Hello. Thank you for standing by for JD.com's fourth quarter and full year 2015 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there'll 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 fourth quarter 2015 earnings call. Joining me today on the call are Richard Liu, CEO of JD.com, and Sidney Huang, our CFO. For today's agenda, management will discuss highlights for the fourth quarter and full year 2015. Following the prepared remarks, Shen Haoyu, CEO of JD Mall, will join Mr. Liu and Mr. Huang for the Q&A portion of the call. Before we continue, I refer you to our safe harbor statements in the earnings press release, which applies to this call as we will make forward-looking statements. 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. Please note that unless otherwise stated, all the figures mentioned during this conference call are in RMB.
Now, I'd like to turn the call over to our CEO, Richard Liu.
Thank you, Ruiyu. Welcome, everyone. JD's strong momentum continued throughout 2015. We made excellent progress on our key strategic goals. During the year, successful sales events like Singles' Day and our uninterrupted service during the Chinese New Year holiday helped win new customers. Our expanding logistics network allowed us to further improve customer experience throughout China. Today, more and more customers are looking to JD as they upgrade the quality of the products they buy and their overall shopping experience. JD's long-term focus on quality, authentic product, and fast, reliable service has made us China's premium e-tailer. International brands now recognize this, which enables us to attract world-class products to our site. We expect this momentum to continue in 2016. I will now turn the call over to Sidney. Thank you.
Thank you, Richard, and hello, everyone. We're very pleased with another quarter of robust growth, thanks to our highly successful Double 11 and Double 12 sales events and the rapid expansion of our customer base. Excluding Paipai.com, our year-over-year core GMV growth was 79% in the fourth quarter, while our net revenue grew 57%, both of which accelerated from Q3 growth levels and are above our internal targets. Meanwhile, China's overall consumption growth also accelerated in the fourth quarter to over 11%, despite the slowing macroeconomic condition. With our differentiated value proposition and a better customer experience, we remain cautiously optimistic about our 2016 growth outlook. Our core GMV composition remains largely consistent with prior quarters. In Q4, our core GMV from general merchandise categories grew 92% and accounted for 51% of total core GMV during the quarter.
Apparel and footwear continue to be the largest general merchandise category, followed by food and beverage, baby products, and home furnishing categories, all growing with strong momentum. Core GMV from electronics and home appliance products saw an accelerated growth rate of 66% during the quarter, led by mobile devices and home appliance categories. Core GMV from our marketplace business grew 103% in Q4 and accounted for 45% of our core GMV during the period. The triple-digit growth illustrates the strong momentum of our platform, which continues to take market share from alternative marketplaces. Our net revenue grew 57% year-over-year, supported by strong growth in both direct sales and marketplace businesses. Our direct sales revenues grew 54%, led by food and beverage, cosmetics, mobile, and home appliance categories. Services and other revenue grew 101% year-over-year, mainly contributed by strong growth and healthy monetization of our platform.
Our non-GAAP gross margin improved to 14%, up from 12.7% a year ago, as a result of a higher GMV contribution from the marketplace. Non-GAAP gross margin on direct sales revenue declined slightly on a year-over-year basis due to a major promotional campaign for our general merchandise products, which was partially offset by the improving gross margin on our electronics and home appliance businesses. Non-GAAP fulfillment expense ratio was 8.2% in Q4 compared to 7.3% in the same quarter last year. The higher fulfillment expense ratio was mainly due to our investments in O2O and the rural area penetration. It is also related to the lower average order value as a result of the recent category campaign discussed earlier. We are evaluating ways to improve order economics and expect to implement such measures in the coming months.
The non-GAAP marketing expense ratio was 4.3% in Q4, compared to 3.3% in the same quarter last year. The year-over-year increase was mainly driven by discretionary branding activities for the Singles' Day events and for the promotion of our new internet finance business and O2O initiatives. We believe the increased marketing spending was highly effective, as demonstrated by the 71% growth in our active customer base over the past 12 months. Our non-GAAP R&D and G&A expense ratios increased nine basis points and 21 basis points respectively compared to the fourth quarter last year. The changes were entirely due to additional spending by our new business lines. We had an impairment charge as part of our year-end review, mainly due to the discontinuation of Paipai.com and the write-downs of Bitauto and a few smaller investments.
