JD.com (JD) Q1 2024 Earnings Call Transcript

JD earnings call for the period ending March 31, 2024.

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JD.com (JD 2.65%)
Q1 2024 Earnings Call
May 16, 2024, 8:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Hello, and thank you for standing by for JD.com’s first quarter 2024 earnings conference call. At this time, all participants are in 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 of investor relations. Please go ahead.

Sean ZhangDirector of Investor Relations

Thank you. Good day, everyone. Welcome to JD.com first quarter 2024 earnings conference call. For today’s call, CEO of JD.com, Ms.

Sandy Xu, will share her opening remarks. And our CFO, Mr. Ian Shan, will discuss the financial results. Then, we will 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 the IR website, which applies to this call. We will discuss certain non-GAAP financial measures.

Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Also, please note, all figures mentioned in this call are in RMB, unless otherwise stated. Now, let me turn the call over to our CEO, Sandy. Sandy?

Sandy XuChief Executive Officer

Thanks, Sean. Hello, everyone, and thanks for joining us today to discuss our Q1 2024 results. We kicked off the year with encouraging momentum in Q1. Our top-line growth accelerated and market share expanded.

While our bottom line trended healthily in the quarter, more importantly, our users showed strong enthusiasm for our further improved shopping experience and differentiated services. And our net promoter score, the NPS, notably improved year on year. This is a result driven by our strong execution against evolving industry dynamics. Our team stayed focused on our own strengths, strategies, and the pace of development, and continued to drive steady progress across all our strategic initiatives in improving user experience, press competitiveness, and platform ecosystem.

Our strong execution is reflected in our improved category performance in Q1. To start with, our general merchandise had a great quarter as our supermarket category returned to healthy growth, while fashion and home goods maintained robust momentum. Particularly, the bounce back of our supermarket category is a great example of how we are able to drive strong business performance by focusing on the key aspects of user experience namely product quality and selection, price competitiveness, and service quality. After spending the past year on strengthening procurement capabilities and upgrading fulfillment networks and operating efficiency, our supermarket category recorded double-digit GMV and revenue growth in Q1 with increased order volume and shopping frequency.

We expect supermarket’s momentum to continue throughout the rest of the year and it to remain an important growth driver in the long run with massive time. Our electronics and home appliances category remains resilient in Q1. We are confident in our market-leading position and proven supply chain capabilities in this category. And we will continue to focus on our own strategies to scale the business and profits with differentiated value-add services, such as one-stop trade-in services, new product launches, more competitive price offerings, and a more dynamic platform ecosystem.

Now, let me share some operating highlights we achieved in Q1 in executing on our strategies. First, user engagement. We are excited to see a series of positive signs in both our user base and user behavior in Q1. Our quarterly active customers delivered another robust growth year on year during the quarter, driven by growth across all user groups, including new users, existing users, as well as our PLUS members.

As to user behavior, shopping frequency on our platform delivered a substantial double-digit year-on-year growth in Q1, more than offsetting the decrease in average order value as a result of our low price offerings. This led to a relatively stable ARPU in Q1 compared to the same period last year. In addition, driven by our expanding user base and shopping frequency, our order volume continued to increase at a double-digit rate year on year in Q1, a pace we have seen for three consecutive quarters. This robust momentum with users makes us confident to say that our relentless focus in user experience are paying off.

We rolled out a number of user experience initiatives, and the team made solid progress in executing them. As such, our NPS continued to rise in Q1 on both 1P and 3P. We believe this is an important driver of our sustainable growth along the way. We are leveraging our core capabilities in supply chain to differentiate user experience on our platform.

For example, the integrated trade-in services we provide in our electronics and home appliances category are at an industry-leading level, and we are further working on this to provide users hassle-free services, including coordinated delivery, installation of new devices, and dismantling of used devices. In addition, our supermarket category also made full use of its supply chain to roll out differentiated services, including direct shipment from suppliers to end users [Foreign language] and 24-hour fresh milk delivered to users since production. Among others, our service offerings are catching up on the 3P side as well. For example, our 59 RMB threshold for free shipping now also covers almost all of the 3P products on our platform.

