JD.com, Inc. (JD) Q4 2023 Earnings Report, Transcript and Summary

Hello, and thank you for standing by for JD.com's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Thank you. Good day, everyone, and welcome to JD.com Q4 and Full Year 2023 Earnings Conference Call. For today's call, CEO of JD.com, Ms. Sandy Xu will share her opening remarks; and our CFO, Mr. Ian Shan will discuss the financial results. Then [indiscernible] the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements and please refer to our latest safe harbor statement in the earnings press release on the IR website, which applies to this call. We will discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Also, please note, all figures mentioned in this call are in RMB, unless otherwise stated. Now let me turn the call over to our CEO, Sandy.

Thanks, Sean. Hello, everyone, and thanks for joining us today to discuss our Q4 and full year 2023 results. In Q4, we delivered healthy top line and bottom line growth and made solid progress on operations, finishing off a productive 2023. In the past year, we stayed focused on constantly improving user experience, lowering costs and increasing efficiency amidst evolving opportunities and challenges. Guided by our business philosophy, we carried out a set of proactive move to drive more sustainable growth for the long term, mainly in the areas of user experience improvement, [indiscernible] and platform ecosystem strategy. Despite some short-term impact in 2023, our strategic focus has successfully steered key operating metrics in a positive direction. 2024 will be a year of execution. Our team will take firm and steady steps to execute our existing strategies and push forward our two priorities for the new year, namely user experience improvement and market share expansion. We are encouraged by what we've seen and are confident that we are on the right path. Let me share some details. First, user engagement. In Q4, we saw the number of costly active customers accelerate at level. If looking at [indiscernible] alone, the growth was at an even faster pace in Q4, particularly in new users. We are excited to see our user momentum pickup in Q1. User behavior also trended better. For example, user shopping frequency on JD continues to rise both in Q4 and the full year. This increase was particularly driven by the growth of our loyal existing users and plus members. This means if users stay longer with us, they tend to shop more frequently with us, a validation of our user focus on user experience and strengthening [indiscernible] share. In addition, the set of growth also translated to a robust order volume growth, hitting double-digit year-on-year in Q4 and accelerating for three consecutive quarters. In terms of JD Plus, we saw another quarter of robust growth of its member base and GMV contributed by Plus members grew faster than our total GMV in Q4. The promising progress in user engagement is a result of our stepped-up efforts in improving user experience, low price offerings and implementing platform ecosystem strategy. Looking at our efforts in improving user experience, in addition to our previously launched popular initiative, such as free shipping, instant refunds and [indiscernible] for best price guarantee, we also recently launched new customer services, such as free doorstep pickup for returns, cash back for delayed shipping. As a result, our Net Promoter Score, the NPS, for both our 1P and 3P business, have improved substantially in Q4. As we are generating great momentum with our users, it's important to continue to build on these initiatives, which we believe will help to propel growth in 2024. Also, as an important part of our holistic approach to improving our user experience, we will continue to step up efforts including our price competitiveness and platform ecosystem. For low price offerings, from day 1, we've been pushing forward our price competitiveness for branded products and a broader selection of value for many products. During the past year, we have further enhanced our ability to