Hello, thank you for standing by for JD.com second quarter and interim 2022 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Mr. Sean Zhang, Director of Investor Relations. Please go ahead.
Thank you. Good evening and good day, everyone. Welcome to JD.com second quarter and interim 2022 earnings conference call. Let me introduce the management team on the call today, CEO of JD.com, Mr. Lei Xu, will kick off with opening remarks. Our CFO, Ms. Sandy Xu, will discuss the financial highlights. After that, we'll open the call to questions from analysts. I would like to remind you 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.
Please refer to our latest safe harbor statement in the earnings press release on our IR website, which applies to this call. We'll discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in our press release. Also, please note, unless otherwise stated, all figures mentioned in this call are in RMB. Now I'd like to turn the call over to Mr. Xu, our CEO.
徐 总. 各位投资者、分析师，大家好，感谢参加京东集团2022年第二季度业绩电话会议。在刚刚过去的二季度，疫情在全国多地复发，宏观经济和外部环境复杂严峻等多种因素叠加，使零售行业遇到了前所未有的巨大挑战。中国GDP同比增长0.4%，而社零和同比下降4.6%，均触底过去两年的最低增速。尽管面对诸多困难，京东不仅帮助用户和合作伙伴共克时艰，尤其在支援上海、北京等全国多地抗疫保供期间，京东累计投入以及为商家减免费用等共二十亿元，同时自身也继续取得好于整体零售行业的增速，并且运营效率和利润率稳步提升，展现出穿越经济周期的韧性和发展动力。中国经济经历了非常长时间的高速发展，但经济发展必然存在周期性，也因此会给企业发展带来阶段性的挑战。企业需要具备长期的思考框架，提前做好必要的、基于长期的战略布局和能力建设，这样才能在周期波动时稳健发展，展现更大的价值，获得更长远的发展机会。这与追求短期爆发性增长的经营理念存在本质不同。
Hello, everyone, this is Lei Xu. Thank you for joining JD.com 2022 second quarter earnings call. In the second quarter, a combination of factors has brought unprecedented challenges to the retail and consumer industry in China, such as the COVID resurgence across many regions and the complex macroeconomic and external environment. China's GDP grew 0.4% year-over-year, while total retail sales fell 4.6%, both hitting their lowest levels of the past two years. Despite all that, JD managed to help its users and partners to glide through the difficulties and continue to outpace China's overall retail industry while delivering steady improvement in operating efficiency and margins.
This once again demonstrates JD's resilience and healthy momentum through difficult cycles. China's economy has experienced rapid development for a long time, but economic development is bound to be cyclical, creating theoretical challenges for businesses. Companies need to have a long term mindset and to actively build strategies and capabilities that will support growth over the long term. This will enable them to mitigate cyclical fluctuations with resilience, showcase greater value, and lay a stronger foundation for the long run. This mindset is fundamentally different from that of pursuing explosive short term growth.
今天我想和大家分享一下，在这样具有挑战的宏观大环境里面，京东为什么对未来保持信心，以及我们在做什么。首先，京东始终围绕着用户体验、成本和效率的核心理念，打造长期的商业模式和核心能力。在第二季度，京东保持了稳健的活跃用户规模，这主要归功于核心零售业务的活跃用户保持健康增长，环比净增超过一千万，并取得同比双位数百分比的增长。京东长期以来对用户体验的极致追求，使我们在核心用户规模稳健增长的基础上，整体用户质量，包括DAU、用户购物频次和APP等也在同步提升。其中二季度我们的DAU同比增速达到25%。用户分层看，我们消费力最强、潜性最高的PLUS用户，在今年前七个月规模继续扩大了五百万，总数已突破了三千万。在规模快速扩大的同时，PLUS会员的年均消费水平也超过普通用户的八倍。我们也高兴地看到，新用户对京东更加认可和信任，新用户的APP明显提升，购物频次更是达到三年以来最高。更多女性用户、年轻Z世代用户和银发群体正在变成京东的忠实用户。这是我们多年来践行客户至上、不负每分热爱等理念的结果，也对我们下半年以及未来更长期的用户规模增长和质量提升打下重要基础。
Now I'd like to share with you why JD remains confident in the future and what we are doing amid the challenging macro environment. First, JD has always focused on user experience, cost optimization, and efficiency to build its long-term business model and core competencies. In Q2, our annual active user base remained strong, mainly driven by healthy user growth in our core JD Retail business, which recorded a substantial net addition of over 10 million users and double-digit percentage growth on a year-on-year basis. On top of this, our long-standing pursuit of superior user experience further propelled user quality, as evidenced by the increases in DAU user shopping frequency and ARPU. In particular, our DAU achieved a 25% year-on-year growth in Q2.
