Dingdong (Cayman) Ltd ADR

Good day and welcome to the Ding Dong Limited second quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nicky Ving, Director of Investor Relations. Please go ahead.

Thank you. Hello, everyone. Welcome to Dingdong Second Quarter 2025 earnings call. With me today, I'm Mr. Changlin Liang, our founder and CEO, and Mr. Song Wang, our CFO. You can refer to our Second Quarter 2025 financial results on our IR website at ir.100me. You can also access a replay of this call on our IR websites when it becomes available a few hours after its conclusion. For today's call, management will go through their prepared remarks, which will be followed by a question and answer session. Before we continue, I would like to refer you to our safe harbor statement in your 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 thoroughly explained and reconciled to the most comparable measures reported in our earnings press release and the filings with the SEC. I will now turn the call to our first speaker today, the founder and the CEO of Dingdong, Mr. Liang.

Thank you to all the analysts and all the partners who accompanied Dingdong along the way online and offline. Thank you to everyone who participated in the second quarter of the Dingdong Market in 2025. As of Q2 of 2025, e-commerce has achieved a profit of 11 consecutive seasons under the non-GAAP standard, and has also achieved a profit under the GAAP standard for six consecutive seasons. In terms of income, it has achieved the same growth for six consecutive seasons. The continued steady growth in scale and profit-to-profit line not only shows us that we have solved the problem of survival and death, but also proved that the team's resilience and execution ability. Because the next stage of higher growth will set a solid foundation. Next, I will first use data to review the business highlights of Q2, and then share the progress of our good users, good products, good service, and good quality 4G strategies, and introduce our new growth points in business, as well as some business dynamics about AI.

Hello, everyone. Thank you for joining Ding Dong's Q2 2025 earnings call despite your busy schedules. As of Q2 2025, Ding Dong has achieved 11 straight quarters of non-GAAP profitability and six straight quarters of GAAP profitability, along with six consecutive quarters of positive year-over-year revenue growth. This consistent growth in scale and profitability not only shows that we have overcome the challenge of survival, but also proves the resilience and execution capabilities of the Ding Dong team, laying a strong foundation for the next phase of high-quality growth. Next, I will review Q2's operational highlights, share the progress of our 4G strategy of good users, good products, good services, and good mindshare, introduce new growth drivers, and update you on our AI-related business developments.

In Q2 of 2025, the GDP growth of JNV is 65 billion yuan, with a 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP growth of JNV is 4.5% growth rate. In Q2 of 2025, the GDP The same rate has increased by 0.3%. Under the GAS standard, the net profit is 1.1 billion yuan, which is the same as last year's 0.7 billion yuan. The same rate has increased by 59.7%. The net profit is 1.8%. The same rate has increased by 0.6%. Based on the rapid growth of business in 2024, we will continue to maintain the trend of growth and continue to make profits this year.

In Q2 2025, Dingdong reported a GMV of 6.5 billion RMB, up 4.5% year-over-year, the revenue of 5.98 billion RMB, a 6.7% increase from the previous year. Non-GAAP net profit reached 130 million RMB, growing 23.9% compared to 100 million RMB in the same period last year, with a net profit margin of 2.1%, up 0.3 percentage points year-over-year. That net profit was 110 million RMB, an increase of 59.7% from 17 million RMB, with a net profit margin of 1.8% of 0.6 percentage points year on year. Putting on our robust growth in 2024, we have maintained our scale expansion and profitability this year.

At the end of the second quarter, Dingdong's 4G strategy of good users, good products, and good pay has been implemented for half a year. Although we are still in a period of change, we have maintained the same growth of performance. At the same time, through adjustment of production relationship and improvement of productivity, The 4G strategy has been successful. The whole company is closely involved in the development of good products. We strive to develop better, more, and do better. I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people, I have people,

By the end of Q2, Bingdom's 4G strategy, centered on good users, good products, good services, and good mindshare, had been in place for six months. While the company is still transforming, it has achieved steady year-over-year growth. Additionally, through adjustment in production relations and productivity improvement, the 4G strategy has already begun to show results. The company remains focused on developing good products, aiming to create more offerings that are well-received, commercially successful, and distinctive. Our principle is, where artists fall short, we deliver. Where artists deliver, we excel. Where artists excel, we redefine. Operational metrics aligned with the 4G strategy continue to improve steadily.

