Hello, thank you for standing by for JD.com's fourth quarter and full year 2018 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'll now turn the meeting over to your host for today's conference, Ruiyu Li.
Thank you, operator, welcome to our fourth quarter and full year 2018 earnings conference call. Joining me today on the call are JD.com Group CEO, Richard Liu, Mr. Lei Xu, CEO of JD Retail, Mr. Zhenhui Wang, CEO of JD Logistics, Sidney Huang, our CFO, and Jon Liao, our CSO. For today's agenda, Mr. Huang will discuss highlights of the first quarter and full year 2018. Other management will join the Q&A session. Before we continue, I refer you to our safe harbor statement in the earnings press release, which apply to this call, as we will 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, unless otherwise stated, all the figures mentioned during this conference call are in RMB.
Now I would like to turn the call to Sidney.
Thank you, Ruiyu. Hello, everyone. Thank you for joining us today. We are pleased to deliver another strong quarter with solid top-line and bottom-line results. Our net revenue growth reached the high end of our expectation, and our non-GAAP net income increased by 67% from the same quarter a year ago. During the Fourth Quarter of 2018, our net revenues grew 22.4%, a solid performance on top of an exceptionally strong Fourth Quarter in 2017, despite relatively soft consumption in large ticket electronics and appliance categories. Revenues from general merchandise categories grew 38% during the quarter, driven by home goods, skincare, and cosmetics categories. In addition, fulfilled marketplace GMV again grew over 40% year-over-year, as we continued to improve marketplace operations. Net service revenues grew by 45.7% year-over-year, driven by JD Logistics third-party revenues and advertising services.
For the full year of 2018, our net revenues increased by 27.5%, and our total GMV grew by 30%, as we continued to take market share and outperform the industries we participate in. Revenues from general merchandise categories grew over 42% during the year as a result of more diversified, high-quality product selection and our superior customer experience. Net service revenues grew over 50% and contributed nearly 10% of our total revenues in 2018, up from 8.4% in 2017, as we leveraged our retail infrastructure to expand into the service segments. Gross margin in the fourth quarter was 14.2% compared to 13% in the fourth quarter 2017. The margin expansion was attributable to the continued margin improvement of both JD Mall and JD Logistics.
JD Mall gross margin increased over 60 basis points, mainly driven by economies of scale from the 1P business, up 38 basis points in Q4, as well as solid advertising revenue growth. JD Logistics' third-party business also achieved significant gross margin improvement during the quarter as they continued to grow its scale and optimize its operations. On a full-year basis, non-GAAP gross margin improved from 13.8% in 2017 to 14.1% in 2018, mainly driven from JD Mall gross margin expansion of 38 basis points during the year, partially offset by investments in new businesses. Fulfillment expense ratio in the fourth quarter was 6.6%, down from 7.2% in the same quarter last year, thanks to improved utilization of our logistics capacity and higher workforce productivity in the seasonally high quarter.
During the fourth quarter, our R&D expenses increased 70% from the same quarter of 2017, but were relatively flat as compared with Q3. For the full year of 2018, R&D expenses increased over 80% to CNY 12.1 billion as we hired top R&D talent around the world to enhance our technology infrastructure and implement our AI-driven digital strategies. With key leaders and various levels of staff now in place, we expect R&D expenses to stabilize in 2019. Our marketing expense ratio was 4.7% in the fourth quarter 2018, up from 4.3% in the same quarter a year ago. Our 2018 full-year marketing expense ratio was 4.2%, comparable to the 2017 level.
Our fourth quarter and full-year G&A expense ratios were 1% and 1.1% respectively, comparable to the same periods in 2017. Coming to the bottom line, our non-GAAP net income in Q4 was CNY 750 million, with a net margin of 0.6%, up from 0.4% in the same quarter a year ago. The improvement was mainly supported by JD Mall's operating margin expansion of 52 basis points during the quarter, and the reduced losses at JD Logistics' third-party business. On a full-year basis, non-GAAP net income attributable to ordinary shareholders, CNY 3.5 billion, with a net margin of 0.7%, down 62 basis points from 2017, largely due to investments in new businesses.
