play a bigger role in supporting JD Retail's long-term growth. In addition to healthier category mix, another bright spot in our Q3 performance was marketplace and marketing revenues, which at the group level grew 24% year-on-year in the quarter It has remained on a double-digit growth trajectory for four consecutive quarters. In particular, growth of our advertising revenues has accelerated sequentially in every quarter this year and exceeded 20% year-on-year in Q3. This strong momentum mainly stems from the accelerated ad revenues generated by core JD retail business. Our improved ecosystem for both 1P business and 3P merchants, better AI-powered ad tools, and improved traffic allocation efficiency all have contributed to the strong trend. As we move into Q4, we expect marketplace and marketing revenues to continue the healthy growth. Our platform ecosystem is taking good shape and gaining positive traction with suppliers and merchants, large and small. The third highlight I want to share is on new businesses. Within the segment, JD Food Delivery continued to make healthy progress in Q3. Its GMV achieved double-digit quarter-on-quarter growth in the quarter, driven by both order volume growth and a healthier order mix with high value orders, contributing a vast majority of total orders. While scaling up, the food delivery business also narrowed operating loss sequentially in Q3, thanks to the improving UE performance. This encouraging progress is achieved through our enriched supplies, increased operating efficiency, disciplined investment amid a competitive market, and our efforts to expand food delivery's revenue streams. More importantly, food delivery continued to generate strong synergies with our retail business. In addition to user growth and engagement, the cohort cumulative cross-selling rate has been on an upward trend, Products from our supermarket, electronic accessories, and CNC categories remained the biggest beneficiaries of this trend. Going forward, we will focus on further growing the food delivery business scale, UE optimization, and unlocking stronger synergies with retail, logistics, and other businesses across our ecosystem. Other new businesses including both Zinzi and international business, are progressing well as planned. Zinzi further penetrated into the lower tier markets and grew its merchant and user base. Our international retail business is gradually establishing capabilities in the UK, France, Germany, and Benelux regions. paving the way for our global expansion. Both are making solid steps in executing on their long-term strategies. One more thing before I wrap up. We unveiled our AI roadmap during the 2025 JD Discovery Conference in September. I want to share a few exciting updates here. First, We launched a number of new AI products at the event, including Tatata, an all-purpose digital human assistant app, and JoyInside, an AI agent for robots, toys, devices, among others. Second, we introduced industry-specific AI applications across four sectors of retail, healthcare, logistics, and industrial. Third, we also made upgrades to a few of our retail technology infrastructure, such as JD Streamer, our new digital human technology that provides e-commerce live streaming and short video production solutions. JoyStreamer has served over 40,000 brands so far, with significantly lower cost and better sales performance compared to real human live streaming costs. In addition, we provide 24-7 nonstop AI customer service, which handled over 4.2 billion queries during our 2011 grant promotion. We are excited about the potential of these AI applications as we foster a comprehensive AI ecosystem spanning across various industries. To conclude, Q3 was a productive quarter with all our business lines moving ahead steadily on our strategic roadmap. The user momentum on our platform was strong. Our core retail business is in a solid shape with multiple complementary long-term growth drivers and great potential for long-term margin improvement. Beyond core retail, new businesses including food delivery, Jingxi, and our international retail business are on track for healthy development, both financially and operationally. Taken together, our businesses are operating in synergy, bolstering our conviction in the path ahead. We see great opportunities to further unlock the collaborative value of our business ecosystems and to position as well for sustainable, high-quality growth. With that, now let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone, and thank you for joining the call today. In the third quarter, we recorded a set of healthy performance across our business lines. Our total revenues were up 15% year-on-year. outpacing the growth of MBS total retail sales. This was supported by double-digit revenue growth in our core retail business. Despite the high base for electronics and home appliances, general merchandise and service revenues both delivered stronger growth in Q3 and recorded their fastest pace since the second quarter of 2023. In terms of profit, JD Retail achieved strong year-on-year expansion in both growth and operating margins in the quarter. And our food delivery business also saw a sequential reduction in investment scale. Overall, our business are moving in the right direction, and we are at a stronger position to drive sustainable growth for the long term. Now, let's go through our financial results in the third quarter. Total net revenues increased by a solid 15% year-on-year to RMB 299 billion in Q3. Breaking down the mix, product revenues were up 10% year-on-year in Q3. Revenues of electronics and home appliances were up 5%. decelerating from last quarter due to the high base effect created by the trading program. This is in line with our expectations. And we are confident that we're positioned to further solidify our leading market position as we leverage our supply chain advantages and stay focused on enhancing user experience, reducing cost, and improving