In Q2, the average SQ ratio of good products is 38%. This year, when Q1 just started implementing a new strategy, the ratio increased by 16.9%. The good product GNV ratio reached 43.1%, and the Q1 ratio increased by 20.9%. More and more good products have attracted more and more good users to pay. . . . . . . . . In Q2, good product SKUs made up an average of 38% of all SKUs, a 16.9% point rise from Q1 when we first introduced the new strategy.

These good products represented 43.1% of our GMV, a 20.9 percentage point increase from Q1. The increase in good products is attracting more good users. The conversion rate of monthly transacting users in Q2 grew by 3.3 percentage points year over year, with the number of monthly transacting users increasing by 5.8%. Good products also boost user engagement, with an average monthly order frequency of 4.4 times in Q2, a 3.2% rise year-over-year. Besides general market users, our good product offerings drew more good users who value product quality and were willing to pay for it. In Q2, the number of good users who placed orders increased by 19.3% quarter-over-quarter from Q1, accounting for 28.9% of total users who placed orders. These users also place about 8.1 orders per month.

区域视角上,公司4G战略以上海为中心迅速向江浙辐射,4G战略也带动了江浙户的进一步增长。 Shanghai, with a higher penetration rate, still achieved 3.5% of the same rate of growth. Jiangzhou, on the basis of continuing penetration, achieved 11% of the same rate of growth. Of these, 11 cities achieved the same rate of growth of more than 20.

Geographically, the company's 4G strategy centered around Shanghai has quickly expanded to Jiangsu and Zhejiang, feeling additional growth in these areas. Despite already high market penetration, Shanghai still achieved a 3.5% year-on-year increase. In Jiangsu and Zhejiang, continual market penetration resulted in 11% yearly growth, with 10 cities surpassing 20% growth.

On the basis of the 4G strategy, we focus on the current business framework of Dingdong Grocery and new business growth points. First of all, on the public chain, we are digging deeper and deeper. More than 85% of the freshness is made from raw materials. We use Dingdong Dragon, Hu Yu Factory, Shida Business Development Department, Dingdong Xiaoman Product Purchase, and Australian Plants to ensure that our products are sufficient, that is, we have goods. On the other hand, we are exploring all channels of sales. In addition to the Dingdong App that everyone knows, our KY sales business abroad is also doing well. In addition, we also provide customers with food, restaurants, factories, and other goods. Through all channels of sales, we can enhance the efficiency of sales and can really sell well. and sell a batch of goods in advance. Finally, in the industry, we continue to expand. First of all, from China to the whole country, we are currently entering Southeast Asia, Middle East, and Central Asia. In the future, we also hope to expand to Europe, the United States, and even the African market. As mentioned above, in the supply and supply chain, in the channel, and in the region, we continue to expand. We have built the point line surface that Dingdong and Leib said. We have broken through the ceiling of growth, and we have also built our system capabilities and core competitiveness.

Building on the 4G strategy, let's take a look at Dingdong's current business framework and its new growth drivers. First, we strengthen our presence in the supply chain by sourcing over 85% of our fresh produce directly from the origin, including Dingdong Agriculture, Gu Yu Factory, 10 product development divisions, Dingdong Xiaoman origin procurement, and direct sourcing from Australia. This ensures ample product availability. In other words, always have stock on hand. Second, on the demand side, we expanded omni-channel sales. Besides our popular Dingdong app, we also serve domestic and international KA channels and B2B clients, such as merchants, hotels, travel agencies, restaurants, canteens, and factories. Omni-channel sales boosted sales efficiency and fully showcased the value of our supply chain, leading to sales success. Lastly, we continuously expanded our operational regions, starting from East China to nationwide coverage, and then gradually entering Southeast Asia and the Middle East, the Central Asia. Looking ahead, we plan to expand into Europe, America, and Africa. These simultaneous efforts across supply chains, channels, and regions form an interconnected system, point, line, Finance solids, which broke growth barriers and enhance our core system capabilities and competitiveness.