However, as we committed in our revised guidance in August last year, the operating margin for JD Mall remained intact, improving from 1.4% in 2017 to 1.6% in 2018, despite a 34 basis point increase in R&D expense ratio within JD Mall. This margin improvement demonstrates the resilience of our core margin trend, which is driven by the retail economies of scale and continuous improvement in operating efficiency. On the last August earnings call, I mentioned that we had established a property management group, not only to develop and manage our state-of-the-art facilities, but also to monetize these assets to compensate for our earnings shortfall last year, unlock value for our shareholders while optimizing our capital structure.
I'm pleased to share with you that we have established our first logistics property core fund in February, in partnership with GIC, the sovereign wealth fund of Singapore, and have just signed a definitive agreement to transfer a portfolio of modern warehouses valued at approximately RMB 10.9 billion to the core fund. The deal will close in several phases, with the majority to be completed in 2019. Our property management group will continue to manage the assets for the current income stream and receive carried interest for future value appreciation. The estimated IRR from the transaction will be in excess of 17%, which is the annual return on these investments since we began developing these facilities from as early as 2012. If we allocate this annual return to the corresponding years, we would have earned at least RMB 1.5 billion in additional profit in the year of 2018 alone.
The GIC core fund transaction demonstrates our ability to source, develop, manage, and monetize well-located, high-quality logistics facilities. As we are developing more similar projects that are available for future disposition, we have designated CapEx related to these developments in a separate line in the free cash flow table, and any future cash proceeds from these asset sales will also be disclosed in this section, so you can make better judgment on our free cash flow situation. Now let's discuss our financial outlook. In light of the relatively soft demand in certain durable goods categories, we expect 1Q 2019 net revenue growth to be between 18% and 22% on a year-over-year basis. For the full year of 2019, we expect our non-GAAP net margin to be between 0.8% and 1.2%.
This margin guidance excludes the development profit from our property management business, which will add another 0.5% to 0.6% to our GAAP net margin. Lastly, one quick note on a disclosure change to the GMV data. Beginning this year, we will no longer disclose quarterly GMV, but will continue to disclose full-year GMV, which is consistent with our major industry peer. As we discussed in the past, the GMV data currently disclosed are for industry comparison only and are not meant for financial analysis purposes. As we expand our service business, GMV is also increasingly less relevant to our revenue streams in the future. This concludes my prepared remarks, and we can now move to the Q&A session.
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. Our first question comes line of Ronald Keung from Goldman Sachs. Please ask your question.
Hi. Congratulations to the strong results. Thanks, Richard, Xu, Zhenhui , Sidney, John, and Ruiyu. In light of the very strong results, I just want to hear our thoughts into our GMV growth and targets from any categories when we think about the growth. I'm actually thinking about from a user base, how do we see user growth trending for 2019, and some of the strategies in driving that. On that front, in driving traffic, could you also give us any updates on your JD Tencent agreement? Any rough timing that we would see or hear any updates from the two partners and aims to achieve on user growth? Thank you.
Sure. Maybe I will first address the category question, Lei Xu can discuss the user question, we'll discuss the Tencent question. On the categories, as we mentioned in the past, firstly, we are a full category retailer with the largest scale in China. We continue to believe this put us in a very unique competitive position to expand across the categories. This has demonstrated in our recent results and also results in the past years. We do expect solid growth above the market growth across all of our key categories, going forward. Now, our overall growth rate may be impacted by certain durable goods categories, as I mentioned in the past, within these categories, we continue to significantly outperform the industry. We are confident that growth should still be intact from a per category basis.
