Hello, and thank you for standing by for JD.com's third quarter 2020 earnings conference call. At this time, all participants are in listen only mode. After the senior management's prepared remarks, there will be a question and answer session, and today's conference is being recorded. If you have any objections, you may disconnect at this time. I would like to turn the meeting over to your host for today's conference, Ruiyu Li. Please proceed.
Thank you, operator, and welcome to our third quarter 2020 earnings conference call. Joining today on the call are Mr. Lei Xu, CEO of JD Retail, Mr. Zhenhui Wang, CEO of JD Logistics, Sandy Xu, our CFO, and Jianwen Liao, our CSO. For today's agenda, Sandy will discuss highlights for the third quarter 2020, and other management will join the QA session. Before we continue, I refer you to our Safe Harbor Statement in the earnings press release, which apply to this earnings call as we will make forward-looking statements. This call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most direct comparable GAAP measure. Please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I would like to turn the call over to our CFO, Sandy.
Thanks Ruiyu Li . Hello, everyone. Thank you for joining our earnings call today. We are pleased to report a strong set of financial results for the third quarter of 2020. We delivered a solid performance in a seasonally light quarter and set new records for many operating and financial metrics. JD leads by example in contributing to the society and supporting the recovery of real economy. We have opened up our retail ecosystem, our self-built supply chain infrastructure, and technology capacity to empower our suppliers, our merchants, and our business partners. We run our business with a long-term philosophy and pursue long-term sustainable growth. Our mission is to improve operating efficiency for the supply chain through technology innovations, and we share growth opportunities and economic benefits with our staff, business partners, and society.
Our unwavering effort in supporting society and our users continue to gain positive recognition and win trust for more and more consumers. This has been reflected in our solid growth of active users and improvement in user engagement across different tiers of cities. Our annual active customers in the past 12 months reached 442 million, adding more than 100 million customers, up 32% from a year ago, the highest growth rate in the past three years. We obtained more than 24 million net additional customers compared to last quarter, the largest expansion in the seasonally light September quarters in our history. This once again validates our long-term operating philosophy to run our business with a customer-centric focus. We continue to generate traction in the lower-tier cities, which contributed about 80% of our new users this quarter.
We are also inspired by the further enhanced consumer loyalty and engagement of our core users who appreciate the consistency of products and service quality we deliver every day. Our core users are buying products from more categories from us and more frequently. We have become a part of many users' daily lives. It's worth highlighting that our JD Plus members exceeded 20 million in October, an important milestone for our paid membership program. JD Plus was the first paid e-commerce membership program in China designed to better serve our core users. Besides the benefits offered on JD app, such as shopping rebates and free shipping coupons, JD Plus has partnered with over 600 industry-leading brands to provide our members with comprehensive privileges in sectors such as movie tickets, travel, hotel bookings, finance, education, dining, and entertainment. Our data shows that JD Plus has effectively improved the engagement and retention of our core users.
As our PLUS members shop more frequently with an ARPU, Average Revenue Per User, that is multiple times higher than that of non-PLUS members. By integrating with the resources of our brand partners, JD PLUS has also created an industry benchmark in the paid e-commerce membership. Our Q3 financial results largely reflect our quality user growth. With enhanced user engagement. We reported net revenues of RMB 124 billion for the third quarter, a year-over-year growth of 29.2%, maintaining strong growth momentum even on the back of Q2 peak season and over last year's high base. General merchandise revenues grew by 35% year-over-year, led by the supermarket and healthcare categories. Net service revenues grew 43% year-over-year, led by the accelerated growth of JD Logistics and strong performance of our advertising business. Our net service revenues contributed to over 13% of total net revenues, making another historical record.
As the economy gradually returns to normal from the peak of COVID-19 outbreak, JD Logistics continued to gain trust from its business partners and delivered an accelerated revenue growth. Besides our solid user and top-line growth, there are a few notable operating and financial performances we want to highlight. First, JD Retail's operating margin reached 3.9% in Q3, a record in our history, and an improvement of 56 basis points compared to the same quarter last year. What's notable is that our operating efficiency continues to improve even as our product mix shifts from the large ticket size but low-frequency categories such as 3C and home appliance to the small ticket size but high-frequency consumer staple categories. Order volume for the supermarket categories grew by over 48% year-over-year in Q3.
