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JD.com (NASDAQ:JD)
Q4 2020 Earnings Call
Mar 11, 2021, 7:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Hello and thank you for standing by for JD.com's fourth-quarter and full-year 2020 earnings conference call. At this time, all participants are in a 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'd now like to turn the meeting over to your host for today's conference, Ruiyu Li. Thank you. Please go ahead.

Ruiyu Li -- Investor Relations

Thank you, operator, and welcome to our fourth-quarter and full-year 2020 earnings conference call. Joining today on the call are Mr. Lei Xu, CEO of JD Retail; and Sandy Xu, our CFO. For today's agenda, Mr.

Xu will share his thoughts on a recent business trip followed by our CFO, Sandy, who will discuss highlights for the fourth quarter and the full year 2020. Both of them will join the Q&A session. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, 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 measure. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. Now, I would like to turn the call over to our CEO of JD Retail, Mr. Lei Xu.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Thank you, Ruiyu. Hello, everyone. Thank you for joining our Q4 earnings call. This is Xu Lei, CEO of JD Retail.

I'm glad to take this opportunity today to share with you. JD Retail's 2020 review and our outlook for the new year.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

2020 was no ordinary year. We observe the significant changes in the macroeconomy, the retail industry, and the way our customers live their lives. The global pandemic greatly impacted society and everyone's lives. It also brought many uncertainties to the global economy.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

But great opportunities can be found amid -- amid the great challenges. With profound challenge changes in consumers' mindset and behaviors during this period, China's online retail penetration continues to deepen. Consumers need attention span, content forms, and means of communication, all in one of many changes.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Consumers' demographics and new cases became increasingly segmented and diversified. The lower tier markets, consumer economy, the users who were born after the 1990s and the year 2000, the community economy, the on-demand consumption, and many more engaging trends have presented us a wide range of growth opportunities.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

In the face of these challenges and opportunities, JD's business model has proven to be resilient through different economic cycles. We adopted a more open approach to running our business and continuously enhanced our ability to enable our business partners. Our long-standing business philosophy of the noble principle of doing business served as our true north in navigating the uncertainties and changes. All these efforts have helped us to gain the trust of many more users and business partners.

Over the past year, we have not only successfully withstood the challenges but also seized the opportunity for fourth -- for further growth and iteration.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

JD.com delivered a strong set of financial results in 2020. This is mainly attributable to our continuous investment in improving our users' experience and also always put our customers first in running our business.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

By the end of Q4, we hit a new high with annual active customers for the past 12 months reaching 472 million. We saw accelerated user growth and added 110 million new active customers compared with a year ago. This is the largest expansion in our history. We continue to see exciting user growth in the lower-tier cities, which contributed to over 80% of our new users for the first time in Q4 2020.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

We're even more delighted to see increased engagement from our customers. For example, the ARP value -- the ARPU from our 2015 customer cohorts increased to more than five times by 2020. And we also see a very active engagement of our JD Plus members.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

In 2020, we maintained healthy growth in our core businesses and achieved significant progress in new business initiatives. JD Retail is JD's earliest and most mature core business. It plays a fundamental role in JD achieving its long-term strategic goals. We are pleased to say that in the past year, JD Retail reflects the high quality and accelerated growth and meaningful and sustainable innovation.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Looking ahead in 2021 and beyond, as a supply chain-based technology and service provider, JD Retail will continue to focus on three key strategies: enhancing our media platform capacities for supply chain and technology, our omnichannel strategy, and our online marketplace ecosystem.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

First, on the media platform for supply chain and technology, JD has been investing intensively in the building of supply chain infrastructure for a long time. At the end of 2020, we managed more than 7 million SKUs of our direct sale products in over 900 warehouses across China.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

During COVID-19, the supply chain has impacted the development and cooperation among industries and enterprises around the world. The need for a reliable supply chain is all the more imminent in an environmental increase uncertainty. What JD aspires to do is to -- what JD aspires to do is to build a media platform ability that can be applied in more diverse new cases and channels.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

With this go in mind, we have been investing unswervingly in supply chain and technologies to help merchants both online and offline, big and small, including brands and factories, to improve their operational efficiency and to enhance the customer experience and to improve their risk of resistance capacity. This will also help promote high-quality growth of the whole industry and create value for the entire society. For JD, this endeavor will further diversify our revenue streams and drive our service revenue in the future.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Second, in face of a broad range of business channels and new cases, our omnichannel strategy aimed to increase the overall retail efficiency to satisfy customer service needs to provide people with immediate access to products and services and to create value for merchant and customer. Our omnichannel business is complementary to JD's platform main retail model. Omnichannel is not only a key strategy for JD but also a new trend that older retailers must address. The penetration rate of this model is still quite low among offline businesses.

