Hello and thank you for standing by for JD.com's third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time.
I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director, Investor Relations. Please go ahead. Thank you. Good day, everyone. Welcome to JD.com third quarter 2024 earnings conference call. For today's call, CEO of JD.com, Ms. Sandy Xu, will kick off with her opening remarks. And our special, Ms. Yan Shen, will discuss the financial results
and then we'll open the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the Safe Harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only, and will include forward-looking statements. And please refer to our latest Safe Harbor statement in the earnings press release on our website, which applies to this call. We'll discuss certain non-GAAP financial measures
Please also refer to the reconciliation of non-gap measures to the comparable gap measures in the earnings price release. Also, please note, all figures mentioned in this call are in R&D, unless otherwise stated. Now, let me turn the call over to our CEO, Sandy. Thank you, Sean. Hello, everyone. Thanks for joining us today to discuss our Q3 2024 results. We had a solid Q3 with improved operating and financial results.
Our top line growth accelerated sequentially. Our active user base and shopping frequency expanded with stronger momentum, and our bottom line achieved another substantial uplift. At the heart of this achievement is our relentless focus on building supply chain capabilities and logistics infrastructure, which enable us to continuously unleash strength
in delivering lower cost, higher efficiency, and best-in-class user experience. This is the key competitive strength that we are focused on as we face an ever-changing macro and competitive landscape. Citi has been dedicated to establishing core supply chain capabilities since day one, along with putting significant efforts
into building out retail and logistics infrastructures around the country to better serve consumers and contribute to the real economy of local areas nationwide. This enables us to play a key role in contributing in the trading program, both online and offline.
JD is best positioned to support this program, not only with our strong user man share in home appliance and 3C categories, but more importantly, with our supply chain capabilities and our fulfillment infrastructure. Consumers are attracted to JD's platform for the wealth of product selections. Our integrated service
covering every step from dismantling, shipment to installation of the heavy bulkhead appliances, and smooth checkout process using trade-in subsidies. The trade-in program has proven to be very effective in unlocking consumption potential and driving the technological upgrade of the entire industry chain.
And we expect to continue to play our role in this effort to better serve customers and suppliers, stimulate consumption, and promote healthy industry development. Turning to general merchandise category, in Q3, its revenues increased by 8% year-on-year, a healthy momentum that has been sustained for three consecutive quarters this year.
It was primarily attributable to our supermarket category, which delivered another double-digit revenue growth year-on-year in the quarter. As a key growth driver for us, the supermarket category continued to enrich its product portfolio in the quarter to cover different price tiers. It has also launched many initiatives, such as direct shipment from suppliers to customers,
that gained strong traction among our users. As such, with improving user experience, we saw healthy increase in both user base and user engagement in supermarket, particularly with a robust 20% increase in shopping frequency during the quarter. Also, notably, within our fashion category, apparel and sports and outdoors
both recorded double-digit revenue growth year-on-year during the quarter, thanks to our efforts to enrich product selection, enhance user experience, and drive user mindshare of shopping for clothing on JD. It's clear that our supply chain strength is at the core of our progress in operations and financials. In addition to that,
Going forward, we will continue to focus on a few key areas to drive our high-quality sustainable growth in the long run. First, user growth and engagement. We've seen a set of encouraging results resulting from our efforts and investments in users. The number of our quarterly active customers has been growing at double-digit rates year-on-year for the last four quarters in a row.
with Q3 being the highest. The growth was distributed across market tiers and user groups, including new and existing users. In addition, in Q3, user shopping frequency maintained double-digit year-on-year growth, primarily driven by our increased price competitiveness, category makeshift, and wider coverage of free shipping service.
Our JB Plus program is on the right track. As we saw, a set of metrics, including active plus number and shopping frequency, continue to improve. All this progress in user growth and engagement really speaks to the fact that we've been providing best-in-class experience to users of different income spectrums and demands.
with the right products, price, and service offerings. On such robust momentum, we will continue to invest with discipline in user growth and user experience. In addition to users, let me share some progress we made on price competitiveness and platform ecosystem. We further improved our price competitiveness as we continue to leverage
on the strength of our 1P supply chain capabilities, as well as our enriched repeat product offerings and white label goods. As a result, we are better able to serve both our existing users and new users, and our NTS for price competitiveness increased year-on-year for another quarter, particularly
we saw a steeper trajectory of user-based expansion and order volume growth in lower-tier markets compared to that of higher-tier markets on our platform. Low price is the very essence of retail, and our commitment to that will never change. To reinforce our everyday low-price user mindshare, we have launched a series of campaigns
such as the monthly Super 18 sales that offers a selection of discounted products on the 18th of every month. The weekly Black Friday, offering deals that mainly cover supermarket category. The daily late night flash sales, offering discounts for limited time and limited supply, as well as the half price clothing promotions.
These offerings are highly welcomed by our users. Last but not least, we also continue to make progress on our platform ecosystem. We onboarded more 3P merchants during the quarter, particularly SMEs and those from industry belts, to expand our product offerings at different price tiers. As such,
Our active merchant base maintained a very healthy year-on-year growth. More importantly, we also made solid progress in the quarter in user engagement, which led to accelerated year-on-year growth in 3P order volume and the number of users who purchased 3P products on our platform, both of which reached record high growth levels in Q3.
