---
title: "JD.com: Continues to focus on FMCG and 3P ecosystem"
description: "1Q24 Conference Call Minutes"
type: "topic"
locale: "en"
url: "https://longbridge.com/en/topics/21142131.md"
published_at: "2024-05-16T15:45:27.000Z"
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# JD.com: Continues to focus on FMCG and 3P ecosystem

**The following is a summary of JD's first quarter financial report conference call in 2024. For financial report analysis, please refer to "** [**Is JD still worth it without buybacks**](https://longportapp.com/zh-CN/topics/21138417?app_id=longbridge) **"**

**I. Review of Core Financial Information:**

**II. Detailed Content of Financial Report Conference Call**

**2.2. Q&A Analyst Q&A**

**Q: How do we balance growth and profitability? In the context where everyone wants to exceed industry growth, how will JD maintain growth this year, especially in high-base areas such as electronics? How to increase new and old users from the perspective of user frequency?**

A: The Chinese consumer market is experiencing healthy growth. Despite the market being fragmented, with over 300 cities having a population of over a million, it provides huge growth potential for online sales. In 2023, China's online sales penetration rate was about 30%, and it is expected to continue to rise with the improvement of e-commerce efficiency and business model innovation. In categories such as home appliances and computers, despite having a high online consumption rate, there is still growth potential. **Categories such as supermarkets, home furnishings, automobiles, sports and outdoor, and services also have great room for improvement in online penetration, and these categories are growing rapidly on the JD platform.**

As China's largest retailer, JD utilizes a 1P business model and supply chain advantages to provide a differentiated user experience and continuously optimize cost and efficiency management. Over the past year, JD has focused on improving user experience, offering low-priced goods, building a healthy platform ecosystem, and taken proactive measures such as reducing procurement costs and improving customer service. These efforts have led to an increase in user growth and engagement, with JD Group and retail business achieving double-digit growth in the first quarter, and user shopping frequency also increasing. JD's NPS continues to improve, reflecting an increase in user satisfaction. The company believes that by providing diverse, affordable, and high-quality products, it can achieve long-term growth and market expansion.

**Q: As competitors reinvest for growth, how do we set profit margin targets?**

A: Looking ahead to 2024, **JD is confident that full-year growth will surpass the total retail sales of consumer goods in China, bringing stable profits to the group and retail business.** JD believes that business growth and profitability go hand in hand, and by improving supply chain efficiency and user experience, it will bring long-term sustainable profits.

JD enhances user experience by continuously optimizing products, prices, and services, driving GMV growth and expanding market share. With the growth of business scale and improvement in market position, JD's advantages in supply chain and efficiency will further strengthen, achieving healthy profit growth. The company will continue to invest in improving user experience, forming a virtuous cycle of business growth and profit growth. Last year, JD focused on internal improvements, enhancing operational efficiency and cost competitiveness, and identified significant opportunities to further enhance operational capabilitiesIn terms of business focus and investment, JD.com has lowered the threshold for merchants to join, strengthened support for small and medium-sized enterprises, and launched a series of customer service updates, significantly improving user satisfaction.

Looking ahead, JD.com will continue to leverage its 1P advantage to drive the development of the platform ecosystem, strengthen the virtuous cycle between business scale and profit growth, and have confidence in achieving long-term goals.

**Q: If the policy of trading in old appliances for new ones is implemented in conscious consumer spending, is this policy effective enough to truly increase consumer spending? How much incremental growth does JD.com expect to achieve through the trade-in policy?**

A: It has been ten years since China's last nationwide policy of trading in old appliances for new ones, and many households are facing the need to update old appliances. The new policy aims to encourage low-cost replacements and improve residents' quality of life through incentive measures. The Ministry of Commerce has issued an action plan to promote the trade-in policy, and local governments are actively promoting it, with more subsidy policies expected to be introduced.

JD.com has partnered with over 100 home appliance brands to promote the trade-in service and has launched subsidy activities in 20 provinces and cities, aiming to provide consumers with cost-saving and convenient replacement services. Leveraging its advantages in the supply chain, logistics, and services, JD.com provides one-stop services, including free pick-up, old item disposal, new item delivery and installation, with no restrictions on the new items. In 2023, JD.com's trade-in users grew by 200% year-on-year, accounting for a mid-to-high single-digit percentage of home appliance sales. With continued government promotion, it is expected that the incremental sales of home appliances this year will be greater, and the proportion of trade-in sales will increase.

**Q: Management previously mentioned that FMCG will be an important category supporting JD.com's growth this year. Besides the low base and relative ease, do you think consumers will actually increase spending on FMCG categories? If consumer demand remains at last year's level, is FMCG still the key growth driver this year? Do you expect JD.com to gain more market share in this category?**

A: The FMCG industry is showing overall positive growth, especially in the basic necessities sector. Despite the low online penetration rate, FMCG and fresh product sales are growing rapidly, and JD.com is gradually increasing its market share. Data from the first quarter shows that the rapid growth of FMCG significantly drove the sales and revenue growth of JD.com's general merchandise, surpassing the industry average.

