Dada Nexus Limited (NASDAQ:DADA) Q4 2021 Earnings Conference Call March 8, 2022 8:00 PM ET

Company Participants

Caroline Dong - Head, Investor Relations

Philip Kuai - Chairman & Chief Executive Officer

Beck Chen - Chief Financial Officer

Jun Yang - Co-Founder & Chief Technology Officer

Conference Call Participants

Ronald Keung - Goldman Sachs

Eddie Leung - Bank of America

Thomas Chong - Jefferies

Alicia Yap - Citigroup

Ashley Xu - Credit Suisse

Andre Chang - JPMorgan

Wei Fang - Morgan Stanley

Wei Xiong - UBS

Wei Fang - Mizuho

Operator

Good morning, ladies and gentlemen. And thank you for standing by for Dada's Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the managements’ prepared remarks, there will be a question-and-answer session. As a reminder, today's conference is being recorded.

I'd now like to turn the meeting over to your host for today's call, Ms. Caroline Dong, Head of Investor Relations for Dada. Please proceed, Caroline.

Caroline Dong

Thank you, operator. Hello, everyone, and thank you for joining us today. Our fourth quarter 2021 earnings release was distributed earlier today and is available on our IR website at ir.imdada.cn, as well as on GlobeNewswire services.

On the call today from Dada, we have Mr. Philip Kuai, Chairman and Chief Executive Officer; Mr. Beck Chen, Chief Financial Officer; and Mr. Jun Yang, Co-Founder and Chief Technology Officer.

Mr. Kuai will talk about our operations and company highlights, followed by Mr. Chen, who will discuss the financials and guidance. They will all be available to answer your questions during the Q&A session that follows.

Before we begin, I'd like to remind you that this conference call contains forward-looking statements, as defined in the Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements are based on upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict in a manner of which are beyond the company's control.

These risks may cause the company's actual results or performance to differ materially. Further information regarding these and other risks, uncertainties or other factors is included in the company's filings with the U.S. SEC.

The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law.

Please note that unless otherwise stated all figures mentioned during the conference call are in RMB.

And it is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Kuai Philip. Please go ahead.

Philip Kuai

Thank you, Caroline. And thank you all for joining us today. We're pleased to announce another excellent quarter and a strong finish to the year. Despite macro weakness in the fourth quarter, Dada Group delivered revenue growth on a comparable net basis of 80.3% year-over-year.

The strong revenue growth is achieved by operating efficiency is greatly improved. I'd like to highlight our recent progress and provide updates on our two platforms. And then back, we'll go through our financial results in greater details.

The Chinese central government has recently stated that leveraging the advantages in massive data and a rich application scenario, China shall promote the deep integration of digital technology and the real economy, empower traditional industries to transform and upgrade, create new industries, new formats and new models to continue to strengthen, optimize and scale up its digital economy.

In this regard, DADA is working hard and striving to be a digital economy enabler. We continue to leverage our strong digital technology capabilities to empower the real economy, promote the integrated development of the digital economy and the real economy, and just forward the application of digital technology in the new development roadmap of China.

The central government also proposed to establish a comprehensive cross-departmental supervision system and improve the coordinated supervision of markets quality and safety, to anticipate issues, as well as provide controls and supervision during and after the events. DADA actively supports development policies and developed our business in full compliance with regulations.

So before jumping into our business updates, I'm pleased to announce that JD.com’s investment in Dada obtained regulatory approvals in late February this year and was completed on February 28. We're looking forward to further deepened strategic cooperation with JD.com.

Compared to the mutually beneficial cooperation with JD.com has always been a strategic priority for us. This week, we officially launched Shop Now or Xiaoshigou, unified brand for our on-demand retail services within the JD ecosystem in October 2021. We have been leveraging the collaborative synergies to support the development of the real economy and then jointly lead the development of the on-demand industry.

So during the fourth quarter, the GMV of Shop Now, Xiaoshigou, enhanced strong growth momentum and increased several times year-over-year. As of the end of 2021 more than 70% of the active stores on JDDJ were available on Shop Now.

So going forward, we will further defend the omni-channel cooperation with JD.com, improve JD user’s mindshare for on-demand retail and [indiscernible] and the product categories of on-demand retail on JD.

Now let's talk deeper about JDDJ, the leading local on-demand retail platform in China. Despite a challenging macro environments, JDDJ do manage to grow its revenue by 80% year-over-year in the fourth quarter, significantly outpacing the overall consumption growth.

The government has been encouraging the platform economy, provide support for high quality economic development and high quality life, guiding the platform economy to be more open, innovative and empowering. JDDJ has consistently positioned as an open platform and commits to empower the retail industries through technology and service innovation.

