Hello, thank you for standing by for JD.com third quarter 2017 earnings conference call. At this time, all participants are in a listen-only mode. After the management prepared remarks, there will be a question and answer session. Today's call is being recorded. If you have any objections, you may disconnect at this time. I would like to turn this over to your host for today's conference, Ms. Ruiyu. Ruiyu, please go ahead.
Thank you, operator, welcome to our Q3 2017 earnings call. Joining today on the call are Richard Liu, our CEO, and Sidney Huang, our CFO. For today's agenda, Mr. Huang will discuss highlights for the third quarter 2017. Following the prepared remarks, Mr. Liu and Mr. Huang will answer your questions. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies 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 directly comparable GAAP measures. Finally, please note that otherwise stated, all figures mentioned during this conference call are in RMB. I would like to turn the call over to Richard.
Thank you, Ruiyu. Hello, everyone. Thank you for joining us today. We are pleased to report another quarter of solid top-line growth and record profitability. During the third quarter 2017, our net revenue from continuing operations grew 39.2%, a solid performance following an exceptionally strong second quarter. Our deluxe sales revenues grew 38%, led by home appliance, food and beverage, cosmetics, home furnishing, and baby products. General merchandise categories as a whole grew 67% in revenue on a year-over-year basis, despite the intense competition in these categories. Our revenues from services and others increased 46% year-over-year, an acceleration from the growth rate in the seasonally similar first quarter of 2017, supported by improved brand engagement and better monetization of our platforms.
Some of you may have noticed that we moved our GMV disclosure to the back of the earnings release and are using just one instead of 2 different definitions for this non-GAAP metric. As you may recall, we began to disclose 2 sets of GMV numbers since the fourth quarter of 2015 in order to provide an apples-to-apples comparison to our major industry peer while maintaining our original definition in parallel for investors' convenience. Over the past 2 years, we see continued confusion over these different definitions, we decided to simplify it beginning this quarter. Since the industry definition is broader with many unfulfilled orders in the numbers, we will not further analyze such GMV figures, which are provided for industry comparison only and should not be relied on for financial analysis purposes.
However, we will continue to provide qualitative analysis on our GMV trend based on the underlying transactions actually fulfilled. For the third quarter of 2017, the fulfilled GMV grew in the low 30s, mainly attributable to two factors. First, the anniversary effect of integrating the Yihaodian platform, without which the GMV growth rate for JD Mall would be in the mid-30s. Second, the impact from certain apparel and general merchandise merchants withdrawing from our platform. Based on the feedbacks we received from these merchants, the move was mainly due to the coercive tactics from our competition, which, if proven true, would be illegal and clearly against the merchants' will. Despite this short-term headwind, we are pleased to see a very successful November 11th promotion season, which demonstrated the resilience of JD's powerful platform.
We are also pleased to report very healthy gross margin expansion in the third quarter, which reached a record high of 15.3% on a non-GAAP basis. Non-GAAP gross profit after fulfillment expenses, another important measure of our platform monetization, grew 64% on a year-over-year basis as we gained further economies of scale from procurement, merchant services, and the fulfillment network. Our collaborations with leading platforms such as Tencent, Baidu, NetEase, Qihoo, and Toutiao have shown exciting early results as we provide better precision marketing tools to our merchants and brands to enhance ROI on their advertising spending while reaching a broad customer base on multiple platforms. Leveraging in-house AI technologies, our real-time bidding advertising platform has generated triple-digit revenue growth in the past three quarters and is now contributing a significant majority of our advertising revenue. During the third quarter, we continued to invest proactively in logistics, branding, and technologies.
Non-GAAP fulfillment expense ratio increased 11 basis points from the same quarter last year, as we significantly expanded our warehouse network during the quarter to better serve our merchants and prepare for the November promotional season. At the end of September, we had 405 warehouses nationwide with approximately 9 million square meters in total space, up over 50% from 12 months ago. Non-GAAP marketing expense ratio was 3.5% in Q3, higher than the 3% in the same quarter last year, as we continued to increase our branding efforts to reach consumers in the lower-tier cities. In spite of heavy investments for our future expansion, we are pleasantly surprised by another quarter of record earnings. Non-GAAP operating profits increased 171% to a record high of RMB 1.5 billion in the third quarter.