Let me take the question of user base in 2019, from 2 aspects. The first one is about the retention of existing users. In 2018, our average revenue per user has been on the rise, mainly due to 2 factors. One is our product cross-category marketing and also personalized user interface. For our new customer, new user recruitment, we will do our efforts following 3 aspects. The first one is supply chain. We will try to provide the right product offerings to the right tier cities. The second one is that we will explore new marketing scenarios. For example, community and campus and offline like experience stores. In that way, we provide better products and service to new customers to attract the new customers. Also we will analyze our marketing expenditure structure and try to tip our resources to those more efficient and effective marketing investments.
Yeah. With regard to JD Tencent's relationship, both parties are fully committed to such a partnerships of importance to both parties. More details to follow.
Thank you. Once again, if you have more than one question, please request to join the question queue again after your first question has been addressed. Our next question comes in of Eddie Leung, Bank of America. Please ask your question.
Good evening. Thank you for taking my questions. My question is more about the improvement in gross margin or the trend. Just could you give us some comments on the following two factors? One is, I remember you mentioned that the electronics and appliance category has been under some industry pressure, and that's pretty obvious. Historically, one driver for your gross margin is increasing negotiation power and bigger scale so that you can get larger discounts and rebates from your suppliers, especially in electronics appliances. Just wondering if this change, this macro change, would affect the pace of the scalability and how would that affect our gross margin? Separately, again, on gross margin, I see you also mentioned that JD Logistics gross margin improving.
Yeah, just wondering if we have any broad timing that we would expect the subsidies to the third party users, corporate users would be reduced, and hence we would see potentially positive gross margin from JD Logistics. Any comment would be helpful. Thank you.
Sure. On the gross margin, I mentioned even for the electronics and home appliance categories. We remain above the industry growth. Namely, we definitely see double growth, for example, in Q4. To the industry, on the other hand, is in low single digit. The growth will continue to drive scale economies. In fact, when the industry is slow, as the largest retailer, the largest, most important channel, we may gain even more economies of scale when we discuss with these brands, for example, helping them to clear inventory, and also order more unique, customized product models. There are various ways to improve gross margin without compromising the consumer-facing price. We will remain as the most competitive price provider from a customer point of view.
On JD Logistics, we mentioned that in the early stage of its business, we had some early discounts to attract the major customers. After the initial phase, the pricing has been moving back to a more normalized level. Right now, most of these clients have passed the initial discount phase. That's why the gross margin for JD Logistics has been improved quite significantly.
Thank you. Our next question comes line of Alicia Yap from Citigroup. Please ask your question.
Hi. Good evening, management. Thanks for taking my questions. I have questions on these annual active customer accounts. Understand that the company actually disclosed on the quarterly active customer is experiencing year-over-year growth for the third quarter and fourth quarter. Just wonder if we looking at it on a quarterly active customer base on the sequential basis, what is the growth rate from 3Q to 4Q? Should we assume this kind of flattish annual trend to only normalize later in the third quarter of 2019? Thank you.
Right. Yes, the Q4 quarterly customer accounts also increased sequentially, roughly 6% in Q4. There is still upward trend in the active customer base. I mentioned in the past, the divergence of these two data points is really because we are seeing improving quality of the new customers this year. While the customers in the previous 12 months, we did see more one-time accounts. That's why we singled out the recent two quarters just to show our customer growth is still relatively healthy.
Thank you. Our next question comes line of John Choi from Daiwa. Please ask your question.
Thank you for taking my question. Sidney, I have a question on your non-GAAP guidance for 2019. It seems like your R&D expenses are going to be flattish and assuming other, we see operating expenses across the line of operating OpEx. Hopefully with a better improvement in JD Mall and also from improvement on the third-party logistics, shouldn't we be seeing more leverage on your margin? Can you give us a little bit more color on the margin guidance on the breakdown there? If I could follow up, it seems like your merchant account is now a bit higher fourth quarter versus third quarter. Can you give us an update what has changed in terms of the third-party merchants? Thank you.