We believe that there is a huge potential to integrate omnichannel and on-demand fulfillment elements with many in the industry in the future.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Today, JD's omnichannel business has some great coverage and various offline scenarios ranging from front check stores, convenience stores, car maintenance stores fresh groceries, and fresh flowers to pharmaceuticals connecting with millions of offline stores. In the future, based on our unique supply chain and technology abilities, we will develop LBS space technology tailored to the on-demand consumption market. We will also continue to build up our omnichannel supply chain, omnichannel marketing, and offline store digitalization abilities to support their applications in many more industries, businesses, and scenarios.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Meanwhile, we will work on cultivating customers' market share of on-demand fulfillment through innovative measures such as our omnichannel fulfillment initiative and cooperation with external partners such as the partnership with JDDJ and Dada group in 2021. We will expand our coverage to more radio verticals and drive the quality of growth of our omnichannel business. This will provide us additional monetization opportunities.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Third, on building up an online market ecosystem. This is an area of great potential for JD with several years of development we have now established a good foundation for the online platform ecosystem. Notably, we have made good progress in building a healthy platform environment and improved the merchant quality and recent experience.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

We are pleased to see that the NPS, Net Promoter Scores, of our online flat -- marketplace continues to improve over the year. So far this year, our merchants' renewal rate it's much higher than in the past, reflecting a significant improvement in merchant satisfaction and recognition of our platform. Looking ahead, capitalizing on a healthier industry environment, we will continue to experiment with new models and strategies to find the optimal strategies for JD's online marketplace. These attempts will still be guided by JD's ultimate business purpose to improve the customer shopping experience and to provide an open and empowering platform for merchants.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

While adhering to the strategic directions, will continue to underpin our business foundation, keep an open mind, incubate new business, and use innovation to face change. Whether it is our first growth curve represented by our established business such as consumer electronics and consumer goods or our second growth curve represented by our growing business such as healthcare and MRO categories with a third growth curve represented by emerging businesses such as retail innovation, service and technology initiatives, JD Retail can always identify and incubate new growth opportunities.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Here, I would like to emphasize JD's strategic positioning as a supply chain based on technology and service provider. We uphold our long-term business philosophy. Since day one of JD's business, we chose to tackle the hardest but most valuable problems in the industry and society. No matter how far we have come as long as we remain committed to our customer-first core value and supply and-chain-based value creation, we will always be able to go full steam ahead.

This attitude embodies our long-standing business philosophy that is the noble principle of doing business.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

The road ahead is long and winding, but taking one step ahead, we will preserve. We believe the core values and mission that JD has been abiding by are relevant to the new microenvironment and industry development. JD will continue to innovate and invest in these strategic directions. We were constantly and continuously deliver our abilities and create value for society industries, our partners, and our customers, and in turn, achieve long-term high-quality growth at JD.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Thank you for your time. I'll now give the floor to our CFO, Sandy.

Sandy Xu -- Chief Financial Officer

Thank you, Lei. Hello, everyone. We are pleased to finish 2020 with exceptional business and financial performance in the fourth quarter. We outperformed our expectations with an accelerated user and top-line growth and exciting progress in multiple new businesses while maintaining solid online performance and strong cash flow during the fourth quarter and throughout the full year 2020.

These results were driven by our relentless focus on customer experience and investments in supply chain capabilities, technology, and logistics infrastructure over the past years, which has become a hallmark of digital commerce. As we embrace change and position our business for the long run, JD has been at the forefront of many innovative initiatives and structural shifts that are taking place in China. In addition to the exciting developments at JD Retail that later discussed, I would like to further elaborate on some operating and financial highlights. First, let me add more color on our user base.