Our NPS for 3P offerings rose year-on-year as well. As to monetization, commission revenues returned to a positive growth in Q3, in line with our expectation as the impact of discounted commission fees fully lapsed. Advertising revenues in our retail business grew by double digits year-on-year.
thanks to the healthy growth of our ecosystem and improving traffic allocation efficiency for both 1P and 3P merchants. That said, we are still at the very beginning of exploring the potential of our platform ecosystem to drive our business scale and profitability. We will continue to prioritize further optimizing our tools and infrastructure
to better empower merchants, hence further improving user experience on our platform. That's the wrap-up for our Q3. Moving to Q4, we've just concluded single-state grant promotion. With this year's theme of cheaper and better, our supply chain strengths were brought into full display. Our team did a great job expanding product assortment
for both our 1P and 3P offerings, providing competitive prices and serving users with best-in-class experience. We saw users respond well with user number and order volume, both recording double digital during the promotion. Finally, we are very encouraged by a more supportive policy environment that aims to realize the huge potential of consumption in China.
and at the same time drive industry upgrades, create employment and lift household income, which will further build consumption confidence. While we see consumer sentiment starts to improve, we understand it takes time for the benefits of the policies to feed through. We will continue to focus on executing our strategies in place, using our supply chain capabilities
and fully tapping into our potentials to drive lower cost, higher efficiency, and best-in-class user experience. We believe this will lead us to further expand our market share and profits. With that, I'll turn it over to Ian for our financial highlights. Thank you. Thank you, Sandy, and hello, everyone. In Q3, our top line group accelerated from last quarter
and outpaced the group of domestic total retail sales, driven by strength across our major business segments and categories. Our general merchandise category continued with strong momentum in the quarter. And more importantly, we saw a turnaround in revenue growth in our electronics and home appliances category, due to our comprehensive support for China's nationwide trading program. With our strong user mindset,
supply chain capabilities and logistic services that we have built over the past two decades. We are able to provide superior customer experience and bring value to business partners and the society at large. We also achieved an increase in profitability during the quarter as we continue to improve cost and efficiency, especially on the logistic side.
Both gross margin and the non-cap net margin expanded at a solid pace year over year in the quarter. Moreover, we continue to return value to shareholders. During the quarter, we completed our share repurchase program announced in March this year and launched a new $5 billion US dollar share repurchase program for the next three years through the end of August 2027. In detail,
we repurchased a total of 31 million Class A ordinary shares, equivalent to 15.5 million ADS, which accounted for 1.1% of our ordinary shares outstanding as of June 30, 2024. The total value of the shares repurchased in Q3 was approximately $390 million. During the nine months,
ended September 30, 2024. The total value of the shares repurchased was $3.65 billion, which accounts for 8.1% of our ordinary shares outstanding as of the end of 2023. The progress reflects our commitment to creating value for shareholders. With that, let me turn to our Q3 financial performance.
Our net revenues grew by 5% year-on-year to RMB $260 billion in Q3, of which product revenues were up 5%. By category, revenues of electronics and home appliances grew by 3% year-on-year, with growth improving sequentially in each of these three months. September was notably strong for home appliances and PCs.
due to our contribution to the trading program, which has been proven very effective in boosting overall consumption. And we've seen this upbeat momentum sustain our platform in Q4 quarter to date, including doing a single state grant promotion. Of note, it's our unparalleled supply chain capabilities and keen focus on user experience that set us apart
from peers in the industry. Revenues of general merchandise recorded another solid growth of 8% year-on-year in the quarter, of which revenues of supermarket category, apparel, and the sports and all those of fashion category also double-digit increase year-on-year, with massive 10. And our investment in building user experience and user mindshare in the general merchandise category
We believe there is significant room for us to drive further growth over time. Service revenues grew by 7% year-on-year in Q3, of which marketplace and marketing revenues up 6% and logistics and other service revenues up 7%. For marketplace and marketing, commission revenues returned to positive growth in a quarter
as the impact of our discounted fees to merchants fully lapsed. Advertising revenues maintained solid momentum, with advertising revenues from JD Retail recording another double-digit year-on-year growth in Q3. Key operating metrics of our platform ecosystem showed positive progress in user engagement, including a steady increase in 3P order volume and active users who purchased 3P products on our platform.
Now, let's turn to our segment performance. JD Retail revenues were up 6% year-on-year in Q3, thanks to the turnaround of electronics and home appliances, and the robust growth of general merchandise. Moreover, JD Retail recorded another meaningful gross margin improvement in the quarter, as we continue to drive better scale benefits of 1P, favorable mixed-shift towards higher margin categories,
and higher contribution of 3P. As a result, we are able to pass over the savings to our users and offer them an enriched portfolio of quality products of different price tiers. The achievement in gross margin offset the increase in our operating expense, especially in marketing expense as we devoted efforts to drive user groups and user engagement. As a result,
JD Retail's non-gap operating income increased by 6% year-on-year and operating margins stayed stable at 5.2% in Q3, compared to the same period last year. Now, looking to JD Logistics, JD Logistics revenues increased by 7% year-on-year in Q3. This was due to healthy momentum in both internal and external revenues, which increased by 8% and 6% year-on-year, respectively.
