Hello and thank you for standing by for JD.com's First Quarter 2016 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, Ruiyu Li. Please go ahead.

Thank you, operator, and welcome to our first quarter 2016 earnings conference call. On today's call, Sidney Huang, our CFO will discuss highlights for the first quarter. Following his prepared remarks, Richard Liu, CEO of JD.com and Haoyu Shen, CEO of JD Mall will join Sidney for the question and answer portion of the call. Before we continue, I refer you to our Safe Harbor statements in the press release, which applies to this call as we will make forward-looking statements. Also, this call includes some discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. Now, I would like to turn the call over to our CFO, Sidney Huang.

Thank you, Ruiyu, and hello, everyone. We are pleased to report another quarter of solid growth and improving margins on our core business. Our core GMV grew 55% year-over-year in the first quarter 2016, more than doubling the industry growth rate despite a notable slowdown in national consumption growth. More importantly, the growth was healthier and our JD Mall operating margin showed a meaningful improvement. I'll discuss both in more detail in a minute. From a macro perspective, China's overall consumption growth decelerated in the first quarter to 10.3% from 11.1% in the first quarter last year. As we have cautioned since last the October – since last August, a sustained weak economic environment could over time hurt consumption. Although, we continue to believe such impact maybe moderate or delayed due to the secular trend of the offline online shift and healthy employment level supported by the government. During the first quarter, we conducted a detailed review of our business lines in conjunction with our annual budgeting process. We made an important decision to rationalize our core e-commerce business with the more balanced approach to growth and profitability. Business units under JD Mall are being evaluated for their operating profitability for the first time in addition to their growth metrics. Concurrent with this balanced focus, we are now sharing with you the operating margins from our core e-commerce business and the operating loss from the new businesses, thereby providing more visibility into the financial trends of these different segments. Now let's first review our growth metrics. The GMV from our marketplace business grew 63% in Q1 and accounted for 41% of our GMV during the period. Some of you may ask why the growth rate has seemingly slowed. So I will share a few reasons in addition to the overall…

Thank you. The question-and-answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask question, we will take one questions at a time from each caller. If you have more than one question, please request to join the questions queue again after your first question has been addressed. The first question comes from the line of Eddie Leung from Merrill Lynch. Please go ahead.

Hi, good evening. Thank you for taking my question. I noticed that the GMV per order actually increased materially year-on-year. So just curious on what's the reason behind it. Did we see the ticket size of electronics or general merchandise going up or was it because of customer buying more products per order and hence we have seen an increase in GMV per order? Thank you.

Yes. Eddie, this is Sidney. The reason is actually mostly related to the scale back on the cell phone recharge sales, which had a lower ticket size. So it had to had a quite meaningful impact on our GMV, and which also in turn had a very meaningful impact on the average value per order.

Thank you. Next question comes from the line of Chi Tsang from HSBC. Please go ahead. Chi Tsang - The Hongkong & Shanghai Banking Corp. Ltd. (Broker): Good evening. Thank you very much for taking my question. Wondered if you could give us a little bit more color regarding your commentary regarding the slowdown in marketplace GMV, you outlined three buckets, Tencent, business rationalization and brushing. I was wondering if you can just give us some more additional color on how you can buckets – put those into three different buckets please in terms of the impact? Thank you.

Right. So, on the Tencent transaction impact, you could actually see there was a deceleration over the past three quarters with average over 20% a quarter. So that was really businesses maximizing – max out the incremental contributions from the traffic support, and so we have mentioned this over the past three quarters. So, if you want to quantify, you could take the previous two quarter's pace of slowing down around 20% a quarter. And then you have the two other elements. For the virtual product kind of rationalization, we – it's -if you look at the virtual product category as a whole, we actually saw a meaningful decline during the quarter. If you assume, let's say, so it is actually magnifying impact on the growth rate. So, if you take let's for example 3% of the marketplace GMV from last year, for example, by eliminating that you would have a negative impact on the growth rate of nearly 6% this year. So, that gives you some idea on why the growth rate would decelerate a little bigger because you're essentially not only not growing that category, but you actually decelerate that category. And for the anti-brushing, it's really, really difficult to quantify as you know. They are – they couldn't be identified to begin with. So, now we're providing severe penalties and we also started to implement a number of downgrading mechanism. So, the impact, there will be a ripple effect on the merchant's behavior. And for that part, it's very difficult to quantity.