By the end of Q4, we hit on the old high watermark for our annual active customers in the past 12 months at 472 million. We saw accelerated user growth to 30% year on year and added 110 million new active customers from a year ago. In addition, we managed to grow our user base while continuing to reduce our marketing expense ratio in 2020. This improved marketing efficiency was driven by our long-term user-centric operating philosophy and technology-driven marketing efficiency improvement, paving the way for our sustainable future growth going forward.

Let us come to a number of our new fitness initiative, which are making exciting progress. First on taking logistics. Began as JD group's in-house logistics department in 2007, JD Logistics has been building logistics -- logistics infrastructure and technologies, as well as operational and industry knowhow for over a decade. It has become the leading technology-driven supply chain solution and logistics services provider in China and operated over 900 warehouses with an aggregate gross floor area of 21 million square meters.

On February 16, 2021, JD Logistics submitted a listing application form to apply for the listing of its shares on the main board of Hong Kong Stock Exchange. Please note that there is no guarantee at whether and when the proposed listing will take place. Some of our smaller businesses are also experiencing rapid growth. For example, JD Property recently launched its first logistics property development fund with some prestige strategically metrics.

So far, total AUM of JD Property's core fund and the development fund has exceeded RMB 19 billion. JD Property also entered into a definitive agreement with series A financing. The total amount expected to be reached is approximately U.S.$700 million. We also restructured some business units recently to better coordinate our internal resources and capture market opportunities.

For example, we established the Jingxi Business Group recently to further strengthen our supply chain capacities to better serve customers and empower SMEs in the lower-tier cities. To achieve better synergies, our social e-commerce platform, Jingxi; convenience store business, Jingxitong, formerly known as Xintonglu; and community group purchase business, Jingxi Pinpin, were consolidated under the Jingxi Business Group's banner. And in December, we announced that JD cloud and AI business will merge with JD Digits subject to the board and regulatory approval. The propose to reorg was designed to drive synergies in the development of innovative technologies and product solutions.

This will allow JD.com to focus more on core retail and logistics businesses and gain more flex -- flexibility in allocating resources to new business. Within our retail business, JD Health achieved an important milestone with the successful listing on the Hong Kong Stock Exchange on December 8, 2020 with a gross proceeds of approximately HK$31 billion. As a technology-driven platform centered on the supply chain of pharmaceutical and healthcare products and healthcare services, JD Health aims to provide easily accessible, convenient, high quality, and affordable healthcare products and services covering our user's full lifespan. JD has demonstrated a proven track record of successfully incubating, developing, and growing new businesses from our core B2C e-commerce business.

We believe this is enabled by our relentless focus on superior customer experience and our efforts in building and investing in supply chain capabilities and technology infrastructure. This creates a better cycle, allowing us to identify new opportunities to empower external business partners and grow beyond our core e-commerce business. Therefore, we will continue to invest in exciting new initiatives that can drive long-term sustainable growth for our group. Our financial performance reflects the trajectory of our long-term development.

Our net revenue grew 31.4% year on year to RMB 224 billion in the fourth quarter, continuing our strong growth momentum with the successful promotion season. More importantly, we are driving on our top line in more expansive ways. Our electronic and home appliance categories increased 25% year on year during Q4, continuing to outperform the industry by a large margin. General merchandise revenue continues to grow faster at 34% year on year in Q4, led by the FMCG, healthcare, cosmetics, and home product categories.

All the volume for the supermarket category grew by 45% year on year in Q4. Another key metric shows that we are growing our top line in a more diversified way is our net service revenue growth, which accelerated to a 40 -- 50 -- 53% year on year in Q4. The highest growth we had in the past 11 quarters. This is mainly driven by the strong growth momentum of JD Logistics' external revenue, as well as our advertising revenue.

For the full year of 2020, net revenues reached RMB 746 billion with the year-on-year growth accelerated to 29.3%, from 24.9% in 2019. Electronics and home appliance revenues recorded solid growth of 22% year on year amid challenging market conditions. While our general merchandise revenue grew 38% year on year in 2020. Next, service revenue grew by 42% and accounting for 12.6% of our total revenue in 2020.

