Hello, thank you for standing by for JD.com first quarter 2016 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 would now like to turn the meeting over to your host for today's conference, Ruiyu Li. Please go ahead.
Thank you, operator. Welcome to our first quarter 2016 earnings conference call. On today's call, Sidney Huang, our CFO, will discuss highlights for the first quarter following his prepared remarks. Richard Liu, CEO of JD.com, and Shen Haoyu, CEO of JD Mall, will join Sidney for the question and answer portion of the call. Before we continue, I refer you to our safe harbor statements in the press release, which applies to this call, as we will make forward-looking statements. This call includes some 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 unless otherwise stated, all figures mentioned during this conference call are in RMB. I would like to turn the call over to our CFO, Sidney Huang.
Thank you, Ruiyu. Hello, everyone. We are pleased to report another quarter of solid growth and improving margins on our core business. Our core GMV grew 55% year-over-year in the first quarter 2016, more than doubling the industry growth rate despite a notable slowdown in national consumption growth. More importantly, the growth was healthier, and our JD Mall operating margin showed a meaningful improvement. I will discuss both in more detail in a minute. From a macro perspective, China's overall consumption growth decelerated in the first quarter to 10.3% from 11.1% in the fourth quarter last year. As we have cautioned since last August, a sustained weak economic environment could, over time, hurt consumption. Although we continue to believe such impact may be moderate or delayed due to the secular trend of the offline-online shift and the healthy employment level supported by the government.
During the first quarter, we conducted a detailed review of our business lines in conjunction with our annual budgeting process. We made an important decision to rationalize our core e-commerce business with a more balanced approach to growth and profitability. Business units on the JD Mall are being evaluated for their operating profitability for the first time in addition to their growth metrics. Concurrent with this balanced focus, we are now sharing with you the operating margin from our core e-commerce business and the operating loss from the new businesses, thereby providing more visibility into the financial trends of these different segments. Let's first review our growth metrics. The GMV from our marketplace business grew 63% in Q1 and accounted for 41% of our GMV during the period.
Some of you may ask why the growth rate has seemingly slowed. I'll share a few reasons in addition to the overall slowing consumption growth. First, our marketplace had experienced exceptional growth in the four quarters following our Tencent partnership, with tremendous traffic support particularly helpful to our platform business, which began in the third quarter of 2014 and ended in the second quarter of 2015. Since the third quarter of last year, when we reached the anniversary of the transaction, the growth rate began to gradually revert to a more normalized pace. That is why you have seen a deceleration of growth rate over the past three quarters. It is important to note that our marketplace still grew more than double the industry average this quarter.
Second, as part of the business rationalization process mentioned earlier, we identified certain virtual product categories with extremely low take rates, which were not economically sensible to further growth. One example that we had mentioned before was the telecom operators cutting take rates on cell phone recharge sales starting January 2016. Such products will continue to be offered for user convenience and traffic generation purposes. We will discontinue promotional incentives for these thin-margin businesses, which will result in a GMV decline in these categories. Third, we have further strengthened and implemented new technologies since January 2016 to identify so-called brushing transactions and penalize the violators with a downgrade mechanism and increased fines. Many of you know, brushing refers to merchant-initiated transactions through fake customer accounts. They are not easily identifiable by the platform.
These activities create misleading product reviews, damage customer experience, and compromise the integrity of the platforms. Brushing has become a common practice on all e-commerce platforms. We are committed to minimizing it at all costs. This anti-brushing campaign marks our second recent major initiative after we shut down Paipai.com last November to uphold the JD.com platform as the most trusted e-commerce destination in China. We hope our new anti-brushing technologies will become more and more effective throughout 2016. In summary, our marketplace GMV will continue to outgrow the market but at a more normalized pace. In the first quarter, our GMV from general merchandise categories grew 56% and accounted for 48% of total GMV during the quarter. Food and beverage was the fastest-growing general merchandise category, followed by cosmetics and home furnishing. Apparel and footwear continued to be the largest general merchandise category with strong growth momentum.