efficiency. Revenues of general merchandise were up 19% year-on-year in the quarter, a notable highlight of our Q3 performance. Growth in general merchandise has sustained double digital growth for four consecutive quarters and further accelerated from the previous quarter. Within general merchandise, both supermarket, and fashion categories saw growth rates surpassing meetings in Q3. The results were mainly driven by our continuous efforts to enhance our operational capabilities, build up better user experience and mind share, alongside our growing market share. This gave us the confidence that the strong momentum in our general merchandise categories will continue going forward as we capture the huge potential in this market. Service revenues were up 31 percent year-on-year in Q3, a solid acceleration compared to previous quarters. Notably, marketplace and marketing revenues increased 24 percent year-on-year, accelerating sequentially every quarter for seven quarters in a row. Within this line, advertising revenues continue to see robust growth, mainly driven by the notable improvement of user engagement and better advertising tools that we provide for both suppliers and merchants at our core retail business. This demonstrates our more robust ecosystem and the strong growth in the number of merchants and users on our platform. We expect marketplace and marketing revenues to continue solid growth in Q4, contributing to both our top-line growth and margin performance. Logistics and R&S service revenues grow 35% year-on-year in Q3, mainly driven by the incremental delivery revenues from food delivery business. Let's turn to our segment performance. JD Retail revenues were up 11% year-on-year in Q3. Our core retail business has built multiple growth drivers, and we believe growth of the general merchandise category and value-added services, including advertising, will be important pillars in retail's long-term growth. JD Retail also saw healthy progress in margin expansion in the quarter. Its gross margin has sustained year-on-year expansion for 14 quarters in a row and was up 1.3 percentage points to 19.3% in Q3. This was driven by a favorable mix shift towards higher margin business along with optimized procurement costs by leveraging our scale HVAC and supply chain advantages. In addition, in Q3, JD Retail's non-GAAP operating income was up 28% year-on-year to RMB 14.8 billion, and the operating margin was up 76 bps to 5.9%. both continuing strong momentum. Moving to JD Logistics. The logistics revenues were up 24% year-on-year in Q3. Both internal and external revenues grow at a steady pace. And JD Logistics also saw incremental delivery service revenues generated by full delivery business. In terms of profits, JD Logistics' non-GAAP operating income was compressed 39% year-on-year to RMB $1.3 billion in the quarter as it continued to invest in customer experience, service capabilities, and technology to enhance the efficiency of the entire logistics process. These efforts aim to boost JD Logistics' competitiveness in products and services, and strengthen its market position, which over time will translate into sustainable margin expansion. Our net new business generated RMB 15.6 billion in revenues, a steady growth compared to last quarter. This was driven by the continued expansion of our food delivery and international business. Non-GAAP operating loss of new business slightly widened sequentially to RMB 15.7 billion. To break this down, food delivery saw a sequential reduction in its investment in Q3. Our food delivery business continues to scale with a healthier financial model with extended revenue streams, disciplined spending in users, and increased operating efficiency. As to other new business, both Jinxi and international business increased investments compared to a quarter ago. They're in a rapid development stage. and are important pillars in JD's long-term strategies. Going forward, we will continue to scale up the new business and further unlock synergies to set the stage for our future growth. At the same time, we are committed to improving UE performance and aim to drive healthy and sustainable bottom line growth in the long run. For our consolidated profit performance in Q3, our gross profit was up 12% year-on-year to RMB 50 billion. And the gross margin was 17%, slightly reduced by 0.4 percentage point. This was primarily due to margin dilution. from the food delivery business and JD Logistics, which offset JD Retail's solid gross margin extension in the quarter. Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 5.8 billion in Q3, and non-GAAP net margin was 1.9%, both done year-on-year. This near-term headwind in profits Many reflect our investments in food delivery. Our last 12-month rate cash flow as of the end of Q3 was RMB $13 billion, compared to RMB $34 billion in the same period last year. This was primarily due to cash outflows associated with the trading program and the decline in operating income. By the end of the Third quarter, our cash and cash equivalents, restricted cash, and short-term investments totaled RMB $211 billion. In summary, we're encouraged by the solid progress in both core retail and new business. Retail has built a group metric with multiple drivers and a clear path to our long-term margin target. Full Theory is growing with a healthier financial model. And other new business, including lower-tier market and international business, are also making solid steps to the next chapter. All our businesses are on the right track, starting to generate notable synergies with one another and collectively contributing to our high quality development in the long term. With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, you're welcome to ask questions in English or Chinese, and our management will answer the question in Chinese. We'll provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in the original language. Operator, we are open. the call for Q&A session now.

