Mar 10, 2023|
Highlights of JD.com Q4 and Full Year 2022 Earnings Call: Cautious Opitmism
by Yuchuan Wang
JD.com released the fourth quarter and full year earnings results for 2022 on March 9. For the first time, the company’s annual revenues surpassed RMB 1 trillion yuan (US$151.7 billion), while achieving profitable growth and strong cash flow. (Click to access to the earnings report)
In the fourth quarter of 2022, JD.com recorded double-digit DAU (daily active user) growth year-on-year and has seen an upward trend for both user structure and user quality, driving up user shopping frequency and ARPU (average revenue per user). The number of the company’s paid membership JD PLUS also reached 34 million in the quarter. According to analysis, JD PLUS members spend 8 times the average annual amount of non-members.
The three-year pandemic has seen consumers’ lifestyles and preferences change notably. Amidst ever-evolving opportunities and challenges, JD.com stays focused on lowering costs, increasing efficiency and constantly improving user experience to satisfy the diversified consumption demands. Mr. Lei Xu, CEO of JD.com reiterates this company’s business philosophy in the earnings call, and based on which the company is committed to providing better products, price and services.
“In terms of prices, our goal is to be known by consumers for providing the most consistent “everyday low prices,” said Xu. Price is keen to user experience, Xu explains that in the past, all e-commerce players focused on grand promotion, which created a phenomenon of “no promotions, no buying; no promotions, no sales.” JD hopes to transform marketing strategy from focusing on big sales to creating an environment of everyday low price, contributing to the healthy development of the whole industry, benefiting consumers, supply chain, brands and merchants.
The recent “RMB 10 billion yuan discount program” is one of JD’s efforts for “everyday low price” policy, in addition to “compensation for higher prices”, “free shipping above 9.9 yuan”, “price guarantee” and more. The genuine and tangible benefits to consumers will be collectively invested together with brands and merchants on the platform. “Not all the discounts we directly hit our gross margin or marketing expenses,” said Sandy Xu, CFO of JD.com. “Our target is to smooth out the operation pressure from the two major promotion seasons (618 and Singles’ Day) to improve operating efficiency for the entire supply chain and also to attract new users or recap our existing users.”
JD is also improving its marketplace ecosystem to power up from the supply side, including rolling out the “Spring Dawn” initiative that provides greater support to different types of merchants on the platform, including individual owners, self-employed businesses and enterprises. The initiative includes 12 supportive measures that aim to lower costs and increase sales for merchants, such as further streamlining store-launch process to 10 minutes for individual owners, zero-cost trial operations, and RMB 2,100 yuan worth of gift packages for newly opened stores, among others.
Mr. Xu also shares his thoughts on China’s reopening in wake of Covid. “We see the recovery of consumption is underway,” said Xu. “We continue to keep our cautious optimism on the recovery. And we believe that in the second half of the year, the recovery will be faster.”