offer great value in branded products and expanded our selection for white label products. Our price competitiveness has notably improved according to our customer survey and in-house price comparison. We are [indiscernible] to see our increased both sequentially and year-on-year in Q4, a proof that user experience [indiscernible] for JV's low price offerings is picking up. We also note other key metrics are trending well. The number of our users from low share markets grew faster in Q4 compared to previous quarters and growth of order volume and ship shopping frequency generated by lower market leaders reached double digits year-on-year, outpacing that of our total users. We also note growth of low ticket-sized orders, further and far exceeded the growth of our total order volume in Q4. I want to highlight again that our price competitiveness is not supported by subsidies. The backlog for JD's business model is always the supply chain capabilities, which enable us to generate scale efficiency and lower product costs so that we can provide better value to users while maintaining healthy financial performance. Shifting to platform ecosystem strategy. The number of active 3P merchants on our platform delivered another stellar growth both in Q4 and on a full year basis as the team did a great job onboarding and supporting them. Meanwhile, 3P users and 3P order volumes both saw accelerated growth year-on-year in Q4 and in the full year of 2023. That said, we are still at an early stage of building our platform ecosystem and we are now prioritizing monetization of our young and rapid growing ecosystem at this stage. Therefore, we are not taken by surprise when we see revenue benefited from our 3P marketplace is lagging the growth of our 3P merchant base and orders in Q4, which was also partially driven by one-off factors. Ian will elaborate on this later. We believe this is only temporary. In fact, [indiscernible] quarter-to-date, we've seen marketplace and marketing revenues bouncing back to a stronger momentum. As shared before, our platform ecosystem encourages [indiscernible] to develop in a complementary way. Our 1P business import continues to make solid progress, thanks to our core capabilities in supply chain. In particular, users responded well to our nonstop services during the Chinese New Year holiday, our offering we've been committed for 12 consecutive years. Also, enabled by our supply chain strength, our home appliance and electronics category continued to gain market share throughout 2023 despite industry headwinds. Going forward, we will further leverage our supply chain capabilities to build up better service capabilities, penetrate into lower-tier and offline market and strengthen our cooperation with suppliers, which we believe will lead to a continuous expansion in market share in 2024. Moreover, we saw our supermarket category trend to the right direction as dedicated itself to optimizing the supply chain and giving a better product mix and fulfillment network. We believe there will be more upside for supermarkets in 2024. Finally, I want to highlight our commitment to shareholder returns. As announced in our earnings press release, our Board has approved our 2024 annual cash dividend payment, the aggregate amount of USD 1.2 billion, a meaningful increase compared to 2023. The Board has also approved a new share repurchase program of USD 3 billion over the next 36 months. We are committed to creating more value for our shareholders. To conclude, 2023 was a year of strategically focused and organizational upgrades, which have set the foundation for JD. 2024 will be a year of execution along the strategic road map that is in place. We will continue to build upon the good foundation in user experience, more price offerings and platform ecosystem strategy and will further build up our total capabilities in supply chain. With the market share and user experience at top of mind, we are confident in making steady progress this year. With that, I will turn it over to Ian for our financial highlights. Thank you.