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 two questions at a time from each caller. If you have more than two questions, please request to join the queue again after your first two questions have been addressed. Your first question comes from Kenneth Fong at UBS.

Hey, Sandy, Ian, Sean, good evening. Thank you for accepting my question. I have two questions. The first one is about the impact of shareholding. First, in the second half of the year, we shareholding is in a high technical stage. How does the management look forward to the growth of the large-scale products and Jindong overall in the second half of the year? In fact, from the financial aspect, if the demand for shareholding is delayed, what will be the impact on the profit rate of Jindong retail? This is the first question. My first question is on the government trading subsidies. As the year-on-year comparison base is getting higher into the second half, into the fourth quarter, can management share the growth outlook for the electronics and home appliances growth for JT Retail? And financially, as the trade-in subsidies fade and volume kind of slower in terms of growth year on year, how should we think about the margin impact on JT Retail? My second question is on the overseas development. Post the recent acquisition on some of the company oversees, And JD joined by Commence Operations. Can management share about its overseas strategy, including the scale and the pace of investment? Thank you.

Thank you for your question, Kenny. As you can see, since last year, the national stock market policy has clearly aroused demand for consumption, especially for the sales of home appliances and computers. Thanks for your question, Kenny.

Yes, since last year, the trading program has stimulated consumer demand and contributed to the sales of home appliances and PCs. So this created an inevitable high base for the industry, which is within the market's petition. Although the trading program has caused short-term fluctuation in the consumer demand, its more substantial impact is driving industry upgrades and promoting products. that are innovative, intelligent, and green, and ultimately leading to high-quality growth of the industry.

京东在国股期间积极地支持了政策的落地, 在家电和3C品类的市场份额供应链能力也得到了进一步提升, 特别是我们的自营模式。 这些核心优势的持续强化, 才是京东差异化的竞争力和业务长期发展的基础。 Since the trading program, JD has actively supported implementation of the policy.

As such, we have further enhanced our market share and supply chain capability in the related categories. And especially on our 1P model, The continuous enhancement of our core advantage differentiates JD and builds our long-term growth foundation. We'll continue to leverage our strengths in product, price, and service with the goal to further strengthen user mindshare and consolidate and expand our market share. We'll focus on a few areas.

这个几个领域包括首先产品创新方面, 那我们也会跟品牌方合作推出更多的 and customized products to promote product upgrades and innovations. In terms of price, we will also use the advantages of scale and our supply chain capabilities to drive the constant optimization of cost and price to provide more competitive prices for users. In terms of service, we will also create online and offline all-channel shopping experiences. For example, we will continue to improve the offline layout of 3C products, 那么在高线城市聚焦我们的京东Mall 我们的超级甜点 城市旗舰店这样的大店 在下沉市场呢 专注我们的家电专卖店这些业态 那以及包括我们送装一体的差异化的服务 可以为用户提供更加优质的体验和更高效的模式 来不断的去巩固我们的市场份额 那截止三季度 我们在全国已经有超过20家京东Mall在营业

So this area includes first on the product innovation, we'll collaborate with brands to launch more customized products, driving product upgrades and innovation. Price optimization will also leverage our scale advantage and supply chain capability to further optimize cost, offering users more competitive price. And on the service, so we're offering omnichannel consumer service. We'll build a seamless online and offline shopping experience for our customer. For example, we have been strengthening our offline presence in home appliance and 3C categories, focusing on large stores like JD Mall, JD Home Appliance City flagship stores in the high tier cities, and smaller ones such as JD Home Appliance stores in the low tier market. In addition, we also provide differentiated service, including integrated delivery and installation, offering better user experience and more efficient service to our user. With these efforts, we'll further consolidate our market share. As of Q3, we have over 20 JD malls nationwide, and the number of JD Applied City flagship stores exceeded 100.

Regarding the profit, we will continue to provide the most cost-effective products to ensure the user experience and strengthen the user's mind. At the same time, whether it is during the stock market or in the future, our team will continue to use the ability of the supply chain to strengthen and build up the brand. By customizing the reimbursement in these ways to promote the improvement of industrial efficiency and bring about the improvement of industry profits, it will also bring about the improvement of long-term profit.

In terms of profit margin, we'll continue to offer users the best value for money product to ensure better user experience and mindshare. Additionally, whether during the training program or in the normalized phase going forward, our team will leverage supply chain capabilities and enhance collaboration with brands.

总体来说,我们非常有信心在家电和三星品类 We will continue to strengthen our own capabilities and strategic layout, cooperate closely with brand companies, and jointly deal with short-term industry challenges to assist the industry in long-term health development. At the same time, our growth power will also be more diversified, including supermarkets, health, fashion, these Japanese products, as well as advertising and other service income, and we will continue to accelerate growth. to become a new driving force for the overall growth of Jingdong. And as we have just shared, our number of users and the frequency of purchase of users have also maintained a strong growth trend. In the past double 11, our number of lower-end users also increased by more than 40%. These have provided good support for the health growth of Jingdong's income next year, making us more confident in long-term growth.

So overall, we are confident in our user mind share and market share in the home appliance and 3C categories. JD will continue to strengthen our capabilities and strategic positioning, working very closely with brands to address short-term challenges and support the long-term healthy development of the industry. Additionally, our growth drivers are now more diversified. we have seen sustained sales growth acceleration in categories such as supermarket, health, fashion, and service revenue from advertising, which are emerging as new growth engines for JD. Furthermore, as I just have shared, both our user base and shopping frequency have been on a stronger growth trend. During JD's Double 11 grant promotion, the number of our shopping customers increased by 40% year-on-year. This set of momentum will support our healthy growth next year and give us more confidence in the long term.

