JD.com, Inc. (JD) Q3 2021 Earnings Report, Transcript and Summary

Hello, and thank you for standing by for JD.com 's Third Quarter 2021 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. Mr. Sean Zhang, Director of Investor Relations. Please go ahead, sir.

Thank you. Good evening and good morning, everyone. Welcome to our Third Quarter 2021 Earnings Conference Call. Joining us on the call today are Mr. Lei Xu, President of JD.com, and Ms. Sandy Xu, our CFO For today's call, Lei will kick off with opening remarks and Sandy will discuss the financial highlights. After that, we'll open the call to questions from analysts. Before we continue, let me refer you to our latest Safe Harbor statement in the Earnings Press Release found on our IR website, which applies to this call as we will make forward-looking statements. Also, during this call, we'll discuss certain non-GAAP financial measures. Please also refer to our earnings release, which contains a reconciliation of non-GAAP measures to the comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this call are in RMB. And now, I would like to turn the call over to our President, Mr. Lei Xu.

[Foreign Language]

[Interpreted] Hello, everyone. This is Lei Xu. Thank you for joining JD 's Third Quarter Earnings Call. Starting from this earnings call, it's great pleasure for me to take the position as President of JD.com and communicate with you in my new capacity.

[Foreign Language]

[Interpreted] As we all have observed in the second half of this year, much [Indiscernible] happened and has brought notable uncertainties and challenges to the world, to China, and to the retail industry, such as the COVID cases, the macroeconomic fluctuations, lacking of goods in a wide range of worldwide due to supply chain disruptions. The planet we're living is undergoing profound changes.

[Foreign Language]

JD continued to deliver high-quality growth this quarter. When the external environment shifts, JD is able to continue to outperform the industry with more certainties and stronger resilience. This is due to our stronger control across our supply chain and entire business processes, which allow us to react more agilely to changes and ensure stable business operation and reliable fulfillment, even in the face of extreme weathers, COVID, and other special circumstances. Therefore, we're in a unique position to create greater value for our customers, business partners, and the real economy. The core competencies in supply chain and logistic infrastructure, which we have been committed to building for 18 years, have accumulated powerful advantages for us. These advantages have greatly differentiated us, particularly in terms of value creation and business resilience from the platform-based traffic-driven Company.

[Foreign Language]

[Interpreted] First of all, our resilience is reflected by another solid set of results in Q3, despite macro and industry challenges. Our total revenues sustained healthy growth at 26% year-on-year, even on a high comp from last year. Regarding active users. In addition to the healthy growth rates in Q3, we're more pleased to see that our continuous improvement in user experience has resulted in stronger consumer mindshare and engagement. In the latest Singles Day Grand Promotion, JD maintained strong growth momentum even on the basis of last year's accelerated growth. This demonstrates the rising recognition JD gained among customers, suppliers, and brands. It is also a testament to JD's contribution in the recovery of the retail industry and the real economy. In particular, this has helped millions of online and offline micro and SME to gain fair growth opportunities and reasonable profits. Moreover, the healthy growth momentum of our core retail business combined with further enhanced supply chain capacities and operating efficiency has put us in a stronger footing to firmly execute our long-term strategy.

[Foreign Language]

And now let's take a closer look at how JD's resilience is reflected in our core retail business, as well as the execution of JD Logistics and the new business long-term strategies.

[Foreign Language] JD's Market

JD's Marketplace Ecosystem has made solid progress in this quarter. Starting from the second half of last year, we have introduced a series of smart operating tools, lowered the entry barriers for new merchants, and provided integrates of line chain solutions to further optimize merchants operating efficiency and growth path. Our efforts have been -- has generated initial success. I'd like to share a few progresses of our marketplace business made this quarter. First, growth of both total number and the types of merchants accelerated on both the year-on-year and sequential basis. In Q3, the number of third-party merchants joined JD tripled that of Q1 and Q2 combined, with apparel and home categories leading the growth. Second, merchants operating efficiency, growth path, and satisfaction level further improved. Third, the Net Promoter Score NPS of our marketplace business continued to improve, particularly the NPS of apparel and home categories were at their all-time high. Going forward, we will leverage the healthier competition and development environment of the industry to continuously enrich our marketplace ecosystem, explore new models, and formulate our differentiated strategic approaches. Our goal has always been to provide customers with better shopping experience and services, open to and encourage merchants and activity in this marketplace ecosystem.

