Jingdong teleconference record: The quarterly average DAU hit a record high, and the total logistics revenue exceeded the 100 billion mark

Highlights:

1. The revenue in this quarter is still strong, but there are hidden worries about future growth;

2, customer growth is not as expected;

3. The decline in gross profit and the expansion of marketing management expenses drag down profits;

4, the loss of new business is exaggerated, and the strategic contraction is not arbitrary.

Beijing time on the evening of March 10, before the US stock market, Jingdong announced its 2021 fourth quarter financial report, the following is the minutes of Jingdong's quarterly performance meeting, please see "Jingdong came to the crossroads, revenue shiny, the prospects are confused? 》。

Management Statement:

As China's Internet industry matures, JD.com will abandon relying on extensive traffic-based growth methods such as subsidies and enter the stage of refined operation. JD.com's self-operated suppliers have achieved deeper coverage of all categories, the number of suppliers has continued to maintain double-digit growth, and the growth rate of the number of third-party merchants in JD.com is also accelerating. In the fourth quarter, the number of third-party merchants on JD.com's main website exceeded the sum of the previous three quarters.

Jingdong logistics business: Jingdong logistics total revenue exceeded the 100 billion mark, logistics revenue structural optimization. Revenue from external customers grew faster, accounting for more than 50% of total annual revenue for the first time. Revenue from supply chain customers contributes more than 70%.

Jingxi: Revenue growth exceeded QoQ+40%, which was brought about by the concentration of resources in jingxi's business in specific markets. We believe that the fresh category is a long-term track that requires 5 to 10 years of investment, and the scale brought by short-term marketing is not sustainable, and it is necessary to gradually build short chains, logistics infrastructure capabilities and user minds.

Incremental Operational Metrics:

Quarterly average DAU grew by more than 25% year-over-year, a record high in the fourth quarter. JD.com's membership exceeded 25 million in the quarter, with average membership spending up double-digit percentage points from the same period last year; the average annual spend of Plus members was 10 times that of non-Plus members. Offline stores and business partners Omnichannel 21-year-on-year GMV growth of nearly 80%. The increase in JD Logistics revenue was mainly due to the increase in the number of external integrated supply chain logistics customers and the increase in ARPU, and the contribution of external revenue reached a record high, accounting for 57% of JD Logistics's total revenue for the whole year of 2021. While the number of SKUs we manage continues to expand, we always keep our inventory turnover below 35 days.

Analyst Q&A

Q: Based on the current situation of macroeconomic weakness, how do you view the growth of JD Retail this year?

A: There are many uncertainties in the overall macro-economy in 2022, the price of the upstream of the supply chain is rising, and the epidemic situation in many places has great uncertainty about the overall domestic consumption

In times of uncertainty, we leverage our capabilities in the supply chain to support merchants and help them better turn their money and inventory.

JD.com's resilient business model and core supply chain capabilities have proven that it can outperform the market

Here's a fact: at the end of last year and the beginning of last year, we had a large number of visits to partners and annual business negotiations, and many brand owners and partners paid more attention to JD.com in 2022.

Q: In the fourth quarter, general merchandise revenue slowed down, what is the market strategy in terms of JD Supermarket?

A: In the Jingdong supermarket sector, our brand partners feel the pressure from the upstream price rise and the rapid change of consumer demand, which brings great uncertainty to the operation of manufacturers. We will deal with these issues from four perspectives:

1. Bring new products and new categories, establish user minds, and make Jingdong Supermarket the first choice for their supermarket categories.

2. Strengthen collaboration with brand partners in supply chain, marketing, warehousing and other aspects.

3. In the future, we will cooperate with more business partners to develop an omni-channel strategy in a diversified shopping scenario.

4. In terms of supply chain, we have made a lot of innovations in this regard, such as warehouse stores, etc., its profitability is constantly improving, and we are close to the breakeven point.

Q: 3P business strategy

A: In terms of our 3P ecology, we have made the following four efforts:

1. We continue to manage our third-party merchants in a refined manner.

2. We strive to help merchants reduce operating costs and reduce their expenses for running on our platform.

3. Improve the technical tools of the platform to help merchants improve their operational effects.

4. We support the growth of small and medium-sized merchants through more ways such as commission reductions and exemptions.