Another key metric illustrating our operating efficiency improvement is our inventory turnover days, which further reduced to 34.3 days in the last 12 months. This is one of the lowest among the top global retailers and our own historical records. Despite the total number of SKUs managed by us continue to increase with our category expansion. Once again, this validates the power of our scale-driven business model and our long-term margin trajectory. Secondly, our 3C and home appliance categories continue to outperform the industry tremendously, and we continue to gain market share. Our unparalleled supply chain capability better position us, in particular amid the absence of new flagship products from the leading electronic brand starting Q3. As we mentioned before, our 3C and home appliance categories have significant operating and cost structure advantages over our peers, enabling us to provide the best value and service to consumers.
We continue to expand our supply chain capability further bringing more customized products to different consumers and create value for our business partners. Thirdly, JD Logistics is another prominent example of our long-term investment in user-centric experience and supply chain infrastructure. Since we opened our service to third parties in 2017, JD Logistics has made notable progress in providing its customers with integrated logistics services to improve their warehouse management and fulfillment efficiency. As JD Logistics gains more customer recognition, revenue generated from third-party customers contributed nearly half of JD Logistics' total revenues in September. JD Logistics also supports the growth of our 3P merchants on our e-commerce platform. Products marked as delivered by JD Logistics come with more trustworthy and more reliable services, and therefore are often the preferred shopping choices of customers and help generate more organic traffic.
Moving down the line, our fulfilled gross margin improved to 8.7% this quarter compared to 8.4% in Q3 last year. This was mainly driven by the margin improvement of JD Retail and JD Logistics. With our continuous improvement in operating efficiency, our marketing, R&D and G&A expense ratios in the third quarter improved across the board by 16 basis points, 30 basis points and 8 basis points respectively compared to the same quarter last year. As a result, our non-GAAP operating income grew 77%, RMB 12.3 billion, and non-GAAP operating margin was 3%, up 82 basis points from the same quarter last year, the highest level in our history. Moving to the bottom line, our non-GAAP net income attributable to ordinary shareholders in Q3 grew at 80% year-over-year to RMB 5.6 billion from RMB 3.1 billion in the same period last year.
Non-GAAP net margin was 3.2%, up 90 basis points from a year ago, and again, a historical record. Excluding the temporary relief of the Social Security benefit, the margin improvements we recorded in the first three quarters have clearly demonstrated the snowball effect that we continue to generate with our scale-driven business model. With our healthy profitability as a basis, we plan to invest in fast-growing businesses. Specifically, the supermarket category is a key growth area that we are very committed to continuing our investment in to further strengthen our consumer mindshare and market leadership. As our online B2C supermarket operation continues to generate growth momentum, we have been exploring various new business models in different markets to better capture the growth opportunity in this category. Our aim is always to better serve the diverse needs of our customers with quality products and services.
Logistics infrastructure is another strategic area we will continue to invest in to expand our integrated service capacity for the long-term growth. We will also continue to invest in our users and our people. All of these investments truly reflect our long-term operating philosophy. Free cash flow for the quarter improved to RMB 7.5 billion as compared to RMB 63 million in the same quarter last year. Free cash flow for the last 12 months reached over RMB 30 billion, grew by 93% year-over-year. As of September 30th, 2020, cash and cash equivalents, restricted cash, and short-term investments added up to a total of RMB 127 billion. We have a strong liquidity position. In conclusion, JD showed remarkable resilience again in Q3 as China emerges from the pandemic. We delivered both robust top-line growth and year-over-year improvement of profitability, while investing in our capabilities in strategic areas.
It's quite clear that these achievements were driven by our unique business model and operating philosophy. More importantly, JD's resilience is underpinned by our relentless focus on offering true value for our consumers, and unreserved empowerment of our business partners through our technology and infrastructure. Many users are still shifting from offline to online, and the e-commerce penetration is re-accelerating in many categories. JD is well prepared to capture the secular trend, and we will continue to invest for the long term. This concludes my prepared remarks. Let's open the call for questions. Thank you.
Thank you. Ladies and gentlemen, 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 questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you have questions, please press star and the number one and wait for your name to be announced. To cancel the request, it is the pound or hash key. Once again, it is star one to ask a question. First question comes from the line of Ronald Keung of Goldman Sachs. Please go ahead.