For Bitauto, the write-down is covered by the non-cash portion of the initial investment and it reflects the market correction in its stock price over the past six months as a result of the macro-driven sector downturn and the company's proactive investment in auto e-commerce. We believe the auto e-commerce business is still in the early stage of its development cycle, and we look forward to expanding our partnership in 2016. We remain highly confident in Bitauto management's ability to execute on its strategy and ultimately emerge out of this cyclical downturn as a strong winner. Altogether, our non-GAAP net margin was -1.2% in the fourth quarter, which was entirely attributable to our new business lines. Excluding internet finance and O2O, our core JD Mall business remained profitable on a non-GAAP basis in Q4.
For full year 2015, our overall non-GAAP net margin was within our guidance range of breakeven to -0.5%. Let's discuss our cash flow and working capital. Our Q4 adjusted free cash flow was CNY 266 million, and our full-year free cash flow remained strong at CNY 7 billion, excluding impact from internet finance, which had a cash outflow of CNY 14 billion in full year 2015. Inventory turnover stayed low at 37 days in 2015 compared to 35 days in 2014, and accounts payable turnover was 45 days in 2015, four days longer than the prior year level, but still significantly lower than the general industry level. At the end of the cash flow session in the earnings release, we also disclosed the full-year transaction volumes and the year-end balances of our key internet financing business lines.
I know some of our investors are increasingly paying attention to our internet finance exposure, let me spend a few minutes on our thoughts about this unit and a couple of credit quality data points. We position our internet finance unit as a financial technology company that strives to leverage our proprietary data and internet technology to improve efficiency while reducing costs in financial transactions. Central to this strategy is our focus on developing proprietary risk management tools. We know it's hard, and it will take years to achieve a convincing track record on superior risk management. We are working very hard and have a decent early record in our first two years of operation.
The accumulated non-performing assets before charge-off, which is defined as receivables or loans 90-plus days past due, were approximately 0.2% of the total consumer and supply chain financing volume over the past two years. Our coverage ratio, defined as allowance for bad debt over non-performing assets, net of charge-off, was over 300% as of December 31st, 2015, which illustrates our prudent reserve policy. Once again, we understand it takes many years and at least a couple of credit cycles to demonstrate sustained risk management capabilities. We did want to highlight that we are investing heavily in our risk assessment technologies, and so far we have a prudent record. This is also one of the reasons that we were able to raise over $1 billion in a Series A round recently that valued our internet finance unit at over $7 billion in post-money valuations.
I'm pleased to announce that we just closed the deal today. We hope the Series A round will allow the finance unit to be self-funded for its growth in 2016. It is also management's intention that we gradually reduce our own balance sheet exposure and grow the business with our core technology while leveraging external funds from our partners. We will update you when we achieve more milestones. Now let's discuss our financial outlook. We expect Q1 net revenue growth to be between 45% and 50% on a year-over-year basis. This guidance reflects the solid growth momentum in the first 2 months of 2016, despite a higher seasonality pattern observed throughout the industry. For the non-GAAP net income, we expect an overall non-GAAP net margin between positive 0.5% and negative 0.5% for the full year 2016.
This guidance reflects our plan to meaningfully improve our core business margin, our commitment to investing in internet finance, O2O, and other emerging opportunities, and the flexibility to compete effectively in this highly dynamic sector. Our free cash flow outlook from the core business remains positive given our commitment to fast inventory turnover and our lower accounts payable cycle relative to our peers. We intend to manage our CapEx at a prudent level, generally within the operating cash inflows from our e-commerce business. This concludes my prepared remarks, and we can now move to the Q&A session. Operator.
Operator, we're ready for questions.
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'll take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you would like to ask a question, please press star 1 on your telephone keypad. Please ensure that the mute function on your phone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. Again, please press star 1 to ask a question. We'll take our first question from Eddie Leung from Merrill Lynch. Please go ahead.
Good evening. Thank you for taking my question. I have a question on one of your main product categories, which is on electronics. We have heard from some of the offline brands about the slower growth in smartphones as well as, to some extent, home appliances. Just wondering if you could share a little bit of the outlook of this electronics business to us and how you guys can maintain pretty good growth despite potential headwinds in the electronics industry. Thank you.
