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spk04: Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to the Ding Dong Limited second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Please note that this event is being recorded. I will now turn the conference over to the first speaker today, Nicky Zheng, Director of Investor Relations. Please go ahead, sir.
spk00: Thank you. Hello, everyone, and welcome to Dingdong's second quarter 2023 earnings call. With us today are Mr. Changlin Liang, our founder and CEO, and Mr. Song Wang, our senior vice president. You can refer to your second quarter 2023 financial results on our IR website at irz100.me. You can also access a replay of this call on our IR website when it becomes available a few hours later after its conclusion. For today's call, management will provide their prepared remarks first, and then we will be hosting a question and answer session. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release. which also applies to this call. As we will be making forward-looking statements, please note that all numbers stated in the following management prepared remarks are in RMB terms. And we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in your earnings release. and filings with the SEC. I will now turn the call to our first speaker today, the founder and the CEO of Dingdong, Mr. Liang.
spk02: Hello everyone and welcome.
spk08: Hello, everyone, and welcome to Zingdong's 2023 second quarter earnings call. I'll start by providing a brief overview of our operating performance in Q2 2023.
spk02: In Q2, Zingdong bought 48.4 billion yuan. Under the Long Gap standard, the net profit is 0.2%. In the second quarter, we recorded 4.84 billion RMB in revenue with a non-GAAP net profit margin of 0.2%.
spk08: If excluding one-time expenses, we were profitable on a gap basis. At the same time, if we exclude the impact of year-end bonuses issued in Q2, we were operating cash flow positive. This strong performance reflects our setback commitment to our efficiency first with due consideration of scale approach, which has resulted in three consecutive quarters of non-gap profitability.
spk02: The GMV of Dingdong Grocery is 53.2 billion yuan. As we all know, during the COVID-19 pandemic last year, Dingdong Grocery quickly responded and went up. It overcame many difficulties in the supply chain and operation, and fought to protect the people's livelihood. It helped the users to meet their consumer needs, which led to the high-bets of the same period last year. However, in the high-bets last year, this year, the number of users increased by 5% and reached 4 times this year. The number of users has also increased by 8%. At the same time, our membership growth has also been greatly improved. The Q2 membership user GNV ratio has reached 54%, which has increased by 10%. This shows that in the normative operating environment after the epidemic, relying on our continuous commodity power and full chain of operation capability construction to serve the needs of users at the moment, the overall order quality and user connectivity are still improving, and our operation efficiency is continuously improving.
spk08: RGMV reached 5.32 billion RMB in Q2. A year ago, at the height of the pandemic, we successfully met surging consumer demand by quickly adapting to difficulties across our supply chain and operations, which resulted in a strong operational performance. Despite the high base effect set in Q2 last year, we managed to achieve a 5% year-on-year increase in monthly order frequency, surpassing four times per month for the first time. In addition, our ARPU increased by 8% year-on-year, and our member penetration rate improved greatly, with members contributing 54% of the total GMV. This is a 10 percentage point year-on-year increase. Thanks to our product development capabilities and full chain operational capacity, we also make continuous improvements to overall order quality and user stickiness, even with the retail environment normalized post-pandemic. This reflects our commitment to optimizing operational efficiency to meet the evolving needs of our users.
spk02: Next, let me review our progress on the product front.
spk08: Our exceptional product development capabilities are a key growth driver, enabling us to establish robust competitive advantages. We have developed numerous products that are unique to Ding Dong, and our brand is gaining popularity among users. This quarter, we launched the Delicious Keeling Ranking, which highlights top-rated products that have been reviewed by experts and select users, assessing everything, including deliciousness, uniqueness, and the amount of additives. This feature is creating significant growth opportunities for our outstanding products. 例如我們的土屋基,
spk02: Since entering the Mechilin channel in April, the monthly exposure has increased twice in three months, and the transaction volume has increased by 3.6 times. At the same time, the recovery rate of users increased by 5.4% on the 30th. Our free brand, Baolu Workshop, has entered Mechilin for more than a month, and the weekly exposure has increased by 80%. The weekly income has increased by more than twice. We believe that in the future, more and more users will discover and recognize our Dingdong good products.