[Foreign Language]

We made further progress in the implementation of our omnichannel strategy. In our view, the decentralization of the retail industry will continue, and omnichannel strategy will serve as our second curve for growth to break the ceiling of JD's long-term growth. The strategy is also designed to facilitate for the integration and the digital transformation of China 's offline retailer. In the industry, JD possesses the most comprehensive supply chain capabilities that underpin the omnichannel model. In particular, the 3 comprehensive supply chain models, namely the B2C centralized warehouse model, the F2C origin warehouse model, and the local retail model. At this stage, we focus on building our omnichannel capabilities, including decoupling our supply chain capabilities, digital operation, and integrated marketing solutions. We would then apply these solutions to a wide range of shopping scenarios, both online and offline, and enable millions of a break in modern merchants in a variety of industries, including FMCG, consumer electronics, and home appliances, healthcare, apparel, home goods, life services, automobiles, and many more. In Q3, GMV of our omnichannel business grew by nearly triple digits year-on-year. We reached the O2O on-demand retail business that JD joined with Dada Group, recorded an accelerated growth. I'll highly recommend and invite you to visit our innovative offline stores such as JD Mall that was launched at the end of the quarter in Xi'an. JD Super Experience stores, 7Fresh and GeneSeek community stores.

[Foreign Language]

In addition to the steady growth trajectory of our core retail business, our logistics and new businesses also made many robust growths this quarter.

[Foreign Language]

[Interpreted] On JD Logistics, I would like to highlight 2 positive trends. 1. The long-term investment JDL has made in establishing integrated supply chain logistic service capacity started to bear fruit. As it serves more external customers and expand its addressable market. For example, JDL has been developing industry-specific solutions and gaining traction with clients in FMCG fresh produce, 3Cs, and home appliances, furniture, apparel, and automobiles. Going forward, we expect external revenues of its integrated supply chain solution will be the main growth driver for JDL. 2. JDL received Social Security relief for its employees and other measures from government for its distinguished contribution in containing the COVID outbreak last year. Starting from Q3 last year, JDL invested these financial gains in network capacity expansion at large scale in lower-tier cities, as well as in front line worker recruitment, which created additional employment opportunities. The quick expansion of JDL's business and operation optimization this year have gradually mitigated the financial impact from these upfront investments in capacity. As a result, JDL's overall margin performance meaningfully improved in Q3 compared to the first half of the year.

[Foreign Language]

[Interpreted] Our Jingxi business is committed to serving mass consumers and merchants in the lower-tier markets in China, providing cost-effective products and services in support of their pursues for a better life. The industry today is still characterized by high merchandise circulation costs, low efficiency of supply chain fulfillment especially for fresh produce, while local small shopkeepers and store owners are left underserved and user experiences far from ideal. JD is better positioned to make breakthroughs on these fronts, where we have been working as -- where we have been working on our core business logic for many years. In our view, Jingxi business is in a sector that requires 5 to 10 years commitment to building up the infrastructure capabilities for short chain logistics and user's mind share. It is not the time to prioritize scale expansion at the current stage, instead, GNC business will focus on building the core capabilities at the city level, exploring business models that, create real value to local stakeholders, while ensuring that we have a sound compliance-based. Since July, GNC has proactively shifted focus on ten selected provinces, where we are pleased to see improving supply chain efficiency and cost of structure in Q3. In particular, fulfillment cost per order has lowered by nearly 50%, compared to that in the early stage of the business and user experience have largely improved, as well. More importantly, thanks to our focused effort and investment in infrastructure, revenues generated by local group leaders and mom-and-pop stores on GeneSeek has been clearly climbing up.