Eddie, consumer electronics has been the strongest category for the company. The company started in that category, if you talk about cameras and computers, laptops, these categories have been the slowest-growing in our entire portfolio, although still very fast growth compared with offline retailers. The cellphone has gone through very rapid growth in the past few years as smartphone becomes prevalent in China. The growth rate definitely slowed down. If you look at the entire market, I think it's flat basically now and it's not going to grow much fast this year. As an online retailer, we're still having very decent growth. I think for smartphone, the overall market has grown to a level where the growth rate is almost flat. As far as home appliances, I actually just came back from one of our events.
We just kicked off our annual campaign for home appliances this afternoon with over 100 brands and suppliers. We're seeing very good growth in that category. We're still taking share very rapidly from offline retailers. We're very bullish on that category. Overall, I think the entire market is definitely not growing very fast. As an online retailer, we're taking share from the offline guys, and we're seeing much better growth in the industry overall.
基本上都是一种消费者转移很明显。接下来就是说线上的电子产品的增速主要来自于三到六线城市的消费转移，现在你要去县城，还有电子城，而且生意还挺火。那是我们未来的一个市场空白。
JD is already the largest retailer for a lot of these electronics and appliance categories, but it's only maybe 10% if that, of the entire market. For a few years to come, our growth will still be driven by people's move from offline to online, especially from the lower tier cities. If you go to Beijing, Shanghai, Shenzhen, you don't see those marketplaces selling electronics anymore. If you go to lower tier cities, you're still seeing a lot of volume in those offline markets, and we're seeing people increasingly moving to online.
We'll now take our next question from Erica Poon from UBS. Please go ahead.
Great. Thank you. Question is on the net margin guidance. Whether you can separately frame the size for the investments needed for the Internet finance and also the O2O, the JD Daojia. Separately on fulfillment, just wondering how much of the 3P businesses you are fulfilling in terms of warehousing and also delivery. Thank you.
Yeah. Erica, I think the operating profit from JD Mall business will come from, as we mentioned in the past, really scale economies. We illustrated in the past, for example, our 1P business cost module remained substantially lower than the offline industry leaders, and part of that is will increasingly driven by our improving scale, where we can secure better and better rebates from suppliers as we continue to increase in volume. There are also discretionary spending items, like we mentioned on branding activities in the fourth quarter, for example, and also on the logistics that we continue to improve in the lower tier cities and the rural areas. In 2015, it was still investing year for a lot of those new regions. In 2016, there's plenty of room to improve operating leverage.
We deliberately leave a fairly large range to maintain operating flexibility in 2016, mainly for our new business lines. Because when you invest in a new line, especially in a highly competitive China Internet market, there is clearly uncertainty at the beginning of the year. We don't necessarily have a definitive range for those new investments. Now, internally, we do have budget, but I think it is something subject to change. Overall, I think we have a very strong internal budget for our core business in terms of profitability, which leave us plenty of room to invest in both new business initiatives and potential special events that drive our core business.
To your question about providing logistics services to our merchants, we are delivering about 25% parcels for our third-party sellers, and we are serving a much small percentage of their parcels on warehouse side at this point at a single percentage point. Since the end of last year, I think we're making progress on getting people onto our warehouse platform.
We'll now take our next question from Alan Hellawell from Deutsche Bank. Please go ahead. Your line is open.
Great. Thank you very much. Just two quick questions. Would love an update on your cross-border initiative. Maybe it's waiting in GMV. How we should begin to think about margin structure now that we're quite a ways into it? If you don't mind just following a little more on O2O operations, what your incremental geographic coverage goals are, and to what extent we feel the need to apply subsidies, and whether it will be more or less intense relative to last year. Thank you.
Yeah. For O2O right now, we are in 12 cities, and we intend to penetrate the consumer base in those 12 cities before moving into new cities. In other words, we target to achieve enough critical mass and scale economies before expanding further into other cities. We don't have a definitive investment amount, as I mentioned earlier. We do have clearly a competitive advantage in this area because not only we work with some of the best partners such as Yonghui, but also potentially we have great supply chain partners in our fresh food categories.