Thank you. Thank you, Richard, Xu Lei, Wang Zong, Sandy, Rui, and team. Congratulations on the very strong results. My question was around your supermarket strategy. Sandy, you just mentioned about further investments into supermarket. Could you just share how are we thinking about the strategy of your mega warehouse, your stores at home? Where are we in the progress of network selection initiatives? Would you be able to share any thoughts on emerging models like the pre-order and next day self-pickup model, where most people talk and mention as the community group purchases. How do we think about these, given we do have a lot of strong users and supply chain capabilities? Thank you.
Thanks, Ronald. On your question regarding supermarket and fresh, I think first of all, this is a huge market. We have seen a structural opportunity for this category. This will definitely be a strategic priority for our group. As I mentioned just now, we have demonstrated or proved the business model for our traditional B2C operations. Now we have experimenting and we are also exploring different business models or initiatives in this area, covering top-tier cities and lower-tier markets. Because this is a huge market, we understand that there are many companies entering into the market, but we believe by end of the day, there will be quite a few players, and we don't have to compete head to head at this stage.
The fact is, fresh produce is an even more tough category for e-commerce or retail due to the low ticket size and high loss ratios during the production and fulfillment process. We don't believe subsidy is a competitive advantage. The key to winning is to find a way or solution to improve the operating efficiency of the existing business processes and reduce operating costs. This is exactly our mission or our operating philosophy. We will continue to invest in infrastructure and our supply chain capability to build our core advantages in this category or this area.
Thank you.
Just to supplement. For the various new business models we are experimenting, that would include the 7Fresh store warehouse business model, the community group purchase model, or the distribution warehouse models.
Thank you. Next question is from the line of Thomas Chong of Jefferies. Please go ahead.
Hi, good evening. Thanks management for taking my questions and congratulations on a strong set of results. Given our strong user growth trend, can you comment about how we should think about the user outlook in 2021, in particular, our strategies in lower-tier cities penetration? On that front, are you able to comment about the competitive landscape in the online shopping space next year? Thank you.
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This is Xu Lei of JD Retail.
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Due to the impact of the COVID-19 in 2020, we see the overall growth of online shopping. Online consumption has been growing rapidly, JD is a beneficiary in this process, our penetration rate into the Chinese consumption market has been growing up, especially in the lower-tier cities and among users about 45 years old. We believe people's shopping behaviors online have been formed and are here to stay.
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At the same time, we do some different performance on the different categories. For example, there's a very strong demand in the categories of healthcare products, household products, and fresh food, et cetera. In some other categories, due to the impact of the international supply chains, the growth is lower than expected. Overall, for JD.com, we are a comprehensive platform that offers all kinds of categories. This ensures we will have a very sustainable and stable growth this year. At the same time, we'll also leverage our strength in supply chain and our reputations and the market share we have among Chinese customers to keep a leading position on this market.
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At the same time, we'll also continue to explore new traffic fields, both online and offline. We'll continue to strengthen our needs and capacities in terms of supply chain and our omni-channel strategies. We believe based on these unique strengths of supply chains and our special competitiveness, we'll continue to be a better position on this market.
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We have seen that over these quarters, we have a very healthy growth in terms of users. We do see our existing users are shopping more frequently on our platforms. For the new users, because they've already been educated and having a category basis through other platforms, when they become more mature and more customized online shoppers, they will shift to a better platform that can provide better services for them. As you know that JD is a platform with the strength of supply chain and services. We have a better competitiveness to match the shopping behaviors now for more and more customers. We would rather take a long-term perspective to see the sustainable growth of our user space.
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Either in the past and now in the future, I would like to give four keywords for our long-term development. The first is focusing our users' experience. Second, we'll keep open, and we'll develop our omnichannel strategy and strengthen our e- and capacity building, so focusing on supply chain. The four key areas will be in the long run our strategy emphasis.
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Thank you for question.
Maybe let me add a little bit. We have demonstrated that our lower-tier city approach was effective. As I mentioned as an opening remark, around 80% of our new users were coming from lower-tier cities in Q3. I also want to highlight that our marketing cost ratio is also decreasing. That means we can acquire users and retain these users more efficiently. These were driven by our improved technology and algorithm behind the front platform. So far, we have seen very healthy user trends. Users are shifting from the high ticket price, low frequency items to the low ticket price, but high-frequency purchases.