Looking at different user segments, JD PLUS members who are among our users with the highest consumption power and stickiness, further expanded by 5 million in the first seven months and passed the 30 million user milestone last month. While scaling up, PLUS members also maintained high average annual spending, which was 8 times that of non-PLUS members by Q2. We're also pleased to see that our new users have more appreciation and trust in JD with a notable increase in ARPU and record-high shopping frequencies for the past three years. More female, Gen Z, and elderly groups are becoming loyal users of JD, thanks to our efforts over the years to always put consumers first and cherish everyone's love. This also sets a solid foundation for our users' growth and quality improvement in the second half of the year and the years to come.
JD continues to drive forward its long-term strategy based on three pillars, namely consumer, merchandise, and shopping scenarios. As such, we have made unwavering efforts in exploring low-tier markets, building core capabilities in the supply chain middle platform, expanding omni-channel or intercity business, and further strengthening our online marketplace ecosystem. The lower-tier market has also always been an important incremental part of our addressable market, and we have made a long-term commitment to it. In light of the evolving macro and industry environment as shared before, we have shifted our focus to the efficiency of our resource allocation in this area. Moving to the supply chain middle platform, we believe that this is far more than a driver to improve our growth margin and cost structure.
It plays a key role in increasing operating efficiency in the retail industry, boosting breakthroughs and innovations for mature brands, and catalyzing rapid development for emerging brands. JD has integrated and synergized three networks, including a transaction network that covers around-the-clock omni-channel shopping scenarios, a warehousing and distribution network that serves nationwide and extends globally, and a service network that is enabled by intelligent technology. Seamless integration of all three networks overcomes the pain point of a single network. It not only ensures the reliability of JD's own supply chain, but also drives digital transformation and efficiency improvement for the up and downstream industry players, supporting the high-quality development of China's real economy. In the future, high-efficient and flexible supply chain capabilities will be a top priority for the sustainable development of China's retail and other industries.
COVID's resurgence and the complex environment have made this even clearer to an increasing number of companies. China has made significant progress in developing supply chain capabilities, but there is still room for improvement. JD is well-positioned and determined to provide the industry best-in-class supply chain solutions.
在此基础上，京东物流在二季度不仅实现了稳健的收入增长，而且外部一体化供应链收入和客户数继续保持双位数增长，同时外部收入占比已接近六成。此外，京东物流也在继续稳健推进在全球范围内的物流基础设施布局。截止二季度末，京东物流运营的仓库数量超过1,400个，管理的物流基础设施总面积约2,600万平方米。
JD Logistics healthy development is a strong testament to our supply chain capabilities, which are empowering this industry. Amidst the COVID resurgence, JD Logistics once again spared no efforts to protect the people's livelihoods. As one of the first batch of companies working with local cities to ensure supply of daily necessities, we have gained wide recognition throughout society. At the same time, JD Logistics leverages integrated supply chain logistics service capabilities to solve the supply chain disruptions faced by many external customers, such as in FMCG, home appliance, finished furniture, apparel, 3C, automobile, and fresh produce industries. As a result, JDL achieved a steady growth in total revenues during the quarter and maintained double-digit growth in external revenues and the number of external customers. During the quarter, JDL's external revenues accounted for nearly 60% of its total revenues. In addition, JDL continued to expand its logistics infrastructure globally.
By the end of Q2, it operated over 1,400 warehouses and managed a total GFA of approximately 26 million square meters.
京东的全渠道业务在第二季度保持健康发展的姿态。虽然零售行业经受了疫情的冲击，但我们同城零售业务取得了同比三位数的高增长。零售消费行业的变化趋势验证了京东提前布局全渠道业务的战略判断，并且我们对同城零售业务有自己差异化的理解和策略。首先，京东拥有天然的购物属性性质，发展同城零售业务是去中心化场景中对用户消费需求的深度挖掘。其次，京东拥有更强大的供应链中台、B2C销售能力和全域用户的运营和管理能力，可以和合作伙伴建立更全面立体的合作，帮助其业务高效适应市场变化，满足消费者多场景即时的消费需求，从而实现零售行业的成本、效率和用户体验的进一步优化。我们也很高兴看到同城零售行业正在蓬勃发展，京东也会在赋能核心能力的基础上，不断尝试新的模式，提升技术能力，拓展多业态的全渠道业务。
Our omni-channel business maintained healthy momentum in Q2. Although COVID brought significant challenges to the retail industry, our intra-city retail business continued to deliver triple-digit year-on-year growth. The evolution of the retail industry validates our early decision to expand into the omni-channel business, and we have formed differentiated perspectives and strategies around this business. First, JD's customers naturally associate us with shopping. While developing our intra-city retail business, we further explored that association and customer needs in decentralized scenarios. Also, with strong capabilities in supply chain, B2C sales, and user management, JD is able to establish more comprehensive cooperation with partners to help them efficiently adapt to the market changes and meet consumers' instant needs in various scenarios, thus leading the retail industry's cost optimization and improvement in efficiency and user experience. We're also pleased to see that the intra-city retail industry is booming.
JD will further leverage its existing core capacities to explore new business models, improve technical capabilities, and expand omni-channels with multiple business forms.