spk08: Since free-range silky chicken was added to the delicious killing ranking in April, we have seen a remarkable increase in exposure, transaction volume, and customer loyalty. Our average monthly exposure has surged by 200%, while monthly average transaction volumes have skyrocketed by 360%. Additionally, the 30-day repurchase rate increased by 5.4 percentage points. Another product that has grown thanks to the delicious killing ranking is our private label, Striped Mochi Roll by Baus Bakery. In the space of just one month, its average weekly exposure increased by 80% and its average weekly revenue more than doubled. Filled by this new promotional channel, we're confident that more and more consumers will discover and appreciate our high-quality products in the future.
spk02: At the same time, we pay great attention to improving our user experience. As of June this year, we have accumulated We will continue to introduce new member rights in the future to give back to our member users. In the second quarter of this year, our green card member GNV increased by 10% in the same ratio. We're constantly striving to improve the user experience for our download members.
spk08: Our team has been hard at work customizing nearly 100 high quality products exclusively to meet the unique needs of our members in East China. Our existing member benefits such as free dishes, member exclusive products, member exclusive discounts and super member days are just the beginning. We'll continue introducing even more benefits to incentivize and reward our loyal members. We're proud to share that in the second quarter of this year, member GMV increased by 10 percentage points year-on-year and 2.4 percentage points sequentially, while their order frequency increased by 9% year-on-year and 5.2% sequentially. Despite the high base effect created by the pandemic last year, quarterly member ARPU increased by more than 10% year-on-year.
spk02: Next, I would like to talk about the construction of our public chain. In the recent few seasons, we have been able to maintain our profit. In addition to the contribution of commercial power, it also contributes to our continuous investment in research and development technology. We have always followed a long-term business concept. In each part of the public chain, we have been constantly upgrading and optimizing. We have successfully achieved from purchasing The system can also use AI technology to predict order size, carry out product planning, pricing, search, recommendation, intelligent supply and demand management, and storage management. By relying on our continuous investment in systems and algorithmic capabilities, we have greatly improved the operation efficiency of the public chain in the case of processing FDC to SKU millions of units per day on our public chain. Next, I would like to update you on the progress we have made in our supply chain. Our supply chain improvements have been a key driver of our recent profitability.
spk08: alongside our product development capabilities. We have always adopted a long-term approach to every aspect of our operations. Through sustained investment in R&D and technology and continuous upgrades to every link in a supply chain, we now can digitally manage procurement, production, processing, warehousing, fulfillment, and distribution, covering everything from people, goods, logistics, and warehousing. Our proprietary algorithms enable us to predict order size with AI technology perform category planning, optimize pricing, provide search recommendations, replenish supplies, and manage inventory. Even with thousands of frontline fulfillment stations processing millions of FDC to SKUs daily, we still managed to upgrade our algorithm to drive consistent improvement in operational efficiency, resulting in a decrease of nearly one percentage point in the full chain loss rate of all categories in each of the past three years. Our loss rate of unusable goods has been carefully managed down to less than 0.5%, a rare achievement in the fresh food e-commerce industry.
spk02: In the second quarter, our order volume increased by 2.3%. At the same time, we believe that there is still a lot of room for growth in the Huadong area. We are also continuing to invest and optimize the warehouse network layout of existing supply chains. Our Huadong Warehouse Military Day order volume increased by 5%. In the first half of this year, we have upgraded and optimized the warehouse network layout of nearly 100 front warehouses in Huadong based on the coverage area and order density between the stop points. We will further improve our shortage rate and increase our travel efficiency.
spk08: Our order volume was up 2.3% sequentially. We're confident that there is still room for additional growth in the East China region and are working hard to optimize the network layout of our existing frontline fulfillment stations. Our frontline fulfillment stations in East China saw a 5% increase in average daily order volume sequentially. In the first half of this year, we upgraded, split, and optimized the layout of nearly 100 front-line fulfillment stations in East China, which has improved both our out-of-stock rate and fulfillment efficiency. We're confident that we can achieve a full year non-debt profitability in 2023 and that we will maintain healthy and high quality growth throughout the year. Thank you all. That concludes my remarks. Next, I would like to invite Wang Song, our Senior Vice President and Head of Finance, to review the company's financial performance.
spk06: Thank you, Mr. Liang. Hello, everyone. Before I review our financial performance, please note that all of our figures are in RMB. During Q2, we remained committed to achieving high-quality growth by following our efficiency first with due consideration of scale strategy.