Thank you. Next question is from the line of Jin Yu of New Street Research. Please go ahead.
Hey, good morning, good evening, and thanks for taking my question. I know that last quarter you guys announced that you're not going to provide guidance going forward. Given the fact that we're seeing a pretty profound seasonality with second and fourth quarter promotions kind of where they are, perhaps you can give us a directional view of how we should look at the fourth quarter, if it's the similar trajectory that we should look on a year-over-year basis compared to the other second quarter. Any kind of color there would be pretty helpful. Even on the margin side, we've seen this pretty significant operating margin leverage in the first nine months of the year. Just, is there any reason why we can't see the same kind of a step-up function in the fourth quarter as well? Any kind of directional view on the margin as well as on the revenue side color would be great. Thanks.
Sure. This is Sandy. Let me respond to your question. For future trends, in Q3, we continued the great momentum from the first half year on user engagement and new user acquisition, particularly in the lower-tier markets. This formed a very good basis for our Q4 promotion season. In the past Double 11 promotion, our performance exceeded our internal expectation, and the user number and traffic were very healthy so far, as I just mentioned. I think the trend of users shifting from offline to online continues, and we will continue to invest and focus on user acquisition and engagement, in particular, for our fast-growing categories. We also want to emphasize that we see stronger seasonality this year as the users are now better educated by the e-commerce platforms. This is a generic trend for top line.
Then for bottom line, you can now see that the scale benefits of our JD Retail business and JD Logistics business have been gradually realized. We now see opportunities for accelerated penetration of e-commerce in China. To catch up these opportunities, we are going to reinvest the extra profits that we generated in the first nine months of 2020 in user experience. In some of our fast-growing categories or new business initiatives, if this can help us gain market share in the long run. You may see a similar pattern of net margin seasonality in Q4 as in last year.
Thank you. Next question is from Gregory Zhao of Barclays. Please go ahead.
Hi, management. Thanks for taking my question, and congratulations on a strong quarter. My question is about the RCEP, when a group of Asian countries to make the free trade agreement over the Regional Comprehensive Economic Partnership. A lot of products and services will be covered in the agreement, and we know some free tax terms will also be introduced. Would you please help us understand the opportunities from our side to China e-commerce and also the cross-border e-commerce market, and how JD can take the opportunity? Thank you.
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This is Xu Lei from JD Retail to respond to your question. Regarding the growth of our cross-border business, it has been growing steadily this year. We also see that our NPS score, which is our net promoter scores to show the user experience, is also growing rapidly. We pay highest attention to the field of duty-free products and cooperation on the cross-border in these aspects.
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Since this is newly announced news recently, just one day ago. We're still following the news and trying to understand the implications of this new regional cooperation, and we believe that this is very positive news for both the production and consumption in the ASEAN and the Asian region.
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Of course, we will take full advantage of our strength in our cooperation with the international brands and also our supply chain capacity to catch this opportunity. We will watch closely on the development and to see the opportunities to further develop our business. Thanks for your question.
Thank you. Next question is from the line of Eddie Leung of Bank of America Merrill Lynch. Please go ahead.
Good evening. [Non-English content]. I'm just a bit curious on your gross margin. We see your gross margin and fulfilled gross margin are both improved in the quarter. However, we also noticed that your marketplace and advertising revenue actually grew slower than your direct sales business. I'm just wondering what are the key reasons behind the gross margin improvement. Does it mean our 1P revenue gross margin actually improving? Thank you.
This is Sandy. Thanks for the question, Eddie. On your question regarding gross margin, I think for JD Retail, the gross margin improvement was mainly contributed by the change of product mix. As we mentioned that the customer's purchase behavior is shifting from low frequency to high frequency. The scale benefits that we realized from all categories. The gross margin is gradually improving for all the products. Talking about fulfilled gross margin. Again, this is contributed by the scale benefit and partially contributed by the relief of the Social Security benefit by the government. The majority of the benefit was realized in the first half year with a small amount left in Q3. Advertising revenue actually grew faster than the top line product sales. The growth of advertising revenue is kind of offset by the slower growth of the commission revenue. For 3P business, although the GMV actually grew very healthy, but the GMV or the product categories with lower commission ratio grew faster than the categories with higher commission ratio.
Thank you. Next question is from Alicia Yap of Citigroup. Please go ahead.