Thank you. The next question comes from the line of Erica Poon Werkun from UBS. Please go ahead. Poon Erica Werkun - UBS Securities (Asia) Ltd.: Hi, Sidney, thank you. How should we think about the 1P, 3P mix shift going forward? How do you balance the need to maintain quality and service on the hand and on the other, the need for scale and profitability? Thank you.

Yeah. So, I think I'll begin first. So we will continue to see stronger growth from 3P businesses. And now on the surface you may see the 3P growth slowing down a bit more than the underlying business fundamentals because of the unfavorable comparison to previous year, right. So I think over the next few quarters, the growth rate, just based on year-over-year numbers, may seem to be a little less than what's the underlying growth momentum, but it should still grow faster. The healthy part of the business should definitely grow faster than the 1P business. But having said that, as you can see, our 1P business has been growing at a very solid pace and will continue to grow in the foreseeable future. Poon Erica Werkun - UBS Securities (Asia) Ltd.: Thank you.

Just a bit more commentary on what Sidney said. So we are – the marketplace GMV grow slower. The growth rate decelerated a little bit this quarter, but it's still growing faster than the first part of the B2C direct sales business. Our hypothesis, the – there's still will, going forward, there will still be a differential between the growth rate of marketplace GMV and direct sales GMV. Poon Erica Werkun - UBS Securities (Asia) Ltd.: Thank you. Richard Qiangdong Liu - Founder, Chairman & Chief Executive Officer: [Foreign Language] (19:23-19:41)

We've maintained our advantage over the industry growth rate at I think this past two quarters, every quarter we grew at double the growth rate of industry rate and we'll continue to do that.

Thank you. The next questions come from the line of Alan Hellawell from Deutsche Bank. Please go ahead.

Thank you management. This is Eileen Deng on behalf of Alan Hellawell. I have a question regarding your electronic products. Can management give some color about the recent trends especially on the smartphone competition and what is the outlook for the full year? Thank you.

Electronics. So for the consumer electronics business, the cellphone, the computers, the pads, I think, the macro environment is definitely slowing down as you have seen in – from other – from some manufacturers, but we continue to be the leading retailer for that category and I think we're still gaining share from all other retail channels. And we -in the first quarter, we continue to see good growth momentum across all electronics categories including cellphones and computers and pads and peripherals. So, we are already the by far the leading retailer of these categories and we will continue to gain share in spite of the overall slowdown in the industry. But it's definitely impacting our growth rate, but we will continue to grow at much faster rate than the industry.

Thank you for the questions. Next question comes from the line of George Meng from Goldman Sachs. Please go ahead. George Meng - Goldman Sachs (Asia) LLC: Hi, good evening, management. Thank you very much for taking my question. My question is related to your new business, which generate about RMB0.6 billion loss this quarter. So, I understand this is mainly from JD Finance and Daojia, but you also mentioned this time, I think for the first time, about all this technology initiatives as well as overseas business. And within the technology I think you just mentioned cloud computing and smart devices. So, can you maybe quantify how big the investment or loss you are expecting this year, because I think from last quarter, you mentioned absolute loss of all these new business will be not growing that much on a year-on-year basis in 2016. So, just wondering, what's our plan in this a non-JD Finance and Daojia, but also other technology related and also overseas business. And can you remind us how big those businesses are as of today? Thanks. Richard Qiangdong Liu - Founder, Chairman & Chief Executive Officer: [Foreign Language] (22:58-23:09)

Our investments in technology this year will continue to grow, but in terms of percentage of our total revenue, it's not a very big number.

Yeah, and it will all maintain at a similar percentage of revenue this year. So it is actually a very small amount at this point. Same for the overseas business, which we had – we mentioned before that at this point, we only have one joint venture in Indonesia.

Thank you. The next question comes from the line of Sean Zhang from 86Research. Please go ahead.

Thank you. A follow-up on the 3P marketplace strategy, maybe can management walk us through your – maybe your thought process here. What's your newer strategy for 3P category, because I have seen a lot of brand flagship store opening on JD, maybe just share some color on your 3P strategy going forward? And also maybe touch upon your June 18 anniversary sale. What have you prepared in terms of category, I have seen 3P, of course, which is your strongest category have done conferences with suppliers; maybe give us some color on the preparation to the June 18 anniversary sale? Thank you.