As JD Logistics continue to unlock economy of scale and rise operating efficiency, it made outside improvement across profit lines during the quarter. In particular, its non-gap operating income increased by 624% year-on-year and operating margin came in at 4.7%, up 400%.
compared to a year ago. Going forward, we expect JD Logistics' high efficiency and superior service will continue to benefit JD Group as a critical component of our integrated supply chain. Turning to new business, in the quarter, revenue of new business was down 26% year-on-year, mostly due to the adjustment of the Jinxi business. Now, gap operating loss of new business was RMB 616 million in the quarter.
compared to a loss of RMB 192 million a year ago. The result was largely due to the increased loss in JINXI. Moving on to our consolidated profit performance. In Q3, at the group level, gross profit grew by 16% year-on-year, and gross margin grew by 165 bits, to 17.3%.
is the 10th quarter in a row, with our gross margin extension on a year-on-year basis, a strong proof of our high-quality development path. Moreover, our non-GAAP operating income increased by 18% year-on-year, and operating margin came in at 5% in Q3, up 54% year-on-year. Non-GAAP net profit
Attributable to ordinary shareholders increased by 24% year-on-year and net margin came in at 5.1% at 76 bps year-on-year. We are well on track to achieve our long-term margin target with some of the previous quarters already reaching it. For the full year of 2024, we're confident to achieve double-digit growth of our non-GAAP net profit.
Our last 12-month free cash flow as of the end of Q3 was RMB34 billion, compared to RMB39 billion in the same period last year. This decrease was the result of the timing difference of our working capital and the impact of the trading program, which was partially offset by our increased profit and moderated capex. By the end of Q3, our cash and cash equivalent
restricted cash, and short-term investments, added up to a total of RMB $197 billion. To conclude, we had a very solid Q3, with both top and bottom lines trending in the right direction. Looking ahead, we are more confident in the economic environment and the potential of domestic consumption. We look forward to fully utilizing our core capabilities
to play our role in the implementation of the government's stimulus measures. We will continue to execute our strategies in supply chain, price competitiveness, and platform ecosystem to create value for our users, business partners, and shareholders along the way. With that, I will turn it back to Sean. Thank you. Thank you, Ian.
For the Q&A session, you are welcome to ask questions in Chinese or English, and our management will answer your questions in the language you ask. We'll provide English translation when necessary for convenient purposes only. In case of any discrepancy, please refer to our management statement in the original language. Okay, now, operator, we can open the call for Q&A session. Thank you. The question and answer session of this conference call will start in a moment.
In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question.
Your first question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Thank you, Sandy and Shawn. I'd like to ask about the growth. Can you talk about the growth in the 3rd and 4th quarter, and how long will it last? Especially in the 2nd and 3rd quarter, how long will it last?
In addition to the sustainability policy, I would like to hear about the main driving force for the next growth of JD. What are the strategies and progress we have made to maintain our goal of running faster than Sheling?
Thank you, management, for taking the question. I have a question on our growth, and we've seen the appliance trading programs. Could you help us just quantify the boost to third quarter and potentially into the fourth quarter, and how is the sustainability of this heading into next year for the policy-wide boost to appliance? And then excluding appliance, what are our strategies in supermarket general merchandise?
3P and price competitiveness to sustain the strategy for next year if we want to keep the target of growing above retail industry growth. Thank you.
Thank you, Donald. Indeed, in the past period of time, the government has introduced a series of policies to support the economy and consumption, including consumer goods and exchange rates, which have now been developed in a large range of countries around the country and have made positive progress.
Under the leadership of the government-related departments, we have also used the rapid response to the advantages of the supply chain that has grown over the years to improve efficiency and upgrade services through our own backup, so that good products, good prices, and good services can direct our users and cover more consumers.
I would like to emphasize that JD can respond quickly in a short period of time and fully support the work of rescue and innovation. This is mainly due to the fact that we have been actively accumulating a lot in the field of rescue and innovation for many years, including the integration ability of technology and systems, as well as our own operating ability, logistics, and the ability to build, deliver, and install these differentiated services.
At the same time, users have a high degree of recognition for the innovation in buying and selling. So, with the launch of this exchange activity, we have naturally become the first choice for many consumers to buy and sell. Thank you, Rona. To take your first question, in recent months, the government has been rolling out a series of stimulus measures, including the trading policy nationwide, to support economic growth and consumption.
And these efforts have shown positive progress. And under the comprehensive planning of the government bodies, JBE has swiftly responded by increasing inventory and enhancing service efficiency to support the program. Leveraging our extensive experience in supply chain management, we are well positioned to offer quality products and convenient services at competitive prices
to a broad base of Chinese consumers. So here, what I want to emphasize is that our swift response to the trade-in program is due to our years of experience in proactively providing trade-in services, which has made us technologically prepared and systematically compatible with such initiatives. Additionally, GD's unique supply chain capabilities
including our self-operated sales model, logistics and fulfillment capabilities, and large item services. And combined with our strong user mindshare in the home appliances category have made us the preferred partner and preferred supplier for our customers in the trading program.