Hi. Good evening, management. Thanks for taking my questions and also congrats on the solid results. My questions are related to the growth trend for the general merchandise. I think this quarter, the growth rate 35% still very solid, just a little bit more interested to get management view on any elaboration you could provide in terms of a slight decelerated growth from the second quarter achieved for this general merchandise. I think you mentioned the supermarket actually grew about 48%, just wonder which category actually experienced a bit more seasonal slower growth than before. Just very quickly on the single-day GMV performance, how do you rate and compare that with your expectation versus June 18? Since that it is actually stronger than June 18 and is that driven by pricing or any reasons for that strong single sales? Thank you.
That's a very good question. For general merchandise, I mentioned earlier that we saw robust order volume growth in Q3. The order volume grew by 48% in the quarter. If you compare with the second quarter, you'll see that the growth rate slowed down a little bit. I mentioned last quarter, if you remember, there were some COVID-related deals in the first half, including the cleansing products, the disinfectant, liquid soap, et cetera. The sales volume dropped for these products in Q3 as the users, they already have sufficient inventory stored at their home. Also, in Q3, if you look at fresh produce category, its largest subcategory is seafood. It was a drag of our overall growth due to a few COVID cases reported during the quarter were in relation to the imported seafood.
The other subcategories under fresh produce continued to grow very strong during the quarter, but they were with relatively lower ticket size and revenue contribution. Overall, we see the order number, the user growth, and the traffic under general merchandise continued to be very strong during the third quarter. Sorry, what was your second question?
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This is Xu Lei. It's also a question related to the Singles' Day grand promotion.
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As we have stressed that we were not only looking at [audio distortion] the 11th, the Singles' Day. If we look at the grand promotion period from November 1st to the 11th, we're very pleased with the growth results.
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For this year, because of the epidemic impact and so on, we would like to drag the time span even longer because this time our brand partners also pay high attention on these activities. If we drag the timeline from October the 1st to November the 11th, for one and a half month time, we are achieving a much better result than expected.
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For the reasons why the Double 11 performance is even better than the 618 Shopping Festival, I think there are two reasons. One reason is on the consumer side. As we can understand that by the end of the year, a lot of consumers, they have a bigger shopping plan to purchase more stuff.
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On the supply side, in addition to the brand partners, we also see that for the small and medium-sized businesses, they are better recovered than in June from this epidemic. They are in a more comfortable and more ready position to prepare their products and to do their operations. This also contributes to a better performance of the sales growth.
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Thank you for question.
Thank you. Next question is from Jerry Liu of UBS. Please go ahead.
Hi. Thank you, moderator. Yeah, my question is on the logistics business. We saw in the third quarter, revenue growth year-over-year accelerated, versus the last couple of quarters. Just wanted to get an understanding, what are some of the things you did, maybe services or new initiatives, especially for the third-party merchants where we saw the revenue mix come up. Secondarily, we've also heard that from our checks that some of the brands were more willing to work with JD Logistics as some of the traditional logistics infrastructure was not as able to handle the demand post-COVID-19. Just wanted to check with you and see if you have any comments regarding that kind of situation. Thank you.
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This is Wang Zhenhui from JD Logistics.
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Thanks for your question. As you mentioned, indeed, we have seen accelerating growth of our business in Q3. There are several reasons. First, I think it's attributed to our long-term commitment to our improvement of user's experience.
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For JD Logistics, our value proposition is to provide the best user experience and driven by technology and win from our efficiency improvements. We have always increased our investment in our capacity building to provide more services and infrastructure to cater to the needs of our customers. No matter if during the COVID period or in the normal time, we'll always ensure we provide the best supply chain services to our customers to provide value for them. I think this is the key reason they choose us for more cooperation. Thank you.
Thank you. Next question is from James Lee of Mizuho. Please go ahead.
Thanks for taking my questions. Two questions here. First, on online pharmacy, can you talk about some of the key frictions you're trying to resolve to drive higher online adoptions? Should we think about you as more supply constraint or demand constraint? Maybe, can you update also on the margin profile long term? I think previously you mentioned maybe two times higher than offline pharmacy chains. Second, can you talk about the implication of the new antitrust regulations? How does that impact e-commerce and JD? Thanks.