During the fourth quarter, JDDJ continue to digitize the retail industry with respect to enabling retailers and brands and technology departments. Firstly, empowering more retailers and innovation product supplies.

With the continuous optimization on the supply side, we strive to provide industry as a one stop shopping experience for consumers in the on-demand retail space. In 2021, the number of active users on JDDJ increased 51% year-over-year to 62.3 million.

Looking to different verticals. In the supermarket category, we have now established partnership with 85 out of the top 100 supermarket chains in China. According to iResearch, the market share of JDDJ in the supermarket auto sector increased to 27% in 2021. The gap between JDDJ and the second and third players remained wide at 11 and 18 percentage points respectfully.

With continuous expansion of merchant partners and product offerings, deepening cooperation with JD.com and improving delivery to human capability, JDDJ continues to win more users and become a primary on-demand retail channel for more users.

For our supermarket partners, we are committed to helping them create incremental sales through innovative tools and campaigns. Recall that in the last earning call, I introduced the three-in-one coupon that helps improve self efficiencies for retailers, brands and platform.

In early December JDDJ further expanded the coverage of three-in-one coupons and partnered with around 20 original leading players, including CP Lotus and AEON [ph] to launch the first shopping carnival campaign covering more than 10,000 stores in over 100 cities.

The GMV of participating stores increased by more than 200% over regular weekends in November. Meanwhile, the conversion rates increased by over 10 percentage points.

In addition to cementing the leadership in the supermarket category, JDDJ continue to grow its influence in the three C, the consumer electronics category. The GMV of the three C category increased by more than three times year-over-year.

In the smartphone sub category, by the end of December, we had awarded more than 1200 stores on JDDJ. In the fourth quarter, we strengthened our partnership with JD-Daojia, or JD Buy Now Pay Later service to further enhance the experience for consumers purchasing smartphones on our platform.

In the PC and accessory sub category, we established new partnership with more well known brands, including Gemmy, Logitech and Razer [ph] In the home appliance sub sector, total GMV continued to grow by more than 100% on a sequential basis in the fourth quarter. In addition, we launched a strategic partnership with iPhone. And we are gradually onboarding more than 800 iPhone stores onto JDDJ across China.

Secondly, JDDJ continues to drive marketing efficiencies for brands. In the fourth quarter, our online marketing service revenue increased by more than 140% year-over-year. For full year 2021, online marketing revenue growth was over 130%, as JDDJ onboards more brand partners and capture a larger share of their marketing spending.

In addition to deepening cooperation with more FMCG brands, JDDG started to collaborate with the cosmetics business of major international brands, such as L'Oreal, P&G and Johnson& Johnson.

Our innovative marketing campaigns have always been welcomed by brand partners. In January 2020 JDDJ launched the Super Lion’s [ph] campaign to help brand partners achieve exclusive growth in the inflows, customer traffic and sales. This campaign integrates current affairs and engage with consumers across multiple social media channels.

Just ahead of the 2022 Winter Olympic Games, JDDJ rollout the first Super Lions campaign together with P&G, Coca-Cola Sneakers and Ellie. The GMV during the campaign increased by approximately 200% year-over-year.

Moving on to our technology departments. As of the end of January 2022, our omni-channel operating system Haibo covered around 6,000 retail chain stores. Almost valuing in boosting retailers sales, while improving cost efficiency not only help us continue to acquire new merchants, but also enablers to maintain a very high retention rate. In 2021, the renewal rates of the merchant using Haibo system was more than 18 - sorry, 98%.

In terms of future iteration and optimization, we upgraded the procurement module of Haibo in the fourth quarter to improve order picking efficiency and optimize labor costs. The upgraded module enables stores to pick items in different zones based on SKU distribution, sales heat maps, and the labor capacity and then aggregate orders efficiently.

With the launch of the upgraded module, the picking time at stores can be reduced by an average of 40%. At present, more than 80% of the merchants using Haibo system have adopt this module.

Regarding our digitized in-store picking service, Dada Picking, the number of stores covered by Dada Picking continue to expand, as is increasingly recognized by merchants. As of the end of 2021, Dada Picking covered around 500 stores of supermarket chains, with number of orders for few in the fourth quarter growing more than eight times year-over-year.

Let's now move on to Dada Now, the leading local on-demand delivery platform in China. In early 2022, the State Council issued the development plan for a modern comprehensive transportation system during the 14th five-year plan to clarify the major tasks for the transportation industry.

One important task set out in the plan is to expand the supply of high quality transport services, including supporting the development of new modules, like on-demand delivery. With a leading local delivery network that provides service nationwide, Dada Now is always committed to meeting people's needs for a better life, with higher quality, higher efficiency and a lower cost service.