From the perspective of the exchange rate, we can see that the exchange rate has made positive progress. We can see that the increase in the September stocks can reflect the effect of the stock on a certain extent compared with the obvious improvement in July and August. From the perspective of JD,
So on the effects of the trading program, we've seen promising outcomes so far. The National Bureau of Statistics
reported that September sales of household appliances and consumer electronics grew significantly compared to July and August. This trend is also mirrored on JD.com, where the trading program has driven our increased demand of sales for home appliances and computers in September. Our sales on these categories increased sequentially in each of the three months in Q3.
What is worth noting is that in the third quarter, the effect of state subsidies has not yet been fully released. On the one hand, consumers have a process of education. Not all users understand this policy. But on the other hand, in the short term, these categories will also be limited by lack of production capacity. Therefore, from the perspective of brands, they also need a certain period of expansion of production capacity. So some products also have the phenomenon of supply and demand.
At the same time, it is also noteworthy that the full potential of the trading policy
yet to be fully realized in Q3. By part, it's because some of the consumers haven't been fully aware of this policy. It takes some time for them to be educated and to take advantage of this trading policy. And on the other side, due to some limited production capacity, the high consumer demand for some subsidized products may not be fully met in the short term. And for the brands and the manufacturers,
require time to ramp up production. Additionally, at the recent National People's Congress meeting, the government just unveiled to introduce more forceful fiscal stimulus plan facing our next year's economic and social development objective. And expanding the trading program in greater scale and categories of consumer goods is a measure included in this supportive plan.
We believe extending the trading policy would further support consumer spending.
to stimulate short-term consumption. More importantly, we hope that through this effort, we can drive the health development of the industry, thereby driving employment and increasing income for residents to reverse the trend of consumer confidence. So we also hope that consumer confidence can continue to strengthen. This is actually a good thing for the entire retail industry and all kinds of manufacturing industries. We believe that if the policy continues and expands to more categories, it is also very meaningful.
So far, we see that the consumption demand for home appliances and computers on our platform continues to steadily increase, and with more users coming to Jingdong to participate in the exchange, our platform traffic and visits are also increasing rapidly, so we will continue to surround the cost-effectiveness experience to improve our
We believe the government's trading program is not solely aimed at boosting short-term consumption, but also at fostering the healthy development of key industries, creating jobs and increasing household income, and restore consumer confidence. And strengthened consumer confidence benefits the entire retail
and all sorts of manufacturing sector. And we hope the policy will continue and expand to other categories to sustain this meaningful momentum. And currently, this program remains attractive to consumers as reflected during JD's single state grant promotion, where our home appliances and computer sales continue to grow steadily. And moreover, the trading program has increased the traffic and visits
JD's platform. We're committed to enhancing our supply chain across all categories, electronics, supermarket, and fashion, et cetera, focusing on cost, efficiency, and user experience to deliver cheaper and better shopping experiences to our customers.
The second question is about the growth strategy. In the past year, we have always been around user experience, cost efficiency, and continued to promote the landing of our various strategies and strategies. First of all, in terms of price competitiveness, we have always insisted on increasing the scale and efficiency of our supply chain.
to continuously reduce our own purchasing costs to continue to bring lower commodity prices. In addition, non-branded products will also continue to attract more high-quality white-collar industrial merchants through our POP model and our Zoosim model, and more low-priced and high-quality product choices to meet the diverse needs of different users. At the same time, as I just mentioned, we have also created a super 18 monthly
Regarding your second question on growth strategies, this year, we have steadily advanced our strategic plans, focusing on enhancing user experience, optimizing costs, and boosting efficiency.
So enhancing price competitiveness, our ongoing strategies include our continuous lowering our 1P procurement costs by scaling our supply chain and increasing efficiency. That allow us to offer products at more competitive price. At the same time, to increase the supplies of non-brand products
We are introducing more white-label sellers and affordable products through our channels like 3P and Jingqi Business Models to cater to the diverse shopping needs across user groups. At the same time, we strive to strengthen the everyday low-price user mindshare by building our promotional metrics, as I mentioned in my remark.
such as the monthly Super 18 sales, the weekly Black Friday supermarket categories, and the daily late-night flash sale events. Yes, and our Japanese products continue to grow fast, especially in the supermarkets. This year, we also launched an online conversion to improve efficiency. In the third quarter, they continued to grow by a double-digit number, and their profitability is also gradually improving.
So on the general merchandise category in Q3, it also maintained healthy growth and continued to outperform the market. And specifically on the supermarket category, we focused
on our reform of the warehouse network for greater efficiency. And this approach led to double-digit revenue growth in Q3, along with improved profitability. And on the fashion category since September, we have increased the investments on the user side, mainly focusing on reinforcing users' mindshare of shopping for clothing on JD. And this focus contributed to double-digit year-on-year growth in clothing categories.
and other subcategories in Q3.
In terms of platform ecological construction, we have just shared that our third-party 3P business has also achieved very healthy indicators. I will not repeat it here. In fact, we will continue to move forward in these areas. Although we have achieved good results so far, there is still a lot of room for improvement. In the long run, we are confident to maintain a growth rate higher than Shellings and continue to gain market share.
So, and thirdly, on the strengthening of our platform ecosystem, on the three key parts, I've already mentioned or won't repeat, there's a lot of healthy growth has been achieved across different metrics, whereas we see there's still plenty of room to improve in many aspects. So overall, we are confident in our ability to sustain a faster-than-market growth rate and continue expanding our market share. Thank you.