We apologize that for any question in relation to JD Health, we cannot respond at this call because they are in the middle of an IPO process. If you have any questions, you may reach out to their investor relationship team.
Yes, this is Jianwen Liao. I would take the second question with regard to the antitrust. Totally different from typical C2C platform. JD is mainly a B2C retailers with its own merchandising, inventory, marketings, sales, and logistics. That's the first point I want to make. The second, as JD continues to expand into other categories beyond 3C, like fashion, actually JD has been penalized by anti-competitive behaviors, where merchants are being asked to do [Non-English content] or pick one out of two. The third point I want to make is JD fully support the antitrust regulation, which we believe is very important for healthy growth and innovation of the business ecosystem in particular, and the country economy in general. Lastly, which is most importantly, since day one, our founder, Richard Liu, has subscribed to a business principle called 35 cents.
Under which if we make RMB 1 profit, RMB 0.30 goes to partners, and RMB 0.35 for our employees, and the remaining RMB 0.35 for JD's continuing growth. As such, JD is fully committed to a healthy ecosystem that is relying on cooperation, coexistence, and co-evolution.
Thank you. Next question is from Jialong Shi of Nomura. Please go ahead.
Thanks. Good evening, management. Thanks for taking my questions. [Non-English content]. I have two questions. The first question is about the grocery e-commerce business. Management mentioned earlier JD is piloting some of the fresh grocery models, including 7Fresh and a community group buy model, etc. Could management provide some colors on the strengths and the weakness of each of the models? Which model in the management's current view has the potential to become the dominant model in the future for the online fresh grocery business? The second question is about the guidance for Q4. Sandy mentioned JD will reinvest the extra profits earned in the first nine months into improving user experience in Q4. Could management give us some colors? What is the size of the extra profits you guys are aiming to invest in Q4? Thank you.
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This is Xu Lei from JD Retail. To answer your first question about the fresh food community group buying.
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For the fresh food market, it's indeed a very huge segment. You have seen that there are many participants fighting and exploring in these areas, including those traditional retailers and internet players, and also some emerging companies.
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I want to address that for the Chinese fresh food market, the landscape is very different from European and the U.S. market, it's more complicated. In China, the traditional retailers in fresh food categories, the top 10 players, top 10 supermarket brands only take about 5% of the overall Chinese market. It is a much smaller amount compared with the Western markets.
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In general, we can categorize the fresh food market into five segments, we call it the racing tracks. Namely, first is the B2C, second is the warehouse stores, and the third is the community group buying, and fourth is the B2B, and fifth is the ?
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Oh, yeah. It's front distribution center, FDC.
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Actually, for JD, we have started our exploration and investment in these categories, in these racing tracks, including the B2C models and the warehousing store models. We'll keep our eye open and explore the new territories. Actually, for each different category, the business models and the profitability methods are very different.
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We also noticed that for many companies in this competition, they are using these channels as a traffic flow field. However, for JD, we would rather use our supply chains and our premium services to create a more sustainable ecosystem through growth of the fresh food areas. We'd rather not use this as a short-term opportunity and using subsidies to boost the development of the fresh food market, rather than to develop in a more sustainable and stable business model in this field.
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For some of these business models, it has to be focused on this region and to truly localize the services, and to perform in the long run.
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In addition to our B2C and warehousing stores models, we'll continue to be alert and continue to explore and invest in the new models. We value the most is sustainable and stable business models. We'll continue to focus on our core strength of supply chain to make sure these models are stable and provide value for our customers.
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Thank you.
Regarding your second question on the reinvestment of our net income. If you remember that at the beginning of the year, we set the target for this year is that we were going to deliver very good in net margin. At this stage, we can see that we are confident we can deliver that on an annual basis. Because the market situation is changing very rapidly, we are going to make dynamic adjustments to our investments in the various initiatives based on the ROI. Some of the initiatives that we talked about just now are actually for the long-term project. That means the investments may last till next year. For next year, we are still in the middle of our budgeting process. We will then share our thoughts on the resource allocation or the target for next year at our next quarter earnings call.
Thank you. Next question is from Eddy Wang of Morgan Stanley. Please go ahead.
Hi, management. Thank you for taking my question. Congratulations on the good results. I have a very quick follow-up on the online fresh grocery. If you look at next year, given that a lot of the players there actually tend to be very aggressive in penetrating into this online fresh grocery. What's your thought of the market share? Are we still taking all these players, still taking the market share from offline, the wet market or supermarket, or have you seen any signs that these players are just starting to take market share from each other? Just a very simple follow-up. Thank you.