Non-GAAP net income attributable to ordinary shareholders was RMB 2.2 billion, with an increase of 359% on a year-over-year basis. Our GAAP net income attributable to ordinary shareholders was RMB 1 billion, also a record high, with a healthy net margin of 1.2%. The result speaks for itself and provides a strong validation of JD's underlying earnings momentum. Our free cash flow was negative RMB 9 billion during the quarter, mainly due to two reasons. One is the RMB 5.2 billion inventory buildup for the November 11 promotion season, which is largely a timing issue. Two is the much-anticipated CapEx, including RMB 4.4 billion in new land use rights for more headquarters space and new warehouses. As we communicated in the past, we normally acquire land use rights at very attractive economic terms given our contribution to the local economy.
We expect such CapEx to be highly accretive to our shareholders. Even with the cash outflow in the third quarter, our cash position remained very strong. As of September 30, 2017, cash and short-term investments, mainly in money market funds, totaled RMB 41.8 billion, up 71% from RMB 24.4 billion at the end of last year. Let's discuss our financial outlook. We expect Q4 net revenue growth to be between 35% and 39% on a year-over-year basis, excluding any impact on JD Finance for both current and prior year periods. This concludes my prepared remarks, and we can now move to the Q&A session.
The Q&A 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 to the line of Eddie Leung from Merrill Lynch. Please ask your question.
Good evening. Thank you for taking my question. I have a question on the product mix you are selling because we read from the Double 11 press releases. Actually, not press releases, but some of your colleagues actually provided certain colors to the media. It seems like there has been an upgrade in quite some of the product categories. For example, we have seen your high-end products are selling at triple digits growth rates. Wondering how that could affect our margins going forward. Thank you.
I assume you're referring to some of the higher level brands in general merchandise category. They obviously have very healthy margins. This is also a result of our efforts this year to reach out to global brands. Because the overall contribution of those brands are still relatively small, while the impact will be positive, but it will not be very material in the near term.
Got it. Good evening. I have a follow-up on that front. Are we sticking to our previous full-year margin guidance?
Yeah, we would try to stay away from any single quarter guidance on the bottom line. Because this is the last quarter of the year, we would try to stay away from any further guidance.
Yeah, understood. Thank you.
You're welcome.
Thank you. Our next question comes line of Alicia Yap from Citigroup. Please ask a question.
Hi. Good evening Richard, Sidney and Ruiyu. Thanks for taking my questions. I actually have a follow-up question related to margins, and specifically on the gross margin this quarter. It does look like the strength is coming from the 1P business. Just curious, is it driven by slow season that hence you don't have a lot of promotion, or is that driven by the change of category mix like Eddie mentioned? Related to that, since you are retaining your full year guidance, your net margins of 1%-1.5%, you're not changing it. With the outperformance in the 3Q margins, if this is the case that you're retaining your full year margin, should we assume that 4Q net margins will be a much bigger sequential decline versus the 3Q?
Any color you could provide us to think about the margin directions or assumptions for 4Q would be great.
Sure. For the gross margin question, I think there are three reasons. One is from our first party business. The scale economies have been driving our procurement costs coming down on a consistent basis. That has always been part of the contribution, as I mentioned in the past. The second is that I mentioned earlier about our enhanced user engagement, also the brand engagement through better advertising products. Monetization has improved for our overall platform. Really those are the two key drivers. Clearly, without major promotions in the third quarter, would also contribute to the sequential increase in the gross margin.
Related to that, to come back to your question on fourth quarter, I wouldn't guide for any single quarter. If you want to take a benchmark, you should probably benchmark to the second quarter when we had also a very major promotion to the fourth quarter, rather than comparing to the third quarter. Again we're not providing any guidance on the bottom line for any single quarter. Over the long term, our commitment is to improve our profitability on an annual basis. With that in mind, we do not manage earnings on a quarterly basis. If any certain quarter has outsized profitability, we may decide to reinvest part of that excess return back into the business to pursue further growth. That strategy has not changed. We do not intend to pursue very large outsized increase in net margin for any single year.