In addition to supporting domestic consumption with solid logistics infrastructure, Dada Now also continues to take measures to safeguard riders interests. In January, we attended the Administrative Guidance meetings held by the Ministry of Human Resources and the Social Security's and others and three other ministries.

During the meeting, our efforts and achievements in protecting the rights and interests of workers engaging in the new form of employment and improving rider experience were fully recognized by the government.

In terms of our - the business progresses, total revenue from on-demand delivery services to key accounts, or KA chain merchants increased 100% year-over-year in the first quarter. In full year 2021, our KA revenue growth was over 120%. This was the third consecutive year that our KA revenue grow at 100% and above. The strong growth momentum is a result of our enhancing service offerings and expanding customer basis.

While maintaining rapid revenue growth, we continue to improve our service quality and operational efficiencies for the KA merchants. In the fourth [ph] quarter, we achieved higher delivery few fulfillment rates, while reducing fulfillment in costs by strengthening standardized management, deepening corporation with merchants and optimizing operational strategies.

Moving on to SMEs. Orders fuelled for SME merchants in the fourth quarter increased 100% year-over-year. The fast growth of SME orders also led to the increase of overall other density of Data Now delivery network, contributing to delivery efficiency improvement.

For last-mile service, with improving service capabilities, delivery orders experienced steady growth and our pickup orders obtained rapid growth. In addition to offering pickup services to individual consumers and small business, we have also made significant progress in on-site pickup services for large customers, comprehensively catering to the needs of JD Logistics.

Lastly, on Dada on-demand autonomous delivery. Since the open platform was officially launched in July 2021, we continue to empower our upstream and downstream partners in the on-demand delivery value chain through strong technology and operational support.

At present, the platform has delivered over 30,000 orders for supermarket partners. Meanwhile, our delivery fulfillment rates remained stable at over 95% even during heavy promotional periods and bad weather.

While we made this encouraging progresses, ESG efforts are integrated across our businesses. Recently, in recognition of our socially responsible practice, such as anti-pandemic assistance and poverty relief, we were named as a Charity Star of Shanghai in the 10th edition of the awards, being the only Internet and online new economy enterprise awarded.

In January this year, JDDJ was among the first batch of applications to pass the aging-friendly and barrier-free assessment launched by the Ministry of Industry and Information Technology. Dada Group will continue to stick to our ESG strategy and drive sustainable value creation.

With that, I will now pass the call over to Beck Chen to go over our financials for the quarter and the full year. Thank you.

Beck Chen

Thanks, Philip. And before we go over the numbers, just a few housekeeping items in advance. We believe year-over-year comparisons are the most useful ways to judge our performance. Therefore, all percentage changes I’m going to give will be on a year-over-year basis and all figures are in renminbi unless otherwise noted.

I'll start with the Q4 numbers first. The total net revenue increased to RMB2.03 billion, aligning the revenue recognition method of Dada Now last-mile delivery service to a comparable net basis, the pro forma revenue growth would have been 80.3% year-over-year.

Net revenues from Data Now were RMB718 million. Pro forma revenue growth rate was 80.5% year-over-year, mainly driven by increases in order volume of intra-city delivery services to chain merchants.

Net revenues from JDDJ increased by 80.1% to RMB1.3 billion, mainly due to the increase in GMV, which was driven by increases in the number of active consumers and average order size. The increase in online marketing services revenues as a result of the increasing promotional activities launched also contributed to the revenue growth of JDDJ.

Moving over to the expenses side, operating and supporting expense – expenses were RMB1.4 billion. The decrease was primarily due to the decrease of rider-related cost incurred by business upgrade of last-mile delivery services, partially offset by an increase in rider cost as a result of increasing order volume for intra-city delivery services provided to various chain merchants on the Dada Now platform and retailers on the JDDJ platform.

Selling and marketing expenses were RMB1.07 million. The increase was primarily due to the growing absolute dollar amount of incentives to JDDJ consumers, and an increase in personnel cost in connection with the Company’s growing businesses.

G&A expenses decreased to RMB99 million, primarily due to decreased share-based compensation expenses. R&D expenses rose to RMB169 million, mainly attributable to the increase in research and development personnel cost as the Company continues to strengthen its technology capabilities. Non-GAAP net loss attributable to ordinary shareholders of Dada was RMB485 million.

I will now quickly run through a few key full year 2021 financial results and further details can be found in the earnings release. The total net revenue for the full year was RMB6.9 million. The pro forma revenue growth rate was 78%.

Operations and support costs were RMB5.1 billion, compared with RMB4.7 billion in 2020. Selling and marketing expenses were RMB3.4 billion, compared with RMB1.8 billion in 2020.

