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Jingdong Mall Releases Fourth Quarter And Full Year Results

2016/3/2 21:13:00 46

Jingdong MallFourth QuarterAnnual Earnings Report

Jingdong mall released its fourth quarter and full year earnings for the 2015 fiscal year ending December 31, 2015.

According to the financial report, Jingdong's net revenue in the fourth quarter was 54 billion 600 million yuan (US $8 billion 400 million), an increase of 57% over the same period last year.

The net loss was 7 billion 600 million yuan (US $1 billion 200 million), compared with a net loss of 500 million yuan in the same period last year.

Based on non US GAAP, net loss was 656 million 200 thousand yuan (US $101 million 300 thousand), compared with net profit of 83 million 800 thousand yuan in the same period last year.

After the release of the financial report, Jingdong chairman and CEO Liu Qiangdong, CFO Huang Xuande and Jingdong mall Shen Haoyu Shen Haoyu attended the analysts' conference call, interpreted the earnings and answered questions from analysts.

The following is the main content of this conference call Q & a session.

Liang Weiliang, analyst at Bank of America Merrill Lynch (Eddie Leung): my question is about a major product category of Jingdong, that is, consumer electronics.

We heard that sales growth of smart phones and household appliances on line brands began to slow down.

Can the management talk about the marketing strategy of Jingdong's electronic products in detail and how to maintain the current good growth momentum in the development of the electronics industry?

Shen Haoyu: consumer electronics products grew the fastest in the first place, but now the products like cameras and computers are the slowest growth. But compared to offline retailers, Jingdong's performance is still good.

Sales of smartphones have grown rapidly over the past few years, but now the Chinese market is saturated, and growth has begun to slow in recent years, though this year's growth is even faster.

As an agent of online electronic products, the growth of Jingdong is still very fast.

But for the entire smartphone market, it has been growing steadily from the crazy growth in the past few years.

As for household appliances, we have launched a large-scale promotion campaign, established cooperation with more than 100 brands, and provided household electronics products to Jingdong.

Jingdong has been growing very well in this business, and has quickly seized a large share of the market from offline retailers.

We are optimistic about the market outlook of this product category.

For the industry as a whole, the performance of Jingdong is still looking ahead compared with offline retailers.

Liu Qiangdong: let me add a few words.

In the electronics industry, Jingdong's share of China's electronic product agent market is currently close to 10%, which means that 90% of the market share remains to be developed.

Therefore, the core driving force of Jingdong is still mainly from the rapid pfer of consumers from offline to online.

If you go to China's second-largest city to see, including Beijing, Shanghai and Guangzhou, we will find that computer city and home appliance chain store have been shut down one after another, and consumers' online pfer is very obvious.

Next, the growth of online electronic products mainly comes from the consumption pfer from three to six cities.

Now if you go to the county seat, there will be a computer city, and business is quite hot.

For us, this is a market gap.

UBS analyst Erika Vokun (Erica Poon Werkun): my question is about the company's net profit expectations.

Can the management explain in detail how to concentrate resources to increase the profit of e-commerce business, and how to maintain a good profit growth while investing in Internet Finance and O2O business Jingdong.

In addition, how to reduce the performance cost of the third party business from warehousing and express delivery.

Shen Haoyu: the operational obstacles of Jingdong's self operated e-commerce business originate from its own economic scale.

We have talked about this before, for example, the gross profit margin of Jingdong's proprietary business is still far below the leaders of various industries under the line.

To this end, we are constantly increasing investment to enhance the scale of operation, attract more and more excellent supplier groups, and continuously increase the volume of Jingdong's e-commerce business.

At the same time, we launched a series of brand promotion activities in the fourth quarter to continue to improve the logistics network of low grade cities.

2015 is still an investment year for Jingdong, bringing new growth engine to the company's 2016 business and creating a lot of space for continuous improvement of operational capability.

Jingdong is expanding its business scale to maintain its operational flexibility in 2016.

When you invest in new business lines, especially in some competitive markets in China, there is bound to be a lot of uncertainty, and now is the beginning of a year.

Therefore, we can not predict the scale of investment this year.

Normally, we do budget for investment, but this investment is always changing.

On the whole, the Jingdong will make a reasonable prediction of the profit margin of the core business, which will give us plenty of space to invest in new businesses and continue to tap the potential of existing businesses.

Deutsche bank analyst Alan Hellawell (Alan Hellawell): I have two questions.

First, what is the progress of Jingdong's cross-border e-commerce business, such as GMV and profit margins?

The second question, please tell the management about the latest situation of O2O business "Jingdong home".

Shen Haoyu: at present, Jingdong has reached 12 major cities in China.

Consumer

To provide O2O services, we plan to infiltrate consumers in these cities and then enter new cities.

In other words, we hope to do well enough to achieve economies of scale and then expand to new cities.

As we have said before, in this respect, we have no specific investment at present, but we have an obvious competitive advantage in the field of O2O services. This advantage lies not only in our cooperation with the most powerful companies in the field, for example, Yong Hui supermarket, but also our continuous introduction of new product categories to return partners.