第二个问题关于京东的国际业务。 那首先从战略上看,我之前也分享过, 国际化是京东最重要的长期战略之一, 而京东作为中国收入最大的零售商, 我们也希望能够逐步构建起 覆盖全球的更加高效的零售网络 把京东极致的购物体验 带给全球的消费者 我们看到国际市场的规模足够大 比如欧洲是全球第二大的 消费电子市场仅次于中国 而且目前的用户体验 还有很大的提升空间 我们也希望能够抓住 中国供应链出海的机遇 发挥我们自己的供应链优势 更好地帮助 Regarding your second question on JD's international business,

So first, from the strategic perspective, international expansion has always been a key long-term strategy for JD. As the largest retailer in China, we aim to gradually establish a highly efficient global retail network so that we can deliver JD's premium shopping experience to consumers worldwide. We recognize the international market is very big. For example, Europe is the second largest consumer electronics market in the world, only second to China, and there are still many great areas to improve user experience. We also aim to seize the opportunity of Chinese supply chain going global, leveraging our supply chain advantage to better support Chinese brands in their international expansion. In terms of business model, unlike other cross-border e-commerce platforms, we leverage our supply chain capabilities, commit to a local e-commerce approach, and localization strategy. We collaborate with high-quality brands and suppliers around the world to create mutually beneficial partnerships.

In terms of progress, our online retail business, Joybuy, has already started to run in countries such as the UK, France, Germany, and the Netherlands. This also marks an important step in our Jindong internationalization strategy. We will also continue to improve user experience and continue to build on key areas and capabilities. Specifically, we will continue to build and cooperate with many global high-quality brands In terms of logistics, we will continue to improve storage, delivery efficiency and stability. In addition, in terms of development, these platform functions and shopping experience of products also have room for optimization. It is also very welcome that investors and analysts in Europe can experience our products and give us more suggestions. Regarding Seconomy, the project is still in the process of approval. There will be further updates and we will communicate with you at any time.

In terms of progress currently joined by our European online retail business is in the test phase in countries including the UK, France, Germany, and the Netherlands. This marks an important step in JD's international strategy. We'll continue to enhance user experience and build our key capabilities in areas including, first, expanding product offerings and collaboration with premium global brands. Second, enhancing logistic capability to improve the efficiency and stability of warehousing and delivery. Third, investing in R&D to optimize the product functionality and enhancing shopping experience. We welcome investor analysts based in Europe to experience our JoyBuy app and provide us your experience. Regarding the economy, the transaction is still subject to the regulatory approval. We'll provide you guys further updates when appropriate.

从投入上来看,这是一个持续推进的过程。 我们也会坚持逐步和稳健的财务纪律。 So from the investment standpoint, this is a gradual process.

We will continue to advance our international expansion strategy steadily while maintaining our maintain a gradual and prudent financial discipline. We will prioritize investment efficiency and make dynamic adjustments to adhere healthy and sustainable, to achieve healthy and sustainable growth. Overall, the scale of the investment in our international business will not be substantial for JD.com and we'll carefully manage the investment pace and scale. Operator, we can take the next question.

Your next question comes from Ronald Kong with Goldman Sachs.

Andy, I have two questions. First, I want to ask about the strategy and the benefit. In the state of loss, how long do you think the investment period will last? including how to improve the UAE in the future. I would like to hear how we can improve the business model of the cash, cash relief, and various business models, and how to improve the further UAE improvement of our delivery. Secondly, I would like to ask how we can strengthen the competitive advantage of commercial, health, and clothing products in terms of product experience and price. Thank you, management. Two questions. The first is on food delivery. What is the duration that JD will be committed to invest at this loss-making period as part of customer acquisition? And what's the progress in improving unit economics in commissions and business models like the 7Fresh and even coffee across the 7Fresh brands? The second question is on general merchandise, seeing very healthy growth there and in 3P. So how do we plan to further strengthen the competitive edge in the 3K category, supermarket, health, and apparel in terms of speed, selection, quality, and price? Thank you.

谢谢Ronald的问题。 那首先在外卖这边呢,无论是外卖还是即时零售, 对于我们来说同样也是一个长期战略。 Our goal is to promote the healthy development of our business to maintain sustainable growth. So in the past few months, we have been focusing on continuing to optimize the internal operating efficiency to improve the quality of our products. In the past three seasons, in the face of intense competition in the industry, we have maintained a relatively rational attitude. Currently, the overall business is still in the first stage of strategic layout. Our goal is to have a better user mindset and market share in the field of quality delivery. Thank you Ronald for your question.