Addendum: From the perspective of consumption in the macro environment, so far, we have seen that overall consumption in the first quarter and even the first half of 2022 is relatively conservative. Second, in terms of categories, we expect supermarket home products, health products, and corporate businesses including MRO to generate higher growth than our overall average. Third, omnichannel business will continue to be one of our strategic priorities and achieve rapid growth in 2022. Fourth, we also expect 3P to grow faster than 1P.

Q: How will the growing market share of live e-commerce platforms affect JD.com's business? How will JD.com respond?

A: Live e-commerce can attract and meet the shopping needs and interests of some people, and it has developed rapidly under the traffic dividend. We believe that these live e-commerce will have a long-term impact on traditional e-commerce, and we believe that:

1. The consumers of the JD platform are mainly planned and family-oriented, so we are less affected.

2. Brand owners have encountered many difficulties in operational efficiency when entering the new platform and need help.

3. After the dividend period, all kinds of new business models need to build a better ability to work with business partners for win-win results. JD.com has a complete supply chain infrastructure and fulfillment capabilities, customer service and platform management capabilities, and has unique competitiveness. We will also continue to work with content platforms to support merchant partners in operating in the traffic space.

4. JD Logistics also cooperates with live broadcast platforms and short video platforms to provide transportation and logistics support, which is also a huge opportunity for JD Logistics.

Q: What are your user growth expectations for 2022?

A: We're more concerned about quality user growth, so in the fourth quarter, the per capita arpu for new users increased by 11%, the frequency of purchases by old customers increased by 3%, and the per capita arpu increased by 4.5%.

In 2022, we will continue to pay attention to the quality of user growth and refined operation, and the growth points are mainly two aspects.

First, the category, the category of large supermarkets is still our main growth engine, we occupy the consumer mind more successful 3C electronic category, in the current supply side of the shortage of goods can still continue to get the user wallet share.

The second growth point comes from the platform ecosystem construction and our omni-channel strategy, which will provide us with multiple ways to reach new consumers and new users.

Q: What is your vision for the future opex and profits?

A: There has been a change in JD.com's retail, business model and category mix.

1. The growth of the supermarket category will continue to outpace my overall retail business, and its operating margin is steadily improving, but still below our average margin level.

2. Second, the 3P business will grow faster than this, thus mitigating the impact of the category portfolio shift.

3. Third, the omni-channel growth factor is greater than online retail, and this business model is still in a relatively early stage. So it's still at a slight loss, but we're going to improve their UE year by year.

4. As the sponsorship fee of the CCTV Spring Festival Gala and the related publicity fee, it will be reflected in the first quarter report. Our marketing expense ratio and operating margin will be slightly affected in the short term, and the impact on our marketing spend for the full year 2022 is manageable.

5. We have made a lot of investment in production capacity in 2H2020 and gradually increased the utilization rate in 2021, so JD Logistics' UE will also improve compared with 2021.

6. For new businesses, we see competitors becoming more rational now. We always balance our investment in new initiatives with the profitability of our core business. Finally, at group level, we completed the acquisitions of Dada and Debon, and we will start consolidating them in March. They are not expected to have a significant or substantial impact on revenue and profits this year.

Q: What is the cross-selling rate of JD.com's omni-channel? Why do you think users will opt for omnichannel consumption? Is it an incremental business or will it replace a traditional e-commerce business?

A: JD.com has built a variety of supply chain models based on changes in consumer demand, and same-city retail is currently the track of rapid growth of the entire industry. Instant retail can not only open the long-term retail ceiling, but also deeply connect physical and offline retail, helping the digital transformation of traditional retail.

First of all, as an important part of the omni-channel strategy, instant retail is an extension of the existing retail market, but also a trillion market, with great potential, hoping to rely on the capabilities of Jingdong Group to provide users with rich timeliness principles and high-quality shopping experience;

Secondly, fresh and cold chain goods with higher requirements for heavy goods and logistics and transportation conditions will be localized based on nearby stores, and this retail model is also cheaper and more efficient than the traditional C3C model.

At the same time, hourly shopping can also amplify the advantages of social supply, supplement online inventory, co-create with offline stores, and can also get brand support.