We don't really have a new strategy for marketplace business. Our strategy is always, we want to give our customers good selection by having a good variety of merchants on our platform. You may have noticed that we are just about 100,000 – we have just about 100,000 merchants on our platform right now. We are not looking to increase that number too much because we believe that number of merchants already can provide a good selection. And we don't want to have the crowded marketplace. We want all the merchants to be profitable on our platform. And we are increasingly offering our logistic services to them to our merchants, be it last mile delivery services or warehousing services. So we'll continue to grow this business and all these so non-electronic categories, a lot of non-electronic categories are actually driven by third-party merchants. As for the preparation for our anniversary campaign, we're going to have an event in a few days and we will – we have lined up many big brands and merchants to work together with us to have a really rewarding experience for customers. And it's a – because these are – on anniversary sale, we put a lot of resource behind it and we will be having big campaigns across all categories, be it first-party electronics categories or marketplace third-party home and apparel categories.

And I just want to add one point, one side benefit of the anti-brushing campaign is that we actually noted the large merchants are benefiting from these new initiatives. And if you look at March and April sales data, larger merchants were growing much faster than average. So not that we know smaller merchants are not benefiting, but it's just one of the side benefits.

Thank you for the questions. Next question comes from the line of Eugene Munster from Piper Jaffray. Please go ahead. Eugene Charles Munster - Piper Jaffray & Co. (Broker): Hey, good evening. I just want to follow-up on just the overall expectations about GMV growth. You talked about the reasons for the slight deceleration and obviously you talked about the significant market share gains that you had relative to overall economy. And my question is, if you're going to think about the next year or so, should we think about a continued slowdown in GMV, but still outpacing overall e-commerce or any sort of feedback or color you can give us to how to model this out for from a higher level? Thank you.

Yeah, I think as Richard mentioned earlier that we have been growing at more than double the industry average for many years. And that's still our target going forward given our superior user experience and our improving user engagement. So it is, however, difficult to model for the next three years, because it's partly also dependent on the overall consumption growth in China and also the overall e-commerce growth as a sector. Richard Qiangdong Liu - Founder, Chairman & Chief Executive Officer: [Foreign Language] (28:50-28:59)

Yeah. So, nevertheless, we are very confident that our growth rate will significantly outpace the overall e-commerce growth rate over the next few years.

Thank you. The next question comes from the line of Robert Peck from SunTrust. Please go ahead.

Yeah, thank you so much. I've just two quick questions. One, Sidney, I was wondering if you could update us on just the competition from merchants, large sellers, is that heated up at all or sort of subsided? And then number two, where there any anomalies to call out during the quarter, was there any impact from weather, et cetera? Thanks so much.

Yes, I will take a shot and then Haoyu can add. We – the competition has always been very fierce. We have seen competition from offline, major players in the past and we continue to see very, very severe competition from our largest e-commerce competitors. So, we don't see any material change in terms of competitive dynamic. And for any other reasons in Q1, I think we have tried our best to explain the reasons we think are meaningful. We haven't really – it's very difficult to quantify other factors like weather.

Thank you for the questions. Next question comes from the line of Wendy Huang from Macquarie. Please go ahead.

Thank you. My first question is on your fulfillment. So fulfillment cost as a percent of GMV and also the fulfillment cost per order has gone up this quarter. So what's the reason behind that? Is it more driven by O2O business? If this is a case, how should we expect the fulfillment cost to change in the future? And also another part of fulfillment is that the fulfillment in the rural areas, I think Alibaba mentioned last week that they had Taobao service stations in over 140,000 villages. So what do you think of the competition from Alibaba in the rural areas and what's your strategy expand into the lower tier cities and also rural areas? And the second question is on your operating loss, so you mentioned that you had about RMB0.6 billion non-GAAP operating losses on two businesses JD Finance and JD Home. Can you just give more color as to which one is the bigger dragger and also how should we expect the JD Home's standalone losses going forward? Thanks.

Yes, I'll explain number one, three first. And so for the fulfillment expense ratio I mentioned earlier is really related to investments in the lower tier cities and rural areas similar to some of the competitors that we are also – we have recruited many village agents. And so there is higher fulfillment expenses associated with that. The other very, very important factor is the consumable categories growth which has lower average basket size. So that has a very, very important impact on the fulfillment expense ratio and as I – we mentioned before, we are in the process of evaluating ways to improve that order economics in this particular category. And on the RMB0.6 billion for new businesses, so if you want to – in terms of magnitude JD Finance definitely had the largest operating loss at this point followed by the O2O. And then the remaining new businesses actually had a very, very small impact at this point. For the next quarter because of the Dada and Daojia merger, there will be – the reason we are still in the process of assessing the impact is it is most likely to be deconsolidated. However, because the new company on the ordinary share basis, JD still owns a large majority of the ordinary shares and the Dada shareholders are mostly preferred shareholders. So, from a loss allocation point of view, we will still absorb the majority of the combined entity's losses in the other equity pick-up line. So, we are – that's why we need to give the new entity some time to come up with their annual budget so that we can have a better visibility to share with our investors. Richard Qiangdong Liu - Founder, Chairman & Chief Executive Officer: [Foreign Language] (34:29-35:08)