We want to make sure that margin will increase steadily over a very long period of time. Yeah. If you look at it over the long term, any excess return beyond our expectations will be reinvested, roughly 30%-40% of those excess returns back into the business, and half of that will be in technologies.
Thank you. Our next question comes in of Ronald Keung from Goldman Sachs. Please ask a question.
Thank you, Richard, Sidney and Ruiyu on a very strong set of results. I think on the 3P revenue. Sidney you've mentioned it's very strong, 67%. That makes me think about the 3P business, given the challenges in the apparel brand. Can you just share how the merchant number, which you've seen a massive increase on a quarter-over-quarter basis to 160,000 merchants. If we think about apparel and other marketplace merchants by category, can you share just a strategy from now on given the exclusive contracts or competition that we've seen, what is the strategy in our marketplace business and specifically for apparel, moving to high-end with top level? I just want to hear your thoughts on the 3P business and that category. Thank you.
对，我相信所有投资人应该都注意到，媒体已经很多报道了。确实我们在服装品类里面临一个非常艰难的二选一的竞争。其实从二季度以来，已经有超过100多家中国的local品牌，国际品牌没有一个退出。但是大量的中国本地的品牌因为他们太弱小，所以被迫退出了竞争。在服装的品类整个局面来讲，其实我们增长已经几无停滞了。这第一。
Let me quickly translate. You may have read from the media that we are experiencing some headwinds. Over 100 merchants in the general merchandise category have withdrawn from our platform due to certain competition factors in the market. They're leading to some of the merchants going to one platform rather than going to both. Those brands, all of them are Chinese brands. They are relatively smaller. We actually haven't seen any large global brands in this wave.
但是从长期来看的话，比如说我们京东从第一天开始，我们每隔两到三年都会面临一次二选一。这服装的二选一不是我们第一次，我相信这是最后一次了。我们从最早做这个IT数码就二选一，后来上图书也是经历过两年的二选一。家电也经历了整整三年的二选一的困扰。但最后，今天我们不管是IT数码还是图书，还是家电，京东都成为了中国线上和线下绝对的第一名。在14大的品类里面，现在京东在12个品类里面，我们已经成为中国的第一。只有家纺、家居还有服装，只有两品类我们目前还不是第一名。
We have, throughout our history, experienced many of these competitions, where our competitor would force the merchants to choose one out of two platforms almost every 2 to 3 years. In the earliest days that our digital IT products, we faced this competition. Then later was in the books and the media segment for 2 years. Then in the home appliance with our major competitors for almost 3 years. We've overcome all those competitive pressures and have become the largest category leader in all of these categories. Today, out of the 14 major categories, we are the leader in 12 of them, and with only 2 remaining. We do believe that while this is not the first time we're facing this kind of competition, it should be the last time.
在明天我会有一小部分的投资人见面会，可能会说得更详细一点，因为今天时间有限。总之，对于我们来讲，让品牌商在品牌的增长，不仅仅是销售的增长，是它品牌的见识的增长，还有它的净值的增长，这是吸引我们的合作伙伴长期愿意最终我们走到一起最核心的因素。所以过去的图书也好，家电也好，我们始终坚持了让我们的合作伙伴能获取最大的收益，所以最终他们都会支持我们。今天服装，虽然我们在服装不是第一大，和我们的主要的友商相比，我们可能只是它1/3甚至1/5的小。但是你们也可以去访谈任何一个服装品牌，这些服装品牌在京东的净利润反而不比它少。而这会成为我们最终跟这些服装品牌能够进行紧密合作的一个非常重要的吸引点。
The key for us to overcome the competition was because we have always worked very hard to help our brands to grow and help our brand partners to make profit, in return, would also help us to grow with these brands. Today, maybe in the apparel segment, we are only one-third to one-fifth of our major competitor's size. Over time, if you actually check with these brands, the brand's profitability on JD-
管理层。
Net profitability on JD's platform may not be actually any less than their profits on the larger platform.