At present, our overseas strategy is not simply to copy China's front-line business model, but to construct the core with supply chain capacity and products. By entrusting the country's supply chain advantages with fresh products as a starting point, by reducing the risk of the market by cooperating with local retail giants, we have reflected the logic of supply chain capacity output plus localization and channel construction. For example, in Hong Kong, we and Li Jingji, the Milk Group, The strategic cooperation reached by companies such as Hong Kong TV Mall has reached more than 10 million sales and more products are about to start cooperation.

Our overseas approach is not simply a copy of our domestic frontline fulfillment station model. Instead, it centers on our supply chain strengths and product offerings. Using our domestic supply chain expertise, we focus on fresh produce as our key entry point and reduce market risk by partnering with local retail giants. This strategy reflects the concept of exporting supply chain capabilities and jointly developing local channels. For instance, in Hong Kong, we formed strategic alliances with groups like Become Key, Dairy Farm, and HKTV Mall, generating over 10 million RMB in total sales so far, with more products to be launched through these collaborations.

Next, I would like to update everyone on Dingdong Maicai's work and progress in AI. Dingdong Maicai has long strived for digitalized ability construction, and has insisted on algorithmic driving business development. With the deep application of AI technology in business, its role has been upgraded from a single power chain efficiency improvement tool to a key engine for driving business model innovation and optimization of user experience. Dynomite is one of the companies that have developed AI technology in the application field and has become one of the companies that have first integrated AI technology into their business. It is currently a full-line AI layout that covers core business.

Next, I want to update you on Dingdong's AI efforts and progress. Dingdong has long been dedicated to enhancing digital capabilities and relies on algorithms to foster business growth. And as AI technology has been more deeply integrated into its operations, its role has shifted from merely improving supply chain efficiency to becoming a crucial driver of business model innovation and user experience enhancement. Bingdong was an early AI adopter and among the first in industry to extensively embed AI into its business. It now implements a comprehensive full-chain AI strategy across all core business segments.

具体而言,我们的AI全链路布局主要聚焦以下三个核心领域。 第一,内部提效,我们利用大圆模型的理解,生成和推理能力。 A comprehensive full-chain AI strategy centers on these three key areas.

First, internal efficiency enhancement. We leverage the understanding, generation, and reasoning skills of large language models, LRMs, to help our team boost productivity in various areas, including operations, cost management, food research and development, and office administration.

Second, supply chain intelligentization. We rely on multi-modal technology to realize the intelligent management and optimization of supply chain all-threads to improve the accuracy and consistency of the physical world and the digital world. . . . . . Re-testing the process, focusing on image recognition, data analysis, and system interconnection. The whole process is automated, replacing the artificial route, which is successful and effective. The single route time is reduced from 20 seconds per hour to 3 seconds per hour. Accuracy is greatly increased to 98.3%. The route is reduced to reduce the conflict caused by artificial error. All testing data is automatically synchronized to the system. to provide support for subsequent data analysis and quality tracking, achieved data standardization, and improved management efficiency. The system is a successful implementation of public chain intelligent management in the quality control section.

Second, supply chain intelligence. We use multi-model technology for smart management and optimization throughout the supply chain, enhancing the accuracy and consistency of mapping between physical and digital environments and ensuring truth-seeking and traceability across the entire supply chain. Additionally, a large language model or LRM agent also makes decisions on purchasing allocation and promotions, further improving inventory accuracy and system stability. For instance, we developed an automated system for testing fruit sugar content, overhauling the testing process to automate everything from image recognition to data analysis to system integration, replacing manual data entry. The results are notable. Data entry time dropped from 20 seconds to under 3 seconds. Accuracy rose significantly to 98.3%, greatly reducing quality disputes caused by human errors. And all test data is automatically synchronized to the system, supporting data analysis and traceability, standardizing data, and boosting management efficiency. The system represents a successful application of intelligent supply chain management in its quality control process.