G&A expenses were RMB400 million, compared with RMB499 million in 2020. R&D expenses were RMB574 million, compared with RMB429 million in 2020. Non-GAAP net loss attributable to ordinary shareholders of Dada was RMB2.1 billion.

So as of December 31, 2021, the Company had RMB1.8 billion [ph] in cash, cash equivalents, restricted cash and short-term investments. As Philip mentioned earlier, JD account investment in Dada has been completed last week, which further boosted our cash position by US$546 million.

Our strong cash reserves gives us great confidence in our ability to execute long term sustainable strategy, which we believe will create value for both investors and society.

In terms of the outlook. For the first quarter of 2022, we expect total revenue to be between RMB2 billion and RMB2.05 billion, representing a pro forma growth rate of 72% to 76%, adjusting 2021 Q1, '22 Q1 [ph] was Dada Now last-mile revenue to a comparable basis. In addition, we expect pro forma net loss margin based on comparable net basis revenue to continue to experience significant year-over-year improvement in the first quarter of 2022.

So this concludes our prepared remarks. Operator, we are now ready to begin the Q&A session. Thank you.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ronald Keung at Goldman Sachs. Please go ahead.

Ronald Keung

Thank you. Thank you, Phil and Beck, Jun Yang [ph] and Caroline. Congratulations on the solid growth in the fourth quarter and on your guidance. I think I want to ask two questions. One is just, I think we have delivered strong growth since listing and very pretty on track in a very fast growth.

But on the subsidy levels and on a kind of order loss basis on fourth quarter kind of apples-to-apples basis and how - how have we tracked in subsidy rates in the fourth quarter? And I think investors too do want to see a track of continuing, reducing in subsidy rates, while maintaining very strong growth. So want to hear what is management's expectations on the subsidy levels and also a unit economic basis how that will look for 2022?

And then my second question would be on the JD cooperation, if we kind of further split that unit economics, could you share how the Shop Now channel and the different JD channels, are we seeing improved unit economics in those JD specific channels versus our traditional App and JDDJ mini program, just want to see as how mix of GMV increases to the JD channel, would that be one of the drivers of our improving unit economics ahead? Thank you.

Beck Chen

Okay, thank you, Ronald. Let me take, take the last two questions and see whether or not Philip has anything to add. So first of all, yeah, so, in the past several quarters of 2021, we continuously optimized our subsidy ratio, which is like consumer incentives we given to the consumers.

So in - example, in Q4, and our consumer incentives is decreased by 120 bps on a year-over-year basis, and also decreased by 20 basis points on the Q-on-Q level. So, this is the major factor - the major factors for us to further optimize our JDDJ direct margin.

So, in Q4, our JDDJ direct margin is further optimized by 20% bps compared to Q3, and also going forward in 2022, we believe that we will further – our priorities to further optimize the consumer incentives, which is also mentioned in the prepared remarks that some of which are driven by like the promotion of the three-in-one coupon. So with more and more three - three-in-one coupon, applied in the platform, we expect our profit level will be further improved.

And also, the other factor is to further you know, to be integrated with JD, especially with JD retail. So, we believe that, just like you mentioned, so with more revenues, and GMV's contributed through the JD [ph] Retail, and our overall gross margin level and the profit level will be improved as well.

So we foresee that in the last earnings call, we mentioned that we believe in Q2, 2022, we can achieve the breakeven of JD growth [ph] margin level. And right now, we believe that we can achieve positive gross margin level of JDDJ in Q2 this year, and in Q1, we believe it's very close to breakeven for the JDDJ gross margin on the quarterly basis. And maybe for some of the months, it's already positive. So this is - yeah, this is the answer.

Philip Kuai

I will just add some more color. So as you can see that, during the last few quarters, our profitability have been greatly improved, continuously improving, and we'll continue to improve that. And we're very confident that at the same time we grow our top line very fast, at the same time we improve the profitability.

As we can see that the on-demand retail, the whole industry is due at a relatively early stage with the entire industry growing fast. So we believe is quite important to keep the scale growing and to strengthen our market leadership. So we will do both things right.

And also regarding the JD Corporation, and how that can help us to improve our profitability. So one of the key costs is to acquire customers, acquire users. And we have shifted our user acquisition strategy since our deepened cooperation with JD. So before most of the - our costs are spent to acquire user to the JDDJ app. And now as we have bought the open Shop Now and a lot of JD resources to do business, so we are shifting our focus to acquire users within the JD user base, so that can also save a lot of user acquisition costs. So, among others, there are a lot of positive - values can be generated through the corporation with JD, that I just want to mention how that user acquisition will help us. Thank you.