GMV from electronics and home appliance products grew 54% during the quarter, led by mobile devices and home appliance categories. Our net revenue grew 47% in Q1, supported by strong momentum in both direct sales and marketplace platforms. Our direct sales revenues grew 45%, led by food and beverage, cosmetics, home appliance, and mobile categories. I would also like to highlight our revenues from services and others, which increased by 91% year-over-year, and demonstrated the strong growth in the underlying GMV and improving monetization of the JD.com platforms. Our non-GAAP gross margin improved to 14%, up from 12.2% a year ago, as a result of higher 1P gross margin and higher GMV contribution from the marketplace. Non-GAAP gross margin on direct sales improved over 80 basis points on a year-over-year basis, mainly due to increased scale economies across all key categories.
Non-GAAP fulfillment expense ratio was 8.2% in Q1, compared to 7.2% in the same quarter last year. The higher fulfillment expense ratio was mainly due to our investments in rural areas and the expansion of the consumable product category, which has lower average order values. The non-GAAP marketing expense ratio was 3.3% in Q1, compared to 3.0% in the same quarter last year. The year-over-year increase was mainly due to lower tier city marketing activities and the promotion of our new businesses. Our non-GAAP R&D and G&A expense ratios increased 6 basis points and 11 basis points respectively compared to the same quarter last year, which were entirely attributable to the higher spending by our new businesses, partially offset by the operating leverage from JD Mall. Our non-GAAP operating margin was negative 0.5% in the first quarter, which had a 32 basis point improvement over the same quarter last year.
Excluding the new businesses defined as JD Finance, O2O, overseas business, and the technology initiatives, including smart devices and cloud computing. Our core JD Mall business had an operating margin of 0.5% on a non-GAAP basis with a 60 basis point improvement over the same quarter last year. This margin improvement was primarily driven by the higher gross margin, partially offset by the higher fulfillment and marketing expenses discussed earlier. The new businesses, on the other hand, incurred a non-GAAP operating loss of nearly RMB 0.6 billion during the quarter, mainly from JD Finance and the JD Daojia. Now let's discuss our cash flow. In the first quarter, the free cash flow totaled RMB 2.9 billion, excluding the impact from JD Finance loan balances, which had a net cash outflow of RMB 1.6 billion during the quarter.
In the same quarter, JD Finance raised RMB 10.6 billion through the Series A fundraising, securitization, and the bank loans. As we stated in our last earnings call, JD Finance is expected to self-fund its growth in 2016 and beyond. Our working capital inventory turnover for the last 12 months stayed low at 37 days compared to 35 days in the previous LTM. The accounts payable turnover for the last 12 months was 46 days, four days longer than the previous LTM. We will be using the rolling 12 months turnover data going forward to avoid misleading quarterly volatility and provide a more meaningful trend to investors. Finally, let's discuss our financial outlook. We expect Q2 net revenue growth to be between 40% and 44% on a year-over-year basis.
This guidance reflects our conservative outlook in light of the slowing consumption growth and our increasing focus on profitable growth in 2016. For the non-GAAP net margin outlook, we maintain our previous guidance for the full year 2016, pending our assessment of the accounting impact from the Dada-JD Daojia merger. This concludes my prepared remarks, and we can now move to the Q&A session.
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 questions queue again after your first question has been addressed. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel a request, please press the pound or hash key. Please note there will be a short silence while questions are being collated. The first question comes from the line of Eddie Leung from Merrill Lynch. Please go ahead.
Hi. Good evening. Thank you for taking my question. I noticed that the GMV per order actually increased materially year-on-year. Just curious on what's the reason behind it. Did we see the ticket size of electronics or general merchandise going up, or was it because of customer buying more products per order, hence we have seen an increase in GMV per order? Thank you.
Yes, Eddie, this is Sidney. The reason is actually mostly related to the scale back on the cell phone recharge sales, which had a lower ticket size. It actually had a quite meaningful impact on our GMV, which also in turn had a very meaningful impact on the average value per order.
Thank you. Next question comes from the line of Chi Zhang from HSBC. Please go ahead.
Good evening. Thank you so much for taking my question. I wondered if you could give us a little bit more color regarding your commentary regarding the slowdown in marketplace GMV. You outlined three buckets, Tencent, business rationalization, and brushing. I was wondering if you could just give us some more additional color on how you can put those into three different buckets, please, in terms of the impact. Thank you.