Thank you, Sandy, and hello, everyone. We recorded a set of healthy top and bottom line results in Q4, ahead of our expectations as we focus on experience improvements, price competitiveness and platform ecosystem in 2023. We are also committed to sharing our success with our shareholders. The Board has approved our annual cash dividend of USD 1.2 billion for the fiscal year of 2023, representing USD 0.38 per ordinary share or USD 0.76 per ADS. Our dividend per ADS increased by 23% compared to the annual dividend paid in 2023. In addition, with that up share repurchases in Q4 and bought back 15 million ordinary shares for a total of approximately USD 203 million. As the existing program will expand soon, the Board has approved a new share repurchase program of USD 3 billion over the next 36 months. This demonstrated our dedication to returning value to our shareholders. Now let me turn to our Q4 and full year 2023 financial performance. Our net revenues grew by 4% year-on-year to RMB 306 billion in Q4 and RMB 1.1 trillion for full year 2023, as we navigated a mix of macro recovery, seasonality factors and our strategic refocus. Breaking down the revenue mix, product revenues were up 4% year-on-year in Q4 and 1% on a full year basis. By category, electronics and home appliances revenues were up 6% and 4% year-on-year in Q4 and full year, respectively, once again outpacing industry group. We have seen solid market share expansion in these categories across every quarter of 2023 and continue to feel confident in this momentum going into 2024. General merchandise revenue saw a turnaround to positive year-on-year growth in Q4 despite the impact of scaling back of [indiscernible] International business, the high base in Q4 2022 due to stockpiling and the seasonality impact of Chinese New Year shopping festival. On a full year basis, such factors led to a 5% decline in general merchandise revenues. Taking a closer look, categories such as home goods and decoration, sports and apparel recorded double-digit year-on-year growth in Q4. As we further enriched our product and service offerings, these categories also drove higher user traffic, conversion rates and user stickiness in the quarter. As for our supermarket category, we believe it has bottomed out and its growth trend will continue to strengthen in 2024, driven by its increasing order volume and user shopping frequency. Service revenues grew by 3% year-on-year in Q4 and 18% on a full year basis, primarily driven by the growth of logistics and other service revenues, which were up 8% and 30% year-on-year for the quarter and full year, respectively. Marketplace and marketing revenues were down 4% year-on-year in Q4 and up 3% on a full year basis. The soft performance in the quarter was primarily due to the decline in commission revenues as a result of our enhanced support for fast-growing new merchants. While advertising revenues also experienced one-off headwinds in Q4, mainly due to the seasonality impact of Chinese New Year Shopping Festival, we believe those were short-term fluctuations and our platform is progressing well on our current strategy with a fast expanding base of active 3P merchants and accelerated growth in both 3P users and 3P order volumes. In the Q1 quarter-to-date, we saw that marketplace and marketing revenues have resumed growth. Now let's turn to our segment performance. JD Retail revenues increased by 3% year-on-year in Q4 and 2% on a full year basis. Our Retail segment's gross margin continued to increase, both in Q4 and full year of 2023. This was driven by our improved supply chain capabilities, which enable us to offer more value to our users while recording healthy margin expansion due to increased operating efficiency. Our strategic refocus also brought tailwinds to gross margin throughout 2023. On a full year basis, Retail fulfilled gross margin was up 39 bps. Though in Q4, Retail fulfilled gross margin was down slightly by 7 bps year-on-year due to extended free shipping offerings since late Q3. Retail segment's non-GAAP operating margin came in at 2.6% in Q4, softer than a year ago, but in line with our expectations as we invest in user experience and expanding user base. On a full year basis, Retail's non-GAAP operating margin continued to improve to a record level of 3.8%. Beyond our expectations, we are confident that our continued focus on user experience will lead to a better market position and expanded market share in 2024 and eventually present more headroom for property expansion. JD Logistics recorded a 10% revenue growth year-on-year in Q4 and 21% on a full year basis. External revenues accounted for 70% of total revenues in both Q4 and full year. In terms of profitability, JDL's non-GAAP operating margin picked up meaningfully with a 73 bps expansion year-on-year to 2.8% in Q4 and 22 bps expansion to 0.6% on a full year basis. Before moving on to the next section, please note that following Dada's announcement in January, we are reporting the aggregated results of Dada and new business on the other segment this time. We've adjusted the results of this segment in Q4 to reflect Dada's impact. Revenues of the segment was down 9% and 11% year-on-year in Q4 and full year, respectively, primarily due to Dada's impact and the scaling back of and international business. Excluding the disposal gain and the impairment loss of long-lived assets of JD property, non-GAAP operating loss of the segment was RMB 474 million in Q4 and RMB 1.5 billion in full year, both representing substantial narrow down on a year-on-year basis as a result of the scaling back of Jingxi International business. Moving to the consolidated bottom line. In Q4, we recorded RMB 8.4 billion non-GAAP net income, attributable to ordinary shareholders with non-GAAP net margin expanding 16 bps to 2.7%. On a full year basis, our non-GAAP net income attributable to ordinary shareholders was RMB 35.2 billion, and non-GAAP net margin was up 55 bps year-on-year to an all-time record of 3.2%. We continue to generate healthy cash flow. Our last 12 months free cash flow as of the end of Q4 was RMB 41 billion, an increase of 14% from a year ago. This was driven by our improved profitability and further optimize cash conversion cycle. By the end of Q4, our cash and cash equivalents, restricted cash and short-term investments added up to a total of RMB 198 billion. To conclude, we have taken proactive actions and delivered a set of solid financial and operating results in Q4 and full year of 2023 amid evolving external environment and our business refocus. Going into 2024, we are well set to continue to execute the strategies we have in place. We feel confident in making further progress towards our operating priorities of user experience improvement and market share expansion and we're committed to sharing our success with our shareholders. With that, I will turn it over to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, you're welcome to ask questions in Chinese and English and our management will answer your questions in the language you asked. We'll provide English translation when necessary for convenience purpose only. In the case of any discrepancy, please refer to our management statement in the original language. Okay. Operator, we can open the call for Q&A session.