We also made progress to expand coverage of our free doorstep picking up for return service among 3P merchants. We are encouraged to see 3P user experience on our platform continue to improve and our 3P NPS score trended upward in the quarter. Moving on to our low price offerings. Our price NPS continue to increase in Q1, both sequentially and on a year-on-year basis, as our improved price competitiveness increasingly resonates with users.

Meanwhile, growth of our user base in lower tier cities accelerated in Q1, exceeding our growth rate in higher tier cities. Order volume and shopping frequency generated by users. And lower-tier cities continued to record double-digit year-on-year growth in the quarter. Faster than that is our total users.

Moreover, growth of low ticket-sized order volume continued to accelerate meaningfully in the quarter. All this reflects our increased attractiveness to price-sensitive customers and our abilities to serve them effectively. With our 1P supply chain capabilities and enriched offerings of 3P, we are strongly positioned to pursue low price yet sustainable way. This is the essence of retail, the core of JD business model, and a key competence that helps us stay ahead of price competition.

Next, moving on to our platform ecosystem. We were encouraged to see our active merchant base continue to rapidly expand on our platform in Q1, driven by our effective supporting measures and optimized operating tools. Both our 3P user base and 3P order volume continued to grow at a faster pace in Q1 compared to previous quarters. Our marketplace and marketing revenues returned to a positive growth in Q1 as we navigated one of the impacts in the past quarter.

This was primarily driven by the growth in our advertising revenues, while commissions remained soft due to our strategy to prioritize ecosystem development over monetization at the current stage. I want to point out that the low 3P monetization rate at the moment does not reflect the true potential of our marketplace and marketing revenues. And we anticipate more upside going forward. That said, we maintain our strategic priority of building a vibrant and thriving platform ecosystem, where both our 1P and 3P merchants are adequately incentivized to better serve users.

On a separate note, 2024 marks the 10th anniversary of our listing on Nasdaq. Looking back on the past decade, our revenues have scaled up significantly by 16 times from 69 billion RMB in 2013 prior to our listing, to over 1 trillion RMB last year. Our non-GAAP net income attributable to ordinary shareholders has expanded by an even more impressive 157 times from 224 million RMB to 35 billion RMB. The total amount we returned to our shareholders through dividends and share buybacks has surpassed the total capital raised over the course of the past 10 years.

And we have created full-time jobs for over 500,000 employees with social insurance and housing fund benefits as of the end of 2023, a 13 times increase compared to 10 years ago. We are proud of our achievements in the past as we created tremendous values to our users, employees, shareholders, and the society as a whole. We have a clear vision to navigate the next decade with our ever improving user experience, stronger price competitiveness, and thriving platform ecosystem. To conclude, 2024 is marked with our consistent strategies and continued execution.

And we are pleased to kick the year off with a quarter of accelerated growth and healthy profitability. As we focus on executing our strategies, we will further improve the user experience which leads to stronger demand share and user growth, thus helping to reinforce our market position and expand our market share. This will keep us on a sustainable path of healthy profit and cash flow, allowing us to continue to execute and deliver for the rest of the year and the years to come. With that, I will turn it over to Ian for our financial highlights.

Thank you.

Ian ShanChief Financial Officer

Thank you, Sandy, and hello, everyone. In Q1, we delivered a solid [Inaudible] both top line and bottom line. We also took extra steps to return capital to shareholders. Since the beginning of the year, we had repurchased a total of $98.3 million class A ordinary shares, equivalent of $49.2 million ADS, for a total of $1.6 U.S.

dollars, amounting to around $3.1 of our ordinary shares outstanding as of December 31st, 2023. We have also completed our $1.2 billion U.S. dollar annual cash dividend payment in April 2024. This move demonstrates our commitment to creating value for our shareholders through shareholder return and, more importantly, through our sustainable business growth over the long term, as we’ve done since our listing on Nasdaq in 2014.