Right. On the Tencent transaction impact, you could actually see there was a deceleration over the past three quarters with average over 20% a quarter. That was really businesses max out the incremental contribution from the traffic support. We have mentioned this over the past three quarters. If you want to quantify, you could take the previous two quarters' pace of slowing down around 20% per quarter. You have the two other elements. For the virtual product kind of rationalization, if you look at the virtual product category as a whole, we actually saw a meaningful decline during the quarter. If you assume, let's say, there is actually a magnifying impact on the growth rate.
If you take less, for example, 3% of the marketplace GMV from last year, for example, by eliminating that, you would have a negative impact on the growth rate of nearly 6% this year. That gives you some idea on why the growth rate would decelerate a little bit bigger, because you're essentially not only not growing that category, but you actually decelerate that category. For the anti-brushing, it's really difficult to quantify, as they couldn't be identified to begin with. Now we are providing severe penalties, and we also started to implement a number of downgrading mechanisms. The impact, there will be a ripple effect on the merchants' behavior. For that part, it's very difficult to quantify.
Thank you. The next question comes from the line of Erica Poon Werkun from UBS. Please go ahead.
Hi, Sidney. Thank you. How should we think about the 1P, 3P mix shift going forward? How do you balance the need to maintain quality and service on the one hand and on the other, the need for scale and profitability? Thank you.
Yeah. I think I'll begin first. We will continue to see stronger growth from 3P businesses. Now on the surface, you may see the 3P growth slowing down a bit more than the underlying business fundamentals because of the unfavorable comparison to previous year. Right. I think over the next few quarters, the growth rate, just based on year-over-year numbers, may seem to be a little less than what's the underlying growth momentum. It should still grow faster. The healthy part of the business should definitely grow faster than the 1P business. Having said that, as you can see, our 1P business has been growing at a very solid pace, and will continue to grow in the foreseeable future.
Thank you.
Just a bit more commentary on what Sidney said. The marketplace GMV grew slower. Growth rate decelerated a little bit this quarter, it's still growing faster than the first party, the B2C, direct sales business. Our hypothesis is that going forward, there will still be a differential between the growth rate of marketplace GMV and the direct sales GMV.
Thank you.
We've maintained our advantage over the industry growth rate at, I think, the past few quarters. Every quarter, we grew at double the growth rate of industry rate, and we'll continue to do that.
Thank you. The next question comes from the line of Alan Hellawell from Deutsche Bank. Please go ahead.
Thank you, management. This is Aileen Dung on behalf of Alan Hellawell. I have a question regarding your electronic products. Could management give some color about the recent trends, especially on the smartphone competition, and what is the outlook for the full year? Thank you.
Right. For the consumer electronics, the cell phones, the computers, the pads, I think the macro environment is definitely slowing down, as you have seen from some manufacturers. We continue to be the leading retailer of that category, and I think we're still gaining share from all other retail channels. In the first quarter, we continued to see good growth momentum across all electronics categories, including cell phones and computers, and pads and peripherals. We are already by far the leading retailer of these categories, and we're continuing to gain share in spite of the overall slowdown of industry. It's definitely impacting our growth rate, but we continue to grow at a much faster rate than the industry.
Thank you for the question. Next question comes from the line of George Meng from Goldman Sachs. Please go ahead.
Hi, good evening, management. Thank you very much for taking my question. My question is related to your new business, which generated about the RMB 0.6 billion loss this quarter. I understand this is mainly from JD Finance and Daojia. You also mentioned this time, I think for the first time, about all these technology initiatives as well as the overseas business. Within the technology, I think you just mentioned cloud computing and the smart devices. Can you maybe quantify how big the investment or loss you are expecting this year? Because I think from last quarter, you mentioned the absolute loss of all these new business will be not growing that much on a year-on-year basis in 2016. Just wondering what's our plan in this, not on JD Finance and Daojia, but also other technology-related and also overseas business.
Can you remind us how big those businesses are as of today? Thanks.
Our investment in technology this year will continue to grow, but in terms of percentage of our total revenue, it's not a very big number.
Yeah, it will maintain at a similar percentage of revenue this year. It is actually a very small amount at this point. Same for the overseas business, which we mentioned before that at this point, we only have one joint venture in Indonesia.
Thank you. The next question comes from the line of Sean Zhang from 86Research. Please go ahead.