Cheers Andy. Thank you. Your next question comes from Alicia Yap from Citigroup. Please go ahead.
Hi, good evening. Thank you for accepting my question. Congratulations on your strong performance. I have two quick questions. One is to follow up on what we just talked about. The Jindong Revenue Government is a new stimulus. In fact, the stability of real estate also led to an increase in the demand for home appliances.
But recently, a lot of investors have been paying attention to next year, especially to the growth and driving force in the second half of the year. They are worried that there will be a high technology in home appliances, which may cause the growth rate to slow down next year. We think that if the real estate market is more stable, it may bring more
The second question is, in recent quarters,
profit and profit growth are all above expectations. One of them is mainly the improvement in profit on the logistics side, and on the retail side, in fact, cost optimization, efficiency improvement, etc. But Jingdong has actually achieved a very good profit increase this year.
Thanks for taking my questions. There are two questions. First is that it's good that JD has been benefiting from the appliance training stimulus and also with the stabilizations of the real estate sector,
which likely have attracted the demand for appliance in the end of 3Q and also into the 4Q. But investors lately have a new concern about the growth driver into next year, especially for the second half of next year, and worry that there might be a high base for appliance sales and also JD's growth might slow down. We would try to argue that if real estate actually stabilize,
further stabilize, which could actually drive more sustainable demand for appliance, and it may not necessarily see a rollover of the growth for JD. So what is management view for these? I appreciate if we can address all the various JD growth driver into the next year. Second question is, one of the bigger boosts of better than expected profit beat the last quarter that we deliver.
likely to have driven by JD logistic margin improvement and also JD retail cost optimization and also the efficiency improvement. Just, you know, JD also has delivered very good profit improvement already this year. As we head into next year, 2025, can management provide any preliminary thoughts in terms of the investment, the spending that you might want to invest, and how would overall margins and profit growth outlook heading into next year? Thank you.
Thank you, Alicia. That's a very good question. Let me answer the first question first. Our understanding is that this subsidy for exchange of new products, as I just said, I think it is more of a leverage. It is not just to stimulate the consumption of home appliances in the short term, but more importantly, it is through this effort to stimulate
and increase the income of residents and reverse the trend of consumer confidence. My personal opinion is that once the consumer confidence is strengthened, it will be more meaningful for us to increase our best categories and our user groups. So next year, we still have a cautious and optimistic attitude.
As for the driving force of growth, we have already answered some of the first questions. I think we should stick to our long-term strategy.
the experience of users and the growth of users. And then we continue to promote the expansion of these categories that we think are more potential, as well as the expansion of products of different price ranges, especially those industrial range products that are loved by lower-end market users. We are also focusing on these and putting in a lot of effort to promote the development of these businesses. And then, of course, this is related to our platform ecosystem.
And thank you, Alicia, for your question. I will address the first part on the growth. So as I just mentioned, our belief is that for the trading policies the government introduced, it's playing a role as leverage. It is not only aimed at a short-term consumption increase for the home appliances categories,
but more play a role to boost the consumption with the job created and increase the household income to restore consumption confidence. So, in my opinion, the confidence, consumption confidence restoring, it's more meaningful to help JVs grow in terms of the specific categories and our targeted groups.
So for the next year, we remain cautiously optimistic for the overall economic and consumption growth trajectory. And in terms of our company's growth drivers, and we will continue to carry out our long-term strategic plans, mainly focused on first to continue to foster our users' experience and user growth, and continue to invest
on those categories that have a high growth potential and expand our product offerings and with a wider range of prices that cater to the needs of the lower tier markets and introduce more products from the industrial belt, et cetera. We are making steady efforts to invest in these businesses. And thirdly, we continue to invest in our platform ecosystem to provide a thriving environment for everyone to continue growth.
First of all, there are three driving factors for the long-term increase in the profit margin of JD. The first is that the scale and efficiency advantages of JD on the supply chain will continue to be released. As you can see from the Q3 financial report just released, our net profit margin has gradually increased. This is mainly due to the continuous improvement of the commodity margin through the efficiency of the supply chain.
So regarding the prospects on profits,
I'd like to share our thoughts. So first, our long-term profit margin improvement will be driven by three key factors. So JD's strength in supply chain scale and efficiency will continue to drive margin growth. As you can see in our Q3 earnings, we saw a continuous increase in our net margins, which is mainly due to the gross profit margin improvement in product supply chain and JD logistic profit growth.
driven by cost management and efficiency improvement. And the second driver is the category mix. There is still significant potential for margin improvement in many categories, such as the supermarket category. Additionally, favorable category mix shift itself can also lead to higher margin. And the third driver is our 1P versus 3P mix. As the ratio of 3P business grows over time on our platform,
It will also positively impact our module growth. At the same time, we will combine the changes in the macro and market environment, as well as our long-term strategic layout to persist in the user experience and growth, the core supply chain capability, and the direction of taste and quality, to make a firm and disciplined investment, and then layout for the long term. In the long term, our profitability will continue to improve with the healthy development of the business and the efficiency of the operation.