[Foreign Language]

I hope that my sharing today has showed that, JD is a new type of real-economy based enterprise that, has the trace of both real economy and digital technology capabilities. Such type of enterprises will play an even greater role in China 's economic development in the new era. From a long-term perspective, JD is strategically positioned to generate compelling growth opportunities, despite the current complex and evolving micro-environment. We remain fully confident in the future, as we have been relentlessly working on the most difficult -- the hardest yet the most valuable thing for all our shareholders. Thanks to our core capabilities and unique business model that we have built over years. That said, we still have a lot to do, and thank you all for your continuous trust and support for us along the way. This concludes my remarks today. Now, I'd like to give the floor to our CFO, Sandy, for more details.

Thank you, [Indiscernible]. Hello, everyone. We delivered a set of solid operating and financial results while making steady progress on many of our strategic priorities in Q3. This demonstrates our commitment to pursuing sustainable quality growth. We are encouraged by the overall strength and resilience of our unique business model, which continues to put us on a strong footing to navigate the unprecedented complexities in the macro environment. Our total net revenues reached RMB 290 billion in Q3, representing 26% year-on-year growth and 27% 2-year kickoff, maintaining a strong growth momentum Even our high comp from last year. Our growth continued to outperform the industry, and we further gained market share in the quarter. Our top-line growth was backed by sustained improvement in our user base and user engagement. We are very pleased to see a 25% year-on-year growth of our LTM active user base, reaching a total of RMB 552 million in Q3 with the addition of 111 million users from a year-ago. We attach greater importance on improving our user experience and user engagement in Q3. Our mobile DAU accelerating to over 30% year-on-year in September, which demonstrates our expanded consumer mindshare. In addition to gaining mindshare, we are also winning users wallet share. Average order frequency for all our users increased to 23% year-on-year driven by both our new and existing users, while total order volumes sustained a year-on-year growth of about 40% in Q3. Within JD Retail, the number of categories users purchased expanded to a historical high even in the low season. In particular, users who have stayed with JD for more than a year tend to double the number of categories they purchase. This core JD users love the new products and categories that we introduced and are increasingly spending more on fresh produce, cosmetics, fashion, and the luxury goods. The improved user engagement is again driven by our continued focus on customers experience. Our NPS score has been on a steady growth trajectory, hitting all-time high this quarter as we continue to enrich our product offering and improve shopping experience, after-sales, and fulfillment services through technology. Category-wise, we would like to highlight that the growth of our net service revenues was over 43% year-on-year, compared to 23% growth of net product revenues. Net service revenues contributed a historical high of 15% to our net total revenue. Marketplace and advertising revenues continued a high growth of 35% year-on-year. A notable acceleration from 24% that we achieved in the same period last year. This is a strong testament of our continuous efforts to improve our Marketplace ecosystem which drove an influx and higher engagement with third-party merchants across almost all categories. We expect our marketplace business to continue to gain momentum in the coming quarters. Logistics and other services, revenues grew by 53% year-on-year, mainly driven by the hyper-growth of JD Logistics external revenue, which I will discuss more shortly. Now, let's look at our segment performance. First, our core business JD Retail's revenues reached RMB198 billion in Q3, with 23% year-on-year growth and a 2-year CAGR of 25%. The power of JD's supply chain capability was on a full display against the global supply chain costs change. Our electronics and home appliance revenues maintained resilient growth of 19% year-on-year, significantly outpacing the industry's low-single digit growth in the same quarter. We are also delighted to see GMB growth of our third-party sales in these categories accelerated to 45% year-on-year, significantly outpacing that of our 1P business. General merchandise revenues grew 29% year-on-year, and 32% two-year cater in Q3. This was mainly driven by the 35% two-year K-Cup of our supermarket order volume growth in the quarter. I want to share a few observations of our supermarket categories. First, supermarket categories were again the largest contributor of our new users in this quarter. Second, the average number of orders per user for supermarket categories continued to increase and reached its all-time highest level. Third, users are purchasing mall high-frequency supermarket products on JD, including food and beverage, fresh produce, and baby and maternity products. All these have helped drive our daily user engagement