Thank you. A follow-up on the 3P marketplace strategy. Maybe can management walk us through maybe your thought process here? What's your new strategy for the 3P category? I have seen a lot of brand flagship store opening on JD. Maybe just share some color on your 3P strategy going forward, and also maybe touch upon your June 18 anniversary sale. What have you prepared in terms of category? I have seen 3P, of course, which is your strongest category, have done conferences with suppliers. Maybe give us some color on the preparation to the June 18 anniversary sale. Thank you.
We don't really have a new strategy for marketplace business. Our strategy is always we want to give our customers good selection by having a good variety of merchants on our platform. You may have noticed that we have just about 100,000 merchants on our platform right now. We're not looking to increase that number too much, because we believe that number of merchants already can provide a good selection, we don't want to have an crowded marketplace. We want all the merchants to be profitable on our platform, we are increasingly offering our logistics services to them, to our merchants, be it last mile delivery services or warehousing services. We'll continue to grow this business and all these non-electronic categories. A lot of the non-electronic categories are actually driven by third-party merchants.
As for the preparation for our anniversary campaign, we're going to have an event in a few days. We have lined up many big brands and merchants to work together with us to have a really rewarding experience for our customers. Because it's our anniversary sale, we put a lot of resources behind it, we will be having big campaigns across all categories, be it first-party electronics categories or marketplace, third party, home apparel categories.
I just want to add one point. One side benefit of the anti-brushing campaign is that we actually know that the large merchants are benefiting from this new initiative. If you look at March and April sales data, large merchants were growing much faster than average. Not that we know small merchants are not benefiting, but it's just one of the side benefits.
Thank you for the question. Next question comes from the line of Gene Munster from Piper Jaffray. Please go ahead.
Hey, good evening. I just wanted to follow up on just the overall expectations about GMV growth. You talked about the reasons for the slight deceleration. You talked about the significant market share gains that you've had relative to overall e-commerce. My question is, if you were going to think about the next year or so, should we think about a continued slowdown in GMV, but still outpacing overall e-commerce? Any sort of feedback or color you can give us to how to model this out from a high level. Thank you.
I think as Richard mentioned earlier that we have been growing at more than double the industry average for many years, and that is still our target going forward, given our superior user experience and our improving user engagement. It is, however, difficult to model for the next few years because it is partly also dependent on the overall consumption growth in China and also the overall e-commerce growth as a sector. Nevertheless, we are very confident that our growth rate will significantly outpace the overall e-commerce growth rate over the next few years.
Thank you. The next question comes from the line of Robert Peck from SunTrust. Please go ahead.
Thank you so much. Just two quick questions. One, Sidney, I was wondering if you could update us on just the competition for merchants, large sellers, and if that has heated up at all or sort of subsided. Number 2, were there any anomalies to call out during the quarter? Was there any impact from weather, et cetera? Thanks so much.
Yes, I'll take a shot and then, Haoyu can add. The competition has always been very fierce. We have seen competition from offline major players in the past, and we continue to see very severe competition from our largest e-commerce competitors. We don't see any material change in terms of competitive dynamic. For any other reasons, in Q1, I think we have tried our best to explain the reasons we think are meaningful. It's very difficult to quantify other factors like weather
Thank you for the question. Next question comes from the line of Wendy Huang from Macquarie. Please go ahead.
Thank you. My first question is on your fulfillment. Fulfillment cost as a percentage GMV and also the fulfillment cost per order has gone up this quarter. What's the reason behind that? Was it more driven by the O2O business? If this is the case, how should we expect the fulfillment cost to change in the future? Another part of fulfillment is about the fulfillment in the rural areas. I think Alibaba mentioned last week that they had Taobao service stations in over 140,000 villages. What do you think of the competition from Alibaba in the rural areas, and what's your strategy in expanding into the lower tier cities and also rural areas? The second question is on your operating loss. You mentioned that you had about RMB 0.6 billion non-GAAP operating losses on two business, JD Finance and JD Daojia.
Can you just give more color as to which one is a bigger dragger? Also, how should we expect the JD Daojia's standalone losses going forward? Thanks.
I'll explain number one, number three first. For the fulfillment expense ratio I mentioned earlier, it's really related to investments in the lower tier cities and rural areas, similar to some of the competitors that we've recruited many village agents. The other very important factors is the consumable categories growth, which has lower average basket size. That has a very important impact on the fulfillment expense ratio. As we mentioned before, we are in the process of evaluating ways to improve that order economics in this particular category. On the RMB 0.6 billion for new businesses, if you want to In terms of magnitude, JD Finance definitely had the largest operating loss at this point, followed by the O2O. The remaining new businesses actually had a very small impact at this point.