With that, let me turn to our Q1 financial performance. Our net revenues grow by 7% year on year to RMB 260 billion in Q1. Breaking down the mix, product revenues were up 7%. Within product revenues, our electronics and home appliances category was up 5% in the quarter, thanks to the resilience of mobile phones and home appliances but were offset by the softness of PC due to industry headwinds.

Our general merchandise category returned to a solid new growth year on year as supermarket categories rebounded to achieve double-digit revenue growth in the quarter. Other categories of general merchandise, such as fashion and home goods, also maintained strong momentum in the quarter. Service revenues grew by 9% year on year in Q1, primarily driven by logistics and other service revenues, which were 14% year on year in the quarter. Marketplace and marketing revenues returned to positive growth in Q1 as we’ve caught more 3P merchants and nurtured our platform ecosystem.

Our advertising revenues resumed healthy momentum in Q1 as we include traffic allocation efficiency on both our platform for both 1P and 3P merchants. Commission revenues under marketplace and marketing continue to decrease at this stage due to our supporting measures to merchants to cultivate our platform ecosystem. Now, let me turn to our segment performance. JD Retail revenues increased by 7% year on year in Q1.

I would like to highlight that even as we dedicate ourselves to low price offerings, JD Retail’s cross-margin continue to increase in the quarter. Higher 1P product sales growth margin across almost all categories. This, again, demonstrates the beauty of JD’s business model. With strong supply chain capabilities at our call, we’re able to continuously expand our economies of scale and pass the benefits to our users.

In addition, we continue to improve our user experience, including lowering the threshold for free shipping, improve user engagement through initiatives — like our sponsorship of Spring Festival Gala, as a result of these efforts. We achieved higher user shopping frequency and increased order volume. JD Retail non-GAAP operating profit decreased by 5%, and operating margin was down 50 bps year on year to 4.1% in Q1, in line with our [Inaudible] moving on to JD Logistics, revenues of JD Logistics increased by 15% year on year in Q1, with strong momentum for both of its internal and external revenues. However, JD Logistics non-GAAP operating margin increased to 0.5% in the quarter, a meaningful improvement compared to a loss margin of 3.1% a year ago.

This is the result of JD Logistics to the optimized fulfillment network and operating efficiency, increased scale benefits, as well as healthier revenue growth. Turning to new business. Please note that from Q1 2024, we start to report Dada’s results on the new business. Therefore, this segment mainly includes JD profit, Dada, Jingxi, and overseas business.

Revenues of new business were down 19% in Q1, primarily due to the adjustment of Jingxi business. Excluding the impact of the [Inaudible] of JD property, non-GAAP operating loss of new business was RMB 670 million in the quarter, narrowing from RMB 846 million in the same quarter a year ago. Moving on to our consolidated bottom line. Our non-GAAP net income attributable to shareholders at group level came in at RMB 3.9 billion, a 17% increase year on year, with non-GAAP net margin coming in at 3.4% at 30 bps year on year.

This was primarily driven by increased gross margin, effective investments in JD [Inaudible] and JD Logistics improved bottom-line performance. Non-GAAP diluted net income or ADS grew by 19% year on year in the quarter to RMB 5.65 [Technical difficulty]

Questions & Answers:


Ladies and gentlemen, we’ve lost connection with the speaker line. Please hold, and the conference will resume shortly. Please go ahead.

Ian ShanChief Financial Officer

OK, we’re back. Sorry. So, our last 12 months free cash flow as of the end of Q1 was RMB 51 billion compared to RMB 19 billion in the same period last year. The year-on-year increase of free cash flow was mainly due to our further optimized cash conversion cycle, improved profitability, moderated capex, as well as seasonality factor.

Notably, our last 12 months inventory reached a historical low level of 29 days in Q1 compared to 32 days in the same period last year, which also contributed to our increase in free cash flow. By the end of Q1, our cash and cash equivalents, restricted cash, and short-term investments, added up to a total of RMB 179 billion. To conclude, we’re encouraged by our solid results in Q1. And we’re confident to deliver our operating targets while staying focused on executing our long-term strategies.