Third, consumer experience upgrade. In the app end of daily use of users, we have deeply involved many AI functions, such as the development of dialogue AI, diet AI, support multi-modal interaction, and will recommend logic from simply relying on user behavior data to upgrade to behavior support. Combined with the professional support and recommendation of users such as behavior and nutrition, users can not only recommend vegetables but also provide personalized nutritional suggestions based on medical data. In addition, the language interaction function allows parents to easily customize healthy meals when they are busy playing. At the same time, the system supports the material and food double recognition function, analyzes the balance of nutrition, clearly shows the key nutritional elements such as calories, protein, sugar, etc., allowing users to be completely aware of the nutrition of the ingredients. Compared to the previous simple product order shopping path, Tintormat provides personalized diet suggestions and direct shopping links through AI, effectively reducing the cost of users, helping to transform healthy diet model needs into specific shopping behaviors, thus significantly improving the connection and loyalty of users to the platform.

Third, enhance consumer experience. We have integrated multiple AI features into the user app. For instance, our AI chatbot, Smart Diet Butler, supports multi-model interactions and has upgraded its recommendation logic from solely based on user behavior to the combination of behavior plus knowledge, merging behavioral data with specialized knowledge on nutrition. Users can query products, and the Smart Butler not only suggests recipes, but also offers personalized nutritional advice using medical examination data. Voice integration enables parents to easily customize healthy meals, even when busy with their children. The system also features ingredient-slash-dish dual recognition, which analyzes nutritional balance and displays key nutrients like calories, protein, and sugar clearly, helping users quickly grasp the nutritional value of ingredients. Compared to the previous simple select products and place order process, DingDong now utilizes AI to offer personalized dietary recommendations. and dietary purchasing options.

This improves user decision making and turns vague health eating needs into concrete purchasing behavior, greatly boosting user engagement and loyalty. We have given up some of the major products and users in the 4G strategy, and everyone can feel the day-to-day competition. But we expect to still be able to reach the scale of last year and continue to achieve profit under the perspective of non-GAAP. My speech ends here. Thank you. Next, let's ask CFO Wang Song to introduce the financial situation of the company.

Finally, I want to share our outlook for Q3 2025. Last year's Q3 saw rapid growth for Ding Dong. This year, despite the rollout of our 4G strategy, which led to the drop of some mass market products and users, and amid rising competition, we still aim for a stable scale year over year and maintain non-gap profitability. This wraps up my remarks. Thank you. Now I invite our CFO, Mr. Wang Zong, to discuss our financials.

Thank you, Mr. Liang.

And hello, everyone.

Before I review our financial performance for the second quarter, please note that all of our figures are in RMB. and maintained the same growth for 6 consecutive seasons. GAP's net profit is 13 billion yuan, with a net profit rate of 2.1%, which increased by 0.3%. GAP's net profit is 1.1 billion yuan, with a net profit rate of 1.8%, which increased by 0.6%. In terms of funds, QI's operating cash flow is 100 million yuan, which is the 8th consecutive season. After QIMO, our actual freedom of funds continued to increase to 29.51 billion yuan, We will continue to stick to the vertical area of fresh food, bring good products and continue to invest in the supply chain, and firmly walk our own Chayi Road.