So internally when we look at fulfillment cost, we don't really look at fulfillment cost as a percent of revenue, but look at per order fulfillment cost. If you look at that number on an apples-to-apples comparison basis in the past few years, we're seeing declining fulfillment cost. And we were able to achieve that despite the fact that we are going to more and more rural areas where the order density is less than bigger cities. I just want to add to what Richard said. We are very vigilant of our basket size because we do know that – with that we see the sort of the percentage of logistic cost as a percent of revenue. So we are – as we're selling more and more general merchandize and consumable merchandize, we're seeing the basket size has downward pressure, but we are trying different things to maintain basket size. For example, as you may know, we increased our minimum order size for free shipping recently, again. And so far, it's been about a month now, and so far we're seeing results that we would like to see, so just as you know that we are very mindful of basket size.

All right. The question about penetration into lower tier cities, I think our competitor has 14,000 presences in villages, right. And we're trying a different approach. As we mentioned before, we have representatives working for us to promote JD in villages. So I think the latest count is about 200,000 of them covering 200,000 villages all across China, and we're seeing a good contribution to our GMV from these representatives and where we will continue to push ahead.

Thank you for the questions. Next question comes from the line of Vivian Hao from JPMorgan. Please go ahead. Vivian Hao - JPMorgan Securities (Asia Pacific) Ltd.: Hi, management. Thank you for taking my questions. I have two questions here. The first one is about your gross margins. So what are the top growing categories, for example, like food and beverage, in your 1P business, their gross margin profile? And probably if you could give us maybe the top three fastest growing categories in your 1P business? And the second question is when you mentioned earlier in the prepared remarks on anti-brushing efforts in your 3P marketplace, can we get a sense of how we should think about the percentage of GMV impact in the categories that are most impacted by brushing? Thank you.

Right. So, on the gross margin, we actually saw improvement to our first-party business across all key categories. And so it probably doesn't help to further order these categories because they may change from quarter-to-quarter based on their different promotion schedules. But we did see meaningful pick-up across all categories as they compare to the previous year quarter. Vivian Hao - JPMorgan Securities (Asia Pacific) Ltd.: Thank you.

Your next question comes from the line of Robert Lin from Morgan Stanley. Please go ahead.

Hi. So, two questions here. First on the Finance business, could the management provide some of the key metrics from Finance business. I know you provide actually the disclosure this time about new business, but particularly key metrics such as GMV contribution, consumer finance, we also book a cost of sales of interest expenses in 1P line, maybe also the revenue received. And related to Finance business, obviously, some of our biggest competitors are potentially coming onto public market, right. And so what's this to our timeline on the Finance business IPO, if any? So that's first. On the fulfillment side, I think one of the things that you talked about as JD, the consumable products, will we have something like a JD Supermarket business that's very similar to Tmall Supermarket that we can do bundle and you know increase the efficiency of the extra fulfillment going forward? Thanks.

So, I'll answer the first one. So for JD Finance, first of all, there is no time table for IPO image. It's really too early. We are still developing the infrastructure and the initial business build up at this point. Your question about the consumer financing volume and the impact on our GMV, in Q1, actually we looked at all the volume 55% of consumer finance business – consumer finance volume were repaid within one month during the interest free period. So they are really like a credit card. So if you then look at the remaining 45% that were on installment, the volume contributed very – it's in low single-digit to the overall GMV. So it's very small impact in terms of impacting the GMV growth. And we mentioned this before that we've done our Internet Finance business not for the benefit of e-commerce. There is a side benefit, but that was not the purpose. The purpose is to build a financial technology company, leveraging the big data and also the risk management model so that we can monetize over that technology. We mentioned about the self-funding nature of the business. And we hope to share with you more color on how they would monetize their technology without leveraging the balance sheet at all hopefully in the near future.