[Operator Instructions]. Your first question comes from Ronald Keung with Goldman Sachs.

Thank you, Sandy, Ian and Sean. I have two questions. One is that JD and other e-commerce companies has focused on defending market share, reigniting growth as kind of key focuses in this increasingly zero-sum e-commerce market. So how will management drive the balance between growth and absolute profit or growing profits in the year ahead? And with that, with the profits and kind of cash flow generation, then we've seen the regular dividend of in 2023. We've seen the free cash flow for the business was nearly close to USD 6 billion in 2023. So do we see room to further increase total shareholder return, given the strong free cash flow of the business in the years ahead? Thank you.

Thank you, Ronald. I will answer your first question and Ian second question. So the questions on the growth and versus profits has always been a good question. And in 2023, while will be focusing on the health of our business, we made many efforts and took actions to further enhance our user experience, low-price mindshare and platform ecosystem. So for example, last year, we stepped up our efforts user shopping experience and services by introducing or expanding a series of differentiated shopping and customer services, such as our price guarantee service, a free doorstep pickup service for returns and exchanges, from our 1P to our 3P businesses and also a refund without return services and more. We've seen an accelerated growth in quarterly shopping users in Q4, especially in the new number of new users and we expect the growth trend to continue in Q1. At the same time, any major drop of our profits, which also reflects our efforts to maintain a balance between growth and revenues and profits. And also, we continue to optimize procurement costs and expand our range of low-cost products. In addition, we have introduced a series of measures, including the CNY 10 billion discount program, the [indiscernible] items with free shipping channels and a lower order value threshold for free shipping. Our goal is to provide high-quality products at affordable prices to increase user purchase frequency. We believe that continuous improvement of user experience will promote healthy user growth and purchase frequency, which in turn will help us to increase business scale and market share. So from a platform ecosystem perspective, we have seen more and more new merchants are joining JD's marketplace and the number of active merchants whose business growing our platform is increasing at an accelerated rate. Their participation has greatly improved the diversity of product offerings on the platform, leading to accelerated growth of -- in both the number of users and orders on our marketplace. So in 2024, we will prioritize improving user experience, price competitiveness and platform ecosystem. We will make [indiscernible] efforts to execute on these key areas with confidence that we will continue to gain market share. So here, I want to reemphasize that our business model decides that business efficiency comes from enhancing business scale and technological development. So with these enhancements, we received increased revenue that we can invest in enhancing user experience. This, in turn, leads to increased user engagement, shopping frequency and user growth, ultimately resulting in business scale growth. So this creates a sustainable and virtuous cycle, although it may not have a significant impact on profits. So this is the we are constantly communicate with our and this is the logic of our business model. So the profits are a natural result of our expanding market position and value creation for our users. So during these quarters cycle, our management team will strive to maintain a balance and a good pace between investments and growth while creating good returns for our shareholders. Thank you.

This is Ian. Thank you, Ronald, for asking about our shareholder returns. So I'd like to take this opportunity to update investors on our current Firstly, JD focus is on the long-term healthy development of our business, aiming for healthy scale expansion and stable growth in profits and cash flow. On top of this, we're committed to long-term shareholder return and will continue to give back to our shareholders in various ways. Our balance sheet is strong and we believe that maintaining a good return to shareholders and continuous investment in our business are not contradictory. We have just announced an annual cash dividend of USD 1.2 billion. This is thanks to last year's rapid earnings growth, which yielded solid return for our shareholders. So over the past three years, we have returned a total of USD 4.2 billion in dividend and we plan to continue to pay annual dividends going forward, sharing the company's value creation with our shareholders. Also, our Board of Directors have approved a new repurchase program to buy back to USD 3 billion worth of company shares over the next three years. We will firmly execute the buyback and communicate with investors regularly. We believe that investors will recognize the company's tangible efforts to share its value with shareholders. Thank you.

