Earnings Call: Q4 2020

Mar 1, 2021

And thank you for standing by for jd.com's 4th Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a 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 meeting over to your host for today's conference, Ruiyu Yumi. Thank you. Please go ahead. Thank you, operator, and welcome to our Q1 and full year 2020 earnings conference call. Joining me on the call today are Mr. Lei Xu, CEO of JD Retail and Sandy Xu, our CFO. For today's agenda, Mr. Xu will share his thoughts, A recent business trend followed by our CFO, Sandy, who will discuss highlights for the Q1 and full year 2020. Both of them do join the Q and A session. Before we continue, I refer you to our prepared remarks In the earnings press release, which applies to this call, as we may make forward looking statements. Also, 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 measures. Finally, please note that, unless otherwise stated, All the figures mentioned during this conference call are in RMB. Now I would like to turn the call over to our CEO of JD Retail, Thank you, Ruiyu. Hello, everyone. Thank you for joining our Q4 earnings call. This is Xu Lei, CEO of JD Retail. I'm glad to take this opportunity today to share with you JD Retail's 2020 review and our outlook for the New Year. 2020 was no ordinary year. We observed significant changes in the macro economy, the retail industry and the way Our customers live their lives. The global pandemic greatly impacted society and everyone's lives. It also brought many uncertainties to the global economy. But great opportunities can be found amidst great challenges. With the profound challenge changes in consumers' mindset and behaviors during this period, China's online ratio penetration continues to deepen. Consumers' needs, attention spans, content forms and means of communication all underwent many changes. Consumers' demographics and use cases became increasingly segmented and diversified. The lower tier market, the silver economy, the users who were born after 1990s and the year 2 In the face of these challenges and opportunities, JD's business model has proven to be resilient through different economic cycles. We adopted a more open approach to running our business and continuously enhance our ability to enable our business partners. Our long standing business philosophy of noble principle of doing business served as our true north in navigating the uncertainties and changes. All these efforts have helped us to gain the trust of many more users and business partners. Over the past year, We have not only successfully withstood the challenges, but also seized the opportunities for quarter growth and iteration. JD.com delivered a strong set of financial results in 2020. This is mainly attributable to our continuous investment improving our user experience and also always put our customer first in running our business. By the end of Q4, we hit new high with annual active customers for the past 12 months reaching 472,000,000. We saw accelerated user growth and added 110,000,000 new active customers compared with a year ago. This is the largest expansion in our history. We continue to see exciting user growth in the lower tier cities, which contributed over 80% of our new users for the first time in Q4 2020. We're even more delighted to see increased engagement From our customers, for example, the ARPS value the ARPS from our 2015 customer cohort increased more than 5x by 2020. And we also see a very active engagement of our JD Plus members. In 2020, we maintained healthy growth in our corn businesses and achieved significant progress in new business initiatives. JD Retail is JD's earliest and most mature corn business. It plays a fundamental role in JD achieving its long term strategic goals. We are pleased to say that in the past year, JD Retail realized the high quality and accelerated growth and meaningful and sustainable innovation. Looking ahead in 2021 and beyond, as a supply chain based technology and service provider, JD Retail will continue to focus on 3 key strategies, encompassing our middle platform capacities for supply chain and technology, Our omni channel strategy and our online marketplace ecosystem. 1st, On the Mido platform for supply chain and technology, JD has been investing intensively in the building of supply chain infrastructure for a long time. At the end of 2020, we managed more than 7,000,000 SKUs of our direct sale products in over 900 Warehouse across China? During COVID-nineteen, supply chain has impacted the development and cooperation among And enterprises around the world. The need for reliable supply chain is all the more imminent in an environment of increased uncertainty. What JD aspires to do is to build a middle platform mobility that can be applied in more diverse use cases and channels. With this goal in mind, We have been investing exhorvingly in supply chain and technologies to help merchants, both online and off line, big and small, including brands and factories, to improve their operations efficiency, to enhance their customers' experience and to improve their risk resistance capacity. This will also help promote high quality growth of the whole industry and create value for the entire society. For JD, This endeavor will further diversify our revenue stream and drive our service revenue in the future. 