JD.com conference call: "Trade-in" boosts consumer confidence recovery, mobile phone and home appliance demand rebounds, strengthening takeout business to enhance user stickiness

On March 6th, Beijing time, the CEO of JD.com stated during the earnings call that since the second half of last year, national consumption stimulus policies have boosted consumer confidence. Since the beginning of this year, mobile phone demand has rebounded, mainly benefiting from the trade-in policy, and computer sales have also maintained strong growth. In the home appliance sector, due to early sales releases ahead of the end of 2024 and the staggered timing of the Spring Festival, there have been short-term fluctuations in sales at the beginning of the year. However, with the arrival of the home decoration season in March, it is expected that home appliance sales will continue to accelerate month-on-month. As for the highly anticipated takeaway business, JD.com stated that the overall retail strategy remains unchanged. From the perspective of consumption scenarios, instant retail is a natural extension of core retail business, and takeaway is one of the high-frequency businesses that can enrich service scenarios, provide quality supply, enhance user stickiness and activity, and increase user value. JD.com's goal is to improve the overall efficiency of the delivery network, benefiting core retail, e-commerce, and instant retail businesses. From the user's perspective, there is strong demand for quality takeout. Meeting users' differentiated needs can enhance their trust in JD.com, complementing the user mindset of the core e-commerce business. Currently, the takeaway business is still in a relatively early stage of development, and JD.com will dynamically adjust according to the gradual development of the business. In terms of AI strategy, JD.com is actively utilizing AI to optimize costs, efficiency, and user experience, and will continue to drive business growth and efficiency optimization in the future. AI technology has been widely applied in various business scenarios at JD.com, including search recommendations, AI shopping guides, merchant management tools, supply chain management, and daily office processes. For example, AI has enhanced user experience in core retail scenarios, such as providing professional advice through the AI shopping assistant "Jingyan" and AI digital humans. Regarding shareholder returns, JD.com will return to shareholders through dividends and buybacks in 2024, with a total dividend payout increasing to $1.5 billion and a total buyback amount reaching $3.6 billion for the year. In 2025, the company will continue to implement a $5 billion total buyback plan, to be used over three years, while maintaining an annual cash dividend policy. In terms of long-term profit margins, policy support has boosted consumer demand, and JD.com remains optimistic about long-term consumer sentiment. Future profit margins will steadily improve through supply chain optimization, with a long-term profit margin target of reaching high single digits. The following is the full Q&A: Q1: Besides the strong growth in electronics and home appliances, how should we view JD.com's growth drivers this year and next? What are our investment priorities for JD.com's supermarkets this year? Additionally, the government has expanded the trade-in policy for home appliances and electronic products; what is the growth trend for this category in Q1 this year? Facing a high base and weakened demand elasticity in the second half of the year, how will the company consolidate its market leadership? A1: In 2024, JD Retail achieved robust double-digit growth in major categories such as electronics, home appliances, and daily necessities. Although the industry environment varies across different categories, the core driver of growth remains JD.com's long-term investment in user experience, cost, and efficiency, which continuously releases growth potential and will bring differentiated growth opportunities to JD.com in the future. In 2025, the government will continue to promote consumption stimulation, and JD.com will leverage its supply chain efficiency and quality service to support this process. At the same time, we are actively laying out user experience, user growth, and platform ecology in the daily necessities category, and have made good progress We believe that these investments and driving forces in non-electrical categories will continue to drive JD.com's retail business growth in 2025 and beyond. In the daily necessities category, JD.com continues to strengthen the operational capabilities of its team and increase investment in user category awareness, expecting this category to maintain a good growth momentum. With the enhancement of user experience, the number of quarterly active users and shopping frequency have achieved double-digit growth over the past year. We will further optimize the refined operation of user traffic to promote the continuous healthy growth of user scale and activity this year. In addition, in terms of platform ecology, the user awareness of JD.com's self-operated model is continuously strengthening, and users' recognition of the 3P (third-party platform) model is also deepening. In the fourth quarter, the number of 3P users and order volume accelerated growth, with growth rates surpassing the overall retail business. The improvement in ecological activity lays a good foundation for sustainable growth in the future. In the supermarket category, JD.com continues to enhance its supply chain and category operation capabilities, especially in optimizing the procurement and sales ends, committed to providing users with high-quality products that offer better cost performance and cover a wider price range. Over the past year, key categories in supermarkets have seen their revenue growth outpace the overall supermarket business while enhancing capabilities. In the future, we will further strengthen the supply chain capabilities of segmented categories while promoting fulfillment efficiency optimization, closely collaborating with the logistics team to create a warehousing and distribution model more suitable for the supermarket category, reducing fulfillment costs while improving delivery efficiency. Overall, the supermarket market space remains vast, and we are confident in continuously expanding our market share. Since the second half of last year, a series of consumption-boosting policies introduced by the government have significantly driven the recovery of consumer confidence. This year, we have seen a rebound in mobile phone demand on the platform, mainly benefiting from the inclusion of mobile phones in the old-for-new policy. Meanwhile, computer sales continue to maintain strong growth. In the home appliance sector, some sales were released early at the end of 2024, coupled with the impact of the Spring Festival's timing, leading to short-term fluctuations