Our non-GAAP operating margin improved by 13 basis points year on year to 0.5% in Q4 and up 52 basis points year on year to 2.1% for the full-year 2020. JD Retails's operating margin paying 1.5% in Q4 and reached 2.8% on our full-year basis in 2020, up 28 basis points from 2019, mainly driven by improved operating efficiency and, to a lesser extent, the relief of Social Security during the COVID-19 pandemic. The margin improvement in 2020 was realized even as we shift our category mix toward the high frequency but small ticket size consumer staple categories that are still in the early stage of realizing earnings potential and proactively reinvest some of our Social Security benefits in value creation for our users and the logistics infrastructure. We are well on track of our long-term margin trajectory.

Moving to the bottom line. Our Q4 non-GAAP net income attributable to ordinary shareholders was RMB 2.4 billion and non-GAAP net margin improved 59 basis points year over year to 1.1%. Our full-year 2020 non-GAAP net income attributable to ordinary shareholders reached RMB 16.8 billion, up 57% as compared to RMB 10.7 billion last year. Non-GAAP net margin for the full-year 2020 improved to 39 basis points year over year to 2.3%.

Again, our profitability has improved meaningfully in 2020 even as we incurred additional expenses related to COVID-19 and exclude the benefit of the Social Security relief, which had about 25-basis-points impact. It's worth highlighting that we continue to strengthen our financial position while stepping up support to our business partners. Our inventory turnover days further reduced to 33.3 days in the last 12 months. One of the lowest among the top global retailer and our own historical record again despite of the continuous expansion of total SKUs directly managed by us.

This is achieved through the continuous improvement of our technology and operating efficiency. Our free cash flow for the training complements hit a new record of RMB 35 billion, grew 80% from a year ago. As of December 31, 2020, cash and cash equivalents, restricted cash and short-term investments added up to a total of RMB 151 billion. We believe our solid profitability and financial position provide us with a strong foundation for investments in a range of growth opportunities.

In summary, JD.com capped off a challenging year of increased uncertainties with a remarkable performance. We further improved our technologies and tools, enhanced our ability to serve users and ecosystem partners, which paved the way for our future growth. We continue to witness and deepening of online penetration across many categories, and the technology-driven transformation in many aspects of consumers' daily life and the society in China. We expect to maintain the growth momentum that we generated in 2020 on multiple fronts in 2021 in spite of continued macro challenges and the high comparable base impact.

We also expect our long-term margin trajectory will continue. However, we do not forecast the short-term margin as we believe JD.com is still in a fast-growing stage in an enviable growth market with many exciting opportunities. With our core regional supply chain and logistics capabilities, JD is well-established with convincing value proposition to benefit from the secular trends and drive the long-term sustainable growth of our business in 2021 and beyond. This concludes my prepared remarks.

Let's open the call for questions. Thank you.

Questions & Answers:


Operator

The question-and-answer session of this conference call will start in a moment. [Operator instructions] Ladies and gentlemen, we will begin the question-and-answer session. [Operator instructions] Your first question comes from the line of Eddie Leung of Bank of America. Please ask your question.

Eddie Leung -- Bank of America Merrill Lynch -- Analyst

[Foreign language] Good evening. Just a couple of quick follow-ups after your presentation. Firstly, your user growth is pretty impressive, very strong. I'm wondering if there is any impact on the ticket size, if the ticket size is coming down because of the new users, does it affect the operating life range of your logistic pieces? Seems like the fulfillment cost as a percentage of sales, you know, a bit higher than our expectations, so just wondering your thought.

And then I think Xu Lei mentioned that the renewal rate of your platform merchants are improved last year. So just wondering how quickly is the number of marketplace merchants are growing because of the improved up renewal rate? Thank you.

Sandy Xu -- Chief Financial Officer

Thanks, Eddie. This is Sandy. Let me take your first question regarding the fulfilled margin. So I think for gross margin, we would look at 1P and 3P separately.

If we look at the pure B2C gross margin in Q4, it went down a little bit. But if we include the advertising revenue in re -- relation to our 1P product, that is how internally we manage the operating results. The gross profit margin for 1P actually slightly increased. So this is after considering all of our reinvestments in Q4 for the additional profits that were generated from the first nine months in the year.

