JD Group (09618) exceeded expectations in its third-quarter performance in 2023, achieving a three-party beneficial model for consumers, brand merchants, and JD.

On November 15, Beijing time, JD Group (09618) released its third-quarter 2023 performance. Despite continuing to maintain the strategy of offering genuine low prices for goods, providing genuine subsidies to merchants, and investing in genuine services, JD Group still achieved year-on-year revenue growth in the third quarter. Additionally, JD Group benefited from continuous optimization of its supply chain efficiency, leading to steady improvement in profitability. The third-quarter net profit exceeded market expectations. JD Group's consistent and robust financial performance over the past year has demonstrated that by continuously improving supply chain efficiency, it can achieve a model where consumers benefit, brands and merchants earn money, and JD improves quality and efficiency. In the third quarter of 2023, JD Group's revenue reached RMB 247.7 billion (approximately USD 34 billion). The revenue growth rate of core categories, such as electronics and home appliances, remained higher than the industry average. Service revenue reached RMB 52.4 billion (approximately USD 7.2 billion), accounting for more than 20% of the total revenue for the first time, reaching 21.2%. The logistics and other service revenue grew by 19.3% year-on-year. With JD Group's firm commitment to creating more employment opportunities and contributing to society, the company's total expenditure on human resources (including its own employees and external personnel) in the third quarter and the first nine months of 2023 reached RMB 25.9 billion and RMB 76.3 billion, respectively. In the third quarter, JD Group's net profit attributable to ordinary shareholders of the listed company under non-US GAAP was RMB 10.6 billion (approximately USD 1.5 billion), exceeding market expectations. The net profit margin attributable to ordinary shareholders of the listed company under non-US GAAP was 4.3%, and the retail operating profit margin was 5.2%. "In the third quarter, we achieved robust revenue performance and reached a new high in profitability, primarily due to our proactive efforts in price competitiveness and platform ecosystem construction and our supply chain advantages," said Ms. Xu Ran, CEO of JD Group. "We are encouraged to see progress from a series of proactive efforts, such as expanding the number of merchants and improving user purchasing behavior. With our clear strategy of creating value for users and business partners and further optimizing our value proposition for the future, I believe JD is in a favorable position for long-term sustainable growth." JD Group's core categories continue to grow faster than the industry average, consolidating its industry advantage. It has also enhanced user experience by developing over 200 services. In the third quarter, JD continued to offer high-quality and affordable products to consumers and upgraded its support measures for merchants. Although price reductions and subsidies create pressure on revenue under the self-operated model, JD's retail revenue remained robust. The revenue from electronic products and home appliances remained flat compared to the same period last year, with revenue growth in the first three quarters exceeding the industry average. Since August 23 this year, JD PLUS members purchasing JD self-operated products have enjoyed free shipping without limits on the number of orders, unit price, or spending limit for the whole year. Regular users also upgraded from "RMB 99 free shipping" to "RMB 59 free shipping." JD Express has also launched three service commitments ahead of the industry: "must compensate if not picked up within an hour," "must compensate if delivery exceeds the agreed time," and "must compensate if delivery fails to reach the designated address." After years of accumulation, JD can provide over 200 services addressing pain points for users, among which over 80 are industry-leading and unique services that have been created 10 years ahead of the industry in areas such as price protection and home replacement. How to truly benefit consumers? JD has a "consumer experience formula": (product + service) / price 1 (customer expectation). The greater than 1 the result is, the more consumers feel it is of great value. Providing the ultimate low price to consumers should not be achieved at the expense of product and service quality. Sufficient profits must be given to brand owners, merchants, and distributors to invest in product research and development and improve quality of service. JD's low-price model benefits consumers, brands, and merchants. This model was further confirmed during JD's Singles' Day (November 11) this year, where transaction volume, order volume, and user numbers all reached new highs. During this year's Singles' Day, many JD procurement and marketing professionals, who specialize in the supply chain, moved to live rooms and recommended excellent global products to consumers from the most professional perspective, using the most down-to-earth language and the most affordable prices. JD's procurement and marketing live streams provided services with "no placement fee, no commission for influencers, just cheaper prices," aiming to benefit consumers and let merchants earn money. During this year's Singles' Day, the number of viewers of JD's procurement and marketing live streams exceeded 380 million, driving over 60 brands to achieve sales exceeding RMB 1 billion. The transaction volume of nearly 20,000 brands increased by more than three times compared to the same period last year, and the transaction volume of new merchants increased by more than five times compared to the previous period. The overall number of merchants reached a new high, with over 400,000 physical stores participating in JD's Singles' Day. In the third quarter, JD's "Spring Dawn Plan" upgraded 20 measures to support merchants, providing them with a shop-opening experience of "more traffic, faster operation, better service, and lower costs." The upgraded plan brought more cost reductions for merchants, allowing them to enter with zero burden. On the one hand, JD canceled the previous "zero-cost trial operation" period of 90 days, and extended the "zero-cost trial operation" time limit for some merchants indefinitely, without the need to pay a deposit during this period. On the other hand, JD expanded the low technology service fee category to 98% for personal and individual merchant As a result of these merchant support measures, the overall number of merchants maintained a triple-digit year-on-year growth rate in the third qPIERLOT JD Official Flagship Store has officially started operating. The high-end diamond jewelry brand DE BEERS from London and VALENTINO beauty products have both joined JD.Since the third quarter, more than 50 offline stores such as JD Mall and JD Home have opened in cities such as Ningbo and Shanghai. The JD 3C digital store has opened a total of 47 JD Home and JD Computer Digital new stores in the third quarter, covering cities such as Beijing, Shanghai, Guangzhou, and Shenzhen. JD Hour Purchase has cooperated with more than 400,000 physical stores and participated in JD's 11.11 event this year, creating an "instant retail ecosystem" in over 2,200 counties and districts to provide consumers with a "59 yuan free basic shipping" service. The asset scale of JD's supply chain infrastructure has increased by 17% to reach 148.6 billion yuan as of the end of the third quarter. JD Logistics operates over 1,600 warehouses, with a total management area exceeding 32 million square meters, including the management area of the Yun Warehouse ecological platform. In Linzhi, Tibet, with the official operation of the first Shenzhen Agricultural Products Group's pre-warehouse, local highland special products such as matsutake mushroom products, Tibetan xiang pork products, and white meat ganoderma can be stored nearby, opening up a new "transportation channel for product production and distribution integration" in the region. In Jia Shi, Xinjiang, by building a national origin intelligent supply chain center, the logistic costs of local fruit merchants have been reduced by about 20%, directly driving the local new plum industry to increase revenue by over 1 billion yuan and the average income of fruit farmers to exceed 12,000 yuan. JD partnered with Weihai, Shandong to open the sea cucumber autumn fishing season, and through 10 measures such as e-commerce empowerment, joint construction of sea cucumber e-commerce standards, logistic facilities construction, landmark product development, and omni-channel sales, it has driven the sales of Weihai's sea cucumber industry across the country. JD has proven through 20 years of practice that in the business ecosystem, consumers, brands, and merchants are not in a zero-sum game. By continuously optimizing the five elements of product, price, service, cost, and efficiency that affect consumer experience and merchant supply, and constantly "squeezing water" from the supply chain, the saved money can be passed on to consumers, brands, and merchants, thus helping to stimulate market vitality with "genuine low prices".