in sales at the beginning of the year. However, with the arrival of the home decoration season in March, we expect home appliance sales to continue to accelerate growth month-on-month. Since the second half of last year, indeed, the old-for-new policy has had a strong pull on home appliance sales, which will bring a relatively high base to the entire industry. However, we have also seen more long-term benefits from the upgrading of the home appliance industry and a positive industry structure, and the potential demand for old-for-new in home appliances remains enormous. In terms of proportion, the sales volume achieved through the old-for-new policy last year is still a very small proportion compared to our existing home appliances. On one hand, we will continue to enhance our old-for-new service capabilities to provide consumers with a better experience, stimulating potential demand for users to upgrade their devices. At the same time, we will leverage our supply chain advantages to reach users in lower-tier markets through more channels to meet the upgrade and replacement needs of more users. Additionally, we will continue to drive industry innovation through user insights to stimulate consumer demand. Q2: JD.com has always focused on ROI investment and achieved over 30% profit growth last year. This year, JD.com has increased its investment in areas such as clothing and instant retail. Can management share the strategies and investment scale for each segment in the future, as well as how to balance the impact of growth and profit margins? In addition, JD.com recently announced the start of zero-commission entry for quality dine-in restaurant merchants. Could you introduce the positioning of this strategy, the level of investment, and its impact on the group's profit margins?** A2: JD.com aims to achieve healthy growth in overall business in 2024 while maintaining continuous investment in user experience and core competitiveness, thereby strengthening the overall business foundation and market positioning of different segments. JD.com's business model is based on the supply chain and centered on user experience, with investments consistently revolving around these two main lines, which in turn drive scale growth, efficiency improvement, and profit growth, allowing us to continue investing in long-term development and forming a positive cycle. At the same time, we continuously optimize the layout of our warehouse network by adjusting routes and warehouse placements, and we keep investing in automation technology to reduce fulfillment costs across the industry, which is particularly important for supermarkets to continue enhancing profitability. Different business segments are at different stages of development and have different focuses. Specifically, in relatively mature categories of powered products, we will continue to enhance supply chain efficiency, release scale advantages, and drive steady profit growth; while maintaining rapid growth in daily necessities, we will optimize profitability, with warehouse network layout being one of the key measures; In the clothing category, we will continue to invest to strengthen users' perception of JD.com clothing and further enhance the supply chain capabilities for clothing, hoping that more users can understand and choose JD.com clothing in the exploration of new business. In addition, in terms of new business exploration, instant retail, as a natural extension of core retail business, is still in the early stages. We will focus on differentiated models and the expansion of rich quality supply. Long-term healthy growth and active investment complement each other. This year, JD.com will further release scale effects and supply chain efficiency in core businesses and categories to drive profit enhancement. At the same time, JD.com consistently emphasizes investment efficiency and financial discipline, and this principle will not change. We are confident in steadily moving towards our long-term profit margin goals. Regarding the issue of takeout, first, our strategic focus on retail has not changed. I suggest that everyone should not think of instant retail or takeout as separate businesses, but rather consider them in the context of JD.com's overall retail capabilities and service experience. The investment in instant retail, including takeout, has a positive effect on enriching consumption scenarios, building capabilities, meeting user needs, and enhancing user experience. From the perspective of consumption scenarios, instant retail is a natural extension of core retail business, and takeout is also one of the high-frequency businesses under the instant retail scenario, which can enrich our service offerings to meet user needs, provide higher quality supply, and strengthen user stickiness and activity, thereby enhancing user value. Focusing on capabilities, we further reuse and enhance our existing fulfillment and delivery infrastructure capabilities, enabling faster and more flexible technical coordination, which is a strong complement to JD.com's original efficient fulfillment network and capabilities. Our goal is to improve the overall efficiency of the delivery network, benefiting our core retail and core e-commerce businesses, as well as our instant retail business From the user's perspective, we also see a strong demand for quality takeout, so meeting users' differentiated needs can further enhance their trust in JD.com, which complements our core e-commerce business mindset. In terms of investment rhythm and impact, we will first focus on better meeting the needs of JD.com's existing users, providing them with richer consumption scenarios and supply, increasing user frequency and stickiness. We will also leverage our high emphasis on food safety to enrich quality supply through measures such as recruiting and supporting quality merchants and improving the rights of delivery personnel, gradually establishing a differentiated user mindset for quality takeout. In terms of business rhythm, we will further build differentiated capabilities and business models based on existing e-commerce foundational capabilities. Currently, we are still in a relatively early stage of business development, and we will make strategic and disciplined attempts and investments. We will also dynamically adjust based on the gradual development of the business and communicate with everyone in a timely manner. In the long term, our goal remains to enhance shareholder value and the company's profitability. Q3: My question is about AI. Many Chinese internet companies have widely deployed large models. What is JD.com's strategy regarding AI? Has the company already applied or plans to apply large models in its business? What impacts will AI deployment have on our business in the short and long term? A3: JD.com has always enhanced efficiency and reduced costs through technology-driven and business innovation. Currently, AI technology