Liu Qiangdong: about the O2O project, I think you are all interested. Some people compare us with Instacart (the O2O platform of the US grocery community). Although the business models of the two are closer, our two companies still have essential differences. The Jingdong is home to focus on the fresh area, and as far as I know, Instacart is mainly groceries in the United States, so the category of the two is different.

If it is a grocery, we can use Jingdong mall mode to achieve without Jingdong mode.

The Jingdong's home mode is mainly food based food, especially fresh and medicinal products.

In terms of fresh products, only the Jingdong can get home in the future. This business mode can sell fresh products on a large scale online, such as platform mode and Jingdong self operated mode. These two business models are simply not able to make fresh ones, especially the low-end food, high-end, imported, Jingdong mall mode can be done.

However, a large number of more middle and low end foods can only be solved through Jingdong.

Therefore, it will take a long time for Jingdong to get to this model, and any business done by Jingdong is planned in ten or twenty years' vision or strategy.

For the time being, the biggest problem with Jingdong's coming home mode is the lack of standardization.

Therefore, Jingdong is now working hand in hand with all supermarkets to implement the standardization of fresh products.

Only after standardization can fresh products be individually packaged and sold on the Internet.

Of course, what makes us most happy is that Jingdong users have adapted to this mode, and their repeat purchase rate far exceeds that of Jingdong mall.

That is to say, their purchase frequency is very, very high.

Simply from these figures, it also gives us strong confidence.

Shen Haoyu: let me answer the question of cross-border electricity supplier business.

The Jingdong launched cross-border electricity business in the second quarter of last year. This business has achieved good results in the fourth quarter, and grew very fast. Only because it is too small, it accounts for only 1% of the company's total revenue.

Nevertheless, we are satisfied with this achievement, but Jingdong still needs to take a series of measures this year to increase the profit margin of the business and not at the expense of healthy growth.

To ensure this, we must strictly screen merchants.

Cynthia Men (Cynthia Meng), a Hongkong based analyst at Jie Fu Lu: the first question is about Jingdong mobile business.

The proportion of mobile terminal pactions in GMV, the size of each order, the performance of mobile terminals compared to PC terminals, and the traffic and conversion rate directly brought by WeChat.

The second question is whether management can talk about the expansion of Jingdong in the three or four tier cities.

Shen Haoyu: the company has published this data in the earnings report, that is, the fourth quarter mobile terminal accounted for 60.1% of the total orders.

Now, it has been two months since the first quarter of 2016, and this data continues to be eye-catching.

We do not disclose the proportion of mobile end pactions in GMV.

As for WeChat and mobile phone QQ, these two products of Tencent are still bringing steady flow to Jingdong, contributing more and more to GMV and other aspects.

Especially after the double eleven promotion campaign, Jingdong attracts a large number of users to these two channels.

After the end of the double eleven activities, we saw some growth in operation data, such as user conversion rate.

We will continue to strengthen cooperation with the Tencent team to further enhance the contribution of WeChat and mobile QQ to our profits.

Liu Qiangdong: as for the expansion plan of low tier cities, I also want to share with you the company's strategy.

2016 is the year when we enter the rural strategy in an all-round way. By the end of last year, we have entered more than 140 thousand villages. These villages have village level agents of Jingdong. By the end of this year, we plan to cover more than 400 thousand villages in China in one year.

To do this, it marks the completion of Jingdong mall's regional expansion investment over the past decade.

Next, our goal is to improve operational efficiency, reduce costs and make a lot of innovations in the areas we have entered.

At present, we have obtained relevant government approvals. The Jingdong can provide UAV delivery service in two counties, and now we are carrying out the test of UAV delivery.

We hope to provide UAV delivery service to 400 thousand villages throughout the country later this year, so that we can significantly reduce the cost of Jingdong delivery to villages.

86 Securities Research Analyst Sean Chang (Sean Zhang): I remember that when Liu said in a forum at Yabuli, the proportion of daily goods in Jingdong's proprietary business GMV reached 15%, so how much contribution will the daily necessities bring to Jingdong's proprietary business GMV? Second, the total area of Jingdong logistics network has reached 4 million square meters. What are the plans for the expansion of storage network in the coming year?

Shen Haoyu: in Jingdong's proprietary business, the growth rate of GMV for daily articles is much faster than that of electronic products.

Jingdong's self employed GMV is growing at three digits, but the contribution of this category is still low, though it is growing fast.

Jingdong storage center area has reached 4 million square meters, and with the continuous expansion of Jingdong's proprietary business and delivery services for more and more third parties, the storage area in the future is expected to increase steadily.

Goldman Sachs Group analyst George Men (George Meng): management has just mentioned the construction of logistics and O2O services.

In December last year, Jingdong signed a strategic cooperation agreement with the Chinese sportswear brand Lining. How is this cooperation going? What are the plans for the future? Is it only through Jingdong that Lining

O2O

The service sends products to its stores, including online and offline.

Does Jingdong plan to provide more services to more brands in the future?