As I mentioned at the earnings call last quarter, we planned to bring back some of the additional profits generated from the first nine months in the fourth quarter to -- to really provide value to our customers and also to bring back to build our logistics infrastructure. So again, to emphasize that the gross margin for 1P actually slightly increased compared to the same quarter last year. And if you look at the full -- fulfilled gross margin for 1P, there is also a slight improvement from last year compared to the Q4, and we see very meaningful improvement for the full year compared with last year by about 20 basis points. So this is driven by the spreading improvement of gross margin by many categories, including the category mix shift toward lower-margin supermarket category.

So the -- the relief of social benefit has no impact on the improvement for the full year of fulfilled gross margin as we had the one-time [Inaudible] benefits 2019. So the amount is almost the same. Really, what's dragging down the total fulfilled gross margin for our group is the 3P's revenue contribution. We can see that the -- the contribution for -- from the 3P's revenue went down a little bit in the fourth quarter even though the 3P contributed more GMV in Q4 as compared to Q4 last year.

We were quite encouraged by the healthy performance of our marketplace business model. But the category mix within the marketplace business model also changed slightly. The healthcare, supermarket, electronics, and home appliance categories outperformed the apparel and home pro -- products. So that means the categories with relatively lower tax rates are growing faster than categories with higher tax rates, and they're our marketplace business model.

Again, we believe this is a healthy move and a good indicator of our efforts in building a bet -- better marketplace ecosystem, particularly for our historically strong 1P categories.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

And to answer your second question, you would know -- you have all known that JD's reputation is the strongest in terms of the consumers' impression of our service experience.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

And through that year, you can see that a number of merchants on our platform has enjoyed a steady growth.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Some consumers have a higher expectation from our service will also have a higher expectation on the qualities and products from our cost -- from our merchants on the platform.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

So in the last year, we have done a -- went down from screening work over our low efficiency and the low operation merchants, and still, we see to over a number of our merchants on the platform is steadily growing. And this year, we have been recruiting more high-quality merchants. They have a -- they -- they are more experienced and are running their business in a more efficient way.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

So we will pay close attention on the efficiency of our internal platform and also the operational efficiency of other merchants on the platform and how well they are running their stores. And for this year, the cutoff time for merchants' renewal is on March 30. So we have seen the renewable rates is much higher than in the past, and we're also seeing the improvement of our merchants' satisfaction rate on our platform.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Thank you for the question.

Operator

Your next question comes from the line of Ronald Keung of Goldman Sachs. Please ask your question.

Ronald Keung -- Goldman Sachs -- Analyst

Thank you. And thank you for taking my question. Thank you Xu Lei, Sandy, and management, and congratulations on the strong 2020 performance. I think my -- my question would be on both of you Xu Lei and Sandy, you mentioned about a lot of new businesses, which are very exciting and I could see you've launched Jingxi.

Also, all the different initiatives in -- in -- in both in kind of new businesses. How -- how should we think about our kind of plan to invest in these? I think because, of course, JD Retail is -- is very strong on itself, but given so -- so many exciting initiatives, did you go through these initiatives made one by one or the biggest key, and how -- how should we think about how commitment or the plan to invest in terms of magnitude? Thank you.

Sandy Xu -- Chief Financial Officer

Thanks, Ronald. This is something maybe let me take the questions regarding COC. And later I can comment on some other new initiatives. So, in Q4, as I've mentioned, we did a restructuring for our Jingxi Business Group to really try to generate synergies from the three separate business units.

We see -- there is a great opportunity in this group purchase business or group -- group purchase industry or the fresh produce category. So -- so, we firmly believe there is a structural opportunity. The huge market size and highly fragmented supply chain with lots of opportunities and potential to improve the operating efficiency through technology and innovative business models. And we will also see that the good purchase business model works better for smaller, picking-sized items in the lower-tier market as it can generate better fulfillment efficiencies through short-changed logistics.

And be more efficient in inventory management and marketing, especially for perishable and non-food products, and provide the users from the lower-tier's market with better experience. So, even though at present most players in this market built their full purchase business model primarily driven by traffic, we believe by end of the day, it will go back to the basis of retail business, i.e. platforms will compete on cost of products, operating efficiency, and customer experience. So, we see this will be a long-term initiative and ultimate goal is to improve the operating efficiency of supply chain, the wholesale, and retail business in the lower-tier market through technology and improve people's living standard.