Your next question comes from Kenneth Fong with UBS.

My first question is on the platform ecosystem. We have been investing to build our 3P ecosystem. Judging from the total and active merchants, we have received very solid results. Can management share with us under what circumstances we will start to accelerate the monetization of the 3P merchants? And also for 2024, any change and update for our 3P strategy? And my second question is for overseas. We see a lot of e-commerce platform investing overseas. Can management share with us your thoughts on our overseas expansion?

Thank you, Kenny. To your first question about platform ecosystem. As I have previously mentioned, JD's platform ecosystem includes both our self-operated and third-party models. The tools are complementary to other and jointly contribute to create good user experience. Our Net Promoter Score has improved substantially in Q4. For both 1P and 3P, we have been investing in platform ecosystem as a long-term strategic direction, so there is still a lot of room for improvement in our 3P business development. Our first step is to increase the number of merchants and their product offerings. We need to attract more merchants and help them succeed on the platform in order to enrich the platform's product offerings for our shoppers and foster positive business competition across the platform. Over the past year, we have increased our efforts to recruit merchants, simplified their onboarding processes and provided more support and fee reductions for small and medium sized merchants. To date, the number of effective merchants on our platform is close to 1 million, reaching the goals we set for ourselves at the beginning of last year. The number of active merchants have accelerated, more and more new merchants are finding effective ways to do business on our platform and continue to grow. At the same time, we've received positive feedback from users. The number of shopping users and order volume on 3P platform continues to grow with users NPS for 3P rising at the same time. Both our 3P and overall GMV have gradually entered a trajectory of healthy growth. Building JD's unique platform ecosystem is a long-term project, we're still in the early stages. Our focus is not on a fast monetization of 3P in the short term. Instead, our priority in 2024 will be to attract more merchants, especially the small and medium-sized merchants in the industrial . To enrich our product offering, and at the same time, we will continue to foster merchant growth, the platform's governance and operating . We will also further optimize the traffic distribution mechanism to create a clear growth path and their business environment for merchants. And to provide better user experience on 3P platform, launching a prosperous growth for both our 1P and 3P businesses. We believe that [indiscernible] offering a wide range of high-quality goods and improving user product matching accuracy, we can attract more users and meet diverse needs. This will create a virtuous cycle that help merchants succeed, and as a natural result, [indiscernible] monetization will increase. Such virtuous cycle will form one of the key drivers of our long-term revenue and profit growth. We're at a good shape now and not in a rush to increase monetization in the short term, but the trend of our steady improvement remains unchanged in the long run. In addition, our marketplace and marketing revenues experienced short-term fluctuations in Q4. This was primarily due to our efforts to develop the platform ecosystem. We launched a set of supporting initiatives, including commission play offerings for new merchants and proactive commission reductions in certain categories and programs. These initiatives resulted in a decline in commission revenues. Additionally, advertising revenue growth slowed slightly in Q4 due to the late start of the Chinese New Year promotion compared with the previous year and highlights of the previous year driven by people's stockpiling behavior in December. With the ease of seasonality factors in Q1, we expect that advertising revenues will return to healthy growth. And overall, looking at 2024, as user traffic improve, we expect growth of our ad revenues to gradually accelerate. Thank you. So Kenny, let me share some thoughts regarding our overseas business strategies. So first of all, we are always on the outlook for overseas opportunities and [indiscernible] to establish our presence. And given that our business model and advantages are distinct from other platforms, our approach to globalize -- to global expansion will likewise be different. We aim to leverage our competitive strengths to establish our international presence. As you know very well, JD's business model is built on supply chain capabilities and centered around user experience. Supply chain is the cornerstone of our international business development and we will continue to focus on this to expand our capabilities on the global market. To share some examples, for JD Retail, our outbound e-commerce platform is actively improving shopping experience by offering high-quality products and services to global users. In the meantime, it also assists Chinese companies in expanding their business and brands to overseas markets. We're still in the early stage for all these efforts. And at the same time, we're increasing our efforts in inbound cross-border business. JD Worldwide has established three direct procurement centers worldwide so far to improve cross-border supply chain efficiency, offering consumers in China a wider range of imported products and lower costs while ensuring product safety. So for JD Logistics, it has established a strong overseas supply chain, starting from warehouse and now expanding to overall supply chain services. Currently, it operates nearly overseas and direct warehouses, managing a floor area of almost 900,000 square meters. This enables JD Logistics to serve a large number of overseas customers as well as Chinese brands expanding abroad. Also, JD Property is expanding its business in Southeast Asia and Europe with a focus on markets such as Vietnam, Indonesia, Singapore, U.K. and the Netherlands. Its customers include international logistics and FMCG giants as well as emerging Chinese companies going overseas. As I mentioned, both JD Logistics and JD Property, they are more enterprise service facing for the [indiscernible] customers who don't have a very strong impression or experience so far. So we also introduced an omnichannel retail platform in Europe called . This business leverages JD's advanced automated logistic technologies and global supply chain capabilities to provide high-quality shopping experience for customers across 24 European countries. Not only does Ochama serve European local brands and merchants. It also provides a dependable path for Chinese brands and merchants to expand their business abroad. But certainly, Ochama is still in the incubation stage. And next, we will continue to focus on these areas, the business layout that we are good at with the strength to expand our global capabilities.