In addition, as you mentioned just now, the total area of Jingdong's logistics network has reached 4 million square meters. Can you introduce the latest situation in this area? At present, the "Asian first" warehouse in Shanghai has been put into use, and Jingdong now has six "Asian first" warehouses. Would you like to ask if Shenyang, Wuhan and Guangzhou's "Asia 1" warehouse is now in operation?

Shen Haoyu: according to the cooperation agreement between Jingdong and Lining, we provide Lining with logistics services in North China and send their products to their stores and agents.

According to the results of the cooperation between the two sides, Jingdong is likely to provide such services to Lining stores and agents in other regions to help Lining deliver the sports equipment ordered by users online to the home.

In the 4 million square meter storage network, some of them are still under construction, and more and more warehouses will be put into use in the future.

Liu Qiangdong: our Asian first project is not completed at one time. The construction of "Asia first" project in each region is divided into one, two and three phases. The specific situation will be made according to the regional sales situation of Jingdong.

Morgan chase analyst Vivian Hao (Vivian Hao): first, considering the huge investment of Jingdong in logistics, how much will the performance cost account for in the company's revenue this year? Second questions, can the management reveal the latest progress of Jingdong's home and Jingdong finance and the respective revenue contribution of these two businesses?

Shen Haoyu: the proportion of logistics cost in total company revenue is increasing, but if we calculate the logistics cost per order, this data will continue to decline.

Considering that we are one of the most important e-commerce operators in China, and we are expanding our operation scale, we will see that the ratio of revenue to cost will gradually shrink.

Liu Qiangdong: I remember that I said this problem two quarters ago, that is, with the increasing profitability of Jingdong mall, the losses caused by the group every year in investing in new businesses will not change too much, so we can see the profitability of the group from this aspect.

That is to say, the future losses of all new businesses of the group will not increase substantially compared with that of last year.

About Jingdong

Logistics network

I also have a message to share with you.

A few days ago, Shentong and Tantong have been backdoor listing in China, and announced their respective operational data one after another.

According to the operational data released by the two companies, we can see that the average charge per order, including miscellaneous fees and franchise fees, exceeds RMB 13 yuan.

From these figures, I can tell you that Jingdong's express delivery fees are much lower than Shentong and Tantong.

At the same time, the coverage of Jingdong, the quality of service and the speed of delivery are far more than those of the two companies.

Therefore, because of these comparative figures, it proves that Jingdong's own logistics will not bring about the increase of operating costs, but will lead to the reduction of costs.

Tian Hao capital analyst Hou Xiaotian (Tian Hou): the first issue concerns Jingdong's cross-border e-commerce business.

Taobao also has this kind of business at present, and its growth is very fast recently. So, please talk about the future development trend of this market, and what advantages do Jingdong mall have relative to its competitors? Second questions about Jingdong financial business, what is the GMV and revenue of this business at present?

Huang Xuande: Jingdong has a proprietary platform that can support new products launched by businesses.

We can be regarded as a pioneer of cross-border electricity business, so although more and more companies are entering this market, Jingdong still has confidence in maintaining the leading position of the market.

We have also invested a lot of resources in building a good ecosystem to help cross-border business partners grow.

Cross border electricity supplier is a very new business now. We can not say Jingdong has won. After all, every company in this field is working hard to become the leader of this market.

We will continue to develop this business in the next few quarters.

As for Jingdong financial business GMV, we only calculated the GMV of cross-border e-commerce products, but we will not disclose GMV of other businesses in Jingdong finance.

If we look at the volume of pactions, we do not publish this data in our earnings reports.

In addition, Jingdong's financial sector's revenue is very small.

Nomura Securities analyst Jialong Shi: my problem is also related to Jingdong's Internet banking business.

As far as I know, many companies in China provide such services to individual consumers. What are the advantages of Jingdong compared to competitors? In addition, how many GMV related to Internet financial services in the fourth quarter?

Liu Qiangdong: every product provided by Jingdong to consumers is putting the user experience in the first place, including the Jingdong ious that we provide to users. I believe some analysts have used Jingdong IOUs, and should have a deep impression on its user experience.

Therefore, our risk control capabilities and data processing capabilities, as well as the insight ability of consumers, are all important competitive advantages for us.

Today, Internet finance is very popular in China. A lot of companies are doing Internet finance, but Jingdong has our own core values.

For example, in the hottest days of P2P business, we are faced with great temptation. We also insist on not doing P2P related business, because this is not in line with our business values.

Under the overall business guidance of user experience first, we emphasize the innovation of financial products. For example, Jingdong is the first company to launch financial ious in the world, the first company to launch product crowd raising, and the first company to launch stock raising platform.

In fact, in addition to the payment, in the entire Internet financial industry, among all the new products with real commercial value, Jingdong has come to the front of their competitors, the first to launch this product.

We will also increase product innovation this year to provide consumers with more and better products.

We believe that at any time, as long as you can surprise users and let users like you, let users trust you, then I believe Jingdong financial business will one day, like Jingdong mall, bring huge returns to our shareholders.


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