所以在任何一个品类，当我们在这个品类里面跟主要的友商造成威胁的时候，其实我们都会面临这个二选一的窘境，这几乎是最后一次。就是在我们超过的时候可能最后一招吧，之前所有招都用上的时候，最后一招。我们二季度，我们服装是成为我们增速快的。三季度和包括我们第四季度，我们服装的品类增速肯定是几无停滞的。但是我相信影响我们最多不会超过三个季度，主要就是今年的Q3和Q4。我相信从明年Q1开始，我们会有无数办法让我们的服装品类重新地加速增长。而且最重要的是，今年如果大家看所有没有撤出我们平台里的服装品牌，比如说一些国际的品牌，他们在京东的增速，特别在我们今年Double 11期间，最大的增速已经是200%。这也说明了整个京东平台，我们对这种服装，对这品类的消费者这种购买力是非常非常强。
Throughout our history, in any category and every category, we always encountered this competitive tactic. It's almost inevitable, but it can always be overcome. We believe this is the last category, and the fact that we are facing this competitive tactic again is also suggesting the competition may be running out of It's really the last resort in terms of competitive tactics. Another interesting fact that for the global brands that stayed on our platform during the most recent November 11 promotion, all of them grew over 200%, and which really validated the power of the platform.
最后一点我想跟大家分享的是，我们最近几个季度所有的女性品类，我们服装整体GMV是不增长，但是所有其他的品牌是加速增长的。除了服装之外，我们化妆品、我们的珠宝、我们的食品，包括我们的母婴，所有女性品类，其实过去每一个季度的加速增长都已经成为我们增长的最主要的推动力。这也是表明有越来越多的女性消费者开始加入这个平台，信任京东和喜欢京东，来京东进行消费和购物。
Another point I want to add is that over the past few quarters, the categories which are mostly targeting female customers are growing the fastest. All of them have been growing in an accelerating fashion. This demonstrates really our platform has been offering the female customers a great value proposition. I just want to add one more point that Richard mentioned earlier, is that even though our current quarter actually saw a stagnant growth in the apparel category, and which could also last two to three quarters, we're confident that beyond the next two to three quarters, we will see growth resume again, and just as we saw in other categories, reach inflection points.
当我们拥有越来越多女性用户的时候，服装的增长是不可避免的。
When we have more and more female consumers on our platform, the growth from the apparel segment will be almost inevitable.
Thank you. Our next question comes line of Jerry Liu from UBS. Please ask a question.
Thank you. My question is relating to the cash flow statement. I wanted to get your view on cash conversion cycle and how quickly that can improve without JD Finance, and whether as you gain economies of scale, you can see further improvements, even excluding this benefit from the financing business. Thank you very much.
Well, there's no impact from JD Finance at all. As I mentioned earlier, the negative cash flow this quarter was, one, it's a timing issue for inventory build-up. We did stock up a higher inventory level than the prior year as we focused on trying to overcome some of the merchants withdrawing from our platform. We revert to the first party for those products. This is really a timing issue post November 11th. In December, there may be another promotion, the inventory will be digested. Another factor was the CapEx. None of these are related to JD Finance. In fact, we are supporting JD Finance, not the other way around.
从过去八九年，我相信你可以说绝对都是为正的。全年来看。
On a full year basis, you can be assured that our free cash flow will always be positive from JD Mall alone. In fact, if you look at the last 12 months, the free cash flow was still very, very strong.
Thank you. Our next question comes line of Grace Chen from Morgan Stanley. Please ask a question.
Hi. Thank you for taking my call. We can see that JD.com has been delivering very good margin improvements. At the same time, we also see that you are accelerating investments as well. I think Richard Liu just mentioned that JD.com in general will reinvest the excess return, 30%-40% of the excess return, and half that will be in technology. As you can see, we have many other investments, including we invest in FMCG, branding, logistics, overseas expansion as well. What will be the priority of these other investments? Also, can you help us rank them when they compare investment in terms of size? Thank you.
Most of the items you mentioned earlier are actually part of our regular businesses, which will see continued investments. What Richard Liu mentioned earlier was any excess return beyond that. We will reinvest part of that. Technology will be the most important element for those investments.
Thank you. Our next question comes from Jin Yoon from Mizuho Securities. Please ask a question.
Hi, good evening, guys. Sidney, the 100 merchants or so that left the platform or allegedly left the platform, is that a net number or gross number of additional merchants that you have added on during that period? Second of all, just going back to the CapEx. Are we pretty much done with the CapEx spending for this calendar year, or should some of that land rights investments, should that trickle into the fourth quarter as well? Thanks, guys.
