JD.com (JD 2.61%) has been executing well lately. After growing active customers to half a billion in the first quarter, the e-commerce company broke that number, repeatedly, in the subsequent three quarters in 2021. It ended the year with a record 570 million customers, cementing its position as the third-largest e-commerce platform in China (by active users) behind Alibaba and Pinduoduo.
But users growing to a new record is just one aspect of JD's achievement in 2021. Here are three important things that investors should know to get a better overview of the tech company's performance in 2021.
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Another year of solid growth across the board
After delivering record revenue in 2020, JD exceeded that in 2021 by posting a 28% growth in revenue to 952 billion yuan ($149.3 billion ). Of that, product revenue improved by 25%, and service revenue -- which includes logistics, healthcare, and advertising -- increased by 45%. In short, the company delivered growth across all major segments.
Besides growing its top line, JD also reported a solid free cash flow of 26 billion yuan ($4.1 billion) in 2021, albeit lower than 35 billion yuan in 2020 -- the decline in free cash flow was due to higher capital investments. It is unusual for a growth company to generate enormous free cash flow, and JD is one of the rare breeds.
It is also worth mentioning that JD Plus members (similar to Amazon Prime subscribers) exceeded 25 million in the fourth quarter of 2021. These members spend 10 times more per annum than non-Plus members, which will be an important future source of growth for JD. Thus, we can expect the company to focus on growing Plus-members in the coming years.
JD retail marched forward steadily
Once a cash-sucking business, JD retail has evolved into a powerhouse that is not only growing steadily but also solidly profitable.
In 2021, this business generated 866 billion yuan ($135.9 billion), up 25% year over year. The operating margin also improved from 3% last year to 3.1% this year due to operating leverage. Besides, JD retail improved its inventory turnover days, down from 33.3 days last year to 30.3 days in 2021.
While JD retail delivered a respectable financial performance in 2021, it also made some qualitative enhancements to the strategic aspects of the business. For example, it grew the gross merchandise value of its omnichannel business by around 80% in 2021 thanks to the strong performance in its brick-and-mortar stores -- including Freshstar and 7Fresh.
Jingxi, JD's group-buy app targeting customers living outside of China's main cities, also delivered commendable performance lately -- with revenue growing at 40% quarter on quarter in Q4 2021. Although it's still early days, Jingxi could be the answer to price-sensitive consumers who value low price over quality.
In short, JD has strategically positioned its e-commerce business to remain relevant to consumers, both now and in the future.
What is next on JD's radar?
Despite being known for its e-commerce business, JD is also good at investing and building non-e-commerce businesses. Some of the more successful ventures are JD Health, JD Logistics, and JD Technology -- made up of its fintech, artificial intelligence, and cloud businesses. JD hopes that by investing in these adjacent industries, it can sustain its growth engine for years to come.
So far, JD's strategy has worked beautifully, evident by its consistently high growth rate despite its already massive size. As a result, the tech conglomerate is always on the hunt for promising new opportunities. And two of these look very interesting.
The first venture is an online pet hospital. In partnership with veterinarians and offline pet hospitals, JD Health aims to provide users with a seamless omnichannel experience. Through JD Health's platform, pet owners can get 24/7 access to various consultation services -- such as video consultation -- from 5,000 professional veterinarians.
Another promising venture is its strategic partnership with Shopify (SHOP -2.37%). Through this partnership, JD will help international merchants list their products on JD's platform, allowing them to reach more Chinese consumers. It will also open up its supplier network to these merchants. On top of that, the e-commerce platform will help high-quality Chinese brands reach consumers globally through Shopify.
Reaching more sectors and customers, when done correctly, means more money coming in. Analysts estimate JD's revenue will increase by nearly 20% this year, the opportunities on the radar just might lead it to exceed those measures. With that, these new ventures should keep the company busy for the upcoming quarters and possibly years.