In Q2 2025, Bingo generated revenue of 5.98 billion RMB, a 6.7% year-on-year increase, marking six consecutive quarters of positive growth. Non-GAAP net profit reached 130 million RMB, with a net margin of 2.1%, up 0.3 percentage points year-on-year. GAAP net profit was 110 million RMB, with a net margin of 1.8%, an increase of 0.6 percentage points. In terms of funds, Q2 recorded a net cash inflow of 100 million RMB from operating activities, the eighth straight quarter of positive cash flow. By the end of Q2, after deducting short-term borrowings, our actual cash-owned increased to 2.95 billion RMB. Dingdong has been focused on the instant retail and fresh grocery e-commerce sectors for over eight years. Our ongoing profitability and rising cash flow reinforce our commitment to the value proposition, narrow and deep. Despite external changes, we'll remain fully dedicated to the fresh grocery vertical, investing continuously in good products and supplying chains, following our unique path.

Next, let's take a look at QI's specific financial situation. QI's revenue is 59.8 billion yuan, with a growth of 6.7%. GMA is 65 billion yuan, with a growth of 4.5%. Benefit from the steady promotion of the 4G strategy, good products and good users have led to a growth of the market. Users' mindsets have continued to improve. . . . . .

Let's now review the specific financial results for Q2. Revenue was 5.98 billion RMB, up 6.7% year on year, while GMV reached 6.5 billion RMB, up 4.5% year on year. Thanks to the steady advancement of our 4G strategy, good products and good users contributed to overall market growth. With user mindshare continuing to improve, the average monthly order frequency hit 4.4 times, reflecting not only a year-on-year increase, but also matching the peak level of last year's Q3. Additionally, our 2B business saw consistent growth, with revenue climbing 69.4% year-on-year and its revenue share rising by 1.6 percentage points year-on-year.

QI's interest rate is 28.8%, which is 1.2% lower than before. The main reason for the decrease in interest is that we have added investment on good products. Good products are on the market, and we have firmly replaced the products that users don't like. For example, in Shanghai, we replaced about 3,600 SQs in the first half of the year. At the same time, we replaced about 1,300 SQs in the same period last year. At the same time, we did active operations on interest. We will continue to invest in good products, and use the spirit of the craftsman to demonstrate our core competitiveness.

Gross profit margins stood at 28.8%, down 1.2 percentage points from the previous years. The decline was mainly driven by our increased investment in good products, the steady availability of such products, and the proactive replacement of unpopular items. For example, in Shanghai alone, we replaced about 3,600 SKUs in the first half of the year, about 1,300 more than the same period last year. Additionally, we took a proactive approach in managing gross profit and continue to pass the cost benefit to consumers through in-depth product supply and chain optimization and cultivation. Our goal is for more families to have access to our good products Moving forward, we'll continue to incubate good products, conduct thorough research with a craftsmanship dedication, and strengthen our core competitiveness.

QI's turnover rate is 21.7%, and it has decreased by 0.7%. The decrease in turnover rate is mainly due to the increase in scale efficiency and efficiency. At the same time, we continue to work on good service. Since this year, our timely delivery rate of 97.3% has reached the highest level in history. . . . .

The fulfillment cost rate dropped to 21.7%, down by 0.7 percentage points year on year. This decline was mainly driven by economies of scale and ongoing efficiency gains. Meanwhile, we remained committed to excellent service, achieving a record on-time delivery rate of 97.3% so far this year, which is 1.6 percentage points higher than last year in Q2. The fulfillment time of ASAP orders also has improved, averaging 35.8 minutes to 0.6 minutes faster than last year.

QI's sales rate is 1.7%, which is 0.6% lower than before. In the future, we will continue to increase our investment in new products. We will continue to increase our investment in new products.

The marketing expense ratio was 1.7%, a 0.6 percentage point improvement year-on-year. Moving forward, we plan to further boost investment in promoting good products, leveraging them to generate traffic and continuously enhance our conversion rates.

QI's management and research costs are 5.5% of the total revenue and the same basic products as last year. We will continue to develop and invest in food research, agricultural technology, and technical data algorithm. We will continue to enhance the ability of product development and the digitalization of whole chain, and also enhance the efficiency of supply chain.

Combined administrative and R&D expenses represented 5.5% of revenue, remaining stable compared to the same period last year. We will continue to invest in food R&D, agricultural technology, and technical data algorithms to continually enhance our product development and full-chain digital capabilities, thereby improving supply chain efficiency.