spk08: We have achieved non-GAAP profitability for three consecutive quarters through our ongoing efforts to improve operational efficiency and optimize costs and expenses. We also achieved a non-GAAP net profit margin of 0.2%. Additionally, if we exclude one-time expenses, we were profitable on a GAAP basis.
spk06: 接下来我们来看一下2023年QI的具体业绩情况。 The QI of Dingdong Maicai in 2023 was 53.2 billion yuan, which dropped by 25.2%. The revenue dropped by 48.4 billion yuan, which dropped by 27%. The main reason for the decline in revenue is the high base formed by the epidemic in the same period last year. As mentioned in the first two cases, the epidemic in Shanghai and other areas in the same period last year, Dingdong Maicai overcame all kinds of difficulties in supply chain and operation, and stopped most users from increasing their consumption needs, which led to the high base in the same period last year. Now let's dive in. In Q2, GMV was 5.32 billion RMB, a decrease of 25.2% from the same time last year.
spk08: while revenue was 4.84 billion RMB, a drop of 27%. As previously mentioned by Mr. Liang, the primary reason for the decrease was the high base effect created during the same period last year, when the pandemic restrictions were impacting Shanghai and other regions. During that period, we successfully navigated supply chain and operational challenges to fulfill the surge in consumer demand. Given the base effect and short-term macro headwinds, we experienced a decrease in Average Order Value, or AOV, on a year-on-year and sequential basis. However, we remain confident that with the continued optimization of our product offerings and a gradually improving macroeconomic environment, AOV still has substantial room for growth.
spk06: The foreign exchange rate is 31%, and it remained stable since last year. We believe that this will become a competitive barrier for Dingdong to buy vegetables and gradually transform into the company's stronger profitability ability.
spk08: Although growth margin decreased by 0.6 percentage points year-on-year in Q2, it remained stable overall at 31%. To achieve sustainable growth, we plan to continue focusing on product development as our core driver and deepen our supply chain engagement. Upgrading and optimizing our systems and algorithms will help improve operational efficiency in our supply chain, lower costs, and increase profitability. We aim to establish this as our competitive advantage, resulting in stronger profitability in the long term.
spk06: QI的履约费用率为23.7%,同比去年上升了0.4个百分点。这是由于去年QI受疫情影响形成的AOV的high-based。 但我们的单金履约费用仍然同比下降了7.8%。 这说明我们履约单的效率依然是在持续提升的。 我们一直在努力提升履约每个环节的效率。 For example, in Q2, our shipping efficiency has increased significantly. The shipping cost of single-duty logistics has also dropped by 8.4%. In addition, we have also been increasing the saving of environmental protection on packaging materials. The cost of single-duty packaging materials has also dropped by 17.6%.
spk08: Fulfillment expense ratio increased by 0.4 percentage points year-on-year to 23.7%. This was due to last year's pandemic, which created a high AOV base effect. Despite this, our average order fulfillment costs decreased by 7.8% year-on-year, indicating continued improvement in our efficiency on the fulfillment side. We're committed to enhancing efficiency across every aspect of the fulfillment process, which is reflected in the significantly improved efficiency of our mainline logistics and transportation units. Average mainline logistics cost per order dropped by 8.4% year-on-year. Additionally, we are passionate about conservation and environmental protection and achieved a 17.6% year-on-year reduction in the cost of packaging consumables per order.
spk06: QI's sales cost is 1.8%. QI's management cost is 1.8%, while last year's cost was 0.5%. Development cost is 4.2%, while last year's cost was 0.3%. We will continue to develop and invest in food development, agricultural technology, and technical data algorithm. From a long-term perspective, we believe that the investment of technical facilities in the above three aspects will strengthen Dingdong's competitive advantage. At the same time, we have also brought significant efficiency improvements in the construction of our own research and development capabilities. 在保证服务质量和系统稳定性的同时,我们也通过对营地上和大数据等基础设施及电商和供应链等应用系统的持续优化进行了有效的降本增效。 在QI,我们的IT服务 费同比降低了23.7%。 Marketing expense ratio was 1.8%, down 0.4 percentage point compared to the same time last year.