May 24 not only marks the 10th anniversary of our listing on Nasdaq, it’s also a start of a new chapter for JD to serve more users and provide them some parallel user experience by developing an ecosystem that fosters the prosperity of both 1P and 3P. With that, I will turn it over to Sean. Thank you.

Sean ZhangDirector of Investor Relations

Sure. Thank you, Ian. We apologize for the breaking up for today’s call. So, for the Q&A session, you’re welcome to ask questions in Chinese or English.

And our management will answer your question in the language you ask. We’ll provide English translation when necessary for convenient purpose only. In case of any discrepancy, please refer to management statement in the original language. OK, Operator, we will open the call for Q&A.

Thank you.


[Operator instructions] Your first question comes from Ronald Keung with Goldman Sachs. Please go ahead.

Ronald KeungGoldman Sachs — Analyst

Thank you. Thank you, Sandy, Ian and Sean. I have a question on our growth and then how do we balance growth and profitability. Let me ask first in Chinese and then I’ll translate my question.

[Foreign language] Thank you, management. I have a question on our growth, and then how do we balance that with profitability. We’ve seen many players this year, even our incumbents, I call them, each aiming to grow faster than total retail and aiming to sustain market share. So, in this overall industry, where everyone wants to grow faster than industry, how do we see the key drivers for JD this year? Sustaining, regaining market share across categories, electronic, whether it was a high base last year, how do we see this growth? FMCG and general merchandise just talked about the supermarket growth that Sandy mentioned.

How do we keep drivers to grow faster at an industry and from user and frequency perspective, existing to new users? And how do we balance this growth and profitability our targets for margins as more players reinvest for growth? Thank you.

Sandy XuChief Executive Officer

[Foreign language] Thank you for that — for your question. So, first of all, I’d like to point out that China has a vast consumption market, and this market continue healthy growth. And in the meantime, [Inaudible] with over 300 cities in China boasting population of over 1 million people. So, in 2023, we see that China’s penetration of online physical goods sales stood at around 30%.

So, this is a figure expected to rise as the e-commerce platforms and we enhance our efficiency and evolve our business models. [Foreign language] And category-wise, we see certain categories, such as computers and home appliances, have a higher than expected potential to further penetrate online despite that we think these categories already have a relatively high online consumption rate. [Foreign language] And moreover, significant room for online penetration exists in some other categories like we can see, supermarkets, home goods, automotive, garden and outdoors, and services, these categories have a large potential to continue online penetration. And these are also among the fastest growing categories of our platform.

So, with that, I want to say that we believe we are still facing a massive total addressable market. [Foreign language] So, in terms of JD’s core competitiveness, for JD, we are China’s largest retailer leveraging our one-day business. We are able to leverage our offline chain capabilities to provide users with a premium and differentiated user experience and to excel in cost and efficiency management. It also paves way for us to develop our platform ecosystem.

[Foreign language] So, as discussed in the last quarter, over the past year, we centered around user experience, low price offerings, and platform ecosystems. And we’ve taken a set of proactive moves with a focus on business health, including enhancing our [Inaudible] reducing procurement costs, and introducing various customer service upgrade, such as lowering thresholds for free shipping, upgrading monthly price guarantee service, offering free doorstep pickup for returns, and implementing employee policies among others. [Foreign language] So, all our efforts improving user experience has come up with some positive changes in our user growth and engagement. So, in this Q1, both JD Group’s and JD Retail’s quarterly numbers experienced double-digit growth, continuing the trend of high-growth rate from Q4 last year.

So, at the same time, we’ve also observed a clear uptake in users’ shopping frequency as they engage more actively on our platform. [Foreign language] Furthermore, our NPS has shown consistent improvement. So, in Q1, our NPS saw meaningful improvement on both 1P and 3P sides on a year-on-year basis, as well as a sequential basis. While the influx of new members of our platform as we pushed forward our platform ecosystem last year led to some fluctuations in our NPS.