In the Q2 of 2025, we achieved a net profit of 2.1% under the GAP standard, and increased by 0.3%. The net profit is 1.3 billion yuan. At the same time, we also achieved a net profit of 1.8% under the GAP standard this quarter, and increased by 0.6%.

Non-GAAP net profit margin reached 2.1%, up 0.3 percentage points year-on-year, resulting in a net profit of RMB130 million. GAAP net profit margin was 1.8% for the same quarter, a year-on-year increase of 0.6 percentage points.

Based on QMOR, cash and cash installments, short-term limited funds, short-term investments, and long-term interest rates amounted to RMB40.1 billion. We continue to optimize the efficiency and financing structure of funds,

At the end of Q2, the total of cash, cash equivalent, short-term restricted cash, short-term investment, and long-term deposit was RMB 4.01 billion. We're actively improving the efficiency of capital use and financing structure. After subtracting short-term borrowing, our net equity stood at 2.95 billion RMB.

This concludes my prepared remarks.

Operator, we can now start the question and answer session.

Thank you. 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 two. Please state your question in Chinese first and then repeat it in English for the convenience of everyone on the call. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Thomas Chong with Jefferies. Please go ahead.

Good evening. Hello, Mr. Leng. Congratulations to the company for maintaining an excellent result this quarter. You mentioned that the 4G strategy has been in place for six months. Could you summarize the progress and outcome of the 4G strategy during this period? Thank you.

好的,谢谢您的问题。 4G战略已实施半年多,这半年我们围绕着好用户、好商品、好服务、好心智进行了生产关系调整和生产力的提升。

Thank you for your question. The 4G strategy has been in place for more than six months. During this period, we've refined our production relations and enhanced productivity, emphasizing good users, good products, good services, and good mindshare.

首先,我们深入调整了生产关系,解构了传统的商品开发中心,将商品开发、商品运营、品控人员组织在一起。 We established 10 independent business development departments. Each department is led by a core executive of the company. The whole company is focused on high-quality business development work. The organization is also more efficient. At the same time, we reformed the resource allocation and assessment method. For a period of time, we have cancelled the indicators of GDP and profitability, focusing on good products and good user ratio, user recovery rate, user evaluation, and other quality indicators.

First, we comprehensively restructure our production relationships by dismantling traditional product development centers. We integrated personnel from product development operations and quality control to form 10 independent product development divisions, each led by a key executive. This shift enabled the company to prioritize high quality products and increase our organizational efficiency. Simultaneously, we overhauled resource distribution and performance evaluation methods. During this period, we removed GMB and profit margin as performance metrics, instead emphasizing quality indicators, such as the proportion of good products, good users, purchase repeat rate, and negative reviews.

In addition, we have also upgraded our productivity. We have upgraded the app's positioning to a high-quality drive, which means that the traffic is close to high-quality products. It is concentrated on products such as QI, such as QI, our organic product sales, increased by about 40%.

Secondly, we enhanced productivity by reorienting our app's positioning to love of quality. This shift directed homepage traffic toward good products, emphasizing categories such as organic collection, taste of China, mom select, along with products featuring clean ingredients and low GI. For instance, in Q2, our sales of organic products grew by about 40% year over year.

In addition, as mentioned earlier, we fully embrace AI, and at the same time, we also open up our system capabilities for more partners to use. At the same time, we recruited about 500 students this year. We hope that this group of fresh blood will lead us to the landing of our 4G strategy.

As previously mentioned, we're fully integrating AI and expanding our system capabilities to include more partners. Additionally, this year we have recruited around 500 management trainees. We look forward to this new talent helping us to advance the implementation of our 4G strategy.