Okay. Lei Xu will answer the merchant questions. On the first one, just to take on the, as an example, when I say the OpEx will stabilize in 2019, it's stabilizing at the Q3, Q4 level. On a year basis, if you take that run rate, you will still see an year-over-year probably above our revenue growth. That's one factor. Obviously, we will continue to invest in the various initiatives. We'll be on a more selective basis, with more financial disciplines, with a more balanced approach this year. We will be in select areas where we think it's really critical to company strategy, we will continue to invest very aggressively. At the beginning of the year, we will rather start with a relatively conservative guidance. Clearly the margin will be better than last year.
We do hope we can give you more upside over the course of the year, especially when we have better clarity on the macro trend.
Thank you. Once again, if you have more than one question, please request in the question queue again after your first question has been addressed. Our next question comes from line of Jin Yoon, New Street Research. Please ask your question.
Hi. Good evening, guys. I think there was somewhere around 700 basis point delta between online sales and GMV in the quarter. Just kind of wanted to gauge what that delta will look like going forward. I understand that you won't give GMV numbers, but it'd be interesting to hear kind of what the delta will look like for the upcoming year, as well as how much material impact are you seeing from your Pingou business, or how much are you seeing contributions from that business? Thanks, guys.
Right. I think you're referring to the growth rate between the revenue and GMV, and the difference would be the marketplace GMV. I mentioned that our fulfilled marketplace GMV actually grew over 40%. That would bridge the gap in terms of different growth rate of GMV and service.
Last April, we started to launch our Pingou group buying business, and it has proved itself to be very inducing to helping us to reach out to lower-tier cities and markets. That's been very useful, helpful. As you know, as a mainstream e-commerce player, we haven't actually leveraged our competitive advantages in those lower-tier markets. Through Pingou, now we are positioned to do that. Also, as you know, Weixin has been growing very fast, and Pingou has given us the right tool to tap on that opportunity. To seize the opportunity, we have established the social media e-commerce department to help us to reach out to lower-tier cities and also our female customers.
Thank you. Our next question comes from the line of Thomas Chong, Credit Suisse. Please ask your question.
Hi. Thanks management for taking my questions and congratulations on a strong set of results. I have two questions. My first question is about the marketplace business, in particular the apparel category. How should we think about the trend as we head into this year? My second question is about our 7Fresh strategy. Can management give us some color about how many 7Fresh stores will be open this year, and will we pursue the 1P or 3P model going forward? Thanks.
For apparel business, we have three plans for 2019. The first one is that we will step up our efforts to recruit high-quality brands and merchants to provide a wider choice of product offerings to our customers. The second one is that we will build smart operating capabilities. We will integrate our 1P business with our 3P business based upon our supply chain capabilities. For example, we consolidate the warehouses and the stores of merchants with our warehouses and distribution capabilities to improve the overall efficiency. Our third plan is to serve intensively the existing customers to get more value out of our existing customer base. Also, we'll do more Pingou group buying business with them. Great. Because this category is very suitable to group buying business model.
最后一点就是从目前商家的分布和商家业绩来看，18年随着我们整个平台生态的系统能力和产品能力的提升，商家整体的经营的健康度是正常提升的。19年我们会继续加强这方面的工作。
If you look at the composition or the structure of merchants in 2018, thanks to the product improvement and also this improvement of our ecosystem. The structure, the composition of merchants has increased its soundness or wholesomeness. It's quite going in a very healthy direction. We expect to see this trend continue in 2019.
On 7Fresh, it's still a relatively young business that we started early 2018. Currently, we have 12 stores. We're still in the experimental phase, exploring various omni-channel strategies and tactics to prove the model. Honestly, we don't think anyone has proved this model in the market today, so we will take a more managed pace in the expansion of this business this year.
Thank you. Once again, if you have more than one question, please request another question queue again after your first question has been addressed. Our next question comes from of LRT, Janet Renesance, please ask your question.
Thank you. Congratulations on strong results. Sidney, I wonder if you can provide us more colors for your margin outlook with the property fund impact. I'm talking about on an ongoing basis, not the one-time impact. Going forward in 2019 and onwards, how shall we think about, for example, fulfillment as a percentage of revenue? Your management fee, that contribution to the revenue. A revenue and a margin impact. Quickly on the Pingou businesses, I wonder if Sidney can provide us a long-term outlook in terms of user and the GMV contribution, where do you think Pingou can help contribute to your bigger picture? Thank you.