2nd, in face of a broad range of business channels and use cases, our omni channel strategy aims to increase the overall retail efficiency To satisfy customers' diverse needs, to provide people with immediate access to products and services and to create value for merchants and customers, Our omnichannel business is complementary to JD's platform's main retail model. Omnichannel is not only a key strategy for JD, but also a new trend that older retailers must address. The penetration rate of this model is still quite low among offline businesses. We believe that there is a huge potential to integrate omni channel and on demand fulfillment elements with many industries in the future. Today, JD's omnichannel business has already covered various offline scenarios ranging from franchiser stores, convenience stores, car maintenance stores, Fresh groceries and fresh flowers through pharmaceuticals connecting with millions of offline stores. In the future, Based on our unique supply chain and technology abilities, we will develop LBS based technologies tailored to the on demand consumption market. We will also continue to build up our omni channel supply chain, omni channel marketing and offline store digitalization abilities to support their applications in many more industries, businesses and scenarios. Meanwhile, we will work on cultivating customers' share of un demand fulfillment through innovative measures, such as our omni channel fulfillment initiative and cooperation with external partners such as the partnership JD BJ and Dada Group, in 2021, we will expand our coverage to more retail verticals and drive the quality growth of our omni channel business. This will provide us additional monetization opportunities. 3rd, on the building of an online market ecosystem. This is an area of great potential for JD. With several years of development, we have now established a good foundation for the online platform eco Notably, we have made good progress in building a healthy platform environment and improved the merchant's quality and business experience. We are pleased to See that the NPS net promoter scores of our online flat marketplace continues to improve over the year. So far this year, our merchants' renewal rate is much higher than in the past, reflecting a significant improvement In merchant satisfaction and recognition of our platform, looking ahead, capitalizing our healthier industry environment, We will continue to experiment with new models and strategies to find the optimal strategies for JD's online marketplace. These attempts will still be guided by JD's ultimate business purpose to improve customers' shopping experience and provide an open and empowering platform for merchants. While adhering to these strategic directions, we will continue to underpin our business foundation, Keep an open mind, incubate new business and use innovation to save change, whether it is our first growth curve represented by our established business, such as consumer electronics and consumer goods or our 2nd growth term represented by our growing business, such as healthcare and IMRO categories. We're the 3rd growth curve represented by emerging business such as retail innovation, Here, I would like to emphasize JD's strategic positioning As a supply chain based technology and service provider, we uphold our long term business philosophy. Since day 1 of JD's business, We chose to tackle the hardest but most valuable problems in the industry and society. No matter how far we have come, As long as we remain committed to our customer first core value and supply chain based value creation, we'll always be able to go full steam ahead. This attitude embodies our long standing business philosophy that is the noble principle of lean business. The road ahead is long and winding. The changes ahead, we will preserve. We believe the core values and mission that JD has been abiding by are relevant We will constantly and continuously deliver our abilities and create value to society, industries, Our partners and our customers and in turn achieve long term high quality growth at JD. Thank you for your time. I will now give the floor to our CFO, Sandy. Thank you, Lei. Hello, everyone. We're pleased to finish 2020 with exceptional business and financial performance in the 4th quarter. We outperformed our expectations performance and strong cash flow during the Q4 and throughout the full year 2020. These results were driven by our relentless focus On customer experience and investments in supply chain capability, technology and logistics infrastructure over the past years, which has become a hallmark of jd.com. As we embrace change and position our business for the long run, JD has been at the forefront of many innovative initiatives and structural shifts that are taking place in China. In addition to the exciting developments at JD Retail that led just this past, I would like to further elaborate on some operating and financial highlights. 1st, let me add more color on our user base. By the end of Q4, we hit new high watermark For our annual exit customers in the past 12 months at 172,000,000, we saw accelerated user growth to 30% year on year and added 110,000,000 new active customers from a year ago. In addition, we managed to grow our user base We are continuing to reduce our marketing expense ratio in 2020. This improved marketing efficiency was driven by our long term user centric operating philosophy and technology driven marketing efficiency improvement, paving the way for our sustainable future growth going forward. Let's turn to a number of our new business initiatives, which are making exciting progress. 