Whereas our ongoing improvement in platform governance and risk control have driven an upward trend in user satisfaction. [Foreign language] So, in summary, our efforts have yielded some promising outcomes as we see users might share resumed momentum toward JD’s ability to provide more diverse, affordable, and high-quality products at faster speed. It also gives us the confidence to achieve long-term growth, trajectory, and market expansion. [Foreign language]

Ian ShanChief Financial Officer

[Foreign language] This is Ian to address the second part of your question. To follow up on what Sandy just said, we’re confident that our ’24 full year growth will outpace China’s total retail sales of consumer goods. And we will deliver stable profit for both JV Group and JV Retail. And on top of that, we will remain committed to disciplined investments aimed at enhancing user experience and expanding our money share.

So, in JD’s view, business growth and profitability is more reinforcing than contradictory. JD’s business model is based on supply chain with user experience at the core. [Inaudible] both supply chain efficiency capabilities and user experience. So, we firmly believe that our long-term sustainable profit will stem from our strong market position and exceptional user experience.

[Foreign language] So, for JD.com, from our perspective, we believe that by constantly dedicating energy and resources to enhancing product, price, and service, we can deliver superior user experience. And this, in turn, drives up GMV growth and expands our market share. And as our business size expands and the market position gets enhanced, our advantage in supply chain and efficiency is further strengthened, which leads to healthy profit growth. And this enables us to continue to invest in product, price, and service to constantly improve user experience.

This forms a virtuous cycle among business growth, user experience enhancement, and long-term profit growth. [Foreign language] So last year, much of our efforts was directed toward internal enhancements, including boosting operational efficiency, streamlining workflows, and enhancing long-term cost competitiveness. And through this process, we identified significant opportunities to further improve our operating abilities, and we believe that strengthening these capabilities is crucial for our success in housing profits and long-term competitiveness. [Foreign language] So, in terms of business focus and investment, since last year, we’ve been working on several key initiatives.

We’ve lowered the threshold for merchants to onboard our marketplace while we help to enhance the support measures for SME merchants. In addition, we’ve provided them with a range of effective tools to operate our platform. Therefore, we’re able to increase the variety of product choices available to our customers. And regarding user experience enhancement, we’ve implemented a series of gradual updates of various customer services.

These include lowering the threshold for free shipping services for 1P, improving the functionality of our one-click price guarantee feature, introducing free doorstep pickup for return services for both 1P and 3P, and implementing refund only policies, and more. And these industry-leading service innovations have resulted in a notable increase in user satisfaction as evidenced by our rising MPS. [Foreign language] So, to conclude, from the long-term perspective, we will consistently leverage the advantage we have in our 1P and continue to promote our platform ecosystem to strengthen the virtuous cycle between our business scale and profit growth. And we’re confident to achieve that objective in the long term.

Thank you. Next question, please.


The next question comes from Alicia Yap with Citigroup. Please go ahead.

Alicia YapCiti — Analyst

Hi, thank you. [Foreign language] Good evening, management. Thanks for taking our question on the solid results. First question is, if the appliance trade in policy were implemented, amid the cautious consumption spend remain, will the policy effective enough to boost consumer to really spend? And what could be the incremental growth JD expect to be able to enjoy from the trade-in policy? The second question is management previously knows that that FMCG will be an important category to support growth for JD this year.

Other than low base and easier comp, do you think consumer will really spend more income on FMCG category? If consumer demand remains last year, will FMCG still be the key growth driver this year? Do you anticipate JD to take more share in this category? Thank you.

Sandy XuChief Executive Officer

[Foreign language] Thank you, Alicia, for your question. First on the trading service. So, as you know, it has been about a decade since China last introduced nationwide trading initiatives. So, for many Chinese households, it’s now time to replace their home appliances and other durable goods.