关于O2O项目，我想大家很多人感兴趣，也有很多人会拿我们跟美国的Instacart相比较。虽然二者的商业模式是非常的接近，但是本质的不同是，京东到家核心的专注在生鲜领域。据我所知，Instacart在美国好像是杂货为主，所以二者品类是不一样的。杂货我们完全可以用京东商城的那种模式就可以把它做了，不需要京东到家模式。所以到家模式主要是以湿为主的食品，特别生鲜、医药这些东西。
Yes, I know a lot of people are curious about our O2O business, and some compare us to Instacart in the U.S. One very different position for us is we focus on the fresh produce category versus Instacart is delivering a more broader kind of grocery category. For us, we focus exclusively on fresh produce, and for other grocery products, we can fulfill them through our own JD Mall 1P platform.
从生鲜品类来说，未来的只有京东到家这种商业模式才能够在网上大规模地卖生鲜。像平台模式，包括京东自营的模式，这二者商业模式其实根本没法去做生鲜的。或者特别中低端食品，高端的、进口的、organic这些东西都可以在京东的这种模式可以做。但大量普通的、中低端食品必须用京东到家这种模式才能够解决。
For fresh products, especially the mid-tier to the day-to-day fresh products, it is very difficult for either 1P business or platform business to operate effectively. We believe O2O model is the only effective way to deliver these fresh products to consumers' hand. For high-end and also organic fresh products, clearly there is a way for us to operate on a 1P basis.
所以京东到家这种模式也需要很长的时间。京东我们做任何业务都是以十年、二十年的眼光和战略去规划它。目前到家这种模式遇到最大的问题是生鲜没有标准化。所以京东到家正在跟各个超市做生鲜的标准化，因为只有标准化之后才能够适合网上的独立包装进行销售。
Yeah. We expect the O2O initiative will be a long-term investment for us, as we did in the past with our other business lines. The biggest challenge today for our O2O initiative is the non-standardization of the fresh food packaging. We are working with our supermarket partners to standardize some of these fresh product packaging so that we can fulfill them more effectively.
当然，我们最高用的，已经现在使用京东到家这些用户，他们的月度复购率是远远超过京东商城的，也就是他的购买频次是非常高的。这也从这个数字来看，也给了我们很强的信心。
Yeah. We're most pleased that with the initial results, we can see that repeat purchase rates on JD O2O is much higher than our JD Mall traditional business. This is very encouraging.
I think you also have a question about cross-border business. We really started the business in Q2 of last year. Q4 is a big quarter for cross-border for imports. We had a very good growth actually in Q4. It is still a small business for the company. It is just about 1% of the company right now, and it is not profitable. We are looking to improve the profitability of that business this year without sacrificing healthy growth. The big categories are baby products, food and supplement, and skincare and cosmetics. We think it is a good practical selection for our customers.
Operator, next question, please.
We will now take our next question from Cynthia Meng from Jefferies. Please go ahead. Your line is open.
Thank you. Thank you, management, for giving us the opportunity, and congratulations for strong results. My question is with respect to mobile. Can management give us some more color on the mobile GMV contribution and the average ticket size per order on mobile compared to the PC users? Any color with respect to contribution from Weixin directed traffic and the conversion rate? That will be helpful. My second question is with respect to lower-tier city expansion. Maybe management can give us some more update on that front. Thank you.
On mobile, I think we mentioned in our release that in Q4, it accounted for 61.4% of total orders. We've had almost two months now in Q1, and what I can tell you is we're seeing continued growth in that number. We don't disclose GMV contribution from mobile, but that number is lower than the percentage of orders because the ticket size is still smaller. As you can understand, when it accounts for an increasingly high percentage of total GMV, the basket size order size naturally converges to the overall average. It's going up. It's getting closer to the PC numbers or the overall numbers.
As far as contribution from WeChat and Mobile QQ, the two Tencent properties, we're continuing to see good progress in terms of order contribution and GMV contribution, especially after Double 11, because during Double 11 we have campaigns, and it's a great time for us to acquire new users from these two channels. After that, we're seeing DAU and these numbers go up. We're also seeing reasonable improvement on conversion. We're going to continue to focus on working with the Tencent team closely to improve the productivity of those two channels.
For lower tier cities, order contribution is around 45% in Q4.
45%. Okay. We had a big year last year, actually, in penetration of lower tier cities. The last year, we really get the vast majority of the job done. By end of this year, we'll cover-
400,000
400,000 villages in China. The total is 600,000, I believe. This will mark, by and large, the end of almost 10 years of JD's continued increasing coverage of the entire country. Once we finish the coverage, we will work on continuing to reduce costs and do innovations. One example is we've got permission from two county governments to use drones to deliver packages in China. We hope by end of this year, we have more places where we can really deliver our JD package to our customers using drones.