1st, on JD Logistics. Began as JD Group's in house logistics department in 2007, JD Logistics has been building logistics, logistics, infrastructure and technologies as well as operational and industry know how for over a decade. It has become the leading technology driven supply chain solution and logistics services provider in China and operated over 900 warehouses with an aggregate growth area of 21,000,000 square meters. On February 16, 2021, City Logistics submitted a listing application form to apply for the listing of its shares on the main Board of Hong Kong Self Exchange. Please note that there is no guarantee as to whether and when the proposed listing will take Some of our smaller businesses are also experiencing market growth. For example, City Property recently launched its So far, total AUM of JD Properties' core funds and the development fund has exceeded RMB 19,000,000,000. JD Properties also entered into a definitive agreement with Series A financing. The total amount expected to be raised is approximately US700 $1,000,000 We also restructured some business units recently to better coordinate our internal resources and capture market opportunity. For example, we established Yonsei Business Group recently To achieve better synergies, our social e commerce platform, Xunxi, convenience store business, XunxiTong, formerly known as XunTonglu, And Clinics' purchase business, PingXi Kitchen, were consolidated under the PingXi Business Group banner. And in December, we announced that JD Cloud and AI Business will merge with 6 digits, subject to the Board and regulatory approvals. The proposed reorg was designed to drive synergies in the development of innovative technologies and product solutions. This will allow jiggy.com to focus more on core retail and logistics businesses and gain more flexibility Within our retail business, CityHealth achieved an important milestone With the successful listing on the Hong Kong Stock Exchange on December 8, 2020, with a gross proceeds of approximately HKD 31,000,000,000 As a technology driven platform centered on the supply chain of pharmaceutical and healthcare products and healthcare services, CityHealth aims to provide easily accessible, convenient, high quality and affordable health care products and services covering a user's full lifespan. JD has demonstrated a proven track record of successfully incubating, Developing and growing new businesses from our core B2C eCommerce business. We believe This is enabled by our relentless focus on superior customer experience and our efforts in building and investing in supply chain Capabilities and Technology Infrastructure. This creates a virtuous cycle, allowing us to identify new opportunities. We empower external business partners and grow beyond our core e commerce business. Therefore, We will continue to invest in exciting new initiatives that can drive long term sustainable growth for our group. Our financial performance reflects the trajectory of our long term development. Our net revenues grew 31.4% year on year to RMB224 1,000,000,000 in the 4th quarter, continuing our strong growth momentum with a successful promotion season. More importantly, we are driving our top line in more expensive ways. Our electronic and home appliance cash flow increased Continued to grow faster at 34% year on year in Q4 led by the FMCG, Healthcare, cosmetics and home products categories. Order volume for the supermarket category grew by 45% year on year in Q4. Another key metric shows that we are growing our time in a more diversified way is our net service revenue growth, which accelerated to 63% year on year in Q4, the highest growth we had in the past 11 quarters. This is mainly due to strong growth momentum of JD Logistics' internal revenue as well as our advertising revenue. For the full year of 2020, net revenue reached RMB 746,000,000,000 with year on year growth accelerated 29.3% From 24.9% in 2019, electronics and home appliance revenues recorded solid growth of 22% year on year amid challenging market conditions, where general merchandise revenue grew 38% year on year in 2020. Net service revenue grew by 42% and accounted for 12.6% of our total revenue in 2020. Our non GAAP operating margin improved by 13 basis points year on year to 0.5% in Q4 and up 52 basis points year on year to 2.1% for the full year 2020. JD Retail's operating margin came in 1.5% in Q4 and reached 2.8% on a full year basis in 2020, up 28 basis points from 2019, mainly driven by improved operating efficiency and to a lesser extent, the relief of Social Security during the COVID-nineteen pandemic. The margin improvement in 2020 was realized even as we shift our category mix towards the high frequency but small ticket Consumer, staple categories that are still in the early stage of realizing earnings potential and proactively reinvest Some of our social security benefits in value creation for our users and the logistics infrastructure, We are well on track of our long term margin trajectory. Moving to bottom line. Our Q4 non GAAP net income Attributable to ordinary shareholders was RMB 2,400,000,000 and non GAAP net margin improved 59 basis points year over year to 1.1%. Our full year 2020 non GAAP net income attributable to ordinary shareholders reached RMB 16,800,000,000 up 57% as compared to RMB 10,700,000,000 last year. Non GAAP net margin for the full year 2020 improved 39 basis points year over year to 2.3%. Again, our profit ratio has improved meaningfully in 2020 even as we incurred additional expenses related to COVID-nineteen and excludes the benefit of the Social Security relief, which had about 25 basis points impact. It's worth highlighting that we continue to strengthen our financial position, while stepping up both our business partners. Our inventory turnover days further reduced to 33.3 days in the last 12 months, one of the lowest among the top global retailers and our own historical record of gains, despite of the continuous expansion of total SKUs directly managed by us. This is achieved through the continuous improvement of our technology and operating efficiency. Our free cash flow for the trailing 12 months Cash and cash equivalents, restricted cash and short term investments added up to a total of RMB151 1,000,000,000. We believe our solid profitability and financial position provide us with a strong foundation for investments in a range of growth opportunities. In summary, jiggy.com passed off a challenging year