And these old products are often low in functionality, high in energy consumption, and may pose risks to health and safety. However, due to the high cost of replacement, many families continue using them for the moment. [Foreign language] This trend, the introduction of a new trading policy, offers incentives to address this long-standing demand. It will encourage Chinese families to trade in their old items for new ones at a lower cost, thereby, enhancing the overall quality of life for many people.

[Foreign language] So, currently we’ve seen that governments at all levels are actively promoting the implementation of trading policies. So, we see the Ministry of Commerce has released the action plan to promote trade-ins for consumer goods, while local governments are also conducting research and making arrangements. And we’re also coordinating with different levels of governments, and we look forward to the introduction of additional trade-in subsidizing measures that will directly benefit Chinese consumers. [Foreign language] Meanwhile, at JD, we have collaborated with over 100 brands, including the top brands like Haier Media, Gree, and so on, to launch a trading alliance for household appliances and home goods.

And this alliance has so far launched a trade-in subsidizing promotions in 20 cities and regions across China, with the goal of offering more cost saving-and hassle-free trade-in services to consumers nationwide. [Foreign language] At JD.com, we’ve also been building and refining our trading service capabilities and leveraging our strengths in supply chain, logistics, and services. We continuously elevate the trading service experience to new heights. So, we introduced integrated one-stop trading service, which includes free doorstep pickup, dismantling, handling of the old goods, and free delivery and installation of new goods, etc.

And moreover, there are no restrictions on the treating items, original purchase channel, brand, age, or condition. So, with these offerings, JD has shortened the treating process no more than two times of user home visits. So, this is a very unique strength we can provide our services to our users because we’re not only having retail services, but also logistic services. And on the back end, we have also done a lot of work over the years to provide the systematic support.

So, all of these infrastructures and abilities enable us to provide such a seamless treating services to our consumers today. [Foreign language] So since 2023, more than 16 million users have chosen JD to trade in their old appliances for new ones. And the first time users of our trading service has also recorded a 200% year-on-year increase [Foreign language] So, in 2023, a trading program accounted for mid to high single-digit percentage of JD’s home appliances sales. And with the government actively promoting this initiative this year, we anticipate more incremental sales to our home appliances category.

And this trading-driven sales are expected to comprise a higher percentage of our overall sales in this category. [Foreign language] At FMCG question, so, first of all, I want to share from the consumption trend standpoint, the overall FMCG sector maintains positive growth momentum. According to the Q1 MBS data, FMCG categories, particularly basic living goods, have shown robust growth. And FMCG and fresh produce are the two sectors that enjoy a rapid increase that enjoy rising sales, whereas they have relatively low online penetration.

So, we’ve seen a lot of online platform and e-commerce players. We are steadily capturing market share from traditional offline markets. [Foreign language]And in light of JD’s Q1 data, the anticipated swift rebound of FMCG played a significant role in driving the overall growth of our general merchandise sales and revenues, leading to our general merchandise growth rate outperforming the corresponding industry growth released by MBS. [Foreign language] And in terms of our strategies for the supermarket categories, we’ve seen significant enhancements in this category as we delve in deeper into each subcategory to enrich product offerings and reduce procurement costs and passing on the benefits to our consumers.

And additionally, to address user demand and consumption pain points, we are exploring various measures such as the open sourcing of products, customize the development of new products to provide consumers with high-quality products, competitive prices, and excellent services. [Foreign language] So at the same time, our logistic fulfillment network reform has also empowered us to lower the threshold for free shipping and tailored to the characteristics of different product categories. We are undertaking fulfillment network reforms. As JD’s business scale and category mix have evolved significantly over the past years, we’ve adjusted the algorithm and design of fulfillment network every few years.

So, for instance, our unique city-based warehouse model offers a superior shopping experience compared to the industrywide, sending nationwide from one place model. However, our city-based warehouse model requires us to improve scale efficiency, to reduce parcel moving times from one place to another, and reduce the delivery distances through algorithm upgrades, and thereby continuously reducing overall fulfillment costs. [Foreign language] So, all in all, we believe the essence to continue to promote the growth of the supermarket category is to return to the essence of retail, which is to focus on the better cost efficiency and users experience. So, looking ahead, so despite, fierce competition in the supermarket categories and the industry players adopting various strategies, we remain confident in the growth potential of this category and to view the supermarket category as the crucial driver of our overall growth.