spk08: This highlights our success in using product development as our main source of traffic by creating distinctive and unique products that attract a greater number of target customers and boost user retention. We're also pleased to report that our G&A expense ratio decreased by 0.5 percentage points compared to last year and is now at 1.8%. While our R&D expense ratio increased by 0.3 percentage points year-on-year to 4.2%, we remained committed to investing in food R&D, agricultural technology, and our algorithms, while advocating for our conservation and environmental protection. These investments will strengthen our competitive advantage in the long run. Our infrastructure investment in these areas has already yielded significant efficiency improvement, and we have also adopted cloud computing, big data, e-commerce, and supply chain applications to optimize our systems and reduce costs. As a result, our IT service costs decreased by 23.7% year-on-year in Q2, while maintaining consistent service quality and system stability.
spk06: During Q2, we achieved a non-GAAP net profit margin of 0.2%,
spk08: As previously mentioned, after excluding one-time expenses, we were profitable on a gap basis. This demonstrates that we can continuously improve our product development and full-chain capabilities, leading to better operational efficiency and profitability, even in the post-pandemic environment.
spk06: In QI 2023, the operating cash flow was 1.78 billion. After QI 2022, we achieved a positive operating cash flow. As of the end of 2023, short-term limited funds and short-term investments amounted to 55.2 billion yuan. Q2, we took the initiative to optimize the financing structure. Under the premise of ensuring sufficient operating funds and always passing through the supply chain financial services and suppliers, we took the initiative to reduce short-term loans and supply chain financial loans. Operating cash outflow was $178 million. We achieved positive operating cash flow when excluding the payment of year-end bonuses for 2022. Our cash and cash equivalents
spk08: Short-term restricted cash and short-term investment totaled $5.52 billion at the end of Q2. We proactively optimized our financing structure by reducing short-term and supply chain financial loans, which decreased the loan balance by $127 million. Although this was the main reason for the decrease in our balance of cash, we have ensured sufficient operating funds to serve our suppliers with supply chain finance.
spk06: We are highly confident in our ability to attain non-GAAP profitability in the remaining quarters and for the full year of 2023.
spk08: This concludes our speeches today. Operator, now we can enter the Q&A session.
spk04: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. When asking the question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call. At this time, we will pause momentarily to assemble our roster. The first question comes from Thomas Chong with Jefferies. Please go ahead.
spk05: Hello, Mr. Nair. Congratulations on achieving three consecutive quarters of long gap profitability. Can you introduce the current development of the company in different regions? What is your specific focus in different regions? Thank you.
spk02: Thank you for your question. In the last 100 years, considering the factors of the epidemic in Shanghai, we have put our main efforts in Shanghai. In the follow-up Q2 and Q3 and Q4, we will focus on Jiangsu and Zhejiang. We hope to improve efficiency, order density, and ROI in the existing advantageous areas. Thank you for your question. To address the challenges presented by the pandemic, we strategically prioritize our efforts in Shanghai during the first half of last year.
spk08: As we progressed into Q3 and Q4, we shifted our focus to Jiangsu and Zhejiang. Our plan was to optimize efficiency, enhance order density, and increase ROI in our existing focus areas before expanding further. Once the gross profit margin stabilized in East China, we could then concentrate on improving operational indicators in North and South China and expanding to new cities.
spk02: Now it seems that our previous strategy is completely correct. Jiangzhou and Fuzhou regions have gradually matured, and these three regions have achieved a steady profit of three consecutive seasons. From the financial data, Jiangzhou and Zhejiang's daily daily sales have increased by 27% and 21% respectively. A series of indicators show that we are doing well in the East China Sea region. At the same time, the business power in this area is also becoming stronger. We not only have the ability to develop products, In retrospect, our strategic approach has proven to be well-founded. The Jiangsu, Zhejiang, and Shanghai regions have all experienced steady growth, with each contributing stable profits for three consecutive quarters.
spk08: Based on operational data, daily order volume in Jiangsu and Zhejiang has increased by 27% and 21% year on year, respectively. These key performance indicators also demonstrate our ongoing success in East China. Our product development capabilities in this region continue to improve, and we have developed the ability to rapidly analyze user feedback and iterate accordingly. This has contributed significantly to our ability to achieve results across different regions. Since operations in North and South China began after those in East China, we expect that it will take some time for us to ramp up the union economics and establish a strong presence in these areas. Nevertheless, we see significant potential for growth in these regions. In sum, we will focus on consolidating our market share in mature markets in East China to provide support for the development of our operations in North and South China.