Sure. For the 100 plus merchants that left the platform, essentially, they are the ones closed the shops, at least, for the recent promotion period. There's no consideration on the new ones. These shops had a specific act of closing the shops, all in a very short period of time. This is clearly by no coincidence, and they are all major domestic apparel brands, so all around the same time. On the CapEx, clearly there won't be as much in the fourth quarter. As I said, if we do get invests in new land use rights, we normally get them at a very attractive economic terms.
It is something that's very good for our shareholders, just to reiterate that point, that we could always turn around and get a third party to pay a much higher RMB amount for those, and we can lease them back. It can be easily monetized. It is actually very scarce resources that only JD and very good real economy companies can have the privilege to acquire them.
Thank you. Our next question comes from Natalie Wu from CICC. Please ask a question.
Hi management. Thanks for taking my question. Richard, you've just mentioned that as long as the net profit margin to be improved at similar level scale every year, you are happy to invest extra money into the R&D growth, et cetera. Can it be interpreted as margin guidance, let's say, next year could be 1% higher than this year?
Yeah. I can promise you that net margin would increase every year. As I said earlier that we can't give you more specific guidance, but improvement should be meaningful.
Thank you.
Thank you. Our next question comes the line of Chi Tsang from HSBC. Please ask a question.
Good evening. Thanks so much for taking my question. I'm wondering if you can comment a little bit on your M&A strategy, both internationally and domestically. I know you've been exploring expansion in ASEAN, and sort of domestically, what is your appetite for consolidation to increase your market share? Thank you.
We are, as we mentioned in the past, we are taking quite conservative approach in terms of international expansion. We had an earlier joint venture with a partner in Indonesia, and we also recently announced a partnership with Thailand's Central Group. In both cases, we have similar equity interests with our joint venture partners. The rationale is that we wanted to leverage our technology and e-commerce know-how, and then at the same time leverage local partners, local expertise and their local consumer insights. It is a relatively conservative, but also, we believe, a very effective way to expand in the international market. At this point, our focus is in Southeast Asia. Until we gain some valuable experience, we will pretty much stick to this region.
For domestic investments, it's been also quite consistent that we wanted to invest in the companies in our ecosystem where we can create the synergies between us and investees. We obviously have a great distribution channel. We are also developing our technologies to empower other partners. Some of the second investments could be also in technologies. Not only from in-house R&D development point of view, but we will also take a minority stake in other leading technology companies so that we could leverage their technology as well.
Thank you. Our next question comes from Alex Yao from JPMorgan. Please ask a question.
Hi, good morning and good evening, everyone. Thank you for taking the question. I have a question regarding the customer growth. You guys grew the customer base by 34% this quarter, actually in the past 12 months. I'm just wondering, can you share with us what is the key driver for the user growth? Is it the self-marketing effort? Is it the price subsidy, or is it more because category expansion into female-oriented categories such as FMCG? Also, we'd like to hear update in terms of traffic contribution from Tencent. Will there anything that you guys can do, such as data exchange, product integration, et cetera, to drive more user growth from Tencent's social platforms? How should we think about the user growth trend in the next couple of quarters? Thank you.
Really, two customer segments we're seeing the greatest growth. One is female customers, and two is customers from the lower tier cities. These are also the two segments where JD was historically having a lower penetration, and we've been making a lot of efforts to increase our penetration, and we've seen very encouraging results in the recent quarters. We've had a very good partnership with Tencent over the past three years. We are seeing the relationship deepening and more recently, we are also planning to extend our partnership not only online but also to offline, where we can create synergies between the two companies.
Thank you. Our next question comes from Jialong Shi, Nomura Securities. Please ask your question.
Richard, Sidney, I will translate the questions into English myself. I have two questions here. My first question is, I just wonder if there will be any changes in the terms of the new business agreement JD will renew with Tencent next year. My second question is.