As far as FMCG or consumable category, I think that's a category we are very – we have, first of all, we have very sizable business in that category already and it's a category that's had a tremendous growth in past few quarters. And we are – it's category as you know very suited for 1P model and logistics is obviously very, very important to that category. So I have – recently I've seen – talked to many leading FMCG brands and we are increasingly the number one retailer for these leading FMCG brands in China and we've built great partnership. And we are also going to try different things too in this space. Globally e-commerce in FMCG is also an area that some parties are trying different things. And you can stay tuned that we are going to try different approaches to win in this space. And by the way we do have a JD Supermarket brand and we've been promoting that brand since Q4 of last year. So it's sort of a sub brand if you will under JD.

Thank you. The next question comes from the line of Natalie Wu from CICC. Please go ahead.

Hi. Thanks for taking my question. I notice that your gross profit actually grew at a very rapid pace at 75% this quarter, just wondering if you are focusing on gross profit growth going forward instead of GMV? And how should we see that GP margin going forward for this year and as well as for the foreseeable future? And also I have a second question about non-GAAP operating margin. I recall that you mentioned last quarter that JD Mall has already achieved the profitability for the last several quarters in a row. Just wondering will this trend be carrying on, say, should we expect an improving JD Mall OP margin this year? Thank you.

Right. So I think we mentioned earlier about a balanced approach between growth and the profitability. So we are – we will continue to pursue growth, but we want to pursue profitable growth going forward. Growth is still very important. If you look at the key KPIs to our business unit presidents they are still – out of four KPIs, two of them are top-line growth related. We just added a bottom-line metrics this year. Soyeah, on the operating – JD Mall operating margin, yes, we have repeatedly mentioned in the past few quarters that we do expect our JD Mall operating margin continue to improve. And we are now quantifying that improvement starting this quarter, and you should expect continued improvement for the remainder of this year. Although, on a quarterly basis, you may still see volatilities, again due to different promotional schedules, but the overall trend will definitely be increasing by a meaningful pace. Richard Qiangdong Liu - Founder, Chairman & Chief Executive Officer: [Foreign Language] (46:13-47:05)

Well, we also have a good balance between profitability and growth. As you have seen in the media, a lot of the categories we are in are not in a good place. Computers and IT products, the overall market is in decline and cellphone is flat, if not declining, home appliances also declining according to major brands and manufacturers. So we think under this context, this natural situation. If we want to maintain a high growth rate as before, we probably would have to pay a very high price. Richard Qiangdong Liu - Founder, Chairman & Chief Executive Officer: [Foreign Language] (47:50-48:03)

Even for apparel, we've heard from some major international brands they are also flat or in decline. Richard Qiangdong Liu - Founder, Chairman & Chief Executive Officer: [Foreign Language] (48:13-48:23)

Right, major FMCG companies as well including P&G.

Thank you. The next question comes from the line of Jialong Shi from Nomura. Please go ahead.

Hi. Good evening, management. Thanks for taking my call, and I have two questions here. For FMCG just wonder how much of your GMV is contributed by this category? And how do you think of the competition from Tmall Supermarket on FMCG? And second question – my second question is about the service revenue. Just wondering if management can provide breakdown of this category between marketing and the commission revenue? How do you think of the growth for each? Thank you.

Yeah. We don't disclose the percentage for each category. But I can tell you FMCG is the second largest general merchandise category behind apparel and shoes. And...

Yeah, and its growing very fast. And as far as competition, as I mentioned earlier, this is a category where – which associated for first-party more, its relatively standardized and logistics plays a big role in the success of this business. So we are very determine to win, because other – service from other less frequent...

All right. So for that and we just qualitatively mentioned and the trend continues that the commission revenue still contribute a biggest portion of the service revenue followed by advertising revenues. And the third category will be logistic services to the third-party merchants. And then the remaining, we have a now very small portion from the Internet Finance business, but it's a still very tiny at this point.

Thank you. The next question comes from the line of Tian Hou from T. H. Capital. Please go ahead.

Hi, Sidney. How are you? Two questions, one is related to the users; the users growth is quite significant at 73% so – in the last 12 months. I wonder how many of them are repeated users? And also on average in each quarter and what is the repeated shopping times, how many times they shop on the JD.com? And what is this number before? So I would like to have a – the view from today and a year ago in terms of how many times they shop? That's the first question. The second question related to the fact you raised the rate for the minimum ticket rate for the free shopping. So my understanding is this is not the first time you raised such a rate, ticket rate. So, I wonder what's the result from last time of such doing. And what is the result do you expect to come out for this time of the ticket rate raising? That's the two questions. Thank you.