spk04: The next question comes from Joyce Zhu with Bank of America. Please go ahead.
spk07: The evening, we noticed that the company exit the Sichuan and Chongqing regions of late. Just want to check if the company has given up on the market in the southwest region. How should we understand the strategic direction going forward? Thank you.
spk02: After a thorough assessment of the overall revenue return of the region, we suspended the services in the relevant areas. The volume of business in the Sichuan region is smaller than our overall business, and it will not be profitable in the short term, and the short-term urban group is not enough to meet the scale operation of the public chain of the region. Thank you for your question. We decided to suspend our services in Chongqing and Chengdu in May of this year following our extensive evaluation of the overall return from the region.
spk08: the business volume from the Sichuan Chongqing area comprised a small portion of our overall business and was not expected to be profitable anytime soon. Moreover, we determined that the surrounding city hubs would not support large-scale supply chain operations in the short term. As a result, we decided to exit the region temporarily. Our focus now is on cost reduction and efficiency improvement. We'll continue to focus on building a stable and profitable business in our core existing markets and consider expansion into new regions afterwards. Despite the exit, we will continue to maintain in-depth cooperation with leading food companies in Sichuan and Chongqing. Thank you. Thank you.
spk04: The next question comes from Robin Leung with Daiwa. Please go ahead.
spk03: Hello, Mr. Liang. I understand that Bintang has been emphasizing the development capabilities and quality. Can you elaborate on your efforts in this area? Thank you.
spk02: Okay, thank you. We have done the following optimization around the core competitiveness and low productivity. First of all, in the supply chain section, we covered a very long and complete section of the supply chain. The value of fresh produce has reached more than 80%. We have done a lot of things related to orders of pesticides in the production area. As long as the farm owner obeys our low-gap standards, such as how to use pesticides and fertilizers, how much to use, etc., to ensure the quality of the product, In this way, we can purchase products with a certain time, price, and quantity before they are sold, ensuring the stability of supply and price, and we can control the quality of the products. For example, our second-level red river ginseng, in the case of only one month of online sales, GMV reached 15 million yuan, and more than 400,000 people bought it. thank you for your question our primary focus is on product development capability as our core competitive advantage and growth driver to achieve this
spk08: we have made the following specific optimizations. We have made extensive efforts on the supply chain funds. We covered a long and comprehensive section of the supply chain, sourcing over 80% of fresh products directly from the origin, including through contract farming in the production areas. We have established DGAAP standards for growers, specifying protocols for fertilizer and pesticide use, among other things, to ensure product quality and stability. This allows us to place orders before planting season at fixed price and volumes while controlling upstream quality. For instance, our Red River Valley blueberries achieved tremendous success, generating nearly 15 million GMB and over 400,000 purchases in just one month of online sales. This success was attributable to attributable to our extensive collaboration with purchases and growers to ensure optimal planting technology, management, quality control, taste, and packaging. We secured 600 acres of production through contract farming, resulting in our best-selling product of the season.
spk02: Second, we did more related to free brand products. Currently, some free-to-use brands generally use OEM methods, while our free-to-use brand products are more free-to-use and production-processed. We have more involved in the development and production process, so that we can ensure that the quality of the product is based on the difference and enhance the production efficiency. We can also enjoy the labor of the production end. We can quickly use data-based presentation and user evaluation to reflect the customer's demand and hope for the product and quickly use it to the production end. Our free-brand single product, free-brand tofu, although the price is very low, but we remember that GNV can also reach nearly 6 million yuan. We have taken a unique approach to our private label products, distinguishing us from our peers who usually rely on OEMs.
spk08: At our company, we prioritize in-house R&D and production, resulting in better product quality, differentiation, and higher production efficiency, as well as greater control over production rhythm. Now, connecting the front and back ends of our business enables us to respond promptly to customer demands based on data and user feedback. A low-unit price product is a prime example of the success. With a quarterly GMV of nearly 6 million and a quarterly repurchase rate of 35%, our private label products accounted for 16% of total GMV last year and 19% this quarter, and we aim to increase that to 30% in the future. Additionally, our own product gross profit margin increased by over 3 percentage points compared to the same period last year.