京东一直在努力为商家构建健康可持续的开放生态体系，并已经积累了一定的基础。在第二季度，居家、运动户外和美妆等品类保持了高于行业的良好增长态势。我们正在从头部品牌、中小商家等各个层级拓展商家生态。商家受到疫情和宏观环境的冲击更大，更加希望与京东这样可以带来确定性经营效果的伙伴加深合作。在第二季度，京东主站APP也进行了全面改版升级，重构流量分配机制，为商家提供更多精细化、数据化的运营工具，优化了商家经营环境。618大促期间，商家在京东的运营效果良好，销售贡献占比同比提升。通过建设更加开放包容的生态体系，京东将继续发挥供应链、物流、技术和服务的核心能力，携手更多商家一起陪伴成长。
JD has been striving to build a healthy and sustainable ecosystem for merchants and has already laid a solid foundation. In Q2, a number of categories, including home appliances, sports and outdoor, and cosmetics, continued to outperform the industry. We have been expanding our ecosystem for merchants, including both top brands and SMEs, as they are more willing to deepen cooperation with business partners like JD that can help them navigate the impact from COVID and the macro conditions. In this quarter, we revamped and upgraded JD's main app, reconstructed our traffic allocation mechanism, and provided more refined digital tools to build a better operating environment for merchants. During the 618 Grand Promotion, merchants achieved better growth and contributed a higher proportion of sales compared to a year ago.
By building a more open and inclusive ecosystem, JD will continue to leverage its supply chain, logistics, technology, and service capability to join hands and grow together with more merchants. To conclude, I'd like to reiterate our thoughts on the cyclical adjustment of economy and the long-term mindset that companies need to have. Economic development has cycles, but that doesn't mean it loses long-term momentum, and we believe that the retail industry has the power to weather different cycles. In face of the current macro and industrial adjustments, what's important for JD is to further strengthen our core capabilities, increase operating efficiency, and ensure healthy margins and cash flow, while at the same time continuing to invest in innovations and the strategies that will position us well for the future.
Looking ahead, there may still be uncertainties, but from a long-term perspective, we believe that China's consumer market has strong vitality and will become the world's largest in scale. When coming out of the cyclical adjustment, we expect to see strong recovery momentum. We will continue to build upon our strengths and capabilities to better capture opportunities and prospects for the long term. With that, I'd like to give the floor to Sandy.
JD has been playing a vital role to serve customers with daily essentials, to help our business partners manage their business efficiently in times of uncertainty, and to support many cities in their efforts to boost consumption. Our solid second quarter results continue to demonstrate our ability to serve our customers and business partners, while manage our business effectively despite the challenging operating environment. In the second quarter, our net revenues reached RMB 268 billion, representing a solid 5% year-on-year growth despite the COVID-related disruptions, particularly in higher tier cities and the tough comps as we lapped the strong recovery from last year. Our GMV, excluding unpaid and canceled orders, came out from the trough in April and has since seen a gradual improvement in growth as COVID-related supply chain and logistics disruptions subsided starting from the end of May.
Product revenues were up a solid 3% year-over-year, reflecting the outperformance of our online retail business, which helped to secure stable supply of essential goods for our users. Our annual active user base remains resilient at 581 million, mainly driven by over 10 million net addition of active users in core JD Retail business from the previous quarter, partially offset by the adjustments in our Jingxi business, which I will elaborate later. Service revenues grew by 22% year-over-year to RMB 41.6 billion, and exceeded 15% of total net revenue for the first time in history. Many merchants faced operational and logistics bottlenecks during the COVID, and increasingly turned to JD's reliable supply chain infrastructure to weather the challenges.
As a result, logistics and other services revenues grew by 38% year-on-year in Q2, which I will talk in detail later. Our marketplace and marketing revenues grew 9% year-on-year and exceeded the RMB 20 billion mark in Q2. In particular, our advertising revenues reported a healthy double-digit % growth, which is faster than our commission revenue as we proactively rolled out relief measures for SME merchants. In the quarter, we saw that many business partners and merchants, especially those from the electronics and cosmetics categories, allocated additional advertising dollars to boost recovery. Moreover, thanks to our improved ecosystems, this year, and new merchants on our platform gained more user and sales traction during the 618 Grand Promotion, and subsequently contributed more sales than before. Now let's turn to our segment performance.
JD Retail's revenues grew 4% year-on-year and reached RMB 242 billion in Q2. I'd like to share three consumption trends that we observed in the second quarter. First, customers continued to shift purchases from discretionary goods to daily essential items, which has driven our general merchandise revenue up by 8% year-on-year in Q2. Notably, our largest growth category, supermarket, continued to see its order volume growing over 25% year-on-year as it serves users' daily needs anytime and anywhere. We are also encouraged to see revenues for healthcare, home goods, sports and outdoors, cosmetics, and MRO recording double-digit growth and outpacing the sector. The trends reflected our expanding user mindshare across many of our emerging categories. Electronics and home appliance category reported a sluggish revenue compared to the same quarter last year.