Ronald Keung

Wonderful. Thank you, Philip and Beck.

Operator

Our next question comes from Eddie Leung at Bank of America. Please go ahead.

Eddie Leung

Good morning, guys. Two questions, if I may. The first one is about different retail categories. Given the current consumption in [indiscernible], especially heading into 2022. Could you talk a little bit about the relative strength and weakness, I have thought you have seen from your different client segments, both under JDDJ and Dada Now?

And then just a quick follow up on Philips comment on user acquisition. Could you also talk a little bit about your strategy on your JDDJ ATP [ph] because you mentioned that you have switched some of the resources to acquire users within JD? Thank you.

Philip Kuai

Sure, Eddie. So I'll give my answer and see if Beck has anything to add. So I believe the first question we have is regarding the different retail categories and how that evolve on our platform.

So we, as you know that we start off with the supermarkets category and we keep strengthening our market leadership in that category. And then we are - we have gradually evolved to many other categories. Consumer Electronics, for example, has been growing really fast. And that also benefit a lot from the synergies with JD.

And also we are very happy to see that, for example, like the parenting sector and the cosmetic sectors, all those has been growing very fast. And because - as you may have noticed that the offline business are seeing some challenges, especially during the COVID and economic slowdown. So the merchants are more willing than ever before to work with us. That's why we are able to acquire a lot of retail partners from different verticals.

So I think going forward, we will eventually achieve our vision to be - basically everything on demand. We are - we are, we will be there, and we're getting close. So everything will be on-demand.

And in terms of the user acquisition, so first of all, they're still our loyal customers, stick to the JDDJ app. Because this app is tailor-made for on-demand retail and a lot of loyal customers love that. And we will keep our user retention program and to keep this app alive and acquire more users.

At the same time, we're seeing that the JD has really opened the door for us and we are able to acquire from the over 500 million JD users. And as you may have noticed, during the last few months, we have now more and more entry point and resources. And we have been innovative - innovating with JD team trying to improve the conversion rates, and to get more access points within the JD app.

So we're very confident that we will be able to grow the user base within JD very quickly. At the same time, it's also very beneficial for JD because now the JD app not only provides the B2C model of E-commerce, but also provides their on-demand E-commerce.

So JD app becomes much more attractive to both new users and existing users. So this will also help to drive the JD user acquisition and JDs user retention, so this is highly win-win, yeah.

Eddie Leung

Thank you very much.

Operator

Our next question comes from Thomas Chong at Jefferies. Please go ahead.

Thomas Chong

Hi, good morning. Thank you management for taking my questions. I would like to take a step back and looking at the big picture about the space right now. Can management comment about how we should think about the competitive landscape in 2022? Are we seeing the competitive environment is a lot more rational compared to last year? And recording the consumption recovery, the impact on the macro headwinds together above the reasons of COVID situation, how should we think about our business trend in subsequent quarters?

And my second question is about our Haibo monetization, given increasing the number of stores are using our sites – systems. Just want to get a sense with regard to the revenue potential, as well as the competitive landscape on this front? Thank you.

Philip Kuai

Sure, Thomas. So I will give you my answer and see if Beck have anything to add. So the first one regarding the competitive - the competition environment, as you mentioned, we are seeing that the players in the markets are now more rational than year before. And people are more cautious in burning cash or improving - have more willingness to improve the profitability.

So I think overall, the competitive environment is more - has been more rational. At the same time, we're seeing that the business model really matters. And we are very confident as we have been in the last two to three years since we first roadshow for our IPO. And for the last two years, we have always been confident about our business model, which was, first of all, we are a platform play. So we don't do - we don't host any inventory. So that means we are not competing with any there - any retailers on board, I think this is continued to be very important.

This is very unlike, some of other platform play, who also to their first party - the first party business and sell inventory. So over the last year we are even more confident that - about our model. And also, if you want to compare our model versus the dark warehouse model, I think over time, people are more clear about the pros and cons of different models.

And again, as we have demonstrated that we are able to grow our top line well, quickly improving the profitability, I think people will - have been realizing that the model, our - our model is more - have more benefits. And also the community grew buying. As a community grew buying the government's policy - government’s regulations and the macro environment impact, I think that is less relevant and less competitive than a year ago. So that's the competition environment. And we are confident about our strengths going forward.

And in terms of Haibo, so first of all, we are very happy to see that Haibo is well received by almost all of our merchants partners and the retention rates for Haibo paying customers is nearly 100%, is 98%, so it's very, very high and people are really loving our features and so on.

And the revenues generated from Haibo is about 200% year-over-year. So, although the Haibo revenue itself has not been that big, but the growth has really encouraging. So we will continue to make Haibo a more powerful tool and system for everybody. And we will continue to explore other monetization opportunities around Haibo systems.