Both food delivery and on-demand retail is a long-term strategy for JD. We aim to drive healthy and sustainable growth of the business. We have been optimizing operational efficiency and improving UE. So in Q3, we remain very rational amid the intensified competition in the industry. Our food delivery business is currently in its first stage of development. Our goal for this stage is to establish better user mind share and market share in the quality food delivery sector. We will be committed to providing high quality food delivery service to our existing premium user while attracting new users. Additionally, as you guys know, what we're good at is supply chain, so we'll continue to deepen our supply chain effort such as through our innovative 7Fresh kitchen model to offer differentiated experience and service to our users.

那么在三季度呢,我们京东外卖也保持了健康的增长态势。 那一个是外卖的GMV环比取得了双位数的增长。 在单量增长的同时,订单结构变得更加健康。 正餐的订单占比持续提升,目前占到我们总订单的绝大部分。 In addition, our order price is also increasing in the second quarter, even in such a fierce competitive environment. In addition, while the scale is expanding, our overall investment in Q3 is narrowing in the quarter. This is mainly due to our advantageous gradual improvement. This year, we have implemented a free policy for business, so our income is relatively low. And one is that the commission income is relatively low. In addition, this new business has also just generated relatively limited advertising income. However, our business team is continuously improving the efficiency of operation, including more abundant supply, allowing our quality food business to continue to grow. In terms of supplementary efficiency, we are also gradually increasing. We have also made more detailed operations and strategies for different regions, user groups, and order types. In terms of efficiency, we are also improving the ability of the underlying system to optimize the overall experience and efficiency. At the same time, in July, we also launched the 7,000 small kitchen model. This is a new model that uses supply chain innovation to solve food safety issues. Our goal is to ensure that consumers eat in peace and can also help quality restaurants make money. Since the launch, the 7,000 small kitchen has been recognized by consumers. So in the third quarter, JD Food Delivery maintained healthy growth trend.

JD Food Delivery GMV achieved double-digit growth quarter-on-quarter alongside order volume growth. It also delivered healthier order mix with a proportion of male orders steadily rising and contributing to a vast majority of our total order. At the same time, average price per order also increased quarter-on-quarter compared to Q2 amid intensified competition. So this is remarkable. While scaling up overall investment in full delivery, in JD full delivery business in Q3 narrowed sequentially thanks to the UE improvement. The revenue contribution of full delivery is still limited as we are implementing a commission-free policy for merchants and only started to generate limited advertising revenues That said, our team has made solid progress in improving operational efficiency, including enriching supplies. The number of high-quality restaurant merchants continue to grow in the quarter. We also further improved our subsidy efficiency with refined operations and tailored subsidy strategy to different regions, user groups, and order types. In addition, as we continue to upgrade our underlying system capability, we have seen better operating efficiency. We also launched our new business, 7Fresh Kitchen model in July, which addressed food safety concerns through supply chain innovation. Our goal is to ensure that consumers can enjoy their meals with peace of mind and at the same time help quality restaurant improve profitability. Since its launch, 7Fresh Kitchen has been welcomed by our customers with a rapid increase in its order volume. It has also boosted sales and order growth of other quality restaurants within the three-kilometer range. By the end of this year, people will see more 7th generation in the region of Beijing.

未来我们也会继续以长期的视角来推进我们的战略规划。 当然同时也会考虑长期的投入产出。 我们的目标始终是打造可持续发展的商业模式, 一方面追求单量的增长, At the same time, it will gradually release the scale effect of take-out business to improve our advantages. In the end, take-out business is a business that can survive independently. And more importantly, the business of Jingdong take-out will be deepened in the entire business ecosystem of Jingdong, including at the user end, supply end, and travel end. All of them have a deep integration and creation of shared value space with our existing business. 那这些业务并不是简单的加减关系。 那么从长期看,我们的用户获取成本会下降。 那么集团整体呢,也会在保持盈利和现金流充足的基础上追求可持续增长。 Looking ahead, we'll drive our strategic progress with a long-term perspective and focus on long-term ROI.

Our goal is to create a sustainable business that drives healthy order growth and, at the same time, gradually unlocks scale, effect, and enhance operations with better UE. Ultimately, JD full delivery should be a self-sustaining business. Moreover, full delivery is deeply integrated into JD overall ecosystem. We believe there is significant potential for synergies in user momentum, supplies, and fulfillment within our ecosystem. The way of our business working together is not simply adding one and cutting another. JD user acquisition costs, in the long term, JD user acquisition costs will decrease, and at the group level, we are committed to driving sustainable growth while maintaining profitable and cash flow sufficient.