meaningfully. Moving on to JD Retail 's margin, it's fulfilled gross margin was similar to that of Q3 last year and operating margin was 4.0%, which retained largely stable compared to its all-time high in Q3 last year. Again, we are successfully shifting our category mix towards high frequency items that can better engage customers, and experimenting new business strategies such as, omnichannel and Shop Now without compromising our margin trajectory. We remain confident in healthy category expansion and long-term margin improvement of our core retail business. Our strategic investments also made steady progress in Q3. JD Logistics, JDL, maintained its growth trajectory in the quarter with revenues growing 43% year-on-year to RMB 25.7 billion, mainly driven by the growth in the number of external integrated supply chain logistics customers and their average revenue per customer. External revenues continued to account for over 50% of JDL's total revenues, while reaching a historic high in this quarter. JD Logistics operating loss ratio was 2.8%, on track to achieve a better margin profile compared to that in the first half of 2021, as JDL continues to ramp up utilization and improve operating efficiency. The number of warehouses operated and managed by JDL has steadily expanded to approximately 1300, with an aggregated gross floor area of over 23 million square meters. Our New Businesses segment revenues grew 33% year-on-year to RMB5.7 billion in Q3. JD property recorded a gain from sales of logistics facilities of RMB 579 million n in the quarter. Growth of our international business continued to accelerate in Q3. For our [Indiscernible] business, we want to highlight that during the quarter is achieved notable improvement in both users experience and operating efficiency, which are our strategic priorities over scale. As we started to proactively focus our [Indiscernible] business in selected markets. We are able to better allocate resources to improve our supply chain for fresh produce and short-chain logistics infrastructure capacity empowers the local merchants and achieves better [Indiscernible]. On the back of our 1P supply chain capacity, we also helped local merchants and farmers to grow quickly on our Jingxi platform. As a result of these strategic shifts, the operating loss of new businesses was RMB 2.1 billion as compared to RMB 1.2 billion in the same period last year. We remain fully committed to empowering local SMEs, including mom-and-pop stores, by providing supply chain support and creating diverse revenue streams for them. While we expect the operating loss ratio to GMB. To gradually narrow down as we continue to optimize the operating efficiency. Moving to the consolidated bottom line, our non-GAAP net income attributable to ordinary shareholders was $5 billion RMB with non-GAAP net margin of 2.3% compared to 3.2% in the same period last year. The decrease is mainly attributable to normalized marketing expenses as increased investments an increase in the investments in logistics and new business segments for our long-term strategic positioning. Notably, since 2012, we have maintained inventory turnover days, consistently below 40 days. Despite the significant increase in the number of SKU s under our management. By Q3 this year, we further shortened our inventory turnover days by 4 days to 30 days in the last 12 months. Thanks to our continuously improving supply chain managing capacity. We then passed on this efficiency gains to further increase our support for our business partners, as we will -- as we also shortened our LTM accounts payable days by 4 days to 46 days. This is another example how JD is a unique business model and relentless focus on building capacity can really create value for all our business partners in the real economy. Our LTM free cash flow this quarter came in at 28.5 billion RMB, which remains largely stable year-on-year. As of September 30th, 2021, cash, cash equivalents, restricted cash, and short-term investments added up to a total of RMB 196 billion, up from RMB 178 billion at the end of Q2, or RMB $127 billion a year ago. In summary, JD shows remarkable resilience again in face of macro and supply chain headwinds, with a solid top line growth and steady profitability in our core business. This showcases our resolute commitment and effective implementation of our strategies, which we are very proud of. And we want to say our greatest appreciation to our hundreds of thousands of employees. Finally, I want to reiterate that JD's sustainable growth will continue in the new era, where our 18 years of trailblazing efforts in building our core competence and our right way to success business philosophy will continue to be rewarded. With that, let's now move to the Q&A. Thank you.

Operator, we can open the floor for Q&A now. Thank you.

Thank you. The question-and-answer session of this conference will start in a moment. In order to be fair to all the clients, callers who wish to ask questions, we will take one question at a time from each caller. If you have more questions, please request you to join the question queue again after your first question has been addressed. [Operator Instructions] Thank you. Your first question comes from the line of Ronald Keung from Goldman Sachs. Please go ahead.