Thank you, Kenny.

Your next question comes from Alicia Yap with Citi Group.

In light of the shift of the consumption preference and also the rationale spending behavior amid the macro sentiment, will JD need to or plan to adjust any specific strategy to fulfill the demand shift? If so, what could be the change and growth initiatives? What is management's expectation for China overall retail sales growth this year? How much higher can JD outperform the overall retail sales growth ? Will JD reinvest to aggressively growing new user in tier city? Will that mostly come from additional subsidy or through the improvement of product offering? Do you have a target KPI set for the number of new customers that you plan to acquire this year?

Thank you, Alicia. As you said, we've seen consumers have become more rational in spending. They pay attention to both the quality and the cost effectiveness of the product. They really value the good products with reasonable price. At the same time, they do care about shopping experience. So last year, we took proactive steps in response to consumer trends. While striving to provide consumer users with better shopping experience and differentiated services, we expanded our platform ecosystem and low-cost [indiscernible] share. We also started the latest consumption trends in and we work closely with brands and merchants to jointly develop new products that better meet new user demand. So overall, we see our performance so far has met our expectations. And in 2024, we will stick to our current strategies and firmly focus on execution and optimization without making major adjustments. Yes. We will continuously improve user experience and services and strengthen our core competitiveness to further underpin users mindshare towards our fast delivery and high-quality reputation. At the same time, we will also optimize procurement costs and enrich our low-priced product offerings and to let people to better feel our price competitiveness. And on the side of product diversity, we will continue to expand our merchant base and also improve the richness of the low-priced products on our platform. So in 2024, we've seen there will be a number of economic stimulus plans and the consumption motion policies come into place, including the encouragement of the trading consumptions, et cetera. So we are seeing this is a healthy recovery trend of the overall economy and the [indiscernible] and this will also help us to -- help some of our to categories. So overall, we are optimistic for this year's overall retail sales and we're confident that we will maintain a faster growth rate than that and continue to gain market share. Thank you.

So for the second question on user growth, we will actively drive up user growth and their purchase frequency. Throughout the past year and this year, we have prioritized improving user experience to achieve high-quality growth. We will continue to improve the diversity of product offerings and promote low-price strategy and expand product pool for users from lower-tier markets to better meet their shopping preferences. So this helped us to enhance user products, matching efficiency and user retention rate. Additionally, we continuously enhance services safeguarding user shopping experience during and after sales, like the free doorstep pickup services for returns and a lower threshold order value for free shipping, et cetera. We believe that subsidizing and other marketing activities are all tools for user operations. These measures can serve some special purposes in certain periods of time and should only be used in targeted and disciplined way. And for -- we saw healthy growth in the number of users in Q4, including our new users experienced strong growth, while existing users maintained steady growth. Users from lower-tier markets also achieved an accelerated growth. User purchase frequency showed a healthy growth, particularly among existing users. Furthermore, user satisfaction rate has improved with NPS of both self-operated and the marketplace, achieving an increase year-on-year. We've seen user growth has maintained such momentum. This year, JD was selected to be the exclusive interactive partner for China Media Group's Spring Festival Gala. During the show, we offered a variety of gifts to viewers , reaching a wide range of new users. An outlook of the whole year, we're confident in user growth.