Both computer and home appliance maintained solid growth in the quarter despite the fulfillment bottlenecks in our commitment to prioritizing delivery of life essentials during COVID resurgence. Mobile phones experienced a soft performance in the quarter amid a sluggish sector momentum. Meanwhile, we are also encouraged to see that since the logistics bottlenecks eased in late May, our electronics category has experienced a nice rebound and has been outperforming the sector again, thanks to our strong consumer mindshare and industry-leading supply chain capability in this category. Finally, fulfilled gross margin of JD Retail was up by 50 basis points compared to the same quarter last year. Although the COVID resurgence added to the operational complexity as well as our fulfillment cost, the incremental cost was more than offset by an increase in gross profit. Most categories have benefited from increased user traffic as JD tops customers' mind for reliability.
As a result, we experienced savings on marketing and promotion. On top of this, we also enhanced our operating efficiency and focused on ROI of general marketing spending and other OpEx. As a result, JD Retail's operating margin reached 3.4% in Q2, an improvement of 80 basis points from a year ago. JD Logistics or JDL was an important pillar that underlies our ability to navigate the supply chain complexity. Its Q2 revenues grew 20% year-on-year to RMB 31 billion. With its proprietary logistics network, JDL was one of the few companies that could still work around the challenges and support fulfillment services that many customers and merchants critically needed in an uncertain time. Subsequently, revenues from external customers continued to outgrow internal revenues, further diversifying JDL's revenue stream.
More impressively, JDL's ongoing operations and technology optimization and stringent cost discipline more than offset the incremental fulfillment costs arising from resulting staff subsidy and protective measures during recent COVID outbreaks. Therefore, its non-GAAP operating margin improved 150 basis points from a year ago and turned positive in Q2. JDL is well on track of improving its profitability even in this challenging operating environment. Dada reported revenues of RMB 2.3 billion and an operating loss of RMB 424 million. During this year's 618 promotion, Dada further enriched customers' shopping experience through enhanced omni-channel collaboration with 150,000 offline stores across China. As a result, the number of users who placed orders through Shop Now increased by over 400% compared to the same period last year.
Dada plays an essential role in executing our important omni-channel or intra-city retail initiative, which has been growing triple-digit percentage, as Xu Lei just mentioned. Finally, due to the evolving macro conditions, we reviewed and rationalized our strategies in different parts of our new business segment. On one hand, we proactively implemented cost control measures and strategic alignment in our new businesses in face of the challenging external environment, particularly the Jingxi business. The operating loss was reduced both sequentially and on a year-on-year basis. On the other hand, we continually pursue long-term growth opportunities through technology, innovation, and our new business models, where we may adjust our pace of investment from time to time based on market conditions.
JD Property recently entered into agreement to set up its third logistics property core fund on top of the two core funds that were successfully launched before, which will bring the total transferred AUM to surpass CNY 27 billion upon the completion. Moving to the consolidated bottom line. In the face of the additional costs arising from the macro uncertainties and fulfillment complexity, we effectively managed our capital allocation across businesses to focus more on our core business and further enhance operating efficiency by pulling different levers in cost control. As a result, Q2 non-GAAP net income attributable to ordinary shareholders was CNY 6.5 billion, with non-GAAP net margin of 2.4%, representing a year-on-year improvement of 60 basis points. On a GAAP basis, net income attributable to ordinary shareholders also turned positive to CNY 4.4 billion, with GAAP net margin of 1.6%.
Our free cash flow for the trailing twelve months this quarter sequentially improved to CNY 27.7 billion, mainly driven by robust operating cash flow as a result of healthy margin improvements in business and prudent cash management, in addition to the seasonality factor. By the end of Q2, cash and cash equivalents, restricted cash and short-term investments added up to a total of CNY 207 billion, up from CNY 186 billion last quarter. During the quarter, we have returned close to CNY 15 billion in cash to our shareholders through cash dividends and share repurchase, which amounted to over 20% of all our accumulated retained earnings in the last three years.
Before I close, I would like to emphasize that while the increased uncertainty in the near term may prove to be challenging for every industry player, including JD, it's also an opportunity for us to strengthen our market position as we are better positioned to grow our business effectively and manage our resources cautiously. We are confident to press ahead with resilient performance, primarily due to two drivers. First, thanks to our proprietary supply chain capability, we are able to quickly adapt to the changing environment and support customers and business partners who were craving for certainty. This enables us to further strengthen our consumer mindshare and continue to outperform the industry. Secondly, relentless focus of operating efficiency and investing our resources effectively has always been the bedrock of our unique business model, and it is playing a bigger role in securing our long-term, high-quality growth going forward.
With that, let's open the call to the Q&A. Thank you.
The question-and-answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask 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 wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your question, please press star then two. If you're on a speakerphone, please pick up your handset to ask your question. Our first question will come from Ronald Keung with Goldman Sachs. You may now go ahead. Thank you, management team. I would love to hear whether you could share how your expectations for second half growth.