In line with JD's long-term strategies and in response to the microeconomic and market changes, we will continue investing in areas that enhance user experience,
our core supply chain capabilities, and build user mindshare in specific categories. And maintaining strategic forecast and long-term planning is crucial for our business success. Over the long run, our profit margin will continue to improve alongside healthy business growth and increased operating efficiency. And JD's long-term profit margin goal will reach a high single digit. As for specific growth and profit guidance,
will be shared at appropriate time. Thank you. Our next question, please. Thank you. Thank you. Your next question comes from Kenneth Fong from UBS. Please go ahead. Good evening. Thank you for your question. I have two questions. The first one is about competition and investment. Over the past 30 years, we have seen various telecommunications platforms invest in their own products.
and there is also a strong support policy for double makeup. Can you share with us the current status of Dingdong? We just talked about the direction of investment of some companies, so let's open it up and think about which aspect we focus on. What impact will this profit margin have? As for investment, my other question is about clothing and makeup. Because we see in the news that Dingdong will be arranging clothing,
My first question is about competition and alignment. During DevOps 11,
e-commerce platform have been investing aggressively on both user and merchants. So can management share your view on the current industry competitive landscape? Also for area for Jingdong investment and for this investment, how should we think about impact on margin? My second question is on the expansion in the acro and cosmetic categories. Because in the news, we saw that we are investing three and one billion respectively.
on Cosmetic and Apparel category. So can management share more about that? Would it be 1P or 3P in terms of operation? And any results that we can share? And then more medium to longer term, what is JD competitive advantage versus PA in our positioning, maybe calculating? Thank you.
Kenny, let me answer your question about industry competition and company investment. First of all, our view is that China's retail consumer market is huge, has a population structure and distribution that is very suitable for e-commerce development, and has the most developed infrastructure in the e-commerce market in the world, including logistics, payment, social and other infrastructure. Therefore, China's e-commerce market still has a lot of room for penetration and improvement.
Hi, Kenny. Thanks for your question. I will take the question on the industry competition and our investment.
So first of all, I want to stress that we continue to hold the view that China is a highly promising retail market, supported by favorable demographic structure and distribution, along with the world's most advanced e-commerce infrastructure, including robust logistics, payment systems, and social media integration, et cetera. So there's still significant room for e-commerce to expand its market penetration.
and with the implementation of supportive measures to boost consumption, including the recent trading policy. We're seeing positive momentum that will inject fresh growth energy in e-commerce.
We will build a range of different capabilities around the cost-efficiency experience, create our own core capabilities and layer-by-layer capabilities, and make long-term and sustainable investments in the construction of capabilities such as deepening capital supply chains and logistics contracts. We will also continue to strengthen the users' mindset. I can share some specific progress with you.
In the past year, we have continued to improve price competitiveness, reduce the threshold for self-driving vehicles, and improve user experience by providing free service, free door-to-door replacement, and so on. For example, we have now introduced free door-to-door replacement services such as 59, from self-driving goods to luxury goods, and launched innovative services such as late-release legs to provide users with a super-long-term shopping experience.
While constantly improving the user experience, we are also attracting new users. The number of Q3 shopping users continues to grow at a double-digit rate and continues to show an accelerating trend. We expect that the number of users will continue to grow rapidly. In terms of creating a new taste, we have become the first shopping platform for many users in the category of home appliances, computers, mobile phones, etc.
So given this e-commerce development momentum, we will maintain
focus on enhancing user experience and driving user growth, developing our differentiated supply chain capabilities based on cost efficiency and user experience, building our core capabilities and competitive edge, making targeted investment in self-operated supply chain and logistic service for sustainable long-term growth. At the same time, continuously strengthening user mindshare. Here are some specific updates.
And on user experience over the past year, we focused on enhancing user experience by increasing price competitiveness, lowering the free shipping thresholds for our self-operated products, and improving our free at-home return services. And now we have extended many services from 1P to 3P products, such as free shipping for over 59 yuan and the free home return services.
Additionally, we've introduced innovative services like compensation for delayed shipping to constantly exceed user expectation. And alongside these improvements on user experience, we are actively working to attract new users. In Q3, we achieved a double-digit year-on-year user growth with accelerated momentum, and we expect this growth to continue.
And in terms of strengthening customer mindshare in key categories, JD has become the go-to destination for home appliances, computers, mobile phones, and electronic categories. As we support the government's trading policy, we also take the opportunity to further integrate our services to reinforce user trust of these categories. And in general merchandise categories like market, supermarket, and succession, we continue to build a stronger user mindshare
Our promotional campaign on the parallel category launched in this September. It's a prime example of enhancing user awareness and engagement in the parallel category.
We can see that with the increase in the number of users, the flow of users has increased significantly, and the number of users visiting the JDong app has increased significantly. The number of active users and orders have increased very well. During the whole time, the number of active users has increased by more than 20,000, and the average number of single-day users has increased by more than 20%.
And on this basis, users' purchase ratings will continue to increase by a double digit. In conclusion, JD will continue to invest in cost-efficiency experience, constantly improving our differentiated competitive advantage of public service as the basis and user experience as the core. During this process, we will of course pay attention to the balance and high-quality development of key indicators such as GNV profits and core flows. Overall, we are very confident that our group profits will increase by more than a double digit.