JD is fully dedicated in this initiative and we will take a somewhat differentiated approach to be more focused on supply chain and logistics networks and try to leverage our existing capabilities. So, we launched our Pinpin business in certain cities from January and it's still in a very early stage. We -- we're entering into this group purchase business, we need to build localized supply chain, short-chain logistics network, as well as technologies and tools to support the operations. We also need to recruit group leaders, business development teams and educate new users step by step, city by city.

So, there are lots of areas need investments but we are not starting entirely from the scratch. We test it, we have been testing the group purchase business model for well, you know, very small scale. For our convenience store business, Xingtonglu, now they named to Jingxitong, we already established some B2B supply chain primarily in the e-comm city category including some localized supply chains. We also have existing B2B logistics network and localized the business development teams in certain regions of the country.

Jingxitong now has over 1 million SME customers and some of this convenience store owners can naturally be tagged to the group leaders of our Jingxi Pinpin business. Our existing centralized procurement platform, the middle platform mentioned by Lei just now for items e.g. home products or other categories can support Pinpin's business and provide users of Pinpin with more product selection. At the same time, better generate scale benefits for core retail through sales from Pinpin's channel.

So, we are working with various business partners including China Daily and the manufacturing bases for agricultural products to strengthen our supply chain capabilities, further upstream, and try to sort the best-value products for our users. At the same time, helping the existing market players on the supply chain with digital transformation including the agricultural products wholesale market. Our Jingxi e-commerce platform aims to serve the users from the lower-tier cities and they have accumulated a lot of loyal users since its establishment. Based on our initial test in a small group of users, we are pleased to see a good conversion of skilled users to Pinpin users.

So, we believe JD Group's existing teams and capabilities in the lower-tier cities form a good basis to start our Pinpin business, although not sufficient to support the growth of the new business as we can quickly replicate, adjust, and apply our existing securities industry know-how and capabilities to the new model. Pinpin can also help increase the engagement of users and merchants from the lower-tier market including coming in stores for Jingxi and Jingxitong business, as well as supporting our main app. So, these are also the logic of reorganizing and consolidating the three business units into one business group. Most importantly, JD is fully dedicated in this initiative.

We sent our best people to this new business group and they also got supply chain support from our core retail and logistics business groups. So, talking about the investments, we have put aside sufficient budget to start and grow the business but we need to invest in many areas as I just mentioned. And we will evaluate the ROIs for the investments and make sure accurate adjustments based on the market situation. It's pretty difficult to accurately predict at this stage how much we are going to spend on this new initiative.

As you can see, the market is very dynamic with the many, many players. What I can tell you is our strategy is not to acquire users through short-term and crazy subsidies but to really impact in building the hardcore capabilities and technology to run the business and create long-term value for our users and business partners and the society. So, this is also consistent with our books' operating philosophy. To improve the transparency of our communication with investors, we plan to take out the operating results of Jingxi business group from JD Retail segment and report under new business starting from Q1 this year.

We are excited about this business opportunity and we look forward to sharing more with the investors as we develop the business.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Let me add something on the new business.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

Not only for e-commerce but essentially for all the retail business, we will focus on the customers, products, and the platform.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

So, since the beginning of JD Retail's development, we started from our products and we start to expand our product selections. So, we do our first-party and then the third-party product offering. And for the next step, where we -- we focused on our customers and we started with providing products to the targeted customer cohorts who are interested in the customer -- consumer electronics and digital products. And then we will continue to expand our consumer base to more people in the lower-tier cities and female users, etc.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

And in terms of the platform, we started to build our platform in a centralized way. And then now, we are moving to more decentralized formats. And in the past two years, we have been exploring new formats with offline businesses and our -- our omni-channel initiatives. So, this is the basic JD's business logic.

And behind that, the most important thing is that we are thinking and are doing things to see what are the points, what we can solve the pain points about bringing down the cost and improve the efficiencies, and giving better shopping experiences for our customers. So, this -- you can see is the process. We are looking for some -- some solutions with pain points and also whether there will be new ways to find -- there will be new more leading or advanced models or methodologies to do retail.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

So, you have seen that in the past year, JD Retail has incubated the JD House and JD MRO. And all of this are being created basing on a principle to solving some pain points and creating value for this industry. And we have seen that in JD's development history and this has happened to many other companies as well. While we are considering to enter a new market, we were first to look at the scale of the market.