Have you seen any further consumer confidence improvement through July and August? I can see that second half last year and during Singles Day, your performance was very strong, much outpaced the industry. For this year's, do we have any strategic strategy on categories, delivery formats and shopping formats, even live streaming? Any of those strategies that we are planning to drive this second half growth? Thank you.
Xu Lei, let me take your question. I need to say that for this quarter, it's we are facing a lot of challenges. Actually, it's the most challenging quarter since we're listed. I don't need to elaborate a lot on the reasons and there are different impacts of the macroeconomics and the cost increases
Leveraging on JD's supply chain capabilities and our staff and user qualities were less affected compared with overall industry.
那么从品类角度来说呢，我们可以看到的是增速比较好的还是民生类的用品，比如像消费品类的、健康品类的、家电品类的，以及我们的全渠道业务和同城业务，这些业务增长应该还是不错的。同时呢，因为我们一直在做线上线下的布局，所以说使我们呢摆脱了之前的只是线上的这种增长轨迹的束缚，所以相对来说呢，取得了一个健康的、稳定的增长。
On the different categories, they are reflecting different conditions. For those categories that are closely related to those essential products for the livelihood such as consumer products, home appliances and health related categories as well as JD's omni-channel business and for intra-city retail business, they are seeing a quick growth. Also JD has been deploying our online and offline development. This also helps us to maintain a healthy and stable growth.
相对来说表现较弱的应该还是长尾的非刚需的品类，比如像服装这个需求比较低迷，包括酒类。酒类的这个场景因为疫情的受限原因，当然了，我们这个市占率呢，还是在稳步的提升。另外就是手机行业，因为全球应该也看到了，它遇到比较大的挑战，整个中国区的这个用户换机的周期也变长。所以说这几个品类应该是表现相对较弱。
For some other categories that are long tail and are non-essential, such as apparel, they're having a weaker month. Do the alcohol categories because their shopping scenarios are limited. However, on these categories, JD continue to expand our market share. Also worth mentioning is the mobile phone industry, as we see they are facing multiple challenges and we see the consumers, they are prolonging their phone changing cycle.
短期的宏观和消费市场的展望，我们还是有看到，就是短期来说，一些负面的因素还会出现，还会有很大的挑战和影响。但是，就像我在之前讲到的一样，我们还是对整个中国宏观和消费的长期的趋势还是比较有信心的。而且，我们一直在打造的供应链能力，所以说它在这种特殊的情况下，给我们的支撑应该还是比较强的。同时我们也觉得有义务为整个行业去提供帮助，而且我们在操作上来说，我们还是比较关注的是优质的增长，包括获得消费者的心智，扩大市场份额，完了以后关注利润率和现金流的健康，这是我们在一些比较关注点。
For the short term, admittedly, we will continue to face some headwind. For the long term, as you just shared, we continue to be confident in the long-term China's macro economy and consumption trends. Since day one of JD, we start to build our supply chain capabilities and we do have faith and see the value of these capabilities. We think we have a responsibility to use our supply chain capabilities to support the productive development of the whole industry. In the coming time, we will continue to focus on quality growth and continue to enhance our market share among our consumers, expand our market share, and be mindful of our margins and healthy cash flow.
关于新的战略，我相信很多的朋友也比较关心，但是我想在这里告诉大家，就是我们理解的战略，应该是在若干年都不会发生调整和变化的。那如果从我们的角度来说，有几点是我们一直无论是之前、现在以及未来我们都会长期做的。比如说第一个，极度地关注用户的体验，第二个供应链，第三个，作为一家零售公司来说的降本增效，而且我们认为未来的空间依然很大。还有持续不断的技术投入，还有就是基于现在的情况，有纪律的创新，这些我觉得应该是一直不会变的。
A lot of people are paying much attention to our strategy. I want to emphasize here for the strategy, it won't change, it will stay for a long time. For the following aspects, it will always continue to be our main focus. First is user experience, and second, our building of the supply chain capabilities. Third, there's a lot of space for us to continue to improve our cost and efficiency. Fourth is our investment in technology. Fifth, we continue to develop innovation business in a disciplined approach.
具体到战术层面的话，实际上这些年我们也没有变化。第一个下沉市场，我们还是要继续做宽用户的广度，我们还会有很多的细节的战术，我们还会在接下来会展开。第二个就是布局同城零售，从这个场的角度，深挖用户的需求。第三个就是继续不断打造供应链能力。我们认为就是尽管我们应该是领先于这个同行业，但是我们还觉得自己的供应链能力还可以继续不断地打造。然后，最后就是不断地打造开放平台生态。其实以上说的这四点，应该说这几年一直也没有更多的变化。
From the tactical perspective, number one, we will continue to deepen our lower tier market to expand our reach to the consumers.
Second, we will deepen in the JD Retail business, working on the shopping scenarios to deepen our understandings and insights on consumers' needs. Third, we will continue to build our supply chain capabilities and view it from a merchandise perspective. Even though we are in a leading position in terms of the supply chain, we see that there is still a lot of room to improve. Fourth, we will continue to build an open platform ecosystem, and these four aspects will remain a long-term tactic for us to continue.