So about the Japanese product category, As I mentioned earlier, this category has achieved a double growth in four consecutive seasons. We can clearly see that there is still a lot of room for growth in the retail and fashion categories. There are still a lot of unfulfilled needs for users in the capital. We also have a clear growth strategy for all categories. In the retail category, we focus on strengthening user mentality and user penetration, and continue to use Black 5 Thank you. whether it's with other online modes or offline, it has a very strong competitiveness. This is also a manifestation of our self-sufficiency mode's scale-up effect. At the same time, we also maintain brand co-creation, improve product type, product type, and fine-tuning operation capability, and create products with Jindong core and potential growth. For example, the products such as Jiu Shui, Mu Ying, and Jiaqing have already established a very strong user core, and other products will also gradually break through.

Regarding your question about our general merchandise category, as I mentioned before, it has sustained a four-quarter consecutive double-digit growth. Key categories, especially supermarket, health, fashion, and home goods all deliver very strong growth. We see significant growth potential in general merchandise, including supermarket and fashion, As our users have substantial unmet demands, we have clear growth strategies for each of these key categories. First, on supermarket categories, we focus on improving user mindshare and user penetration. Through our promotions such as Black Friday and Super 18, we'll build stronger user mindshare of our supermarket offering. Supermarket category will also take the opportunity of our rapid user growth on the platform to drive a higher penetration and conversion. We have been optimizing cost and improving operational efficiency through our supply chain capability, providing more competitive price to our user. which validates the economic scale of our 1P model. Our supermarket category has made solid progress in this area and built strong competitiveness compared to other model online and offline. At the same time, we will collaborate with brands, further refine our operation and build categories with strong JD mindshare and growth potential, such as liquor, baby and mom products, and household cleaning categories all have already established strong user mindshare. We expect to make breakthroughs in other categories as well.

整体来看,我们在日白品类上的策略非常清晰, 那团队的运营能力也在持续提升, 我们对整个品类未来增长的空间充满信心。 那日白品类也正在成为京东多元化增长矩阵的重要部分, 也是我们长期稳健增长的重要驱动力。 Overall, our strategy for the general merchandise category is very clear.

We are confident in the growth potential and market opportunity in the general merchandise sector as we enhance operation and user mindshare. General merchandise is an important pillar of JD growth matrix and will support our long-term Sustainable growth. We can take the next question, operator.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Alicia Yap with Citigroup.

Hi, thank you. 谢谢管理层接受我的提问。 How much is the flow rate of new users? Can you share it? And then can you share the new users who have received the delivery and convert them into core sales users? So can management share with us the synergies on general merchandise category that benefit from the food delivery traffic? Most of your food delivery user comes from a lawyer JD user, and what is the retention rate of the newly acquired user through the food delivery? Would you be able to quantify and share the cohort of new food delivery user who become active user of JD core retail user? And second question is, can management update us on your latest AI strategy and investment? Can you elaborate how AI has helped on JD's core business, and how do we think about the financial impact?

Thank you. Thank you, Alicia. I want to answer the first question. When we see the health development of the food delivery business, The co-effectiveness of core sales is also gradually emerging. First of all, in terms of user growth and activity, the overall DAO of the three-segment JD App continues to maintain high-speed growth, and the increase continues to lead the industry. JD's number of users and shopping frequency remain at more than 40% of the same increase. We also use quality delivery to better serve the existing high-quality users in JD. The repurchase rate of delivery users remains at a high level, and it motivates the activity of large-scale users and the improvement of the shopping platform. At the same time, it also attracts more new users. JD's annual active number of users has exceeded 700 million. It shows that we continue to expand the user base and continuously strengthen the user consistency. At the same time, we are also accelerating the deployment and optimizing the user conversion strategy and tools. Combining the number of users, precision selection, and improving the conversion rate of new delivery users, we see that the conversion rate of new delivery users is increasing in the main business. The conversion rate of the earliest batch of new delivery users has already reached 50%.

Thank you, Alicia, for your question. I'll take the first one. So as JD food delivery drives healthy development, we also see it's generating deeper synergies with JD retail. First, on the user growth and user engagement side. In Q3, DAU of JD app maintained a rapid growth, with growth rates leading the industry. Our quarterly active customers and user shopping frequency both recorded over 40% year-on-year growth in the quarter. As we continue to provide quality food delivery, we have seen JD Food Delivery's user retention rate maintain at a relatively high level and at the same time boost our overall user engagement and user shopping frequency. While serving our high-quality existing users, our food delivery business also attracts new users to our platform. Our annual active customer number surpassed the milestone of 700 million in October, reflecting our expanding user base and increasing user sickness. At the same time, we will be accelerating the deployment and further optimizing our user conversion strategies and tools. based on the preferences of food delivery users. We have been providing retail product selection and recommendation in a more precise way, thus driving better user conversion. We have seen that the conversion rate of the new users acquired by JD Food Delivery has been training up month by month. And for the earliest group of such users, their cohort conversion has reached close to 50% in Q3.