of increased uncertainties with a remarkable performance. We further improved our technologies and tools, enhanced our ability to serve users and ecosystem partners, which paves the way for our future growth. We continue to witness and deepening of online penetration across many categories and the technology driven transformation in many aspects of consumer's daily lives and the society in China, we expect to maintain the growth momentum that we generated in 2020 on multiple fronts in 2021 in spite of continued macro challenges and the high comparable base impact. We also expect our long term margin trajectory will continue. However, we do not forecast short term margins as we believe jiggy.com is still in a fast growing stage We are an enviable growth market with many exciting opportunities. With our core retail supply chain and logistics capabilities, JD is well established with convincing value proposition to benefit from a secular trend and drive the long term sustainable growth of our business in 2021 and beyond. This concludes my prepared remarks. Let's open the call for questions. Thank you. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. Ladies and gentlemen, we will begin the question and answer session. Your first question comes from the line of Eddie Leung of Bank of America. Please ask your question. Good evening. Just a couple of quick follow ups after your Firstly, your user growth is pretty impressive, very strong. Wondering if there is any Impact on the ticket size? If the ticket size is coming down because of new users, does it In fact, the operating leverage of your logistic business seems like the fulfillment costs as a percentage Sales, a bit higher than our expectations. So just wondering your thought. And then I think Xu Lei Zhu mentioned The renewal rate of your platform merchants are included last year. So just wondering how quickly Yes, the number of marketplace merchants are growing because of the improved renewal rate. Thank you. Thanks, Eddie. This is Sandy. Let me take your first question regarding the FOCUS margin. So I think for gross margin, we will look at 1P and 3P separately. If we look at the pure B2C gross margin in Q4, it went down a little bit. But if we include advertising revenue In relation to our OneTE product, that is how internally we manage the operating results. The gross Profit margin for OneTE actually slightly increased. So this is after considering all of our reinvestments In Q4, for the additional profits that we generated from the first Nanimax in the year, As I mentioned at the earnings call last quarter, we plan to reinvest some of the additional profits generated from the 1st 9 months In the Q4, to really provide value to our customers and also to reinvest to build our logistics infrastructure. So again, to emphasize that the gross margin for 1P actually slightly increased compared to the same quarter last year. If you look at the fulfilled gross margin for 1Q, there is also a slight improvement from last year compared to the Q4. And we see very meaningful improvement for the full year compared with last year by about 20 basis points. So this is driven by the steady improvement of gross margin by many categories, including the category mix shift Towards lower margin supermarket category. So the relief of social benefits has no impact on the improvement For the full year of fulfilled gross margin as we had the one time VAT benefit in 2019. So, the amount is almost the same. Really, what's driving down the total fulfilled gross margin for our group is the 3P revenue contribution. We can see that the contribution for on the 3P revenue went down a little bit in the 4th quarter, Even though the repeat contributed more GMV in Q4 as compared to Q4 last year, we were quite encouraged The healthy performance of our marketplace business model, but the category mix within the marketplace business model also changed Slightly, the healthcare, supermarket, electronics and home appliance categories outperformed the apparel and home products. That means the categories with relatively lower take rates are growing faster than categories with higher take rates under our marketplace business model. Again, we believe this is a healthy move and a good indicator of our efforts in building a better marketplace ecosystem, particularly for our historically strong 1P category. To answer your second question, you have all known that JD's reputation is the strongest in terms of And through the year, you can see that a number of merchants on our platform has enjoyed a steady growth. As consumers have a higher expectation of our service, we will also have a higher expectation on the qualities and the products from our merchants on the platform. So in the last year, we have done We saw some screening work over low efficiency and the low operation merchants. And still, we see the overall number of Our merchants on the platform is steadily growing. And this year, we have been recruiting more high quality merchants. They have they are more experienced in running their business in a more efficient way. So, we will pay close attention on the efficiency of our internal platform and also the operational efficiency Of our merchants on the platform and how well they are running their stores. And for this year, the cutoff time for the merchants' renewal is on March 30. So we have seen the renewal rates is much higher than in the past. And we also have seen the improvement of our merchants' Satisfaction rate on our platform. Got it. Thank you for the question. Your next question comes from the line of Ronald Keung of Goldman Sachs. Please ask your question. Thank you. Thank you for taking my question. Thank you, Zhilei Zhang, Sandy and management. And congratulations on the strong 2020 Performance. I think my question would be on both Zhilei