Oh, sure.
Thank you.
Thank you. Next question.
Okay. See you later.
Our next question will come from Kenneth Fong with Credit Suisse. You may now go ahead.
Congrats on the strong results, and thanks for taking my question. We saw a very meaningful uplift in operating efficiency in the second quarter. As internet companies continue to go through cost optimization, how should we think about the margin upside for our business, especially, we are already very efficient? Thank you.
Thanks for the question. This is Sandy Xu. Let me take this one. Overall, looking ahead, as mentioned before, given the increased macro uncertainties and fulfillment complexity due to COVID resurgence, we are more focused on the effectiveness of our capital allocation across different business units and the improvement of operating efficiency this year to ensure our company, our group, is in healthy cash flow and balance sheet position, well prepared for the next booming cycle. Specifically for JD Retail, we expect that the fulfilled gross margin of most core categories to continue to improve in Q3 year-over-year and quarter-over-quarter, especially the supermarket category. The profitability improvement actually comes from a better marketing and operating efficiency and our expanding economies of scale.
Our retail is fundamentally a business of scale. We believe that JD Retail's long-term margin improvement trajectory will continue to be demonstrated. For JD Logistics, even though we still expect to incur some additional costs due to various types of COVID cuts here and there, so far, the magnitude is not as significant as that in Q2. JDL continues to demonstrate the value they could bring to their customers, i.e., the efficiency savings and the better service quality, which are reflected in JDL's improving gross margin. We will try to maintain the full year bottom line target for JDL. For new business, as you all know, we started to adjust our investment pace in new business since the end of Q1.
Our management team are more focused on cash flow and profitability. We expect that our investment scale in new business will decline both year-over-year and quarter-over-quarter. For the group as a whole, we have better control over and confidence in the bottom line performance. We expect the near term profitability at the group level to improve meaningfully year-over-year. We will continue to focus on quality growth and creating value for our shareholders. We are continuing to gain market share in our core businesses, maintaining our commitment to invest for the long term. Thank you.
Yeah.
Just add a few words on the supply chain from Xu Lei, please. I think many people think JD's supply chain capabilities is in a leading position in China. Even though we also think so, but we also see that there plenty space for us to improve on these aspects. We have been reiterating a lot on our mission to improve our supply chain capabilities. For example, in the past, we are thinking about supply chain from our own perspective. For now, we are more taking a more holistic approach and thinking about our partners. Both internal and external collaboration is more important in supply chain building. From internally, we have seen the supply chain capabilities on different categories are different.
We are improving those and making a high standard for the overall capabilities of our supply chains across all categories.
比如说我们以前是以线上业务为主，现在也开始拓展了线下，包括我们自己或者是对外的合作线下。所以说我们要从线上线下一体化角度去考虑供应链。
Before we think a lot, think more mainly focus on the online supply chain with our development, with our offline business and collaboration with external partners. We will also see both online and offline externally.
比如说以前我们供应链更多的是在常态化，那么这次疫情的影响让我们在特殊情况下，尽管我们比其他公司受的影响更小，我们表现得相对会好一些，但是我们觉得我们在这种特殊情况下的供应链能力还要再进一步打造。
In the past we think we operate in a normal situation. Even the outbreak of the COVID in the special situations, even though we are less affected, we are thinking of taking into consideration how we can better perform in extreme or special situations to run our supply chain.
最后我想表达的是，尽管我知道现在有很多的公司都纷纷地表示要加强供应链的学习和能力地打造。
Last I want to say that even though I hear a lot of companies are talking a lot about improving their capability in terms of supply chain these days.
但实际上京东将近二十年的历史，我们在供应链的投入以及我们的理解，以及我们的业务模式，实际上是我们应该是非常地坚定的。我们有自己的对供应链的理解和自己的发展的方向，我们也不会追随于任何一个竞争对手或者叫同行。
I want to point out that JD has been developing our supply chain and building unswervingly in this field in about 20 years of our development. We have been investing in it and evolving our understanding of this field for a very long time. I want to just say that we will unswervingly continue to develop supply chain in accordance with our own understanding in our own direction, and will not follow any other people's footsteps.
好，谢谢。
Thank you.
好，谢谢徐总。谢谢尚副总。
Our next question will come from Thomas Chong with Jefferies. You may now go ahead.
晚上好，谢谢管理层接受我的提问。公司这么好的业绩，我想先问一下呢，在一个宏观的不明朗，还有房地产，还有最近啊天气的问题呢，我们应该怎么去理解呢，下半年我们对家电的一个展望呢？另外的话呢，就是我们在Omnichannel，呃，现在的在收入的占比，还有我们呃，未来的呃，战略可以再多分享一下吗？我第三个问题是在我们的，呃，消费者的层面上面呢，呃，我们在Plus，呃，会员啊，未来的战略，啊也想啊多听一下管理层，啊，对后续的一个，啊战略的，啊，的一个方向。
Thanks management for taking my questions. Congratulations on a very strong set of results. I have a few questions. The first question is more about the macro headwinds as well as what happens to the property sector together with the hot weather these days. How should we think about the outlook for the consumer electronics in the second half?