第二呢,在跨品类购物方面, 我们看到外卖用户的跨品类购物行为在加强, 特别是在商超,生活服务等日白品类上。 那不仅带来新用户, 也拉动了老用户的购物品质的提升。 那我们相信外卖将为日白品类注入新的增长动力。 At the same time, the delivery business has also brought about the rapid development of Jindong delivery business. For this reason, we have set up a special team to closely monitor the progress of delivery business. In the future, we will continue to accelerate the delivery business and core retail in user cross-sector shopping and marketing. We will continue to explore the value of Jindong's overall business ecosystem.

Second, on the cross-sell side, we've seen a stronger trend of cross-category purchases of food delivery users, particularly of our general merchandise categories, including supermarket products and live services. We believe food delivery will create new growth momentum to our general merchandise category as it attracts new users and drives up shopping frequency of our existing users. In addition, CD food delivery has also accelerated the development of our on-demand retail business. We have built a dedicated team that pays close attention to this area. Going forward, we will continue to accelerate the synergies between food delivery and core retail business. in terms of user momentum, cross-category purchases, and marketing. In addition, we will tap into more synergies of our broader business ecosystem, driving healthy progress in our user-based expansion, revenue growth, and efficiency improvement.

Let me answer the second question about AI. We can see that in this era, we also believe in the great opportunity of AI and the great value of the change of business model. At present, Jingdong has already built a complete AI capability system on the basis of facilities, models, platforms, scenes, and product levels. We also plan to continue to invest in and drive all industries in the next three years to form a large-scale AI ecosystem. I'll answer the second question.

So we are in the new era where we see a lot of new opportunities. in AI and significant value of business model reform. JD has built a solid comprehensive AI capability framework that covers infrastructure, models, platforms, application scenarios, and products. Over the next three years, we'll make a sustained investment to foster a trillion R&B scale AI ecosystem across various industry. So at our JDD conference in September, we have unveiled JDAI strategy roadmap and launched flagship AI product including our JDAI, Tatata, and all-purpose digital human assistant, and JoyInsight, and AI agents for robot toys, devices, among others.

那麼在應用上呢,我們的差異化優勢在於我們擁有眾多的落地場景。 including retail, logistics, health, and industry. Taking the retail scene as an example, we provide our customers with AI assistants, advertising AI agents, and more than 50 AI tools, such as classic points, to help our customers generate, sell, and supply chain management, and overcome these links to increase efficiency. At the same time, we are also exploring the experience of e-commerce shopping in the era of AI, and have also launched the smart search recommendation function, Then, by using natural language to accurately understand the needs of users, to achieve the efficiency breakthrough of traditional shopping methods, to provide individualized shopping experience for users. In the logistics scene, Jingdong's logistics robot has more than 20 provinces in the country and more than 10 countries around the world. The large-scale deployment application also covers the logistics chain route of warehouse division, transportation, and delivery, etc. In terms of AI application, JD's differentiation is that we have extensive application scenarios

including retail, logistics, health care, and other industry sectors. So taking both retail and logistics as example, in retail use case, we are providing merchants with over 50 AI tools, such as AI system, AI agent for advertising allocation, and Jing Dian Dian to help merchants enhance efficiency and lower cost in content generation, marketing, supply chain management, and customer service. We also redefined e-commerce experience in the AI era. We launched a smart search and recommendation function through natural language interaction. It can precisely understand user needs and delivering a huge breakthrough in shopping efficiency and truly personalized shopping experience. In the logistic use case, our logistic robots have been deployed across more than 20 provinces in China and over 10 countries globally, covering the entire logistics chain from warehousing, sorting to transportation and distribution. Looking ahead, the expanding deployment of logistics robots, autonomous vehicles and drones will further reduce logistics costs in the society increase our business partner efficiency, and keep optimizing shopping experience for our consumers. Okay, operator, we can take the last question.

Your last question comes from Thomas Chong at Jefferies.

Good evening, thank you for accepting my question. My question is about the development of the company's platform ecosystem, including 3P, the increase in the number, the ratio, and the future weeks. In addition, I would like to share with you our views on the future in terms of profit and loss. Thanks, management, for taking my question. My first question is about our ecosystem development, including the number of freebie merchants, contribution, as well as the expectation over the next few quarters. And my second question is about the outlook in terms of our profitability and margin in the next few years. Thank you.

All right. Thank you. Our platform's ecological development has achieved very good progress. All indicators are also maintaining rapid growth. In the third quarter, Jindong's active business numbers remained the same, with an increase of more than 200%. We have introduced more high-quality top business owners, industrial-grade business owners, and provided consumers with a richer supply of goods. At the same time, the delivery business also brought us a lot of high-quality restaurant customers. We also see the positive feedback from users. In the third quarter, our 3P number of users increased by more than 50% compared to the rapid increase in the number of users on the big plate. From the financial results, the revenue and advertising revenue remained the same, Thank you, Thomas.