For the next quarter, because of the Dada and the Daojia merger, the reason we are still in the process of assessing the impact is, it is most likely to be deconsolidated. However, because the new company on an ordinary share basis, JD still owns a large majority of the ordinary shares. The Dada shareholders are mostly preferred shareholders. From a loss allocation point of view, we will still absorb the majority of the combined entities losses in the other equity pickup line. That's why we need to give the new entity some time to come up with their annual budget so that we can have a better visibility to share with our investors. Internally, when we look at fulfillment cost, we don't really look at fulfillment cost as a percent of revenue. We look at per order fulfillment cost.
If you look at that number on an apples to apples comparison basis in the past few years, we're seeing declining fulfillment cost. We were able to achieve that, despite the fact that we are going to more and more rural areas where the order density is less than the bigger cities. I just want to add to what Richard said. We are very vigilant about basket size because we do know that with that, we see the sort of the percentage of logistic cost as a percent of revenue. As we're selling more and more general merchandise and consumable merchandise, we're seeing the basket size has downward pressure. We are trying different things to maintain basket size. For example, as you may know, we increased our minimum order size for free shipping recently again.
It's been about a month now, so far we're seeing results that we would like to see. Just to let you know that we are very mindful of basket size.
All right. The question about penetration into lower tier cities. I think our competitor has 14,000 presences in villages. We're trying a different approach, as we mentioned before. We have representatives working for us to promote JD in villages. I think the latest count is about 200,000 of them covering 200,000 villages all across China. We're seeing good contribution to our GMV from these representatives, and we will continue to push ahead.
Thank you for the questions. Next question comes from the line of Vivian Hao from J.P. Morgan. Please go ahead.
Hi, management. Thank you for taking my questions. I have two questions here. The first one is about your gross margins. What are the top growing categories, for example, like food and beverage, in your 1P business as the gross margin profile? Probably just to give us maybe the top three fastest-growing categories in your 1P business. The second question is, when you mentioned earlier in the prepared remarks on the anti-brushing efforts on your 3P marketplace, can we get a sense of how we should think about the percentage of GMV impact and the categories that are most affected by brushing? Thank you.
Right. On the gross margin, we actually saw improvement to our first-party business across all key categories. It probably doesn't help to further kind of order these categories because they may change from quarter to quarter based on their different promotion schedules. We did see meaningful pickup across all categories as they compare to the previous year quarter.
Thank you. The next question comes from the line of Robert Lin from Morgan Stanley. Please go ahead.
Hi. Two questions here. First on the finance business, could the management provide some of the key metrics from finance business? I know you provided actual disclosure this time about new business, but particularly key metrics such as GMV contribution, consumer finance. We also book a cost of sales of interest expense in the 1P line. Maybe also the revenue received. Related to finance business, obviously some of our biggest competitors are potentially coming onto public market. What is our timeline on the finance business IPO, if any? That's first. On the fulfillment side, I think one of the things that you talked about is JD consumable products. Will we have something like a JD Supermarket business that's very similar to Tmall Supermarket that we can do bundle and increase the efficiency of the logistics fulfillment going forward? Thanks.
I'll answer the first one. For JD Finance, first of all, there's no timetable for IPO. It's really too early. We're still developing the infrastructure and the initial business build-up at this point. On your question about the consumer financing volume, and impact on our GMV. In Q1, actually, we looked at all the volume, 55% of consumer finance volume were paid within one month during the interest-free period. They're really like a credit card. If you then look at the remaining 45% that were on installment, the volume contributed is in low single digits to the overall GMV. It's very small impact in terms of impacting the GMV growth. We mentioned this before, that we run our internet finance business not for the benefit of e-commerce. There is a side benefit, but that was not the purpose.
The purpose is to build a financial technology company leveraging the big data and also the risk management model so that we can monetize over that technology. We mentioned about self-funding nature of the business, we hope to share with you more color on how they will monetize their technology without leveraging the balance sheet at all, hopefully in the near future.