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This is Xu Lei from JD Retail.
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Indeed, in this year, 2020, JD Super, our online supermarket platform, has been benefited from the principle impact of the epidemics. A lot of customers who used to buy things offline have shifted to our online platform, and their behaviors stay with us. Also, this is a result of our years of investment, our product selections, and our cooperation with our brand partners and our superior fulfillment capacities, and all these have contributed to the faster growth of JD Super.
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Indeed, we do see a strong growth in terms of sales and market shares in our JD Super categories. However, because the shopping behaviors for these product categories are very different from consumer electronic products, actually, for the fresh groceries, their online shopping penetration rate is still relatively low. There's still space to grow.
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You have seen that JD has become the global number one or the key account for many brands or many products, both international brands or domestic brands, but actually for these categories, the market is very huge and the penetration rate has still space to grow.
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We do see actually why there's a lot of brands choose JD to operate. We do have to go through several phases. For phase I, the brands see JD as a very effective sales channel to help them to bring down the cost and increase sales opportunities.
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For phase II, we start to work with our brand partners to do more marketing and to manage their members and the fans to help them to increase their digitalization capacities to engage with their members.
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For phase III, we continue to build more C2M products, namely the consumers to manufacture products to tailor to the needs of different cohorts of consumers from the lower-tier cities will have special preferences, et cetera. Currently, more than 30% of our sales on JD Super are coming from the differentiated products we collaborate with our brand partners. These achievements are based on our advanced data and advanced algorithms. This is a very close and deepened cooperation with our brand partners in this space.
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For phase II, under our omni-channel strategies, JD Super is doing a great job and is being very well welcomed by multiple players with us. Under this omni-channel, JD Super's brand partners, both online and offline, would look at their business performance both online and offline through our data, through our systems and tools. This format is very well performing and well received by our brand partners, platforms, and also benefits our customers.
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I would like to share with you this ambition that I believe our JD Super in the future will become the number 1 category on JD's overall platform. Thank you for questions.
Thank you. Our next question comes from the line of Han Joon Kim of Macquarie. Please go ahead.
Great. Thank you for your time today. I wanted to follow up on live streaming and, I guess, your partnership with Kuaishou and so forth. How you see kind of experimentation going on there and the outlook for next year as well? Thank you.
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This is Xu Lei. I just want to share you a few points about live stream.
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First of all, we believe in the long term, live streaming will not only be a sales channel, it will become a standard operating tool for many platforms, not only the video platforms, but a very standard tool for all the sales and marketing tools.
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For now, a lot of people go to live streams in pursuit of its price discounts. In the future, we think live stream will be able to provide more functions, like to give you more detailed introductions of the products, or be the platform for new product release. There will be multiple functions it can explore.
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For JD Live, we do see the live stream data is going very well, and more and more merchants are engaged on these platforms. The difference between JD Live and other platforms is that because of our customers' different structures, customers would like to see more professional content on our platform. Also for our platform, we always advocate more rational consumption. We want to provide more professional information and invite the CEOs of the big companies to introduce their products on our JD Live platform, and also invite those amateur or the specialists of certain products to give more professional introductions on JD Live.
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Also, we are now increasing our cooperations with other MCN channels and artists. Another thing I want to share with you is that the sales orders achieved on the live stream on JD's main site is much higher than our third-party live stream. I think this is highly related to the customers' trust and healthy behaviors on JD's platform.
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Just to briefly comment on our cooperation with Kuaishou. Kuaishou looks forward to cooperate with JD because of our superior supply chain in terms of products and services, and also we admire Kuaishou as a very unique platform that provides traffic flow into a very big amount of consumer cohorts. This is a very natural supplementary for this cooperation.
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For this cooperation, it's not simply that JD will post a price on Kuaishou for sales, but more, there's a lot behind the supply chains and our services to support this cooperation. There's still a lot of work we're doing to further connect our system. At the same time, I believe that we will provide better values for this cooperation in the long run. Thank you.
Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com's Ruiyu Li for closing remarks.
Thank you, operator. Thank you for joining us today and your continuing support. Please feel free to contact us if you have any follow-up questions. 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.