经过这些组织调整,我向大家汇报一下 4G战略目前的成绩。 首先是好用户,我们服务了一群注重 The quality of the products is willing to be a good quality product to pay for. In June, this group of users accounted for nearly 30% and contributed 68.5% of the GNV. And our new class of good users accounted for about 80%. In the past, our customers mainly passed the first one to attract users. But now we use good products to attract users. In addition, we often say that the return is the king. The number of good users is more than 8 times. And our big plate is 4.4 times. The return rate of these users is very high.

Following these organizational changes, I would like to update you on the current progress of the 4G strategy. Let's first talk about our good users. We have served users who prioritize product quality and are willing to pay for it. In June, nearly 30% of users were considered good users, accounting for about 68.5% of our total GMB. Furthermore, around 80% of new users were classified as good users. While we once relied on low prices for user acquisition, we now attract customers with good products. The repurchase rate is vital. Now, good users show an exceptionally high repurchase rate with at least eight orders monthly per user compared to the average of 4.4.

In addition to good products, we have sent over 4,000 products. In June, our good product SQ ratio has reached 40%, contributing about 47% of G&V. The good product G&V ratio is rapidly increasing. Compared to the beginning of this year, it increased by about 30%. Even though it is a popular product category that everyone is impressed with, it is relatively difficult to differentiate. But we still insist on going to the beginning, go on a differentiated and innovative route, so that the good product ratio in these categories can also be quickly increased. For example, the GDP of good products in the meat and eggs category reached 55% in June, and the GDP of organic vegetables reached 12% in vegetables. The GDP is the same as last year, which rose to about 38%, and the GDP of black pigs reached 35%, and the GDP of black pig consumption in the whole country was 3%.

We have also replaced over 4,000 items with good products. In June, good products made up 40% of our SKUs and contributed to around 47% of our GMV. This shows a rapid growth in GMV, increasing by roughly 30 percentage points since the start of the year. even in categories often seen as mass market where differentiations can be challenging, we continue to source from the origins with innovation. This has led to a quick rise in the share of good products within these categories. For instance, in June, good products accounted for 55% of GMV in meat, poultry, and eggs. Organic vegetables represented 12% of our vegetable sales, a 38% increase of its GMV year over year. In pork, black pork accounts for 35%, while in nationwide market, it makes up only 3% of total pork consumption.

总的来说,经过半年时间,我们的好商品和好用户增长势头都很迅猛。 这代表着我们对市场和用户的理解是对的。 我们四季这条路走对了。 Thank you.

Overall, after six months of implementing our 4G strategy, we gained more good products and users. This indicates that our understanding of the market and user is accurate, and we have developed a winning strategy. We'll persist with the narrow and deep approach to deliver healthy, high-quality ingredients and foods, ensuring every family can enjoy healthier and safer meals. Thank you.

The next question will come from Yang Bai with CICC. Please go ahead.

Thank you, management. How does management perceive the current competition including instant retail and the frontline fulfillment station market, and what is its impact on us?

Thank you. Thank you for your question. Everyone has been paying attention to the topic of competition. Since the beginning of the market in 2021, we have been paying attention to the competition in the mode of online shopping, online shopping, front-end shopping, etc. In the past, we have been paying attention to the answer. From the point of view of Dingdong, we do not emphasize competition. We pay more attention to the value of creation. Looking back, we have always been more firm and accurate in our understanding and positioning.

Thank you for your question. Competition is a highly relevant topic for everyone. Since our IPO in 2021, we have been attentive to competition in areas such as community group buying, platform delivery, and frontline fulfillment stations. We have addressed these issues individually in previous quarters. We focus less on competition and more on creating value. Reflecting on this journey, we have stayed consistent and accurate in our understanding and positioning.