As far as FMCG or consumable category, I think that's a category. First of all, we have a very sizable business in that category already, and it's a category that's had a tremendous growth in past few quarters. It's a category, as you know, very suited for 1P model and logistics is obviously very important to
To that category. Recently, I've talked to many leading FMCG brands, and we are increasingly the number one retailer for these leading FMCG brands in China, and we've built great partnership. We are also going to try different things in this space. Globally, e-commerce in FMCG is also an area that different parties are trying different things. You can stay tuned that we are going to try different approaches to win in this space. By the way, we do have a JD Supermarket brand, and we've been promoting that brand since Q4 of last year. It's sort of a sub-brand, if you will, under JD.
Thank you. The next question comes from the line of Natalie Wu from CICC. Please go ahead.
Hi, thanks for taking my question. I noticed that your gross profit actually grew at a very rapid pace at 75% this quarter. Just wondering if you are focusing on gross profit growth going forward instead of GMV. How should we see the GP margin going forward for this year and as well as for the foreseeable future? Also, I have a second question about the non-GAAP operating margin. I recall that you mentioned last quarter that JD Mall has already achieved profitability for the last several quarters in a row. Just wondering, will this trend be carrying on, and should we expect an improving JD Mall OP margin this year? Thank you.
Right. I think we mentioned earlier about a balanced approach between growth and profitability. We will continue to pursue growth, but we want to pursue profitable growth going forward. Growth is still very important. If you look at the key KPIs to our business unit presidents, out of 4 KPIs, 2 of them are top-line growth related. We just added a bottom-line metric this year. On the JD Mall operating margin, yes, we have repeatedly mentioned in the past few quarters that we do expect our JD Mall operating margin continue to improve. We are now quantifying that improvement starting this quarter, and you should expect continued improvement for the remainder of this year. Although, on a quarterly basis, you may still see volatilities, again, due to different promotional schedules. The overall trend will definitely be improving by a meaningful pace.
Well, we always want to have a good balance between profitability and growth. As you have seen in the media, a lot of categories we are in are not in a good place. Computers and IT products, the overall market is in decline. Cellphone is flat, if not declining. Home appliances also declining according to major brands and manufacturers. We think under this context, it's sort of natural situation. If we want to maintain a high growth rate as before, we probably will have to pay a very high price. Even for apparel, we've heard from some major international brands, they're also slightly in decline. Right. Major FMCG companies as well, including P&G.
Thank you. The next question comes from the line of Jialong Shi from Nomura. Please go ahead.
Hi. Good evening, management. Thanks for taking my call. I have 2 questions here. For FMCG, just wonder how much of your GMV is contributed by this category, and how do you think of the competition from Tmall Supermarket on FMCG? My 2nd question is about the service revenue. Just wonder if management can provide breakdown of this category between marketing and the commission revenue. How do you think of the growth for each? Thank you.
Yeah. We don't disclose the percentage for each category, but I can tell you FMCG is the second-largest general merchandise category behind apparel and shoes.
Yeah, and it's growing very fast.
Yeah.
As far as competition, as I mentioned earlier, this is a category which is very suited for first-party model. It's relatively standardized, and logistics plays a big role in the success of this business, so we are very determined to win. The other, service and others. Next breakdown.
Oh, right. For that, we just qualitatively mentioned, and the trend continues that the commission revenue still contribute the biggest portion of the service revenue, followed by advertising revenues. The third category will be logistic services to the third-party merchants. The remaining, we have now a very small portion from the internet finance business, but it's still very tiny at this point.
Thank you. The next question comes from the line of Tian Hou from TH Capital. Please go ahead.
Hi, Sidney. How are you? Two questions. One is related to your users. User growth is quite significant at 73% in the last 12 months. Also, on average in each quarter, what is the repeated shopping times? How many times they shop on the JD.com, and what is this number before? I would like to have the views from today and a year ago in terms of how many times they shop. That's the first question. The second question related to the fact you raised the rate for the minimum ticket rate for the free shopping. My understanding is this is not the first time you will raise such a rate, a ticket rate.
I wonder, what's the result from last time of such doing, and what's the result do you expect to come out for this time of this ticket rate raising? That's the two question. Thank you.
Right. As for users, we disclose number of active users in the past rolling 12 months, and we don't disclose in more detail than that in terms of how many are sort of old or existing users, how many are new. We're happy with what we're seeing. On one hand, we want to have a lot of repeated users to show that we can retain them on our platform. On the other hand, there are still large potential in terms of new user acquisition. We are seeing a good balance between existing and new users. We recently did look at some cohort numbers.