Okay. Thank you, Alicia. Let's have the last question.

Your next question comes from Thomas Chong with Jefferies.

My first question is about the consumer sentiment in 2024. And how should we think about the trend for different -- for the category? And my second question is related to our thoughts about the competitive landscape [indiscernible].

Thank you, Thomas, for your question. So by 2023, we have seen the society and economy had returned to normal. Although the consumption market showed a recovery trend, people's spending ability and confidence still needed a boost. As we enter 2024 in the current two months, which we can observe, the country's -- the national economy is on track for recovery. With the effect -- with the expected effects of the micro stimulus plans and consumption promotion policies, we believe the momentum of consumption recovery and expansion will be further consolidated, will strengthened. From a JD's perspective in 2024, we [indiscernible] to outperform the overall [indiscernible] market. And taking a longer-term view, we believe that most people's desire for a better life remains unchanged. Our business model aims to provide better services and quality products with greater value for money, so -- which has made us unique advantages to satisfy diverse users' needs in various shopping scenarios. So from the industry perspective, as we have seen that the proportion of online retail sales of [indiscernible] continue to [indiscernible] For some industries, they have enjoyed a high penetration rate, whereas for other industries, such as supermarkets, sports, furniture and home, automotive and other industries, their online sales penetration rates still have plenty of room to improve. And for the category perspective in 2023, we maintain -- we continue to be the market leader in electronics categories and deliver a faster growth rate than the overall market in this area, even though this industry is facing challenges last year. So overall, we are confident to maintain faster than industry growth rate in these categories, especially as you see the government is promoting the treating of consumer goods and stimulate the consumption of electronics and other products. So we're confident to maintain a strong growth in this category. And the competition in the supermarket category is expected to intensify in this year with various players adopting different strategies. JD's Supermarket business has undergone some adjustments in the past year. This includes a focus on core businesses, improvements in supply chain capabilities and enhanced fulfillment efficiency through warehouse network reforms, and these strategies are gradually coming to fruition and there's been a positive trend of growth recovery for the Supermarket category. And on the Fashion & Home segment, this is more heavily depends on the development of our third-party merchants. And due to our unique business models, the way we foster these two categories will be -- with a different approach. So, so far, we have seen our open ecosystem strategy has yielded some initial results and users are becoming more and more aware of JD Fashion and JD Home. We're confident that we will continue to experience healthy growth for these categories, these two categories in 2024. So for the question about industrial competition, which is the internal question here. So we believe that China's retail consumer market is vast and various platforms and business models will coexist. And as we see ourself, JD, it's a retailer and then this market is quite [indiscernible] We think the key for a long-term success here is to satisfy users' experience and create a winning collaboration with all kinds of our partners. In that part, we will continue to stick to our strategy and continue to gain market shares and we're optimistic that all the changes we made in the past year will gradually come to show some effects and the fruition. And also last year, our different JD team came up with innovative tactics and techniques to improve conversion rates and reduce operating loss. Therefore, we think by firmly executing our established strategies, so we are on the right track to deliver results this year. And JD.com, we put on ourselves as a supply chain-based company. So we have these strengths and capabilities to withstand and navigate through different economic cycles and to deliver good results this year. Thank you.

We are now approaching the end of the conference call. I will now turn the call over to J.D.'s Sean Zhang for closing remarks.

Thank you. Thank you, everyone, for joining us today on the call and for your questions. If you have further questions, please contact me and IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

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