Thank you. [Foreign Language]

[Interpreted] Thank you, management. So, my question is on JD Retail margins. We've seen that the margins were strong in the third quarter despite strong growth in supermarkets. Just wondering here our strategies in private labels, omnichannel, and a fast-growing marketplace, and how would that couple with the category mix that could drive the overall blended margins. Are we on track to pull out, reiterating our long-term margin target of mid-to-high single digit? Thank you.

Thanks, Jonah (ph). Let me take this question. Yes, your understanding is correct. As we are experimenting new, various new business models, including omnichannel, including the shop now business model. Overall, our financial model may be affected a little bit. For example, for omnichannel business, we may leverage the warehouse and inventory of offline business partners. We could -- we would share the gross profits with them. But at the same time, we also save the fulfillment costs. So, the fulfilled gross margin remains stable while you may see a decline in the gross margin because of the growth of this new business model. And then our gross margin will also be affected by the category mix shift as we have been discussing in the past a couple of years. However, what we have in this quarter is because of the higher growth of 3P business, that kind of offset the impact from the category mix shift towards higher frequency revenue contribution from the supermarket products, which has relatively lower for fuel gross margin. So overall for Q3, if you look at the fulfilled gross margin for JD Retail, it was relatively stable compared to same quarter last year. So, looking ahead, I would say our expectation on the margin profile or margin trajectory remains unchanged. In the short-term, we May be facing the drag from the category mix shift, as well as the change of the business model. But as JD has been continuously building our capabilities in the supply chain through an improved operating efficiency of inventory management through technology. So, we can gradually improve the margins, I would say, in the long term steadily. And also, as I mentioned before, for many of our categories, our current procurement price is still higher compared to the offline channels. As we continue to grow in scale, we can gradually realize the scale benefit as well. In short, our long-term margin trajectory remains unchanged for JD Retail.

Thank you. Your next question comes from the line of Eddie Leung from Bank of America. Please go ahead.

[Foreign Language]. Thanks very much for taking my question. I'm asking on behalf of Eddie. Wondering the potential impact from the macro factor, such as the lockdown, of the weakness of real estate. And impact to our category growth trends. Thank you.

[Foreign Language]

This is Xu Lei. Let me take your question.

[Foreign Language]

And from the macro level, we do see quite a lot of challenges especially in the second half of the year, especially relatively weak consumption demands and the tight supply chain s from the upstream, and also the rising price of the raw materials coupled with the COVID cases and extreme weathers in Sichuan. These all have posed a lot of challenges for the retail industries, and certain product categories were impacted by the shortage of chips and other component parts. We anticipate, we oversee these -- our shortage of supplies of the chips and so on. We'll continue to last into the first half of next year. And for JD.com we have always been holding our strength with our core capacities in supply chain, which have helped us to deliver more stable performance in this time of uncertainty.

[Indiscernible]

[Interpreted] And on the point of a weaker consumption demand, I want to highlight here that for the main consumption group, the customers group with the JD, they feature more like the urban residents, and they shop for their families, they have more plans, and have more certain shopping plans when they're shopping on JD's platforms. So, this is the main captures of our consumer base, and they are taking the majority of the proportion of our platforms. So, in such way, we are getting smaller or limited impact of this overall trend. But however, under these circumstances, I also want to point out that for those random shopping and endpoint shopping, for some companies or platforms [Indiscernible] featuring more of this kind of shopping will get a better hit -- will get a larger -- greater hit.

[Indiscernible]

And also, facing these challenges of the shortage of supply since the rise of supplies from the upstream, and we can see that in this Q4 and next Q1, the price rise will be transmitted or passed onto the consumer side. As I emphasize that, JD will focus on our core strength in supply chain, and these will give us a better position to tighten our cooperation with our partners. And our merchant partners would like to close with us more closely and to use our strengths to help them to improve their cost and efficiencies. And we will also take as much effort as possible to help them and help the customers to offset the fluctuation in the prices.