In terms of the external environment, the recent fast-food war has attracted everyone's attention. In the current competition, each family is very competitive about its users and traffic. And everyone usually uses the price war to compete in a short-form way. But in the process of the horse-riding circle, we have largely overlooked the construction of goods and supply chains. In the strategy we mentioned, which is one inch narrow and one kilometer deep, we have a relatively obvious difference from ordinary fast-food companies. Specifically, First of all, the two sides have different goals. Our goal is to grow and build an ecosystem, and their goal can be transformed into one kilometer wide, one inch shallow, to compete for users and traffic. Second, the way of thinking is different. We are commercial thinking, ecological thinking. They are traffic thinking, platform thinking, hoping to monopolize the market. Third, the relationship between channels is different. We don't fight, we win, we create, we increase. They are in the current market, they are in the current market, they are in the current market, they are in the current market, they are in the current market, they are in the current market, they are in the current market, they are in the current market, they are in the current market, they are in the current market, First, recent competition within instant retail has gone at widespread attention.

The battle for users and traffic is fierce, with many adopting quick, short-term price rules. However, this focus often neglects aspects like supply chains and product development. As we outlined with our strategic approach of narrow and deep, we differ significantly from typical infant retail companies. First, our goal is to develop the supply chain and create an ecosystem, whereas theirs is to compete for more users and traffic. Second, strategically speaking, we emphasize commodity and ecological approaches, unlike their focus on traffic, platform dominance, and market monopolization. Third, in our relationships with channels, we seek win-win cooperation and steady growth, whereas they engage in zero-sum market competition. Fourth, our interactions with suppliers are collaborative and mutually beneficial, while theirs follow a traditional client-provider model. Fifth, our business models grow in proportion to our upstream and downstream partners, In contrast, bears are characterized by a power law distribution with a few entities controlling most resources and influence and becoming oligopolies. Six, we value long-term relationships and patience, unlike bear focus on short-term KPIs.

Because of these differences, we are completely differentiated from these real estate companies. In fact, if you pay attention to Xiaohongshu and social media, you will see more and more discussions about innovative products and high-quality products under Dingdong. This also constitutes another fresh and beautiful scenery in the current real estate homogenization of extreme prices.

These significant differences set us apart from other instant retail brands. When you browse social media platforms like Xiaohongshu, Red Notes, you see increasing discussions about Dingdong's innovative and high-quality products. This helps us stand out in the current market, which is dominated by price competition and homogeneity.

从消费者的角度,自从疫情之后, 越来越多的消费者对品质提出了更高的要求。 You are what you eat. The consumer is also waking up. On the one hand, the nutrition composition of food will directly enter your body, and it will affect your body shape, health, and energy for a long time. and immunity. For example, long-term high-sugar diet can easily lead to obesity and代谢疾病, and more healthy fruits can reduce the risk of chronic diseases. On the other hand, your choice of diet also reflects your identity, values, and lifestyle. For example, vegetarians may pay attention to environmental and animal welfare. People who love local ingredients Maybe we should promote sustainable eating. In other words, eating not only shapes your body, but also shapes who you are and what you understand. You can see that on our app, many products are developed with the consumer's needs in mind.

From the consumer's point of view, since the pandemic, more individuals have raised their standards for food quality. Consumers are increasingly recognizing that you are what you eat. On one hand, food's nutritional content directly impacts your body, influencing your physique, health, energy, and immunity over time. For instance, Consistently consuming high sugar diets can result in obesity, metabolic issues. While eating more healthy fruits and vegetables can lower the risk of chronic diseases. On the other hand, dietary choices also mirror your identity, values, and lifestyle. For instance, vegetarians might prioritize environmental protection and animal welfare, whereas those who prefer local ingredients may support sustainability. In essence, eating not only molds your body, but also defines who you are and what you stand for. Most products on our app are developed to align closely with these consumer needs.

Thank you.

With that said, we did not introduce Dingdong's 4G strategy, narrow and deep approach, and its love of quality positioning as a way to compete. Instead, these have become objectively Dingdong's unique competitive edge, ensuring its strong position in the market. While our transformation will undoubtedly require time, we believe the results will become increasingly evident. Time is our ally. We aim to create long-term value for our investors. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Nicky Zeng for any closing remarks. Please go ahead.

Thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our website. We look forward to speaking with everyone in our next earnings call. Have a good day and have a good night.

The conference is now concluded. Thank you for participating in today's call. You may now disconnect.