Zhong and Sandy. You mentioned about a lot of new business which are very exciting. And I could You've launched that Dingxi, also all the different initiatives in both in the kind of new businesses. How should we think about our kind of A plan to invest in these, I think, because, of course, JD Retail is very strong on itself. But given some of the exciting initiatives, could you go through These initiatives maybe 1 by 1 or the biggest key and how should we think about our commitment or the plan to invest in terms of magnitude? Thank you. Thanks, Xiaobin. This is Sandy. Maybe let me take the question regarding Xunzi and then I can comment on some other new initiatives. So in Q4, as I We did a restructuring for our significant growth to really try to generate synergies from the 3 separate business units. We see there is a great opportunity in this group purchase Business or good purchase industry or the fresh produced category. So we firmly believe there is a structural opportunity, The huge market size and highly fragmented supply chain with lots of opportunities and potential to improve the operating efficiency through technology and innovative business models. And we also see that the group purchase business model works better For smaller ticket size items in the lower tier market, I think it can generate better fulfillment efficiency through short chain logistics And be more efficient in inventory management and marketing, especially for petrochemical and long tail products and provide users from the lower tier markets with better So even though at present, most players in this market use their book purchase business model primarily driven by traffic, We believe by end of the day, it will go back to the basis of retail business, I. E, platforms will compete on cost of products, Operating efficiency and customer experience. So, we see this to be a long term initiative and our ultimate goal is to improve The operating efficiency of supply chain, the wholesale and retail business in the lower tier market through technology and improved people's leading standard. JD is fully dedicated in this initiative, and we will take a somewhat differentiated approach to be more focused on supply chain and logistics network and try to leverage our existing capabilities. So we launched our KPN business in certain cities from January, and it's still in a very early stage. We were entering into this group purchase business. We need to build localized supply chain, Short chain logistics network as well as technologies and tools to support the operation. We also need to recruit group leaders, Business development teams educate new users step by step, city by city. So there are lots of areas need investments. But we are not starting entirely from the scratch. We tested we have been testing the group purchase business model for a while In a very small scale, for our convenience store business, Xintongdu, now renamed Qixinjitong, We already established some B2B supply chain primarily in the FMCG category, including some localized supply chain. We also have existing B2B logistics networks and localized business development teams in certain regions of the country. Tipton now has over 1,000,000 SME customers. And some of these convenience store owners can naturally be turned to the group leaders of our existing team team business. Our existing centralized procurement platform, the Mido platform, mentioned by Lei just now, For FMCG, home products or other categories can support Pingtan's shipments and provide users of Pingtan with more product selection. At the same time, better generates sales benefits for core retail through sales from Pingtan's channel. So we are working with various business partners, including China Daily and the manufacturing bases for agricultural products to strengthen our supply chain capabilities for the upstream and try to source the best value product for our users. At the same time, helping the existing market players on the supply chain with digital transformation, including the agricultural product facing market. Our Qingqi e commerce platform aims to serve the users from the lower tier cities, And we have accumulated a lot of loyal users since this establishment. Based on our initial task in a small group of users, We are pleased to see a good conversion of Silti users to Ping users. So we believe JD Group's consistent teams and capabilities in the lower tier cities formed a good basis to start our PC business, Although not sufficient to support the growth of the new business, as we can quickly replicate, adjust and apply our existing skill sets, industry note outs and capabilities to the new model. Qutin can also help increase the engagement of users and merchants on the lower tier market, including convenience stores for Xunxi and Sifitong Business as well as supporting our main app. So these are also the logic of reorganizing and consolidating the 3 And we also got supply chain support from our core retail and logistics business groups. So talking about the investments. We have put aside sufficient budget to start and grow the business As we move to invest in many areas as I just mentioned, and we will evaluate the LIs For the investments, we make periodic adjustments based on the market situation. It's pretty difficult to accurately predict At this stage, how much we are going to spend on these new initiatives, as you can see, the market is very dynamic with many, many players. What I can tell you is our strategy is not to acquire users through short term and crazy subsidies, But to really invest in building the hardcore capabilities and technology to run the business And create long term value for our users and agents partners and to the society. So this is also consistent with our group's operating philosophy. To improve the transparency of