[Foreign Language]

And on the impact of the real estate for the home appliances categories. Actually, this is not impact or may happen now, as you see on the news, if you observe the overall, the one-year performance you can see that the performance of the home appliances categories on JD platform is outgrowing the industry average the whole year.

[Foreign Language]

And this can do for several razors: first is our B2C models, our main site, and we have been introducing more -- emerging on a new brand, new product and high-end product, the home-end -- a home appliances products on our platform and to upgrade our product mix and at the same time that consumers are looking to buy more high-quality and better-quality products. At the same time this is coupled with our premium services, including some worry-free change of the product works on trading. All this has driven up a sales and performance of this category.

[Indiscernible]

And secondly, actually a few years ago, we already started to deploy our lower-tier markets. So, they have also very some fruits formed the offline market. The offline market sales of the home appliances as gaining an increasing share of our overall, our categories and helping us to gain more new users and new markets.

[Foreign Language]

And thirdly, we also paid most attention to work closely with our partners on the production of customer to manufactured products and other differentiated products, and all the 3 points me to say that this home appliances industry has been quite a saturated market, and under different circumstances, our special efforts and our differentiated strength in these above 3 points have helped us to achieve continued growth in the home and home appliance industry -- home appliance category. Thank you.

Thank you. [Foreign Language]

Thank you. Your next question comes from the line of Thomas Chong from Jefferies. Please go ahead.

[Foreign Language] Thanks management for taking my questions and congratulations on a very strong set of results. Given that we have somewhere about in our Doubled 11 campaign. Just want to get a sense from the management, what have we learned from Doubled 11 in particular, on the behavior of the merchants, as well as the consumer behavior for this year? And separately, because of the strong Doubled 11, how should we think about our JD Retail performance in the fourth quarter? Any qualitative color would be grateful. Thank you.

[Foreign Language]

[Interpreted] This is Xu Lei. Let me share something about the Singles Day Grand Promotions. And we have already released our performance and results and sales details, so I will not elaborate on this part.

[Foreign Language] [Indiscernible]

And the one major change we have made in this year's Singles Day is that we kick out all the different activities at 8:00 PM, 4 hours earlier and this decision was actually made during our June 18 shopping festival period, so it gave us 3 to 4 months’ time for preparation. We have done a lot of communication, and the preparation internally and externally. So, with this big campaign, it's very well received by all parties, from consumers, brand partners and logistic partners is at given a more convenient for other consumers to shop, as well as our partners to prepare and to reduce their cost, and they can operate at more ease.

[Foreign Language]

And secondly, during desert singles day, we have been making big progress in our marketplace ecosystem as well as omnichannel deployment. And for this, we have also made a lot of preparations before and -- which has been very well received and involved a lot of our merchant’s participation to overload the performance of our marketplace merchants are surprisingly well. And even in those categories, batch, we do not traditionally have the Vantage, will never multi-store categories they also get very good results.

[Foreign Language]

[Interpreted] Of course, this is only one-time campaign, which already proved -- that validated our model and innovation and efforts we have made. And in the following period there's still a lot for -- work for us to do.

Okay. Let me add on the outlook for Q4. So, there are a few factors I have left to highlight for JD Retail. One is that the user growth is still -- is the growth driver for JD Retail. We expect JD Retail continue to deliver quality growth in terms of total user base, user engagement, and [Indiscernible] as they continue to reinforce the consumers mindshare. Second, the supply chain disruptions for certain products remain unchanged and existing as we just discussed. So, this will affect the growth of our 1P business to a certain extent. In particular, the mobile phones and electronics categories. However, as Sean Zhang mentioned, based on the strengths of our supply chain capacity, we expect that we can create even more value and certainties for our business partners in this changing environment, and continue to outpace the industry growth for these categories. And then third, with the implementation of 3P ecosystem and omnichannel strategy since the beginning of this year, the 3P business is growing well on our platform. The 3P merchants served as a great supplement of our 1P business for the categories that are facing supply chain disruptions. Overall, we expect that the growth of 3P will be faster than 1P in Q4, similar to what you have seen in Q3. And fourth, we see that the seasonality is getting stronger this year similar to the first half year. User’s mind share for big promotions is also getting stronger. They're better educated. So, there was pent-up demand from October and consumption demand from December being released early during the Double 11 shopping festival. So overall we expect retail to largely maintain the growth momentum for Q3.