Thank you.

Sean ZhangDirector of Investor Relations

Next question, please.


Thank you. Your next question comes from Kenneth Fong with UBS. Please go ahead.

Kenneth FongUBS — Analyst

Hi, Sandy, Ian, Sean. [Foreign language] Thank you, management, for taking my question. I have two questions. The first one on content.

J.D. has been trying different means on the e-commerce content that have been very innovative and differentiating [Inaudible] like merchandise, live streaming, and recently Richard’s AI live streaming. We see very positive results. Can management share with us the progress and upcoming strategy for content investment into our core e-commerce platform? And my second question is about shareholder return.

We have substantially stepped up shareholder return and repurchased 1.2 billion worth of shares last quarter. How should we think about the pay scale and sustainability of the buyback going forward? Thank you.

Sandy XuChief Executive Officer

[Foreign language] So, thank you Kenny. Let me share some thoughts on live streaming and content ecosystem. So, for JD Retail, we announced our commitment to strengthen our content ecosystem at the beginning of the year, aiming to offer users more diverse and comprehensive content experience alongside our superior shopping experience because we believe that by offering a premium content, we attract new traffic to our JD’s platform and reduce our users acquisition costs and benefit our platform ecosystem. And we also believe that rich content also play a crucial role in increasing user engagement and time spent on our platform, and consequently enhancing our traffic distribution, efficiency, and conversion rates.

[Foreign language] So, our attempt on live streaming as was mentioned with the popular sessions led by our category managers during the Singles Day Grand Promotion and our recent showcases featuring an AI digital representative of our founder, Richard, exemplify our commitment to content innovation, leveraging our JD’s technological capabilities. And notably, Richard’s avatar live streaming, which marks the industry’s first live streaming hosted by an AI avatar of an entrepreneur, drew over 20 million views within the first hour, which also showcases our AI and other capabilities and these applications in the e-commerce scenarios. So, moving forward, we will persist in making technological investments centered on JD’s core business, including our large language model, etc. [Foreign language] So, we’re still at the early stage of our content ecosystem building.

And we hope to provide greater exposure and more traffic to high quality and original content and its creators, so thereby adding value to our consumers by helping them discover products and to make informed shopping decisions.

Ian ShanChief Financial Officer

[Foreign language] And so, thank you. To answer your question on the shareholders returns, I would like to draw your attention, our three-year plan for the $3 billion plan. And so far, we still have around $2.3 billion we scheduled in the years ahead. And year to date, we repurchased a total of 98.3 million class A shares — ordinary shares equivalent to 49 million ADS for a total of 1.3 billion in open markets from both Nasdaq and Hong Kong, accounting for approximately 3.1% of the total ordinary shares outstanding at the end of 2023.

[Foreign language] So, in the long term, our returns will focus on our sustainable, healthy business growth, profitability, and dividends, share buybacks, etc. So, we will continue to reward our shareholders through various means in sharing the success of JD’s business.

Sean ZhangDirector of Investor Relations

Next question, please.


Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas ChongJefferies — Analyst

[Foreign language] Thanks, management, for taking my questions. My first question is about industry and industry competition. How should we think about [Inaudible] and also, how we should think about the industry landscape. How is it different versus this year? My number two question is about ecosystem strategy, the management comments about the number of 3P merchants, as well as contribution in the coming quarters.

Thank you.

Sandy XuChief Executive Officer

[Foreign language] So, thank you, Thomas. Let me share some plans of the upcoming JD 618 grand promotion. So, this year’s grand promotions theme is quality and affordability. We’ve noticed a trend in the market where many low-priced products appear identical.