Beck Chen

And also, as mentioned earlier, in terms of the supermarket auto sector into 2021, the market share of JDDJ has increased to 27%. And also the gap between JDDJ and the second player remain wide at 11 percentage points. And the gap between JDDJ and a certain players are even much bigger than the previous year, as like 18 percentage points. So believes that we will continue to focus on the categories we mentioned in the prepared remarks for the past several quarters, including those newer categories in three C categories and Pathmatics [ph] all those newer categories will contribute to our further you know, GMV growth and everything so on.

Thomas Chong

Thank you.

Operator

Our next question comes from Alicia Yap at Citigroup. Please go ahead.

Alicia Yap

Hi. Good morning, management. Thanks for taking my questions. I have two questions. First, I guess maybe Philip, you are back. Can you guys elaborate you know the major changes that you foresee to happen pose the JD state completion? What are some of the things that Dada will be able to do or you know different collaborative initiatives you - that you are planning in the coming months, post the consolidation?

And then second quickly is, can you share with us the commission take rate this quarter, and also the AOV for the fresh versus the non-fresh category and also percentage of your orders that coming from the fresh versus the non-fresh? Thank you.

Philip Kuai

Okay. So, our partnership with JD has certainly been further strengthened. And as you may have recalled about a year ago, we firstly announced the investments offer from JD and it took about a year for all the regulation, pre [ph] approval. So, over the last year, we are now sitting there and wait, we have done a lot of things already.

For example, as you can see, like the Shop Now, the Xiaoshigou has already been developed and now quickly growing. And also from the organizational perspective, over the last year, we have already set up a org within the JD Retail org. So, both teams has been working very closely already.

And I think going forward, since this officially approved and the completion of the transaction, I think a few things will happen. The first of all, JD, the entire org will see us as a real family and include [indiscernible] order operation and the financial planning.

I think this is very important because within a large organization, while people are setting up their KPIs and OKRs, whether we are included or not will significantly help us to better collaborate with JD teams. And also while JD team is planning on their annual strategy and operation strategies, so I think going forward we will absolutely be considered and included in each of the JD retail teams.

So when they're doing their business planning and when they're seeing their clients, we will be included. For example, as you may have noticed in some of our news release that we are now having more joint business plans with JD Retail and other like brands or retailers. For example, the - we had a JD Retail, Walmarts, JDDJ joint partnership program, and we're having similar programs with many other brands as well. So I think all of those will improve the synergies with JD.

Beck Chen

And relative to second question, the commission rate is raining flat compared to the previous two quarters and the overall AOV has increased to RMB210, which is many contributed - contributed by the increase of the three C ratio digits [ph] and the over AOV of the supermarket categories still remain like RMB145 in Q4. And the overall market category is contributing close to 60% of the total GMV, while the electronics is contributing 30% plus, as a percentage.

Alicia Yap

Thank you.

Operator

Our next question comes from Ashley Xu at Credit Suisse. Please go ahead.

Ashley Xu

Thank you management for taking my question. My info related to our Data Now, KA business, given current environment is quite tough for quite some small merchants in catering business. And that's actually the area we have been trying to expand into. So want to check on our progress on this and also the outlook? Thank you.

Philip Kuai

Yeah, sure. So we're happy to see that our business and service to the 10 merchants, to the KA merchants has been growing really fast. So we have for the last three years, each year we grow over 100% year-over-year. And this year, will continue to grow fast. And so for each of the KAs, we have already going to be working with, we will expand our penetration. And we're doing that and achieving that.

At the same time this year we will be signing up with dm more KA brands. Now one of the reasons why we can continue to grow fast is that our service level and our brands are more and more recognized by the KAY Pay merchants and they really value our service level, our independencies and such trust will help us to win more clients.

Ashley Xu

Okay, thank you.

Operator

Our next question comes from Andre Chang at JPMorgan. Please go ahead.

Andre Chang

Thank you management for taking my question. My question is about a longer term path to profit. While we and investors appreciate the - you know, quick just progress toward the direct positive margin of JDDJ as management mentioned. More investors are nowadays demanding the - know fast growing competing companies to deliver overall profit. I don't know if under the current environment the cooperation JD, et cetera. What's the latest thought of management of total overall profit, the timing and the how to balance between the - maximize the potential to grow, et cetera?

And totally unrelated question, a more short term one. Now even the resurgence of COVID across many cities in China right now. Have we seen some pickup of our demand? And do we expect that such a thing to improve further clarification, further deteriorate? Thank you.