So here, we're also pleased to share the single-day grant promotion performance, which overall exceeded our expectation. With JD's rising user mindshare, we've seen notable improvement in user traffic. With our APP's unique visit, we witnessed significant increase during the shopping festival. And both the active users and authors during the shopping festival experienced a fast growth
the number of active users achieved a double-digit growth, and the average daily active customers increased by over 20%. At the same time, user shopping frequency maintained double-digit growth year-on-year. So, all in all, we will continue to invest in reducing cost, improving efficiency, and enhancing user experience, focusing on our unique strengths in supply chain and user-centered experience. At the same time,
We will closely monitor GNV, profit, cash flow, and other key metrics to achieve a balanced, high-quality growth. And for the full year, we're confident that JD Group's profit will exceed double-digit growth.
I'll answer the second question. Thank you very much for your attention to our efforts and investment in the category of clothing and makeup. In the category of clothing, we hope to further provide users with a rich
We will continue to build a series of long-term activities around clothing and makeup, including clothing 50% off, etc., to enhance the attractiveness of our product category to consumers and gradually strengthen our user mentality.
Specifically, we will strengthen our cooperation with new domestic brands to allow these brands and Zhendong to explore more market space and grow together. We will also expand the 100-million subsidy to cosmetic products to enhance the attractiveness of cosmetic products to consumers.
In September, we held a series of pre-sales activities around the topic of buying clothing in Jingdong, including Zhenwuzhe, Shizhuangzhou Zouxiu, etc., which also strengthens the user mentality in this category. We also saw that this round of activities brought a large number of high-value new users.
During this year's Double 11, not only did the number of active purchases of beauty products, but also the number of shopping boxes and other indicators have grown very healthily. So, Kenny, thank you very much for recognizing our efforts in the fashion and beauty categories. So we've been steadily increasing our investment in these categories with the key goal to enhance user experience as part of our long-term strategy.
And to build user interest and engagement with JD's apparel offerings, we are expanding our product selections, especially the good quality and fashionable product selections, and emphasizing premium services. We've been launching and will continue to plan promotions, including the 50% off campaign on the apparel category to better appeal users and increase their recognition. Specifically on the beauty products,
We are strengthening partnerships with domestic and emerging beauty brands. We expressed a high expectation to work together on exploring market potential for common growth in these categories. And so far, our $10 billion discount program has expanded to cover the entire beauty category, gaining popularity among JD users. And on the Paro product,
In September, we launched several initiatives to boost JD's presence in the parallel category, such as the 50% Off campaign and the London Fashion Show, showcasing a broad brand selection and competitive pricing. And all these campaigns have attracted new users with high purchasing power, who showed greater order values and high repurchasing rate within a month.
Especially during the single-digit grant promotion, we see new active users in fashion and beauty, and their shopping frequency both achieved a healthy growth.
I remember you asked us how to invest. Our investment is around the user experience, that is, the product price and service. In terms of products, we will continue to optimize our algorithm to make our recommendations more accurate. In terms of price, we will also make some investments to make the user experience a more favorable and more affordable price.
In terms of the operating models, currently most of the fashion products on our platform come from 3P sellers. At the same time, we are also setting up efforts
on our 1P operational capabilities, but definitely the users will have the final say to choose between 1P and 3P. And in terms of the investments, we will continue to focus on the products, price, and the services. And we will continue to better our algorithms to introduce more
tailor-made products to the relevant customers. And we will also, in fact, improve the price competitiveness and offer more affordable products on these categories, along with more differentiated services. And with that said, we welcome all the analysts and all these
our partners to use and experience our apparel and fashion categories. And if there are any suggestions, we're very happy to hear from you. Thank you. Thank you. Your next question comes from Thomas Chong from Jeffries. Please go ahead. Good evening. Thank you for your question. My first question is about the situation in Hong Kong.
Good evening, thanks management for taking my question. My first question is about the macro. Can management comment about the recent macro policies measures have any positive impact to consumer sentiment?
And my second question is about capital return. Can management comment about the latest updates on shareholders' returns related to buyback and dividends? Thank you. Thank you for your question, Thomas. First of all, I would like to give a very simple answer, which is yes. We have indeed seen that the recent macro policy has had a positive impact on consumer sentiment.
Thank you, Thomas, for the question. So my short answer is yes. Current macro policies have been taking a positive effect on the overall consumption sentiment.
And we expect as these policies continue to take effect, this will help to improve the economic fundamentals and to help recover and improve household income, which will all provide more energy and vitalization to the consumption potential.
They answer your question about shareholder returns. In the first three quarters of this year, we have firmly implemented shareholder returns. In the long term, we will firmly continue to recoup our shareholders in different ways based on the growth of business health. The first is the progress of the recoup. In the first three quarters of this year, we have recouped $36.5 billion in total, which is equivalent to 8.1% of the shares in circulation as of December 31, 2023.
In the third quarter, we recouped about $3.9 billion. We have fully used the amount of $3 billion approved by March 2024 in the stock recoup plan. We announced a new $3.5 billion recoup plan in Q3. Our goal is to reduce the total shares for a long time.
And regarding the shareholder returns,
We have constantly executed our shareholder return plan over the first three quarters of the year, and we remain committed to delivering returns through multiple channels based on sustained business growth. And on our share repurchase progress, over the first three quarters, we've repurchased $3.65 billion worth of shares, totaling approximately 255.3 million ordinary shares.
or 127.6 million ADS, representing 8.1% of total shares outstanding as of December 31st, 2023. And in Q3 alone, we repurchased approximately 319 million U.S. dollars worth of shares, and we have fully utilized the repurchase amount authorized under the $3 billion U.S. dollar share repurchase program.