The management mentioned earlier, they expect the apparel business to recover from 1Q next year. I just wonder what strategies management may have to turn around the apparel business. Thank you. First, our agreement with Tencent will not expire until 2019, it's still quite early before we'll start a discussion with Tencent. We believe we'll have clearly priorities in getting new support and if we can reach agreement, that would be great. If not, we'll also have pretty fair options. Maybe the type of collaboration could be different, but we are very certain that the two companies will cooperate closely together. In terms of apparel, obviously this is in the midst of intense competition. For trade, for confidentiality reasons, we would rather not share anything further at this point.
If you look at our promises in the past 10-plus years, all of our promises were always realized in the end.
Thank you. Our next question comes from John Choi from Daiwa. Please ask your question.
Good evening, and thanks for taking my question. I had a question on your services and other revenue. Could you give us some more color on, especially given that the 3P GMV might have slowed down quite a bit on this quarter. Should we assume that advertising revenue and logistics revenue have done a bit more this quarter? Any color will be appreciated. Secondly, if you just could let us know the current status or the relationship with Walmart given that it's been about a year in terms of the JD deal. Where have you guys achieved and how do you think this relationship will evolve into? Thank you.
On service revenue, as I mentioned earlier, advertising revenue definitely led the growth in the category, followed by logistics. The business has been growing overall at a pretty healthy rate. Advertising is really the standout within that service revenue category. As far as Walmart, we mentioned in the earnings release that we actually, one of the recent initiatives is to promote a joint membership between JD PLUS and Sam's Club membership. This is just one example. We're definitely seeing a lot more collaboration going on between the two corporations, and there will be a lot more exciting news in the near future. We are exploring additional collaboration in our online, offline efforts.
Another point I wanted to add is, even though we're facing some headwinds for the apparel category, we may lose some commissions and GMV, because our platform continues to offer many different kinds of value to the merchants. You actually see these merchants still utilizing JD platform for other services, such as advertising and marketing services. We have, in the most recent quarter, 266 million active customers, and these are all very, very valuable middle-class and upper middle-class consumers. This definitely creates a great platform for the brands and the merchants. Any smart merchants would clearly not walk away from our platform over extended periods.
Not only smarter merchants, also stupider ones.
Thank you. Our next question comes in from Wendy Huang, Macquarie. Please ask the question.
Thank you. I have two questions. First, just to follow up on Richard's comment about the female users and also penetration into the lower-tier cities. Can you give us a breakdown of your 266 million customers by genders as well as the different tier cities? My second question is about JD's B2B strategy. I noticed that in the past one year, there have been a lot of players in the market start to revamp their B2B product to connect with hundreds of thousands of mom-and-pop shops in China. For example, Alibaba has [unintelligible], and Amazon is also doing similar stuff. Sun Art also launched a B2B sourcing platform. JD, I think, also has a product called [unintelligible]. Can you share with us about your thinking behind your B2B strategy and also what's, in your view, JD's competitive advantage in this regard? Thank you.
Let me answer the second question first. We do have a new business unit, called Xin Tong Lu, and the app is Zhang Gui Bao. We are targeting the mom-and-pop shops. We've now opened over 10,000 of them with JD brand, and on the Singles' Day alone, we opened 1,111 new stores on one single day. We have two key competitive advantages. First is our supply chain resources because many of the suppliers to the convenience stores are already our biggest partners, such as P&G. We will help these brand partners to penetrate and reach those convenience stores as part of their channel expansion. The second advantage is our logistics network. By the end of this year, we are already covering 100% of the provinces and counties, and we can also serve even the rural areas.
In each village, we will have a delivery.
We already have our own logistics network extending to every county and every village. In order to serve the convenience stores in those regions, there's no incremental cost to us. Without the existing logistics network, any third party, any other players who wanted to reach these stores in the rural areas will be highly costly. On the users, we don't disclose specific breakdowns, but what we can tell you is our female customers have been growing much faster than male customers, and also, the lower-tier city customers have been outgrowing the tier 1, tier 2 cities.
Thank you. Our next question comes in from Thomas Chung from Credit Suisse. Please ask the question.
Hi. Thanks, management, for taking my questions. I have a quick question about JD Logistics. Can management give us some update about the business outlook given we see our competitor also steps up in their Logistics business over the next couple of years, and how we can differentiate from our peers? Thanks.