has been widely applied in multiple business scenarios, driven not only at the company level but also through spontaneous employee applications. Due to the characteristics of our business model, JD.com will delve deeper into the supply chain, and we have rich operational data and application scenarios. We are actively using AI to optimize costs, efficiency, and user experience. For example, in the core retail scenario, first, in terms of enhancing user experience, we have reshaped the search and recommendation system through AI technology, effectively improving search satisfaction and traffic distribution efficiency. In addition, we launched the AI shopping assistant "Jingyan" and AI digital humans to provide users with more comprehensive product information and professional advice, reducing search and purchasing costs. In terms of tools provided to merchants, JD.com offers 24-hour AI operational agents and assistant tools around product release, order management, after-sales customer service, and data analysis, including sales forecasting, AI marketing deployment, AIGC content generation, AI pricing, and AI customer service, helping merchants improve operational efficiency and reduce costs. In supply chain management and fulfillment, AI algorithms enhance the accuracy of demand and supply matching and promote logistics automation development. In key production processes at fulfillment centers, AI technology optimizes the level of robotic automation, further reducing fulfillment costs for JD.com and the entire industry. The JD.com team widely applies AI in daily work scenarios to enhance efficiency, such as content review and employee reimbursement processes, freeing up human resources through AI. Meanwhile, R&D personnel use intelligent programming assistants to improve coding, reading, and optimization efficiency, thereby serving users more effectively. AI innovation is still in its early stages, and more tools and applications will be implemented in the future. Currently, the role of AI in JD.com's business is increasingly significant, and in the long term, it will continue to enhance user experience, drive business growth, and optimize efficiency Q4: Could the company clarify how we should think about the year-on-year growth of JD.com's electronics and daily necessities categories in 2025? Can management update us on the latest developments and considerations regarding shareholder returns? A4: JD.com has developed into a mature all-category platform, establishing a strong user mindset and competitive barriers in the electronics and daily necessities categories. Although the growth trends of different categories vary, JD.com enhances user experience and strengthens user trust in the platform through continuous optimization of products, prices, and services. In Q4, both electronics and daily necessities categories accelerated to double-digit growth, with user growth and service revenue also achieving double-digit increases. This year, in the electronics category, we will leverage our supply chain advantages and user mindset to enhance experiences and expand market share, although the home appliance category may be affected by a high base in the second half of the year. In the daily necessities categories such as supermarkets, clothing, and home decoration, we expect revenue to continue to grow rapidly, becoming an important growth engine for this year and the future. JD.com's growth is driven by user growth, platform ecosystem development, and category business exploration, providing momentum for long-term sustainable growth. Regarding shareholder returns, in 2024, we will reward shareholders through dividends and buybacks, benefiting from improved business health and profitability. The total dividend for 2023 is approximately $1.2 billion, increasing to $1.5 billion in 2024, with a dividend of $1 per ADS, a year-on-year increase of 32%. At the same time, we are accelerating buybacks, with a total buyback amount reaching $3.6 billion for the year, reducing the number of outstanding shares by 8.1%. In 2025, we will continue to firmly reward shareholders, executing a $5 billion buyback plan to be completed within three years, while maintaining an annual cash dividend policy, reflecting our confidence in JD.com's long-term development. Q5: The trade-in subsidies for home appliances and mobile phones performed well during the Spring Festival, and retail data also met expectations. How does management view the latest policies and changes in consumer sentiment? The second question is about the profit outlook for 2025 and the trend of profit margins in the coming years. A5: On the policy front, everyone is already quite familiar, and yesterday's government work report further emphasized the importance of boosting consumption and continued support for trade-in programs for consumer goods. Multiple data points from the beginning of this year, including retail performance during the Spring Festival, indicate steady growth in the consumer market. From JD.com's platform perspective, policy support has indeed boosted consumer demand, as reflected in the Q4 data. In the short term, there are still challenges in the macro environment, but in the long term, we remain optimistic about consumer sentiment. China's consumer market is resilient and has great potential, and the continuous advancement of relevant national policies will gradually enhance residents' consumption capacity and willingness, bringing greater growth space for JD.com. Regarding profit margins in the coming years, in 2025, we will continue to improve the supply chain efficiency of core categories to drive profit growth while maintaining a positive and disciplined investment approach for long-term development. In the long run, our profit margin target remains to reach high single digits. The steadily improving profitability from last year further solidifies this goal and demonstrates future improvement potential. In the coming years, we will continue to rely on supply chain efficiency optimization to drive profit margin improvement. Our self-operated business will further enhance supply chain efficiency, and JD Group's gross margin has increased year-on-year for 11 consecutive quarters, mainly due to the growth in product gross margin and cost reduction and efficiency improvement in logistics We believe that by continuously improving supply chain efficiency, we can drive down costs and increase efficiency across the industry chain, better serving our partners and users, which will naturally lead to an improvement in our profits. At the same time, there is still room for profit margin improvement in multiple categories, including supermarkets, and the profit margin of relatively mature categories with powered products also has room for enhancement. In addition, as the proportion of high-profit businesses in overall revenue continues to increase, JD.com's overall profit margin will also steadily improve