Well, as for users, we disclose number of active users within the past rolling 12 months and we don't disclose in more detail than that in terms of how many are sort of old or existing users, how many are new. But we're happy with what we're seeing. On one hand, we want to have a lot of repeated users to show that we can retain them on our platform. On the other hand, there are still large potential in terms of new user acquisition. So, we're seeing a good balance between existing and new users. And if we look at – recently, we did look at some cohort numbers, we look – if you look at users that we acquired early years, how well we're able to retain them, how they perform over the time we're seeing a very consistent trend where if they stay with us – first of all, there's reasonably high retention rate, and if they stay with us, they would buy more merchandise of more categories from us, they would spend more with us. So, for example, if you look at 2008 cohort versus 2009, 2010, 2011, we're seeing pretty consistent trend in terms of their increasing purchase from us. And second question about free shipping policy change. So, we've been doing that – increasing the free shipping basket size by about RMB20 annually always in a spring time, we've been doing that for several years. And every time we did some analysis on how the basket size in different intervals change and we think it did help us to offset the otherwise stronger pressure, downward pressure on basket size as we sell more and more FMCG products. And on the other hand I think increasingly customers are willing to pay for service, pay for speedy and consistent and reliable shipping. And we don't disclose those numbers, but what I can tell you is shipping fee has increasingly become a meaningful part of our revenue, and that's what we like to see going forward.

Thank you for the question. Next question comes from the line of Eric Wen from Blue Lotus. Please go ahead.

Hi, Good evening. Thanks very much for taking my questions. I have a two housekeeping questions. One is your calculation of non-GAAP operating profit, you mentioned a line item called recognition of deferred revenue resulting from equity invested; can you explain the nature of this line item please? And second if you can give an update on your CapEx guidance for the year that will be very appreciated? Thanks.

Yeah. So for – on the first question, it is actually – it's related to resource-based support that we provide to equity investees. So one example would be our partnership with Bitauto where we provide the auto channel in exchange for its equity. So there is a deferral revenue stream from that partnership. And in calculating our non-GAAP profitability we actually exclude that revenue much like the same way that we exclude the amortization of BCA from – business cooperation with Tencent. So, this is consistent. So it will actually reduce by – in the non-GAAP calculation it will reduce our profit. And the second point on CapEx, we maintained our previous guidance that we will manage our CapEx within our operating cash flow from JD Mall.

Thank you. The next question comes from the line of John Choi from Daiwa Capital Markets. Please go ahead.

Thanks for taking my question. I have a couple of questions here. Can you guys elaborate a bit more on your contribution from mobile and how is the cooperation with Tencent has been going? And secondly, any updates on the progress on your flash sales across border will be appreciated? Thank you.

Right. I think we mentioned that 72% of the orders in the past quarter were placed on mobile devices and for us that really means our own app and our entry point WeChat and Mobile QQ. So, the GMV contribution and also – so the order percentage from our partnership with Tencent has been increasing. Although, we believe as Sidney alluded to in his prepared remarks, we believe there is a steep component of that curve is over. Now, it's still increasing as a percentage of our total business, but it's growing at a more steady growth rate. And it continues to contribute a lot of the new user acquisitions for us.

Thank you. The next question comes from the line of Billy Leung from Haitong International. Please go ahead.

Hi, thanks for taking my questions. Just back to the O2O business again, can we just sort of get an idea of where we are in terms of, for example, the market share. Are we seeing competitive? Where we are in terms of investment phase for the O2O business? Lastly just on strategy on this segment especially after we had stake in Dada, are we going to see more vertical acquisition or is this going to be going into a consolidation phase? Just a bit more color on the O2O business? Thank you.

Right. So we also mentioned in the past that our focus for O2O is physical goods, in particular fresh products from supermarkets and the grocery – neighborhood grocery stores. So in that market, in fact we are not only the market leader, but we are probably the only meaningful player and continue to be that way. One of our major competitors in that space actually announced that they will exit the physical e-commerce business from its O2O platform. So it's – we are clearly the market leader in this space and we are not eager to branch out to the more, kind of, crowded competitive space. Now, having said that, this business has now merged into the Dada combined entity, so, it will be up to the new management to determine the strategy going forward. As far as M&A, we are – we have been quite prudent in our recent evaluation process. I think, given the market correction in the recent months, we do expect the valuation of private deals will also come down in the next six months to nine months. So, we will be patient and not to jump on any deals unless it's extremely strategic to us.

We are now pushing the end of the conference call. I'll now turn the call over to JD.com's Ruiyu Li for closing remarks.

Thank you, operator. Once again, thank you for joining us today. Please feel free to contact us if you have any further questions. Thank you for your continued support and we look forward to talking with you in the coming months.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.