As you know, JD's Logistics network is fully integrated, covering all the steps and processes in the Logistics workflow. We've built that over the past 10 years.
所以将来我们会有三条线去发展我们京东物流。第一条线，会不断地提高我们的单量、订单密度，来降低我们的物流成本。
We'll have three ways to improve our Logistics network. First is to increase order numbers so that we can further enhance order density and efficiency.
第二，从今年开始，我们会大力发展第三方物流的服务。我们的目标是在五年之内，超过一半以上的京东物流的收入是来自于京东体系之外的商家。
Second is that we will make a great effort to expand our business serving third-party merchants and partners. Our objective is in five years, the external revenue will be above 50% of the total Logistics revenue.
短短两个季度，已经超过100家大型的品牌已经在使用了我们京东物流的服务。
Within the last two quarters, we already attracted over 100 major brands to our logistics platform.
第三，我们会在物流方面持续不断地创新。我们不仅保持我们速度优势，我们服务的优势，我们还有大量创新，比如我们最近推出的这种冷仓冷链、全流程温度的实时监控的这个服务，都给我们客户带来了巨大的惊喜，也让我们客户对我们感觉更放心。
In addition to the service level and great coverage, we'll also innovate constantly in our logistics capability. One example is that we extended our cold chain logistics capabilities. For products that require cold chain storage, we can monitor the whole delivery process, the temperature of the products, that consumers can actually track those fresh products en route to their home. You can see the temperature movement throughout the delivery process.
我们还会大力发展同城快递这样新的业务，通过我们的投资的公司达达。
We'll also expand the same city delivery services through our partner, Dada Group.
随着我们跟腾讯的这种无界零售发展的不断地深入，我们认为将来有相当一部分的这种品牌的发货其实是同城发货。今天大部分品牌商，比如说一些服装品牌，它的货都是从仓库发货的。而未来我们认为一半以上都会从店面发货。那么同城快递会成为未来一个非常重要的、吸引我们的客户跟我们合作，给我们客户带来更多价值，降低他们成本的一个方式。
As we expand our partnership with Tencent towards offline retail network, we believe that in the future, maybe half of the products will be available in the same city from the merchants and retailers. The same city delivery network will be very critical to provide those services.
当然我们也还建成了全球第一个全无人的，100%无人的，也是100%自动化的B2C仓库，大型仓库。我们的无人机已经测试了超过十七万小时。我们在今年年底，在中国北京，超过100所大学里面送货，都用机器人进行送货。所有的都是我们过去很多年的这种坚持投入带来的结果。我相信未来，JD Logistics在大家面前有大量的创新，也会给大家带来很多惊喜。
Yeah. We have also launched the first-ever unmanned sortation center covering the full sortation process without any single man. This is definitely one of the first of its kind in the world. We've also had 170,000 testing hours for our drone delivery service. Also in roughly 100 universities, we have tested our automated delivery robots. All of these great innovations will put us clearly as a leader in modern, innovative logistics solution provider.
还有一直是我们从来没有公布过，今天跟大家分享，我们无人驾驶的物流汽车已经可以做到了每行驶500公里，只需要人工最多干预两次。
Another fact that I wanted to mention is that our automated-
Self-driving trucks
self-driving trucks, we have tested that for 500 kilometers, we only need human intervention two times. Less than two times.
Thank you. Our next question comes from Alvin Yang from Deutsche Bank. Please ask your question.
Hi, good evening. Thank you for taking my question. We noticed that JD has announced a series of cooperations with other internet companies in addition to Tencent, like Baidu, like NetEase. My question is, what's the underlying reason to do that, and how's our expectation on these cooperations? Thank you.
Yeah. One of the key objectives of those partnerships is to leverage each other's unique consumer insights and unique consumer data to provide much better target marketing for our brands. That's one of the reasons. Clearly too, is that all these platforms have their own very large user base. It also help us reach a broader consumer base.
We are now approaching the end of the conference call. I will now turn the call over to JD.com's Ruiyu Li for closing remarks.
Thank you for joining us today. Please feel free to contact us if you have any further questions. Thank you for your continued support, and looking forward to speaking with you in the future.
Thank you for your participation in today's conference. This concludes the presentation. You are now disconnected.