Beck Chen

Okay. Thank you, Andre. So first, on the profitability of - for the company operating profit level. So – yeah, so, first of all, our target is to achieve the targeted direct-to-margin that updated JDDJ first and in the same time for the overall Dada Now, the need [ph] is right now, it's already achieved like positive AOV, especially like for the chain merchants, the new business under Dada Now in Q2 iterating.

In 2021 the unit economics for the chain merchants is relatively breakeven, though for the fast growth of last year. So for this year, we just set a relatively still high growth target, while we should achieve a positive unit economics for order. So, this is also helping us to improve the profit.

So, for the company level, we will further – still we will further balance growth rate of the two sectors, the growth of the two sectors, and also like the profitability. So, we still maintain that the company will achieve positive operating profit target in 2022, and maybe starting from the second - first half of next year. So, this is about the profitability.

And about the resurgence of the COVID recently in China. So, right now, we still seeing relatively stable costs. We have a very, you know, a good government to help us to maintain the order of the site in each city and unless there is anything you know, like occurring like two years ago, we may see a super like demand from the demand side.

So right now, we just think the demand side is very easily growing, and not like super, like a hike of the demand suddenly. So, right now, we think it's all under our management level and also for us to maintain a very healthy rider network.

Andre Chang

Thank you, Beck.

Operator

Our next question comes from Wei Fang at Morgan Stanley. Please go ahead.

Wei Fang

Thank you, Philip, and Beck for taking my question. I have two small questions about the UK operations under the Dada Now. The first is that, we've heard that some of the tea beverage shops like Haiti, they are cutting their retail prices recently. So do you feel like any pressure in potentially price based competition between the online platforms? Because the tea shops they want to pass on the lower retail prices to delivery cost? Do we see any competition intensifying due to the price cut?

And second question is about the UOE [PH] improvement or the profitability of the KAs – KA operation? I mean, if you compare with how to improve the profitability in the future, do you think that it's more easy to improve the UOE of KA delivery or it is more simple to improve the take rate from the JDDJ's grocery?

It looks like that given your current revenue from the KA operation, it looks like if you can improve the delivery fee by RMB1 per order, then the holding company can be breakeven. So is that achievable way to improve your profitability in the future? Is it more easier than like seeking for higher take rates from JDDJ and grocery operations? Thank you very much.

Philip Kuai

Okay. So first of all, some of the, as you say the tea beverage companies are cutting costs and I think well, overall, the chain merchants are more cautious about the costs. I think that's a - that is the market situation. But I think that is our advantages actually because we do have a very competitive cost base, especially for KA business.

Because for historically for KA business, the service providers tend to use full time riders, stations riders, to the station riders to serve each of the stores. So the cost is really high. But we come to the market with a better solution. So we combine both the station riders and the cross source riders, so - and to achieve a other cost base. So that's why our costs, our cost base are more competitive than most of the other players in the market.

And at the same time, we are increasing our margin or unit economists for our KA business, for the last few quarters and we envision this improvement will continue in the next few quarters, by two thins, one is to continue to improve our cost base, we are improving our efficiencies and lower costs, at the same time because we are - we have a better brand recognition and we are able to penetrate into the higher percentage of the of the markets, we're able to enjoy a higher charge as well. So we are happy about our bouquet [ph] business and how it goes. And in terms of the - yeah, I think that's our - how we look at the KA business.

Beck Chen

And also we will – and managing it, actually, we will balance the take rate enhancement on key accounts and also the take rate enhancement, or monetization increase of JDDJ. So, just like you mentioned, when the increased height - the height is too much in the market. So that's why we think we will gradually improve our take rate or in the same time, further optimize our operational efficiency for the chain merchants businesses.

While we will also put you know, an emphasis on to the improvement of the monetization rates of JDDJ in 2022. And as we mentioned earlier, we will further cut down the subsidy ratios given to the consumers well, they are more used to purchasing through JDDJ or Shop Now.

Wei Fang

Okay. Thank you very much Philip and Beck.

Operator

Our next question comes from Wei Xiong at UBS. Please go ahead.

Wei Xiong

Hi. Good morning, management. Thank you for taking my question. I want to ask about the online marketing services to realize more upside there, are there any other innovative marketing services or campaigns that we can expect this year, similar to the obviously three-in-one coupon that you mentioned, that can help us to gain more wallet of share from the brand partners? And how will they deepened the partnership with JD can help you in this area?

And also maybe just want to get your latest thoughts on what's the level of monetization rate you can realize from online marketing services this year and also longer term? Thank you.

Philip Kuai

Sure. For the sake of time, I hope people will [indiscernible] Yes, the online marketing service has been always a very key revenue stream for us. And one of the key things that we will be starting to do from this year is after the transaction complete with JD, we are now having more and more joint business plans with JD.