My second question is about our omnichannel strategies. Given our solid execution in omnichannel, may I ask about the revenue contribution and the key focus areas in coming years? The third one is about our Plus membership. Given the solid progress that we have made, can we talk about our strategies as well as what we are seeing in terms of the consumer behavior for existing and new members, new users? Thank you.
我回答第一个和第三个问题，先回答一下关于战略的问题。
Can you answer the first and second question, first is about home appliances?
Q2来看呢，整个家电行业面临的疫情和经济下行的这种消，包括消费需求的疲软，供应链的冲击，包括在物流和上门安装的履约，这个受影响其实是非常大的。
In Q2 for the home appliances industry, they are facing multiple challenges, including a downward economy and a weak consumption demand and the disruptions on the supply chains and the logistics and the service to door-to-door services.
那从品牌角度，品牌商角度来说呢，对业务的增长啊，大部分品牌商也是持一个谨慎的态度，所以他们也比较关注确定性的销售。然后呢，这个精细化运营和健康的利润，这是整个家电行业应该大家的共识。所以在这种情况下呢，京东的策略应该更符合品牌商的诉求。所以说大家在二季度，甚至我相信在未来的一段时间，那么京东应该还是品牌商非常重视的一个消费的阵地。
From the brand perspective, they are taking a more cautious attitude and focus on the sales that can bring more certainty, refined operation and healthy profitability. This has been a consensus in this industry and this also makes JD a more preferred partner to work with them in line with this pursuit. I believe in this quarter or in the coming months, JD will continue, they will continue to attach great importance to the collaboration with JD.
我们二季度的这个家电品牌的表现呢，还是优于整个行业的，而且利润水平也表现得非常的出色。我觉得这应该跟我们多年打造的家电的这种供应链的能力和对行业的理解，包括现在已经占领了消费者的心智，合作伙伴的认可等等的多种因素是相关的。那再加上我们自己对成本和费用的管控，应该是相当有纪律性。
For Q2. JD's home appliances category has outperformed the industry and they have delivered quite outstanding margins on JD.com. I think this is a main contributor to JD supply chain and also our deep understanding in this industry and our strong market position among consumers and our partners. This is also a testimony of our disciplined approaches to our cost control and efficiency improvement.
进到Q3以来，我们看到的是家电这个品类还保持了一个向好的趋势，增速应该说在六月份的基础上也会进一步的提升。但是整体呢，因为确实受到这个经济环境的影响，增速较往年是有所放缓的。那么而且下半年的这个疫情和宏观不确定性呢，也依然会存在的，所以说呢，我们还是会去聚焦这个成本、效率和体验。另外想分享的就是我们的家电应该在全渠道方面的进展，应该说品类相对比较快的，包括我们有进入到低线市场的家电专卖店，包括我们的五星的多种形式的线下店，应该说都是远远高于整个行业的增长，所以这也改变了我们家电这个品类自身的一个增长的变化，以及击破了整个行业的这个低迷的增速。
In Q3 we see these categories on the two tracks and it's likely improving since June level. However, overall the market is still in a low level and we are still facing some uncertainties from the macro and external environment. JD will continue to focus on cost efficiency and experiences. Also, I want to point out that thanks to our development in omni-channel, home appliances category is developing fast on omni-channel side. This is also thanks to our strategy to go to the lower-tier cities and our development on those Five-star stores, such as our Five Star Appliance and other formats of physical stores. This also helps this category to outpace the overall market and bring some new growth opportunities for the home appliances industry.
关于用户的话，我想分两块，一个是整个全站的用户来说，应该大家也可以看到，Q2应该是非常有挑战的这个季度，因为内外多种原因，影响了我们用户增长的快速增长的趋势。这里面可能有外部的疫情、消费力的原因，也有我们积极主动地去调整了用户增长的这个策略。
About the user growth, Q2 is also a very challenging quarter and there are various reasons both outside and internally. Outside we have the COVID and the lack of purchasing power. Internally we also take initiatives to adjust our user growth strategies.
我想这个因为我们京喜业务的二季度调整，应该说呢，会带来这个短期的用户的流失。但是呢，零售的核心业务用户呢，依然保持了一个高质量的增长，用户质量是非常好的。
Because of the restructuring of our 京喜 business in the short term, we might lose some users. However, for the active users of our core retail business, we have seen a very high quality growth.
目前看到的就是用户的整个的频次up应该都是显著提升，尤其是新用户，我们这次的新用户的频次和up达到三年来的新高，那么零售用户的购物频次也有稍微是的提升。
For the users, their shopping frequencies are up and are all rising. Especially for the new users, their shopping frequency is up and is rising significantly and reaching three-year high.
