Jingdong’s (JD) annual active customer accounts increased to 334.4 million in the twelve months ended in Q3 2019 from 321.3 million in the twelve months ended in Q2 2019. Meanwhile, Alibaba’s active consumers on its China retail marketplaces reached 693 million. Mobile monthly active users in September 2019 increased by 36% as compared to September 2018. In contrast, Alibaba’s China retail marketplaces had 785 million mobile MAUs in September 2019.In the third quarter of 2019, over 70% of JD's new customers were from lower-tier cities.Click To Tweet
As of September 30, 2019, JD.com had over 250,000 merchants on its online marketplace, and over 200,000 employees excluding part-time and interns.
JD Retail in Q3 2019
In September, JD.com officially launched its social e-commerce platform Jingxi as part of its strategy to penetrate into lower-tier cities and compete with Pinduoduo.
Social e-commerce in China has much higher conversion rates than traditional ones. Social e-commerce GMV reached 626.85 billion yuan in 2018 with an increase of 255.8%. It’s expected to continue the fast growth and exceed 1.3 trillion yuan in 2019 and 2.86 trillion in 2021. 80% of internet shoppers are using social e-commerce channels.
Jingxi is available to consumers across multiple channels including the standalone Jingxi app, Jingxi mini program and a WeChat first-level entry point. Combining social media and retail, Jingxi provides products at attractive prices.
Jingxi also has partnered with domestic manufacturers in over one hundred industrial clusters, serving as a bridge between manufacturers and consumers. During the Singles Day promotion season, approximately 75% of Jingxi’s new users came from lower-tier cities, and approximately 55% of total Jingxi users were female.
In the third quarter, JD.com continued to apply its data-based customer insights to help brands tailor their products to satisfy consumers’ customized demands on JD’s platforms.
To date, JD has established partnerships with over 140 appliance brands under its Consumer to Manufacturer (C2M) initiative covering over 800 SKUs, with premium names including GREE, Midea, Philips, Siemens and Hisense, among others.
In Q3 2019, JD Retail segment had net revenues of RMB128.7 billion, an increase of 27.3% from Q3 of 2018. The operating profit margin for the segment was 3.3% during the quarter.
JD’s Double 11 2019 sales reached 204.4 billion yuan (US$29 billion yuan).
During the quarter, JD Logistics further improved its efficiency in lower-tier cities as it continued to expand its 24-hour delivery service in these areas.
By optimizing its expanding warehouse network with AI-driven technologies, JD Logistics is able to deliver approximately 90% of its direct sales orders within 24 hours in China.
In the third quarter, JD Logistics remained top-ranked in customer satisfaction rate in the national survey of express service satisfaction conducted by State Post Bureau. JD Logistics continued to expand its third-party businesses rapidly in the third quarter with external revenues accounted for nearly 40% of its total revenues.
As of Q3 2019, JD Logistics operated over 650 warehouses. The warehouses covered an aggregate gross floor area of approximately 16 million square meters, including warehouse space managed under the JD Logistics Open Warehouse Platform.
By the end of October 2019, JD.com joint venture Dada-JD Daojia, China’s leading on-demand logistics and omnichannel e-commerce platform, had formed partnerships with over 300 well-known chain retailers and more than 50 first-tier international and domestic FMCG brands.
In the third quarter, Dada-JD Daojia provided its omnichannel customer relationship management (CRM) services to an expanding number of retail partners, helping them develop their own digital membership programs. To date, 135 merchants and over 18,000 stores have joined Dada-JD Daojia’s omnichannel CRM program.
JD Health, a majority owned subsidiary of Jingdong, successfully completed its series A preferred share financing in November 2019, with a post-money valuation of approximately US$7 billion.
Over the past few years, JD Health has built a comprehensive “Internet + healthcare” ecosystem, providing pharmaceutical and healthcare products, internet healthcare, health management and intelligent healthcare solutions to the customers.
“JD Pharmacy” is China’s largest online pharmacy by revenue. JD Health, which benefits from JD.com’s trusted e-commerce brand image and collaboration with leading industry players, continues to expand its customer base and service offerings, aiming to become the most trusted “chief health manager” for customers.
In February 2019, JD Property Management Group (“JD Property”) established its first logistics properties fund (“Core Fund”) with GIC and entered into an agreement to dispose of certain logistics facilities to Core Fund for a total gross asset value of RMB10.9 billion.
By the end of September 2019, the disposition of the majority of these logistics facilities had been completed. Currently, JD Property manages properties with a total gross floor area (“GFA”) of over 10 million square meters, including properties that are completed, under construction and held for future development, making JD Property a top 3 logistics property company by GFA in China.
JD Financial Results for Q3 2019
Net revenues for Q3 2019 were RMB134.8 billion (US$118.9 billion), an increase of 28.7% from Q3 of 2018. Net service revenues for Q3 2019 were RMB16.0 billion (US$2.2 billion), an increase of 47.0% from Q3 of 2018.
Cost of Revenues. Cost of revenues increased by 29.4% to RMB114.7 billion (US$16.1 billion) in the third quarter of 2019 from RMB88.7 billion in the third quarter of 2018. This increase was primarily due to the growth of the company’s online direct sales business and the logistics services provided to third parties.
Fulfillment Expenses. Fulfillment expenses, which primarily include procurement, warehousing, delivery, customer service and payment processing expenses, increased by 12.8% to RMB8.8 billion (US$1.2 billion) in the third quarter of 2019 from RMB7.8 billion in q3 2018.
Fulfillment expenses as a percentage of net revenues decreased to 6.5% in the third quarter of 2019, compared to 7.4% in the same period last year, mainly due to economies of scale from enhanced logistics capacity utilization and staff productivity.
Marketing expenses increased by 7.6% to RMB4.4 billion (US$0.6 billion) in q3 2019 from RMB4.1 billion in the third quarter of 2018.
Income from operations for Q3 2019 was RMB4,973.2 million (US$695.8 million), compared to loss from operations of RMB650.7 million for the same period last year.
Non-GAAP income from operations for Q3 2019 was RMB2,974.9 million (US$416.2 million) with a record non-GAAP operating margin of 2.2%, as compared to RMB638.3 million in Q3 2018 with a non-GAAP operating margin of 0.6%.
Net income attributable to ordinary shareholders for Q3 2019 was RMB612.3 million (US$85.7 million), compared to RMB3,000.6 million for the same period last year.
Non-GAAP net income attributable to ordinary shareholders increased by 160.6% to RMB3,085.9 million (US$431.7 million) in the third quarter of 2019 from RMB1,184.3 million in the third quarter of 2018.
Diluted EPS and Non-GAAP Diluted EPS. Diluted net income per ADS for Q3 2019 was RMB0.41(US$0.06), compared to RMB2.03 for Q3 2018. Non-GAAP diluted net income per ADS for Q3 2019 was RMB2.08(US$0.29), compared to RMB0.80 for the same quarter last year.
Operating cash flow for the twelve months ended September 30, 2019 increased to RMB30.8 billion (US$4.3 billion) from RMB18.2 billion for the twelve months ended September 30, 2018.
Free cash flow, which excludes the impact from JD Baitiao receivables included in the operating cash flow, for the twelve months ended September 30, 2019 increased to RMB15.6 billion (US$2.2 billion), compared to outflow of RMB5.5 billion for the twelve months ended September 30, 2018.
JD net revenues for the fourth quarter of 2019 are expected to be between RMB163 billion and RMB168 billion, representing a growth rate between 21% and 25% compared with the fourth quarter of 2018.