So this will give us a very good opportunity to provide a more comprehensive service to the brands with JD. So brands will see JDDJ and JD Retail as a more integrated solution. And jointly, we will be able to generate more value to the brands.

So - and with that, I think we'll be able to generate more sales for the brands, as well as generate more online marketing value for the reps.

Beck Chen

And also for the overall monetization rate, we expect that for the full year base, we are able to improve by 30 to 40 bps. And also for the cost side we think we have you know a great potential to greatly improve like, just as I mentioned, we believe that after you know one year like Q4, next year, Q4 2022 improvement should be like almost to 100 bps points – bps and on a year-over-year basis. And also for the rights, for the operating costs including those rider costs, we believe still we have a great room to improve, while the older density [ph] is increased.

Wei Xiong

Got it. Thank you, Philip and Beck.

Operator

Our next question comes from Jiulu Li [ph] at CI CC. Please go ahead.

Unidentified Analyst

Hi, good morning, management. Thank you for taking my question. And I have two questions. The first one and how do you see the auto market especially for local e-commerce? Like the market size of auto market or local e-commerce? And what kind of player will JDDJ be here? Or do we have any go for you?

And the second question, as for the cooperation with JD.com, do we need to pay fee like - like commission fee to JD.com? If so, is it possible to cancel in the future? By the way, as announcement in February said, JD.com also provides strategy resources, do strategy resources here mainly refer to user and the client activation, could you share more color about it, yeah?

Philip Kuai

Yeah. First of all the market size, I think the on-demand retail, as we explained earlier, in during our roadshow, I think the market size is even bigger than two years ago when we see that. So the - I think we're still at a very early stage for the on-demand retail.

And especially when we are evolving from just supermarkets to more and more sectors, consumer electronics and cosmetics, beverage, and so on. So there is literally a massive market size. So we're not worried at all about market size.

Yeah, and in terms of the - our partnership with JD, we will be exploring different opportunities and scenarios.

Beck Chen

Yeah, and previously, actually, we are still paying the commissions to JD regarding the Shop Now businesses, and right now it's going to March we are still paying. Of course, we will further like - we will further improve our operational efficiency well, further in negotiating with JD on that path as well.

And then related to the partnership with JD, I think it's very much comprehensive, it's not only related to the user, and go, it's also related to those like operation efficient end go, and also integration or cooperation with different vertical categories of [indiscernible] like cosmetics, for all these vertical categories. And the daily retail will be very close partner of JDDJ.

So in the future the ecosystem will not be just like B2C or auto, it will be like somewhat like B2C plus, auto [ph] pass. So maybe placed online delivery offline will be the future model and more efficient model of the e-commerce sector.

Unidentified Analyst

Thank you very much. Very, clear.

Operator

Our next question comes from Wei Fang at Mizuho. Please go ahead.

Wei Fang

Thank you for taking my questions. Quick one. And remember, last quarter management highlight a partnership, right? With the 200 brands and the monetization rate of 3%, not sure if you can give an update. And also just looking by the 140% new growth for two quarters in a row. I was just wondering, maybe can help us understand how this brand partnerships typically get started? Do you guys reach out to brands proactively or it's the other way? And also, I think, do they typically sign the annual framework with you guys? And if you saw how the 2022 budget looks like? Thank you.

Philip Kuai

Yeah, so because we are a platform, we are selling like millions of SKUs on our platform. So we can see literally what brands are, how they're doing on those platforms, right. So we had a very clear picture. And therefore, and also the brands who are very interested in how they're doing on our platform, right because we are the fastest growing channel for most of the brands in China now.

So with that, we constantly exchange ideas and insights and brands really enjoy working with us to achieve a higher growth. That's how we get started with most of the brands. And once we work with some of the brands and it gets bigger the scale, the size gets bigger and then we will get into a annual contract or annual framework.

For most of the leading brands, we do have annual framework with them. And – but that framework or annual contract is just a - for example if we grow faster or we have a bigger value generated we are able to get more revenue even out of the contract as well. So I wouldn't see that framework as a ceiling of our business with the rest.

Beck Chen

Yeah. And also for like the brands in three C categories, cosmetics in the past and in the future and also in the future JD Retail will help us to acquire more and they will actually introduce more those kinds of brands to us and how to negotiate it we will just you know have met with those three C and cosmetic brands directly and help them to start O2 businesses.

Wei Fang

Got it. Thank you. Very helpful.

Operator

Thank you. That's all the time we have for questions. I will hand back to Caroline for closing comments.

Caroline Dong

Thank you, operator. In closing, on behalf of Dada's management team, we'll like to thank you for your participation on today's call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.