Operator?
We'll now take our next question from Sean Zhang from 86Research. Please go ahead. Your line is open.
Thank you management for taking my question, and congratulations on a strong quarter. I remember Richard's speech at Yabuli Forum. He said that he's expecting over 50% contribution in 1P business coming from general merchandise. Now, general merchandise already contributed 51% total GMV. I want to know what percentage of 1P GMV coming from the general merchandise, and is 1P general merchandise growing faster or slower than the overall general merchandise GMV? On a second question, you mentioned you have four million sq m warehouse capacity right now. Can you give us any color how we see this number go up next year and what kind of growth rate? That'll be helpful. Thank you.
For our 1P business, general merchandise is definitely growing much, much faster than our electronics categories. If you look at I'll just quickly give you a sense. Even within 1P, general merchandise is growing at a triple digit. The contribution today is still relatively lower. It is quickly catching up.
What was the second question?
Yeah, 4 million.
We have 4 million square meters, and you can expect the growth pretty much consistent with our 1P business growth, as well as our development of the third-party fulfillment services. You can take our revenue growth rate and add a margin on top of that to estimate the warehousing square meters growth.
Thank you. We will now take our next question from Thomas Chong from Citigroup. Please go ahead. Your line is open.
Hi. Thanks management for taking my questions. I have two questions. My first question is, can management comment about your fresh sales initiative and what's the contribution to your GMV right now? My second question is about the new initiative in payment. Can management talk about your expectation in terms of your payment initiative and how many users you would like to achieve for your closed ecosystem? Thanks.
Fresh sales continues to grow very, very fast. In Q4, I think it's over 200% growth year-over-year, off a small base. In absolute terms, it's over 1% of the company's GMV. We will continue to see very fast growth this year.
Yeah. On the payment adoption rate, we do see increasing bundling of our customers and bundling of their credit cards and debit cards to our payment solutions. Right now, our focus is still mainly on adoption of our consumers on the JD platform. Basically paying for JD purchases using JD payment. We do have some initiatives partnering with third party and external merchants, but it's still in very early stage.
Thanks.
Thank you. We'll now take our next question from George Meng from Goldman Sachs. Please go ahead.
Thanks management for taking my question. Actually, a follow-up question from last quarter. Last time you guys mentioned about your omni-channel offering to your brand partners such as some of the apparel brands to help them do O2O, basically. I think now you took this 1 step forward by signing a strategic cooperation agreement with Li-Ning last December. Can you elaborate a little bit more on this? What's the progress so far, and what's your plan going forward? Is it just O2O or eventually Li-Ning will also use JD Logistics for all its fulfillment, including warehousing for both online and offline? Do you also have plans to sign similar contract with more brands going forward? If so, I think you just mentioned you have 4 million sq m of warehouses and 6 Asia No. 1 warehouses are self-built.
Can you update us on the proportion between self-built and rent warehouses? In the past, I think you had Asia No. 1 already online in Shanghai. Now you have 6. Does that mean the warehouses in Shenyang, Wuhan, and Guangzhou are all online now? Thank you very much.
The collaboration with Li-Ning is, we took over their Northern China logistics for logistics services to their stores and also to their resellers. If they're successful, we also intend to roll this out in other regions for them, and we'll also probably help them with e-commerce logistics as well. The initiative we mentioned last time, as far as working with the apparel brands stores, leverage that inventory for e-commerce. We continue to do that and continue to make progress. If you look at our entire floor space, which is over 4 million, still a pretty small percentage is self-built, which is Asia No. 1, and we have 6 online now. As we have more of these warehouses come online, the percentage will go up. I think we mentioned we have 6 now in production, but these warehouses are built and they do come online in phases.
For example, in Wuhan, we do have a few structures in production right now, but we're still building more structures. It's really a phased process. Richard just added that in most of these hub cities where we build Asia No. 1, they do come in phases. Phase 1, Phase 2, Phase 3. Really, we pace that according to our sales growth.
We'll now take our next question from Vivian Hao from JP Morgan. Please go ahead. Your line is open.