那未来我们在整个全站的用户角度来说呢，我们还是会分层。第一个呢，下沉市场肯定还是我们一个用户增长的一个主力的市场。但同时呢，像银发，我们认为现在也是非常重要的，因为随着中国人我们的年龄、年龄结构的人口结构的变化以及消费力的变化，所以说银发市场应该也是一个非常重要的市场。
In terms of the different segments of consumers, the lower tier market consumers is an important shopping group. Also we will attach great importance to the silver group, the elderly group of people according to China's demographic changes and their shopping power changes.
最后想提一下关于京东 Plus，因为京东 Plus 这个会员的体系应该与国内外各种付费的会员体系是完全不一样的，就是可能没法按照任何一个角度去直接去对标。我们有自己的理解，完全基于我们自己的平台的特色和用户的发展、消费力去搭建的一个特殊的付费的会员体系。那么这几年的发展应该说达到了我们当初的初衷，并且现在已经显示出了更大的价值，而且我们未来会在上面做更多的一些业务创新。
Hopefully, I want to share a little bit more of our paid JD PLUS membership. This is a very unique system we created based on our own understanding and the features of our platform, the shopping behaviors of our users. It's not really comparable with other membership system in China and outside China. Through years of development, we see this membership, the JD PLUS membership, it's achieving a good success and meeting our expectations and bring a lot of values. In the future, we'll continue to build on this membership system and create more innovative services and benefits for this membership.
Thank you.
Thank you.
This is Sandy. Let me take the omni-channel revenue contribution question. When we talk about omni-channel strategy internally, that actually includes quite a number of business streams, including our Five Star offline home appliance business, our home appliance franchise store business, our 7FRESH, the fresh offline omni-channel business, as well as the Wujing Tianze initiative for our supermarket category, and the intra-city retail, the Shop Now initiative. Some of these business they contribute the one key revenue, but some of them, like Shop Now, they contribute GMV and commission revenue. In terms of the revenue contribution, it didn't change significantly this quarter. It was still around 10% from the omni-channel business as a whole.
To be honest, the offline business was disrupted more seriously compared to online business during the quarter, except for our Shop Now business that is still in early hyper-growth stage. Some of the other offline businesses did seem not to perform as strong as our online B2C business.
Okay. Thank you. This is Thomas. Can we take the next question, please?
Our next question will come from Eddy Wang with Morgan Stanley. You may now go ahead.
Thank you, management, for taking my question. My question is about the on-demand, you know, the retail. We noticed that we have, you know, deepened the relationship between JD and Dada, and I mean, do you think, you know, JD will increase its investment in the on-demand retailing? Given the overall consumption is slowing down, do we think the on-demand retailing could potentially become the next growth driver for JD? Thank you.
Actually, two years ago, when we discussed on-demand delivery, we're talking about O2O, online to offline. Actually, O2O is not equal to on-demand delivery, it's only one form of that. JD had started on this business by then. While we're doing this by then, it's more driven by our exploration to see how to better make fulfillment for those categories that will carry a high fulfillment fee. At the same time, we also realized that the usage demand for on-demand delivery is growing rapidly. In the past, when we do online shopping, we are offering more physical products. But also we have seen that people's demands are extending to more services, especially for the pet services or the aftermarket of the automobile industry.
It's driven us to look at the on-demand market to extend our service offering to the consumers.
Uh,
Certainly from the perspective of our brand partners, when they're doing more e-commerce, they're facing some difficulties in managing their membership, managing their users and doing their marketing. There are their own challenges when they do more e-commerce.
Uh,
Based on all these perspectives, this makes us think the on-demand retail is very important services we need to design and create for different parties in terms of different products and different services and systems and product categories, and all these are in the process of designing and preparation.
Uh,
Even though we have seen the whole industry, a lot of players are interested in this field and are joining this competition. Also on JD's side, we have seen the on-demand orders are growing rapidly, but I also need to make some rational judgments.
Um,
To develop this business, we need to continue to strengthen consumers' mindshare, and we also need to explore new types of supply chain, which is challenging for everybody now. We will also make sure the services, their reliability and stability for the on-demand deliveries. There's a lot of work to do, and we will continue to see the penetration of this business to the consumers and the qualities and the delivery performance of this new business. For the short term, we will not look at the short-term GMV as the goal. However, we do see the GMV on JD in the on-demand ratio is growing in a good track.
Uh,
Also I need to point out for the profit, it's not the right thing for the e-commerce players now is to grab the market in competition with the brand and with our offline merchants. We need a, like, a new system or new pattern that both the three parties are all can benefit from this new business model.
Thank you.
Thank you.
Thomas Chong.
Thank you, Eddy.
We are now approaching the end of the conference call. I'll turn the call over to JD.com's Sean Zhang for closing remarks.
Thank you for joining us today on the call and for your questions. If you have further questions, please contact me and our team. We appreciate your interest in JD.com, and looking forward to talking with you again next quarter. Thank you very much.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.