Sure. On the property management business, we're still in the process of closing those transactions. Only after the closing we will start earning the management fee. With our large scale, we don't think the management fee will have any material impact on our bottom line, at least this year. As we continue to monetize the other assets on the portfolio, it could become meaningful. There shouldn't be much of an impact on our fulfillment expense. After all, with our large warehouse network only about, at the end of the year, roughly 2.5 million sq m of warehouses were self-built, and now we are monetizing them. This is a fraction, roughly about 20-plus % of our overall warehouse space. The current monetization plan will not have much of a significant impact on the fulfillment expense.
关于拼购我再做一些补充。一个确实如刚才所说，拼购业务对于我们在以微信市场为代表的这一类新的市场里面去挖掘低线市场和女性用户对我们的帮助非常大。
Let me add something about group buying business. As I already pointed out, group buying JD Pingou actually is very helpful for us to tap on to the lower-tier cities and female client base through emerging tools or channels like WeChat.
另外一点就是因为拼购所面对的用户的特点，所以拼购业务发展过程中，对原有京东平台尾部商家的活跃有非常大的帮助。
Also it helps us to activate the bottom-tier merchants on our original platform because of the specific characteristics of group buying customers.
关于19年的拼购，我们除了继续保持对拼购和微信市场的关注和投入外，我们重要重点会在两方面进行投入。
We will continue our attention, our emphasis on group buying and information and mainly we will step our efforts in the following two aspects.
第一个是打造更适合拼购和微信市场的供应链的能力。原有我们的商家和商品更多的是依赖于原京东平台。那么从今年年里开始，我们组织了专门的团队去打造专门针对这些市场的包括商品，包括工厂货等
First of all, we will build a supply chain that is more suitable for group buying business model. We established a specialized team to deal with this project. We will provide not just existing products, but also products that actually shifted from space. We are also developing the APP specialized for Pingou.
Thank you. Our next question comes from Jerry Liu, UBS. Please ask your question.
Hi. Thank you. My question is just on the broader macro environment in the fourth quarter and so far this quarter. Have we seen any improvement in the macro environment? Especially as we think about consumer sentiment around big-ticket purchases such as home appliances and smartphones. Secondarily, just following up on the margin questions earlier, what's the assumption around the competitive landscape, around the competitive intensity, over Double 11 in the fourth quarter? Thank you.
I think if you look at our growth rate and also, of course, the durable goods versus the general merchandise categories, the latter has not been much impacted. But the electronics appliance categories were impacted. We do still see double-digit growth. At this point, it's tough to tell, but we are cautiously optimistic for the second half of this year when the government's various incentive policies begin to take effect. We are cautiously optimistic on the macro for the second half.
Thank you. Our next question comes from Natalie Wu, CICC. Please ask your question.
Hi, this is Natalie from CICC. Thanks for taking my question. Just a little bit follow-up on [uncertain] question, for your 305 million active customer accounts, how many of them are originated from Pingou model? What's the current user conversion ratio from Weixin channel team purchase model to your own JD app? Secondly, you have recently announced an internal restructure in your annual meeting, I think. In the meanwhile, you've also mentioned that for your business unit leaders, they shouldn't put too much emphasis on GMV, as GMV is not a leading indicator but a result. Just wondering if there's any new changes introduced to your original KPI mechanism. Thank you.
Yes. I guess the WeChat channel continues to be a very important new customer acquisition channel. Just overall, we still see over a quarter of our new customers coming from the WeChat channel. We don't track how much of that from Pingou and subsequent conversion. I think overall it is definitely a very important new customer acquisition channel. I'll let Lei Xu answer the second question.
As pointed out by Xu Ming, actually, Weixin market is very important for us to increase our user base. However, we still have our centralized app channels, which are equally important for acquiring new customers. We are stepping up our efforts to come up with newer Weixin products to acquire even more new customers. However, I'm not in a position to say Weixin channel is the single most important channel for new customer acquisition. Actually, it's all the important channels for us to acquire new customers.