spk02: Third, as we said before, innovation is always needed, especially for food innovation. We have made new products that are more suitable for users and consumers, such as jade dishes, baking, and beer. Not only is the simple price higher than other products, but the price is also higher. At the same time, these products also bring some new users. According to past data, the proportion of these products' GNV is also constantly increasing. Third, we have always advocated innovation and prioritized investment in food R&D. We can better align with consumption trends and attract new users by developing new product categories like prepared meals, bakery items, and cross-beer.
spk08: These categories not only command higher unit prices but also offer higher gross profit margins. As a result, GMV in these categories is on the rise. Specifically, our prepared meals business officially launched Healthy Prepared Meals 2.0 this year. Aiming to meet growing customer demands around nutrition and health, we will develop distinctive, high-quality, and differentiated prepared meals in line with this trend.
spk02: Fourth, we have optimized the structure of the old products. We have added more medium-high-end products based on the same products. For example, vegetables are our traditional advantage. We used to make more L1 and L3 products. Now we have added L2 and L3 products, such as organic vegetables, mountain vegetables, and vegetables that we have developed in Jiangsu, Rugao, Changshu, Zhixiang, etc. These are medium-high-end products.
spk08: We've also taken steps to optimize our category structure, specifically focusing on enhancing our odor categories. While maintaining some essential livelihood commodities, we have incorporated a greater range of meat-to-high-end products. For instance, our vegetable category has been a top performer. Previously, it primarily consisted of L1 goods for everyday use. However, we have now expanded to L2 and L3 categories, such as organic vegetables and specialty vegetables from high altitude and Lugao, the village of longevity in Jiangsu. These additions are medium and high-end products with relatively higher unit prices. Additionally, our quarterly GMV for local specialty vegetables, meat, and poultry has reached nearly 30 million. Reflecting on the past year, we're thrilled to report a continuous increase in our gross profit margin and a narrowed overall cost ratio. This achievement can be attributed to our successful utilization of product development capabilities as a primary source of traffic, resulting in a reduced reliance on external traffic. In essence, we have successfully established a competitive moat. Thank you.
spk04: The next question comes from Jiajing Chen with CICC. Please go ahead.
spk01: Let me translate myself. Hello, Mr. Liang. Thank you for giving me the opportunity to ask the question. We've seen that Dingdong has been profitable for three consecutive quarters. What is your strategy to ensure sustained profitability in the future? Thank you.
spk02: 谢谢您的问题。 下面我想请我们财务负责人王松来回答这个问题。 谢谢王总。 随着效率优先兼顾规模的发展战略的持续推进, 我们已经在二二年Q4以来实现了连续三个季度, 哪干不该等下的持续盈利。
spk06: Thank you for your question. Our head of finance is going to take this question. All right, thank you, Mr. Liang.
spk08: As we continue to execute our efficiency first with due consideration of scale strategy, we have achieved three consecutive quarters of non-GAAP profitability since Q4 2022. We have also achieved GAAP profitability, excluding the one-time impact of Sichuan Chongqing adjustment this quarter. This is mainly due to our continued focus on honing our product development capabilities and improving our operational capacity to serve users better. Our overall order quality and user loyalty are improving as we optimize operational efficiency.
spk06: 具体来讲,从商品结构上自21年战略调整以来, 我们持续调优商品的结构占比, 非生鲜GNV占比提升了7个百分点以上, 其中玉子菜占比提升4个百分点以上, 自由品牌GNV占比提升近13个百分点, 提供更多更匹配消费者需求的商品丰富度选择。 Compared to 2021, the total number of SKUs in the country has increased by nearly 500, of which more than 1,000 in Shanghai. The main focus is on non-fresh and Japanese dishes. With the improvement of the product structure, the product has a richer supply, due to the continuous improvement of our unit price and interest rate. In the first half of 2023, the national unit price rose to 72.9 yuan, of which Shanghai rose to 75.8 yuan.
spk08: Specifically, since our strategic adjustment in 2021, we have adjusted our category mix. In terms of GMV, this has led to a 7 percentage point increase in the proportion of non-fresh food and particularly prepared meals whose proportion increased by 4 percentage points and private label products whose proportion increased by nearly 13 percentage points. enriching the range of products available to consumers. Additionally, the number of SKUs per station has increased nationwide by around 500, with Shanghai seeing an increase of over 1,000 SKUs compared to 2021. The new additions are mainly prepared meals and non-fresh products. With these changes, the ALV has increased to 72.9 RMB nationwide in the first half of the year, with Shanghai seeing an increase to 75.8 RMB. while the gross profit margin nationwide has remained stable at around 31% since last year.