our communication with investors, we plan to take out the operating results of Silcy Business Group From JD Retail segment, Andrew reports under new business starting from Q1 this year. We are excited about this business Let me add something on the new business. And not only for the e commerce, but essentially for all the retail business, we will focus on the customers' products and the platform. So since the beginning of JD Retail's development, we started from our products And we start to expand our product selections. So we do our 1st party and then the 3rd party product offering. And for the next step, we focused on our customers and we start with providing products to the targeted customer cohorts We're interested in the consumer electronics and digital products. And then we will continue to expand our consumer base to more people in the lower tier cities and female users, etcetera. And in terms of the platform, we started to build our platform In a centralized way and then now we are moving to more decentralized formats. And in the past 2 years, we have been exploring new formats with the offline businesses and our omni channel initiatives. So this is the basic JV's business logic. And behind that, The most important thing is that we are thinking and doing things to see what are the pain points, what we can solve, The pain points about bringing down the cost and improve the efficiencies and giving better shopping experiences for our customers. So, as you can see, it's a process we are looking for some solutions for pain points and also whether there will be new ways There will be new, when we're leading or advanced models or methodologies to do retail. So you have seen that in the past year, JD Retail has incubated JD Health and JD RMO, and All of this has been created based on our principle to solving some pain points and create value for this industry. And we have seen that In JD's development history and this has turned to many other companies as well, when we are considering to enter a new market, We'll first look at the scale of the market. However, we'll think deeper and see whether this new business will truly create Long term value for the industry and society. So, this is, as I mentioned, the basic logic when we are making our decisions to Enter a new business or not. So eventually, we would love to create a sustainable and constant value to the society and our customers. And also supplement our businesses other than the retail business. For JD Logistics, it will continue to build technology and infrastructure to further expand its production and service offerings. And we also have JD International. So we have a small operation in Southeast Asia. They are in the sector growth Next question, please. Your next question comes from the line of Alicia Yap of Citigroup. Please ask your question. Hi, thank you. Good evening, management, Shilei, Zhang, Sandy. From Community Group Buy in the Q4. Just wondering your FMCG category, have you seen any impact given the rising intensity of this community group buy platform from the peers? And then just Quickly on the Q1 Chinese New Year, so any qualitative color that you could share with us Given this year is also another a little bit special year given the stay in the city measure, so what have you In terms of the category demand as compared to the normal Chinese New Year period, any category that you have seen abnormally Thank you. This is Xu Lei. I will answer the questions related to FMCG and the Chinese New Year grant promotion. And overall speaking, we have seen the focus of the community group buying In the following areas, first is the fresh produce and also the FMCGs and some may related to the digital products, We don't see a quite big impact of we don't see the JD's business has been Having a big impact from the fast development of community group buying related to our customers' human behaviors and their mind shares and also their preference on our products. It's also worth mentioning that some of our You have been some favorable items that some community group buying companies want to work with through our supply chain enabling business format. And regarding the point about the spring festival, Shopping festival, because compared with last year's COVID situation, this year, there are some major changes on the consumptions. We do see a healthy Consumption results and consumers' participation in this year's shopping festival. We have seen some categories enjoying very fast groceries during this year's Surged from the pandemic the most last year and this year, the demand is coming back fast. And In contrast, some categories which had a good sales performance last year, such as home cleaning, healthcare and masks, They're coming back to the normal level. So generally speaking, we do see this is a very healthy consumption trend. And one more point to add is that because The government encouraged people to stay at their working place to celebrate the New Year. We do see a surge of remote orders And among our platform, the remote orders are those orders the buyers make the orders and sending to the recipients leaving in other cities. And the sales of the remote order the numbers of remote order actually doubled on our platform. And also because of the staycation, A lot of merchants continue to operate their business on the platform during the brand promotion and even extend their working hours there. So, we do see they are very engaging and very active in participating in these sales events. Yes. And on the revenue contribution from community group purchase in Q4, we only experimented in very We are now approaching the end of the conference call. I will now turn the call over to JD dotcom's Ryu Lee for closing remarks. Thanks, operator. Thank you. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.