Hi, everyone. This is Richard Liu. I would rather talk more about our strategy.
2019. The organization system is really very complicated to explain in a very short time. In 2019, we will focus on three most important things. The first is our lower tier cities. I think some of you will know we have focused on the lower tier cities for several years. From last year, the good news is, I think it was the first year from the lower tier cities is over the tier 1, tier 2 already. This year we will take more products to the lower tier cities to attract more customers. Secondly is our how to say? Digitalization. We will drive our whole group to the traditional management system to based on our big data and digitalization to improve our management system efficiency, to help our partners to keep growing our platform.
The last one is we will open more and more new business model to the offline business. Today we have 7Fresh, we have home appliance, we have JD 3C Home. We have a new channel department. From this year we will have more new offline business model. On the further step, we will keep testing until the business model is improved. We will copy as quickly as possible. Thank you.
Thank you. Once again, if you have more than one question, please request to join the question queue again after your first question has been addressed. Our next question comes from the line of Alex Yao, JPMorgan. Please ask your question.
Hi. Good evening, management. Thank you for taking my question, and congrats on a strong quarter. I have a follow-up question on your previous commentary around user acquisition strategy into the lower tier cities. I think that you guys have been doing this for quite a few years. What will you be doing differently this year versus the previous few years? Apparently there's a new product launch such as the JD Pingou. Is there anything incremental you need to do to be more efficiently tap into the lower tier or lower-end consumer demand? For example, is there a change in supply chain and merchandising strategies such that you will build relationship with the low-end or even super low-end supply chain in China? Is there incremental requirement for you to invest more in lower tier city logistics infrastructure? Any color will be helpful. Thank you.
As Lei Xu already mentioned, I think what you mentioned, going to lower tier city, the lower priced supply chain products is actually one of our initiatives this year. Logistics, on the other hand, we are already in these lower tier cities. We already have a full coverage network. There is not much extra to be done, but more on the supply chain side, more on the product side. Also, the various online, offline omni-channel strategies will also help the lower tier city expansion.
Thank you. Our next question comes in of Richard Kramer from Arete Research. Please ask your question.
Thanks very much. If I just have one question, I'd like to ask the outlook for free cash flow, for 2019. Is this something that's expected to again be sharply negative? At what point, and excluding the real estate transaction, will JD turn to being a sustainably free cash flow generating business? Thank you.
Sure. Yeah. We this time, if you note on cash flow section, I actually separate out the CapEx for development projects available for sale. Those will be turned into cash as we monetize those products. This position will be part of the contra-CapEx account because those were the cash outflow we have already absorbed. If you look at the disclosure, if you subtract this CapEx for development projects available for sale, you will already see a very different cash flow picture even for 2018. In 2018, we had a one-time event as we communicated early in 2018. We do have confidence that cash flow in 2019 will be improved. From both operating sides, because of operating margin will improve, and also from CapEx side, that now that we have also completed a major CapEx year for our technology infrastructure in 2018.
We will have less other CapEx. We will have better
Margin operating cash flow. We will have the development available for sale line separated, which will see cash inflow this year. On combination of all three, we should see better cash flow this year.
Thank you. Our next question comes in of Wendy Huang, Macquarie. Please ask your question.
Thank you. I assume that most of comments you made earlier was more on the electronic side but not on the home appliance side. Given the government subsidy policy recently came out on the home appliance side in certain cities, how do you see that actually has driven the home appliance consumption and how actually JD benefits from that? How sustainable this trend could be. Follow-up on the cash flow questions the previous analyst asked. Should we expect free cash flow to turn positive definitely in 2019 given the three factors you just mentioned? Thank you.
Recently, the government has come up with quite a lot of policies and regulations that they aim to encourage and motivate or stimulate the development of home appliance market. We've been deeply involved in that. I think it will take time to take effect and also it will take time for us to observe the ultimate result of those policies.