And in Q3, we announced a new three-year repurchase program totaling $5 billion, which will execute with the aim of reducing total number of shares in the long run. And on the dividend progress, we completed a $1.2 billion dividend distribution for 2024 in the first half of the year and plan to continue with a steady annual dividend payment based on profitability.
So, for the long term, we are dedicated to rewarding shareholders who share repurchase dividends and the strong operational performance, sharing the value created by our business success. Thank you. Thank you so much. Let's take the last question, please. Thank you. Your next question comes from Jialong Shi from Nomura. Please go ahead.
Hi, good evening. Thank you for accepting my question. I have two quick questions. The first question is about JD Merchants. I would like to know what is the current business scale of JD Merchants and what is their profitability status?
I have two questions. The first question is about JD Supermarket.
So just wondering what is the size and the margin of JD supermarket business? And what was the rationale to have decided to exit our previous investment in Yonghui supermarket? The second question is about JD 3P. So just wondering what does JD think of its potential in 3P and what are your strategies to further unleash the potential of 3P? Thank you.
Thank you for the question, Jialong. Merchandise is a very important part of our business. It is also one of the most important driving forces for our future growth. Merchandise is not only the largest category of general merchandise in Japan, but it is also larger than any chain in China in terms of sales scale.
But if we look at the scale of this industry, the scale is still the largest, and its concentration is also very low compared to these developed countries. In September this year, when we held the 10th anniversary celebration of JD Supermarket, I also told the media that JD Supermarket is one of the important battlefields for JD Group to win the next 10 years.
So, to be honest, the business scale of Shangchao and its profitability have not yet reached our long-term goals. We believe that there is still a lot of potential for development in the long term. We are also full of confidence in the health growth of Shangchao in the future. Since this year, the growth rate of Shangchao has remained at a double digit. We are also continually improving the core business capabilities of our product line, including our self-management capability.
In addition, in terms of our losses, with the increase in our scale and our streamlined operation, as well as our fast-changing, we also see that the profit level of Shangchao is also gradually increasing. So in the future, we will continue to improve our user experience and create a new system for users through better product pricing services. Thank you, Jialong, for your question.
The supermarket category has always been a core part of our business and one of the most important drivers for our future growth. It represents the largest segment among our general merchandise categories and by sales volume surpasses any supermarket chain store in China. Well, at the same time, it's also worth noting that China's supermarket sector is vast and highly decentralized compared with other developed countries.
In September, J.D. Super marked its 10th anniversary and emphasized during the celebration to the media that the supermarket business is one of the key battlefields that will shape J.D.'s future in the coming decade. Admittedly, given its current scale and profitability, J.D. Super still have a way to go to meet our long-term expectations. However, we see significant potential in this category and remain confident
in its healthy growth trajectory. And for this year, JDSuper has achieved a double-digit year-on-year growth, driven by our enhanced operational capabilities. So we will continue to strengthen our core capabilities in our 1P management in terms of the scales, our refined operations, and reforming warehouse network, et cetera, to drive up the profitability.
and continue to center on the product offerings, price competitiveness, and our differentiated services to improve user experience and keep users' mindshare in the supermarket category. The reason for the change in Yonghui's shareholding is mainly because we want to focus on our core business, and we have also achieved the goal of strategic investment and the expected effect of cooperation.
And our strategic investment in Yonghui matched the initial objectives we set at the beginning of the collaboration. The recent shareholding change reflects our proactive decision to sharpen our focus on JD's core business areas.
First of all, the core of our platform ecosystem is to provide the best products, prices, and services to our users through different models. I think that the 3P business is also a good way to supplement the richness of our brand and products for JD. So this is ultimately a user's natural choice process.
And regarding the question on the 3P development, our platform ecosystem development goal is centered around enhancing user experience.
We aim to offer the best products, price, and services through a mix of sales models, with 3P playing a key role in expanding our selection of products and grants. So eventually, this will be our users' natural choice. And building a robust platform ecosystem, there remains substantial room for improvement in 3P operations, business scale, and profit contribution to the platform.
In fact, in the past few years, we have been building our platform's infrastructure and merchant tools. But to be honest, there is still a certain gap from the expectation of merchants. So in this regard, we will continue to invest more and help our merchants to do better traffic operations, and to acquire users and educate users. We also look forward to sharing time with merchants, so that the platform ecosystem will naturally become a long-term driving force for us to improve our income and profits.
And for quite a period of time, we have been investing in platforms, infrastructures, and providing all sorts of merchant tools. Of course, there's still a way to go to better our supplies to other merchants and to help them to better to do the traffic allocations.
and user acquisition, et cetera, to create a win-win situation. So over time, the platform's ecosystem, we aim to have it become a long-term growth driver, generating increased revenue and profitability. Thank you. Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com's Shawn Zhang for closing remarks.
Thank you for joining us today on the call, and thank you for all the great questions. That's a wrap. If you have further questions, please contact me and our team. We really appreciate your interest in gd.com, and look forward to talking to you again next quarter. Thank you. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.