spk06: In the growth of the mature market, Jiangsu and Zhejiang continue to achieve the same annual double-digit growth as the Japanese military. Although the Shanghai area has dropped year-on-year due to the impact of the epidemic last year, the growth is still true compared to Q1, reaching the same level as the Japanese military. With the overall continuous profit of the East China Sea area, to provide more resources to the company. On the one hand, we will further deepen the growth of the East China Sea area. Compared to Shanghai, Jiangsu's order penetration and the amount of long-range missiles can be further improved. In addition, we will focus on the improvement of operating capacity in the North China Sea and the South China Sea in the second half of the year.
spk08: While restructuring the national market, we focused on expanding in the East China region and increasing profitability there. Shanghai achieved overall profitability since Q1 2022, and Jiangsu and Zhejiang have achieved three consecutive quarters of profitability since Q4 2022. In terms of mature market growth, Jiangsu and Zhejiang recorded double-digit year-on-year growth in daily order volume per station. Despite the pandemic impact last year, Shanghai had a positive Q1, reaching an average daily order volume of 1,300 to 1,400. As the East China region becomes more profitable, we'll focus on expanding it. There is room for improvement in order penetration and average order volume per station in Jiangsu and Zhejiang compared to Shanghai. Additionally, we plan to improve our operating capabilities in North China and South China in the second half of the year.
spk06: At the same time, while we are paying attention to the adjustment of the big plate structure and the growth of the area, we will pay attention to the improvement of the operating capability of the whole chain road. On the one hand, we will continue to firmly invest in the production and inspection, relying on the ability of the system and the algorithm to improve our end-to-end operating efficiency. And we are also continuously improving our operational efficiency in stages. As mentioned above, the end-to-end performance of the platform with processing power is continuing to shrink. In the past two or three years, it has stabilized within 1.5%.
spk08: Meanwhile, we're working to improve our full-chain operational capability. On one hand, we're investing in IT innovation to improve the systems and algorithms that can boost our end-to-end operational efficiency, and we have already seen some promising early results from this. As mentioned above, the platform's end-to-end loss, including processing loss, continues to narrow and has stabilized within 1.5% in 2023.
spk06: In the implementation of the end-to-end contract, since the outbreak of COVID-19 has been stabilized, we have continued to adjust the layout of the warehouse network in the selection center to adjust the storage area of the warehouse network. At the same time, based on the calculation to adjust the delivery efficiency of our ground-based logistics, the ability of the front-end warehouse to operate on a standard basis continues to be improved. After the outbreak of COVID-19, the overall workforce has also been steadily improved. Based on the above, despite the one-time cost and the impact of the epidemic last year during the adjustment process,
spk08: As the post-pandemic situation stabilized this year, we optimized our regional network layout, adjusted frontline fulfillment station stock, and improved mainline delivery efficiency with algorithms for end-to-end order fulfillment. Frontline station operational capabilities are also continuously improving. After excluding the impact of the pandemic, the efficiency of personnel both inside and outside frontline stations has steadily improved. Despite initial adjustment costs and the impact on the pandemic, fulfillment costs improved throughout the year, resulting in a 1.2 percentage point decrease year-on-year during the first half of this year and a 9.2 percent decrease year-on-year in cost per order.
spk06: Based on the above, Dingdong will continue to grow the Huadong market under the guidance of a scale-based development strategy with a priority on efficiency. At the same time, we continue to focus on the business power and full chain of supply and demand ability construction in the Hubei and Hubei region markets. Based on this, we are very confident to continue to make profits in Q3 and Q4, both in terms of non-GAAP conditions, and in terms of non-GAAP conditions in the whole year of 2023.
spk08: That said, the company will continue to prioritize efficiency in the East China market and optimize product structure while improving operational efficiency in the North and South China regional markets. Our focus will remain on product development and building full chain operational capacity. Based on this, we're confident that we'll continue achieving non-gap profitability in Q3 and Q4 and for the full year of 2023.
spk04: As there are no further questions, I'd like to hand the conference back to our management for closing remarks.
spk00: Thank you again for joining our call today. If you have further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next earnings call. Have a good day.
spk04: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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