In terms of supermarket category strategy, JD.com enriches its product line, reduces procurement costs, and adopts product open-source and customized development based on user needs and pain points, providing high-quality, reasonably priced, and premium services. The reform of the logistics distribution network further reduces the threshold for free delivery and optimizes delivery efficiency based on different product characteristics.

JD.com's unique urban warehouse model provides a better shopping experience compared to the traditional nationwide unified shipping model. Through algorithm upgrades and scale efficiency improvements, the company has reduced the number of parcel transfers and delivery distances, effectively lowering delivery costs.

Overall, JD.com believes that returning to the essence of retail, focusing on cost-effectiveness and user experience, is key to driving growth in the supermarket category. Faced with fierce market competition and diversified strategies, JD.com remains confident in the growth potential of the supermarket category and sees it as an important driver of overall company growth**Q: In terms of content, JD has been trying different innovative ways of e-commerce content, which are highly innovative and differentiated compared to our peers. Could you introduce JD's live streaming and content ecosystem?**

A: JD Retail is committed to strengthening the content ecosystem to provide a richer content experience, complementing our high-quality shopping services. We believe that attracting traffic through high-quality content can reduce user acquisition costs and enhance the efficiency of the platform ecosystem. The richness of content is crucial for increasing user engagement, increasing user dwell time, improving traffic distribution efficiency, and conversion rates.

In the live streaming field, JD has showcased content innovation and technological strength through category manager-led Double 11 brand promotion activities and the display of founder Richard's AI digital avatar. In particular, Richard's AI virtual image live broadcast, a first-of-its-kind attempt in the industry, attracted over 20 million views in the first hour, further demonstrating JD's capabilities in AI and other technological applications.

Looking ahead, JD will continue to invest in technology around its core business, including developing large-scale language models. Currently, JD is in the early stages of building a content ecosystem aimed at providing more exposure and traffic for high-quality original content and its creators, helping consumers discover products and make informed shopping choices, thereby adding value for consumers.

**Q: Last quarter saw a significant increase in shareholder returns, with a repurchase of RMB 1.2 billion worth of shares. How should we consider the pace, scale, and sustainability of future repurchases?**

A: Please pay attention to JD's three-year, $3 billion stock repurchase plan. Currently, the plan is on track, and in the coming years, we will have approximately $2.3 billion available for repurchases. Year to date, JD has repurchased 98.3 million Class A ordinary shares worth RMB 1.3 billion on the open market, equivalent to 49.2 million ADS, representing 3.1% of the total outstanding ordinary shares at the end of 2023. In the long term, we will continue to reward shareholders through sustained business growth, profitability improvement, dividend payouts, and stock repurchases, sharing in the success of JD's business.

**Q: Could the management provide insights into this year's 6.18 promotion? Can you reveal the current plans?**

A: JD is about to launch the 618 promotion themed "Quality and Affordability." We have observed severe homogenization of low-priced goods in the market, so this shopping festival will focus on showcasing JD's unique advantages in providing high-quality products and excellent services. Unlike previous years, this year's promotion strategy will place more emphasis on user experience, with the event officially starting at 8 p.m. on May 31st, and products available for immediate purchase. We will continue to strengthen cooperation with brands and suppliers to consolidate our market position, while increasing support for small and medium-sized business sellers to help more merchants achieve their sales goals.

We are optimistic about the performance of the 618 promotion. JD's core competitiveness in the supply chain and user services sets us apart in the competitive market. We firmly believe that based on a strong supply chain and a user-centric business model, JD can adapt to different economic cycles and steadily increase market share in the long term**Q: Regarding the ecosystem strategy. Can you comment on the strategy for merchant cooperation? And in the next few quarters, how do we attract and support merchants to enhance our platform ecosystem?**

A: JD.com is committed to expanding the platform ecosystem by attracting and empowering merchants to provide a diverse range of products to enrich the user experience. Over the past year, we have successfully attracted numerous new merchants by simplifying the onboarding process, reducing operating costs, improving efficiency, and increasing traffic support. Currently, the number of merchants on the platform has exceeded one million, with the number of active merchants growing for four consecutive quarters.

Although our total number of merchants is not as high as some platforms, we will continue to strengthen recruitment efforts and support the development of merchants on the platform, expecting the number of merchants to continue to grow in the next few quarters.

In the second stage of platform ecosystem construction, we focus on promoting user participation, aiming to make choosing JD.com a natural inclination for users to purchase self-operated or third-party products. In the first quarter, both third-party transaction users and order volume saw significant growth, and users' positive feedback on third-party products also drove an increase in net promoter score. Since the second half of last year, we have collaborated with merchants to introduce various service innovations, such as delayed delivery compensation, no reason return policy, and free doorstep pickup service, further enhancing the user shopping experience.

We firmly believe that as the platform ecosystem gradually improves, the proportion of third-party orders and total transactions will exceed that of self-operated products, becoming the natural choice for users. JD.com, leveraging the advantages of self-operated business and cooperation with the third-party market, will build a thriving ecosystem, provide a wider range of products, increase user engagement, form a virtuous cycle, and drive sustained growth in long-term revenue and profits for the company.

**Risk Disclosure and Disclaimer of this Article:** [**Dolphin Research Disclaimer and General Disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.