So, as we continue to implement our low-price strategy, our focus for this year’s shopping festival is to highlight JD’s ability to offer differentiated, good products at inexpensive price with excellent service. [Foreign language] And this promotion approach and pace will have some difference from the previous years, and all arrangements will be centered on enhancing user experience. And the event will kick off at 8 p.m. on May 31st, with products readily available for immediate purchase.

[Foreign language] And we will also remain committed to cultivating strong partnerships with our brands and the suppliers to further solidifying JD’s market presence and users mindshare. And we will also set efforts to support SME merchants and to support more than double the number of merchants to achieving over 1 million sales and to support more partners to achieve their growth objectives. [Foreign language] So, overall, we are optimistic about the overall performance for this year’s 618 promotion. And we believe that for different market players, we have different strategies in the everyday sales and during the grand promotions.

What makes JD stand out is still our advantages in supply chain and the reliability we can offer to our users. [Foreign language] So, we firmly believe that JD’s business model, based on robust supply chain and user-centric experience is resilient and sustainable across various economic cycles, and we’re confident in our ability to consistently gain market share over the long term with this business model. Thank you.


We are now —

Sean ZhangDirector of Investor Relations

Sorry, we haven’t been to the second part of Thomas question.

Ian ShanChief Financial Officer

[Foreign language] To address the question about the platform ecosystem, so our initial focus is to expanding our ecosystem scale by attracting merchants. We are actively working on onboarding more merchants and support them in improving their business performance on our platform by offering a diverse range of products on our platform to our customers. And over the past year, we’ve successfully attracted a significant number of new merchants by continuously streamlining our onboarding processes, reducing their store operating costs, improving operational efficiencies, and providing traffic support. So, in this quarter, the number of active merchants on our platform exceeded 1 million, with the number of active merchants experiencing accelerated growth for four consecutive quarters.

And admittedly, our merchant count may not be as high as some other platforms, and we remain committed to further enhancing our merchant recruitment efforts and supporting their activities on our platform, and we anticipate continued growth in the number of merchants in the following quarters. [Foreign language] So, for the second phase of the platform ecosystem building involves encouraging user participation. Ultimately, we aim for it to become a natural process, a natural choice for our users to purchase either self-operated or third-party products. Thus far, we’ve observed the favorable interactions between our users and third party offerings.

In Q1, we achieved accelerated growth in both 3P transaction users and 3P order volume. Meanwhile, NPS for 3P has continued to improve. Since the second half of last year, we’ve been collaborating with our merchants to pioneer service innovations. This has led to the implementation of services like late delivery compensation, refund-only policies, and free doorstep pickup for returns and more services, all of which have constantly elevated our shopping experience for our top users.

[Foreign language] And lastly, we also believe that we will witness an increase in pop sales and revenues. And the prerequisites for this to happen is that we can truly help our merchants to scale up their businesses. From the rapid expansion of merchant members, to active user participation, and to rapid growth of pop GMV, all of this will require time and patience. With the gradual improvement of our platform ecosystem in the long run, the proportion of our 3P orders and GMV will eventually surpass that of our self-operated products.

And this will also be a natural choice by our users. [Foreign language] Leveraging our 1P business and the collaboration with merchants from our 3P marketplace, we are able to foster a thriving platform ecosystem and providing richer supplies of high-quality goods and to increase the engagement of our users on our platform so as to achieve a virtuous cycle. And we believe this virtuous cycle will be an important driver for the continued growth of our long-term revenues and profits. Thank you.

Sean ZhangDirector of Investor Relations

Thank you, operator. So, thank you, everyone, for joining the call today, and thanks for your question. If you have further question, please contact me and our team. We appreciate your interest in JD.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. [Operator signoff]

Duration: 0 minutes

Call participants:

Sean ZhangDirector of Investor Relations

Sandy XuChief Executive Officer

Ian ShanChief Financial Officer

Ronald KeungGoldman Sachs — Analyst

Alicia YapCiti — Analyst

Kenneth FongUBS — Analyst

Thomas ChongJefferies — Analyst

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