As you know, for home appliances category, JD has been enjoying very high reputation. In terms of online market, JD is enjoying a notable competitive advantage over our peers. That will position us in the very favorable position.
Also, this year, 2019, we will open our 1P or direct sale capabilities to our partners and help them to improve their sales. That way together we can do the market even better.
Also, we will increase the percentage of customized products offerings this year. That will help us to tap deeper into the lower city customers and also help us to improve our profitability.
Also, we will penetrate deeper into counties and towns. We'll open up more experience stores, and we will work more closely with the local players to get more engagement points with our customers. On the free cash flow, we don't give guidance on free cash flow, but clearly that will be our objective. Internally, we'll be working very hard towards achieving positive cash flow.
Thank you. Our next question comes in of Grace Chen, Morgan Stanley. Please ask your question.
Hello. Yeah, thank you for taking my questions. My question's about Q4 numbers. The Q4 sales were at high end of the guidance. I'm wondering which areas performed better that led to the upside in the 4Q sales. For the gross margin of fourth quarter as well, it came in better than the expectation. I believe the substantial improvements in the loss of JD Logistics should be one of the key reasons. Could you just share with us some more details about JD Logistics? For example, what's the gross margin status now, and what's your target for gross margin and operating margin in 2019 and maybe in the mid to long term? Any more color will be very helpful. Thank you.
Right. The Q4 growth I mentioned was actually pretty balanced, other than the couple of categories that we singled out. They were still growing at double digits, pretty healthy growth across all the categories. Margin expansion was also partly due to the previous Q4 was at somewhat of a lower margin base due to different promotional strategies. Obviously, we're very, very pleased with the performance on the logistics side, was also a very major positive contributor, given the high volume and better utilization of the facilities. It is a seasonally high quarter for us, normally, in Q4 in terms of utilization. From year to year, there may be different emphasis. We gave the full year guidance for this year already. We will see steadily increasing gross margin for JD Mall, and also improving margin from JD Logistics.
Thank you. Our next question comes from the line of Tian Hou, T.H. Capital. Please ask your question.
Thanks so much for taking my question. The question is related to the new customers. What you guys mentioned, most of new customers come from the lower tier cities, some of that driven by the WeChat. I wonder, when we increase more lower tier city management and the customers, will that impact the GMV per order? That's number 1. Number 2, on an annual basis, if each active or unique customer, what is the ASP on an annual basis? And also how many times they purchase? That's all the question that is related. Thank you.
For Jingxi customers, it's true that the initial stage, actually, their particular price or the customer price is on the low side compared to our other customers. However, after we acquire those new customers, we'll pay a lot of attention to how to retain them and how much they spend afterwards.
We'll sell cross-categories to them. After all those efforts, actually, we see a quite optimistic picture with the Jingxi customer spend with us. Let me share with you the ARPU figure with the overall JD Mall average revenue per user. Actually, last year, in terms of the time customers take to go from, say, middle thickness customer to a high thickness customer, actually, it shortens. That means that it takes less time for us to turn ordinary customers into loyal customers. In the future, we will make even more intensive efforts to turn new customers into the first-time customers and then to turn them into certified customers.
Thank you. Our next question comes from the line of Jialong Shi, Nomura. Please ask your question.
Hi. Good evening, management. Thanks for taking my question. I have just one question. Your fulfillment expense slowed down quite meaningfully. Year-over-year growth slowed down quite meaningfully in Q4. I just wonder what was the driver, and heading into this year, will you see continued leverage on fulfillment expense? Thank you.
Let me take this question. As you know, fourth quarter is our peak season, and we've improved substantially our storage capacity and also warehouse utilization. That's why we have quite a satisfactory fulfillment rate. We think that looking forward into 2019, as the order density improves, our fulfillment rate will stay further improved.
Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com Ruiyu Li for closing remarks.
Thank you for joining us today. Please feel free to contact us if you have any further questions. Looking forward to talking with you in the future.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.