Thank you.

Thank you. Your next question comes from the line of Alicia Yap from Citigroup, please go ahead.

Hi. Thank you. Good evening, management. Thanks for taking my questions. Congratulations on the strong result. I have a pretty simple question. First is regarding your consumer spending cohort. For those that newly added last 2 years, what are the typical spending pattern as compared to the older user, who were already on JD platform like 10 years ago. So, if you can give us some color, it would be helpful? [Foreign Language]

[Foreign Language] [Indiscernible] [Foreign Language]

Let me share with you some observations on the new users on this platform. Actually, since last year, we have seen some very remarkable features, and in the past, we believed that actually most of people who shop online they're already online. However, there are 2 groups of people categorized by ages are rising rapidly on the internet. Besides, as I mentioned before, for -- from the lower-tier markets on the regional perspective, over 70% of users come from -- new users are from larger markets. And beyond them, there are 2 groups -- age groups of people. One is the consumers aged 45 years or above. They are going online later than those people from 25 to 30 years -- to 35 years old. However, when they start shopping online, they have been demonstrating a very strong purchasing power thanks to the education of all kinds of e-commerce platforms they got access to before. And after a period of time when they are customized to the online shopping habits, they find JD and they find shopping with JD is more at ease and gives them more guarantees, so their shopping power start to manifest on JD platform. And the second group is the Gen Z, people aged between 18 to 25 years old. They have demonstrated also an increasing consumption demand and purchasing power on our platform beyond our imaginations. So, for those newcomer shoppers on our platform, our value will need some time to catch on [Indiscernible] for four to five times, it will start to accelerate their online shopping activities in terms of their shopping frequencies based on money they spend on these platforms. So, this is a remarkable trend we have seen very different from 4, 5 years ago.

This is Sandy, I got one point, I think 10 years ago, most users, they came to our platform to make their first purchase on electronic products and mainly computers or mobile phones. But as I discussed it just now, in Q3, supermarket categories contributed the newest users to our platform. We can see that the consumers men share supermarket categories is getting stronger and stronger.

Okay. Thank you, Sandy. Thank you, Sean Zhang.

Thank you. Your next question comes from the line of Robin Zhu from Bernstein. Please go ahead.

[Indiscernible] [Foreign Language]. So, my question is, JD this year likely benefited from both the poor performance of Suning and share gains from peer platforms. I just want management to share some thoughts on how durable these tailwinds are. When do these tailwinds become sort of annualized and become less apparent. Thank you.

[Foreign Language]

And to share a bit about our electronic products. This includes IT, digital products, telecom products and home appliances, which are the traditionally advantageous categories on JD's platform. And on these categories, we are not merely a retailer to sell these products, actually we have gone a long way to collaborate with the partners on their integrated supply chain, their R&D and see to end products production, especially during these special time as we thinking uncertainties of the global supply chain challenges. These help us to perform better together with our partners than overall market performance.

[Foreign Language]

[Interpreted] And for these categories, maybe at specific certain points we are facing competitions from external. But more importantly, we focus on the development of this industry, we focus on the consumers actual needs, and try to satisfy them. So, this is what we have been oriented [Indiscernible] our staff better to meet the demands of our customers and partners.

[Foreign Language]

apparel and home categories, it's applied to different star rates and it's [Indiscernible] over traditional advantages of categories and their development in the past is not as we expected, but there's are huge potential to develop. And with the banner, people went from 2 in the past 2 years, we have been stepping up of efforts including the teams and the systems and the ecosystems in these categories. And for this year, we do have a stellar performance in the single-state grand promotion and we are setting up and accelerate our investments and expectations in the cap rate.

Thank you.

Thank you. We're now approaching the end of the conference call; I will now turn the call over to JD.com 's Sean Zhang for closing remarks.

Thank you for joining our call today. We look forward to talking with you again next quarter. Thank you.

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