Hi. Thank you for taking my question. I have two questions here. Given the headcount expansion in fulfillment personnel, how do we see the fulfillment cost as a percentage of revenue trending this year? Also, do we consider engaging cross-sourcing logistic partners for JD Daojia to be more cost-efficient? My second question is on the margin dilution that you mentioned during the prepared remarks from O2O and internet finance. Can you provide more color on the respective margin profile for the business? Also, what is the revenue contribution from O2O and JD Finance, respectively? Thank you.
As far as the logistic cost as a component of percentage of revenue, it goes up. On a day-to-day basis, we manage logistic costs per order, in RMB terms, and we continue to see that number go down, which is quite amazing considering we are the leading e-commerce operator in China. As we have more innovation in our processes, and as we grow in our scale, we continue to see logistic cost per order go down. As a percentage of revenue, it relates to basket size. As Sidney mentioned, in Q4, we did a preview campaign on consumables, which tend to have a smaller basket size. As the mix shifts in our categories, this will drive the change of basket size.
Also, as Sidney mentioned, we are looking into different ways to encourage customers to increase their basket size, so that our economics will be better. We're very vigilant on these metrics.
On the respective margin profiles, as I mentioned that in Q4, excluding internet finance and O2O, our core business non-GAAP net margin was positive. Because there's a very steep loss in Q4 on the non-GAAP basis, you can have a sense that basically that entire loss was attributable to those new business lines. Also, we mentioned that for 2016, on a core business basis, our operating margin is budgeted to improve significantly from the current level for JD Mall business. We wanted to remain some flexibility at the beginning of the year in terms of the extent of investments in those new areas.
As the core retail e-commerce business improves its profitability, then we also think that the absolute loss, absolute investment for these new business in absolute terms will not increase a lot year-over-year. Combine these two dynamics, you will see our overall profitability of the company will improve over time.
Recently, two major couriers in China, I think they're called STO and YTO, went public in China. We did get a chance to see their numbers. If you look at the numbers, the price per parcel on average in China is about CNY 13 per parcel.
Over CNY 13.
Over RMB 13 per parcel. If we look at our internal numbers, as far as delivery is concerned, it's lower than that. We are very encouraged by these numbers, and we're even more convinced than before that because of our scale, because of our innovation, doing this internally in-house was a very good decision we made years ago.
We'll now take our next question from Tian Hou from T.H. Capital. Go ahead, your line is open.
Good evening, Richard, Haoyu, and Sidney. The question is related to your crowdfunding business. We witnessed that Taobao also has such business, and recently growing pretty rapidly. How do you see this online crowdfunding market is evolving in the future, and what is JD.com's advantage over others? That's number one question. I have a second one following on the JD Finance. I remember one quarter I asked a question regarding how do we record GMV or revenue from JD Finance. At that time, the revenue was recorded as something against the cost. As JD Finance has developing in a much more variety, and I wonder, how do we record the GMV revenue from JD Finance now? Thank you. That's all my question.
Control. Are you doing the audio control?
Yeah. For crowdfunding, I'll take a shot first. We have both product crowdfunding and equity crowdfunding. For product side, we do have a 1P platform to support the latest innovative products that are on our crowdfunding side of the business. We are the pioneer in this business. Despite of multiple players in the market, we continue to be confident in maintaining our market leadership. For equity crowdfunding, this is more about the ecosystem that you build around this business by introducing various third-party service providers, like marketing firms, branding, design firms. We have built an ecosystem to support our crowdfunding partners, our equity crowdfunding partners to develop their business. Having said that, this is still a fairly new business, so we're not saying that we can claim victory.
I think every player still has a fair chance to try their best and become a leader in this industry. We will see in the next few quarters how we continue to develop this business. For GMV, from our finance business, only the crowdfunding product side will be recorded in GMV terms. None of the other businesses will be part of the GMV that we disclose. Internally, we look at gross transaction volume, which we actually disclose in our earnings release on the financing side. It's gross transaction volume, especially on the supplier side. For revenue, if it's the interest income from supplier financing, it will continue to be recorded as a reduction to cost. If it's interest from consumers, and yes, that will be recorded as part of revenue.
Because right now, the interest level is still fairly low, we have just recently started the differentiated pricing. This is risk-based pricing. At this point, the revenue contribution is still very, very small.