If we look at users that we acquired in early years, how well we are able to retain them, how they perform over time, we're seeing a very consistent trend where if they stay with us First of all, there's a reasonably high retention rate, and if they stay with us, they would buy more merchandise of more categories from us. They will spend more with us. For example, if we look at 2008 cohorts versus 2009, 2010, 2011, we're seeing pretty consistent trend in terms of their increasing purchase from us. Second question about free shipping policy change. We've been doing that, increasing the free shipping basket size by about, I think, RMB 220 annually, always in springtime. We've been doing that for several years.
Every time we did some analysis on how the basket size in different intervals change, we think it did help us to offset the otherwise stronger pressure, downward pressure on basket size as we sell more and more FMCG products. On the other hand, I think increasingly customers are willing to pay for service, pay for speedy and consistent, and reliable shipping. We don't disclose those numbers, but what I can tell you is shipping fee has increasingly become a meaningful part of our revenue, and that's what we like to see going forward.
Thank you for the question. Next question comes from the line of Eric Wen from Blue Lotus. Please go ahead.
Hi. Good evening. Thanks very much for taking my questions. I have two housekeeping questions. One is, in your calculation of non-GAAP operating profit, you mentioned a line item called a recognition of deferred revenue resulting from equity investees. Can you explain the nature of this line item, please? Secondly, if you can give an update on your CapEx guidance for the year, will be very appreciated. Thanks.
On the first question, it is related to resource-based support that we provide to equity investees. One example would be our partnership with Bitauto, where we provide the auto channel in exchange for its equity. There's a deferred revenue stream from that partnership. In calculating our non-GAAP profitability, we actually exclude that revenue, much like the same way that we exclude the amortization of BCA from business collaboration with Tencent. This is consistent. In the non-GAAP calculation, it reduce our profit. The second point on CapEx, we maintain our previous guidance that we will manage our CapEx within our operating cash flow from JD Mall.
Thank you. The next question comes from the line of John Choi from Daiwa Capital Markets. Please go ahead.
Thanks for taking my question. I have a couple of questions here. Can you guys elaborate a bit more on your contribution from mobile and how the cooperation with Tencent has been going? Secondly, any updates on the progress on your flash sales or cross-border will be appreciated. Thank you.
I think we mentioned that 72% of the orders in the past quarter were placed on mobile devices. For us, that really means our own app and our entry point on WeChat and Mobile QQ. The GMV contribution and also the order percentage from our partnership with Tencent has been increasing, although as Sidney alluded to in his prepared remarks, we believe that the sort of steep component of that curve is over. It's still increasing as a percentage of our total business, but it's growing at a more steady growth rate. It continues to contribute a lot of the new user acquisitions for us.
Thank you. The next question comes from the line of Billy Leung from Haitong International. Please go ahead.
Hi. Thanks for taking my question. Just back to the O2O business again. Can we just sort of get an idea of where we are in terms of, for example, the market share? Are we seeing competitors? Where we are in terms of investment phase for the O2O business. Lastly, just a strategy on this segment, especially after the staking Dada. Are we going to see more vertical acquisition, or is this going to be going into a consolidation phase? Just a bit more color on the O2O business of ours. Thank you.
Right. We have mentioned in the past that our focus for the O2O is on physical goods, in particular, fresh products from supermarkets and neighborhood grocery stores. On that market, in fact, we are not only the market leader, but we are probably the only meaningful player and continue to be that way. One of our major competitor in that space actually announced that they will exit the physical e-commerce business from its O2O platform. We are clearly the market leader in this space, and we are not eager to branch out to the more kind of crowded, competitive space. Now, having said that, this business has now merged into the Dada combined entity. It will be up to the new management to determine the strategy going forward. As far as M&A, we have been quite prudent in our recent deal evaluation process.
I think given the market correction in the recent months, we do expect the valuation of private deals will also come down in the next six to nine months. We will be patient and not to jump on any deals unless it's extremely strategic to us.
We are now approaching the end of the conference call. I'll now turn the call over to JD.com's Ruiyu Li for closing remarks.
Thank you, operator. Once again, 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 we look forward to talking with you in the coming months.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.