However, we will think deeper and see -- and see whether this new business will truly create long-term value for the industry and for the society. So, this is as I mentioned to the basic logic when we are making our decisions to enter a new business we're not. So, eventually, we would love to create a sustainable and -- sustainable and constant value to the society and our customers.

Sandy Xu -- Chief Financial Officer

Yeah. And also supplement businesses is other than the retail business. For digital logic -- digital logic fix, it will continue to build technology and the infrastructure to further expand its production service offerings. And that will also have to be international, so we have a small operation in Southeast Asia.

They are in the [Inaudible] stage, best deal in the investment stage.

Unknown speaker

Next question, please.

Operator

Your next question comes from the line of Alicia Yap of Citigroup. Please ask your question.

Alicia Yap -- Citi -- Analyst

Hi. Thank you. Good evening, management, Xu Lei and Sandy. Thanks for taking my questions and also congrats on the solid results.

Just very quickly, I wonder have you already generate any revenue from community group buy in the fourth quarter? Just wondering your FMCG category, have you seen any impact given the rising intensity of these community group buy platform from the peers? And then just quickly on the -- the first-quarter Chinese New Year. So, any qualitative color that you could share with us given the issue is also another, you know, a little bit special year giving the state in the cities' measure. So, what have you observed in terms of the category demand as compared with the normal Chinese New Year period? Any category that you have seen abnormally strong this year? Thank you.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

This is Xu Lei. We'll answer the questions related to FMCG and the Chinese New Year grand promotion.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]long but good.

Unknown speaker

And overall speaking, we have seen the focus of the community group buying are in these -- in the following areas. First is the fresh produce, and also the FMCGs and some mainly related to the digital products but mainly focusing on the first two.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

We don't see a quite big impact of -- we don't see that JD's business has been having a big impact from the fast developments of community group buying. I think this is mainly related to our customers' shopping behaviors and to their mindset much -- mind shares, and also their preference of our products.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

And it's also worth mentioning that some of our SKUs has been of some favorable items that some community group buying companies want to work with through our supply chain-enabling business format.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

And regarding the question about the Spring Festival -- shopping festival, compared with last year's COVID situation, this year, there are some major changes on the consumptions. We do see a healthy consumption results and consumer's participation in this year's shopping festival.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

We have seen some categories that are enjoying very fast growth rate during this year's Spring Festival grant promotion. A chance to give beauty products and food, and also home appliances. The home appliances suffered from the pandemic the most last year. And this year, the demand is coming back fast.

And -- and in contrast, some categories which had a -- a good sales performance last year, especially some home cleaning, healthcare, and masks, they are coming back to the normal level. So, generally speaking, we do see this as a very healthy consumption trend.

Lei Xu -- Chief Executive Officer -- JD Retail

[Foreign language]

Unknown speaker

And one more point to add is that because the government -- government encouraged people to stay at their working place to celebrate the New Year, we do see a surge of remote orders and -- among our -- our platform. The remote orders are those orders -- the buyers then make the orders and sending to the recipients living in other city. And the sales of the remote -- the -- the numbers of remote order actually doubled on our platform. And also because of the staycation, a lot of merchants continue to operate their business on the platform during the grand promotion and even extend their working hours there.

So, we do see they are very engaging and very active in participating in these sales -- sales event.

Sandy Xu -- Chief Financial Officer

Yeah. And on the revenue contribution from community -- community purchase in Q4, we only experimented in very small scale in the fourth quarter in one or two cities. So, you can ignore the revenue contribution.

Operator

We are now approaching the end of the conference call. I will now turn the call over to JD.com's Ruiyu Li for closing remarks.

Ruiyu Li -- Investor Relations

Thanks, operator. Thank you for joining us today on the call. Please feel free to contact us if you have any further questions. We look forward to talking with you in the coming months.

Thank you.

Operator

[Operator signoff]

Duration: 67 minutes

Call participants:

Ruiyu Li -- Investor Relations

Lei Xu -- Chief Executive Officer -- JD Retail

Unknown speaker

Sandy Xu -- Chief Financial Officer

Eddie Leung -- Bank of America Merrill Lynch -- Analyst

Ronald Keung -- Goldman Sachs -- Analyst

Alicia Yap -- Citi -- Analyst

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