We've actually made a solid progress in developing our platform ecosystem with a set of indicators growing at a very rapid pace. So in Q3, our active merchant number grew by over 200% year-on-year. we've onboarded more top-tier merchants, as well as merchants from industrial belts, providing users further enriched product offerings. Meanwhile, our food delivery business has also brought in a large number of quality restaurant merchants. We've also seen positive feedback from users. In Q3, the number of users who shopped our 3P offerings grew at a faster pace of over 50% year-on-year, outpacing the growth of our total users. Reflected in the financial results, our commission and advertising revenues have been on a very rapid growth trajectory, with growth rate accelerating to 24% year-on-year in Q3, which is the highest pace since Q2 2022.

Second, our platform's ecological business still has a lot of room for development. Specifically, we will continue to attract more business owners in the biotech industry. At the same time, we will continue to recruit quality business owners and enrich the local supply of 3P Ecology. We will also improve the basic facilities of the platform, provide more technical tools for business owners, help business owners improve their business efficiency, optimize business operation rules and flow distribution, and create a clear growth path and fair business ecology for business owners. We will also continue to strengthen the user mentality of 3P, especially the 3P-based products such as large-scale supermarkets. We have seen more and more consumers build up the mentality of buying clothes and going to JD. Finally, we will firmly develop platform ecology, cooperate with the business, and improve user experience. We believe our platform ecosystem has a lot of potential.

In particular, we will further explore industrial belts to onboard more merchants. We will also continue to expand our food delivery merchant base to enrich local supplies for our 3P ecosystem. In addition, we will continue to strengthen our platform infrastructure and provide more tech tools to merchants with the goal to help them enhance operation efficiency on our platform. We will also optimize merchant operation rules and the traffic allocation efficiency to create a clear growth path and a fair ecosystem for our 3P merchants. In addition to that, we will continue to strengthen user mindshare of our 3P offerings. We were seeing that for our 3P-driven categories, such as fashion category, users have a growing mindshare of shopping for clothing on JD.com. We are committed to developing our platform ecosystem, achieving win-win outcomes with our 3P merchants and better serving our users. Platform ecosystem business will also be our long-term driver for both revenue growth and profitability expansion.

第二个问题是在第三季度京东零售的利润继续保持稳健的增长, 进一步验证了我们的核心零售业务的利润率长期稳步提升的信心。 The main driving force of profit growth includes the health development of our platform, and the rapid growth of service income such as commission and advertising, which leads to an increase in profit. Secondly, we continue to strengthen the self-employment chain, play a key role in the scale effect of core business, and continue to promote the efficiency of business, maintain healthy profit performance, In particular, the net profit rate of retail has remained stable for 14 consecutive seasons. Third, the change in product structure will also affect our profit and loss trend. Now, the operating efficiency and profit rate of most products and brands are constantly improving, especially in the Japanese white product category. The sales and operating capabilities of commercial products and differentiated products are all improving. there is still a lot of room for improvement in profitability. And with the optimization of the product structure, we also have room for improvement in profitability in the long term. Secondly, in terms of investment in new businesses, we are always involved in the investment of supply chain capabilities. In the deployment of new businesses such as take-out, international and surprise, we are constantly improving our supply We believe it will bring overall efficiency improvement and profit improvement. Finally, our profit rate,

For your second question, in Q3, JD Retail continued to see steady profit growth. This further validates our confidence in retail's long-term margin trajectory. The main drivers for this include, first, the healthy development of our platform ecosystem will drive growth momentum in our commission and advertising revenues. which will be a contributor to our margin expansion. Second, as we continue to build up our supply chain advantages and the scale effect of our core retail business, we are confident to further lower costs and improve our operating efficiency, which will lead to better margin performance. To note, JD Retail's gross margin has been expanding year on year for 14 consecutive quarters. Our category makeshift will also impact our margin performance. Currently, the operating efficiency and margin performance of most of our categories and brands have been improving. In particular, our supermarket category has built stronger procurement capabilities and differentiated product offerings. We see meaningful potential to further increase supermarkets margins going forward. Meanwhile, as we continue to optimize the product mix for electronics and home appliances, we also see room to increase these categories' margins in the long term. In terms of investment in our new businesses, we will be centered around supply chain capabilities to make investments, such as in food delivery, international, and Jingxi businesses. As we further enhance our supply, fulfillment, and services, and broaden coverage in categories, customers, and regions, we see more growth potential of our businesses. As the new initiatives generate deeper synergies with our existing businesses, we expect to see improvements in operating efficiency and profitability of our broader business ecosystem. our high single-digit margin target for the long term remains unchanged.

That's a wrap, operator.

We are now approaching the end of the conference call. I'll turn the call over to JD.com's Zhang Zong for closing remarks.

Thank you for joining us on the call today, and thanks for your question. If you have further questions, please do not hesitate to contact me and our team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you. Have a good day.

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