We'll now take our next question from Robert Peck from SunTrust. Please go ahead.
Yes. Hi, thanks for taking my question. Sidney, I was wondering two items higher level. One, could you talk about any impact, if any, from just the general economy slowdown or gyrations in the stock markets on GMV growth? Number 2, your competitor talked about the impact of weather during the quarter. I was wondering if you give us any quantification on the impact, if any at all, on weather. Thanks so much.
Sure. I mentioned at the beginning of my remarks that despite of the economic slowdown, the consumption growth, the overall consumption growth in China was still quite healthy, with accelerating rate of 11-plus% in the fourth quarter, up from 10-plus% in the previous nine months. That is a good validation of our assessment in the past that despite of the macro slowdown, the consumption growth remains healthy. We mentioned a few drivers for that in the past. Again, there could be a lagging effect of the macro slowdown on the consumption. That's why we remain cautiously optimistic about our outlook.
The weather, I think some people asked this question last time as well. We haven't seen any
Meaningful impact on weather. Personally, I don't even know it's a cold winter or it's a warm winter because people say different things, with the colder days, the warmer days.
Operator? Operator, next question, please. Operator? Operator, are you still there?
Apologies. Our next question comes from Jin Yoon from Mizuho Securities. Please go ahead.
Good evening, guys. Just a couple of things. Starting with the gross margins. With high competition and lower-end handsets hurting gross margins in 2015, could we assume as an anniversary this year, 1P gross margin should improve throughout 2016? Second question is, I think you said you finished your round of financing for your internet finance business. Can you talk about what percentage of that business do you own, and is there a floor to that number going forward? Thanks.
Right. For 1P gross margin, I think overall, we expect upward trend in 2016. Whether it's through the mobile phone, which has a meaningful contribution, but it's not something that would actually impact the overall trend. Overall, we do see both gross margin and operating margin to improve for our core e-commerce business. For our internet finance, you can have a quick calculation. We raised RMB 6.65 billion, on top of RMB 40 billion in pre-money valuation. That's about 15% equity stake to the external investors, and we maintain 85% at this point.
Just a bit more color on the 1P gross margin. We look at these numbers by category. We look at each category to say that over time, we want to see gross margin improvement on each category. At the end, it's a blended number, so it depends on the mix shift because different categories do have different gross margin profiles. At the end, it's a weighted number. We do see, for example, in Q4, we had a big campaign on consumables, and there's some gross margin pressure for that category. We'll probably continue to see pretty intense competition within that category. There will be some pressure for that category.
We'll now take our next question from Jialong Shi from Nomura. Please go ahead. Your line is open.
Hi. Good evening, management. Thanks for taking my call. I have a question about your internet finance business. I understand quite a few Chinese companies are now doing this internet consumption loan or supply chain finance business. I was wondering, compared to your competitors, what are JD's competitive edge in this internet finance business? Also, how much of your Q4 GMV is linked to the consumption loan you provide for your customers? Thank you.
For all new products, or just as part of general philosophy, JD focus on improving customer experience. If you look at our Jingdong Baitiao, the consumer financing product, it definitely improved the overall user experience on JD shopping. That's a very important aspect. We also mentioned about risk management, which we focus a large part of our R&D on the risk management. We hope it will be a differentiated advantage. We also have, with JD Mall business, we have unique consumer insight, which can help us in both building the risk management model, but also developing more uniquely customer-friendly products. Richard mentioned, the last point is, we have our own internal strict guideline, what kind of products we will develop.
In the past couple of years, when there was a huge rush to P2P products, we stayed away from that business and never really get close to it, because it didn't really match or fit our internal risk management appetite and policy. In addition to our customer-first philosophy, our JD Finance business definitely is embracing the innovative spirit, and coming up with actually quite a few number one. We are the first company to introduce consumer financing for Jingdong Baitiao, for e-commerce. We are the first in introducing product crowdfunding, and also equity crowdfunding business in China. We intend to continue to innovate, and really generate positive surprises to our consumers. If we can achieve that, we are confident that our JD Finance business will, just like JD Mall, bring significant value to our shareholders.
We are now approaching to the end of the conference call. I will now turn the call over to JD.com's Ruiyu Li for closing remarks.
Thank you, operator. 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 talking with you coming month.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.