JD.com - Q4 2023

Transcript

Operator (participant)

Hello and thank you for standing by for JD.com's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in 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 would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Sean Zhang (Director of Investor Relations)

Thank you. Good day, everyone. Welcome to JD.com Q4 and full year 2023 earnings conference call. For today's call, CEO of JD.com, Ms. Sandy Xu, will share her opening remarks, and our CFO, Mr. Ian Shan, will discuss the financial results. Then we'll take the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on the IR website, which applies to this call. We'll discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release.

Also, please note, all figures mentioned in this call are in RMB unless otherwise stated. Now let me turn the call over to our CEO, Sandy.

Sandy Ran Xu (CEO, and Executive Director.)

Thanks, Sean. Hello, everyone, and thanks for joining us today to discuss our Q4 and full year 2023 results. In Q4, we delivered healthy top-line and bottom-line growth and made solid progress on operations, finishing off a productive 2023. In the past year, we stayed focused on constantly improving user experience, lowering costs, and increasing efficiency amidst evolving opportunities and challenges. Guided by our business philosophy, we carried out a set of proactive moves to drive more sustainable growth for the long term, namely in the areas of user experience improvement, low-price offerings, and platform ecosystem strategy. Despite some short-term impact in 2023, our strategic refocus has successfully steered key operating metrics in a positive direction. 2024 will be a year of execution.

Our team will take firm and steady steps to execute our existing strategies and push forward our two priorities for the new year, namely user experience improvement and market share expansion. We are encouraged by what we've seen and are confident that we are on the right path. Let me share some details. First, user engagement. In Q4, we saw the number of quarterly active customers accelerate at JD Group level. If looking at JD Retail alone, the growth was at an even faster pace in Q4, particularly in new users. We are excited to see our user momentum keep up in Q1. User behavior also trended better. For example, user shopping frequency on JD continued to rise both in Q4 and the full year. This increase was particularly driven by the growth of our loyal existing users and PLUS members.

This means if users stay longer with us, they tend to shop more frequently with us, a validation of our user focus on user experience and strengthening user mindshare. In addition, the signs of growth also translated to a robust order volume growth, hitting double-digit year-over-year in Q4 and accelerating for three consecutive quarters. In terms of JD PLUS, we saw another quarter of robust growth of its member base, and GMV contributed by Plus members grew faster than our total GMV in Q4. The promising progress in user engagement is a result of our stepped-up efforts in improving user experience, low-price offerings, and implementing platform ecosystem strategies.

Looking at our efforts in improving user experience, in addition to our previously launched popular initiatives such as free shipping, instant refunds, and one-click for best price guaranteed, we also recently launched new customer services such as free doorstep pickup for returns, cashback for delayed shipping, 免费上门退换和晚发配. As a result, our net promoter score, the NPS, for both our 1P and 3P business have improved substantially in Q4. As we are generating great momentum with our users, it's important to continue to build on these initiatives, which we believe will help to propel growth in 2024. Also, as an important part of our holistic approach to improving our user experience, we will continue to step up efforts in building our price competitiveness and platform ecosystem. For low-price offerings, from day one, we've been pushing forward our price competitiveness for branded products and a broader selection of value-for-money products.

During the past year, we have further enhanced our ability to offer great value in branded products and expanded our selection for white-label products. Our price competitiveness has notably improved according to our customer survey and in-house price comparison. We are glad to see our price NPS increase both sequentially and year-on-year in Q4, a proof that user experience and mindshare for JD's low-price offerings is picking up. We also note other key metrics are trending well. The number of our users from lower-tier markets grew faster in Q4 compared to previous quarters, and growth of order volume and shopping frequency generated by lower-tier market users reached double digits year-on-year, outpacing that of our total users. We also note growth of low-ticket-sized orders further sped up and far exceeded the growth of our total order volume in Q4.

I want to highlight again that our price competitiveness is not supported by subsidies. The bedrock for JD's business model is always the supply chain capabilities, which enable us to generate scale efficiency and lower product costs so that we can provide better value to users while maintaining healthy financial performance. Shifting to platform ecosystem strategy, the number of active 3P merchants on our platform delivered another stellar growth both in Q4 and on a full-year basis, as the team did a great job onboarding and supporting them. Meanwhile, 3P users and 3P order volume both saw accelerated growth year-on-year in Q4 and in the full year of 2023. That said, we are still at an early stage of building our platform ecosystem, and we are not prioritizing monetization of our young and rapid-growing ecosystem at this stage.

Therefore, we are not taken by surprise when we see revenue generated from our 3P marketplace is lagging the growth of our 3P merchant base and orders in Q4, which was also partially driven by one of the factors. Ian will elaborate on this later. We believe this is only temporary. In fact, Q1 quarter to date, we've seen marketplace and marketing revenue bouncing back to a stronger momentum. As shared before, our platform ecosystem encourages 1P and 3P to develop in a complementary way. Our 1P business also continued to make solid progress thanks to our core capabilities in supply chain. In particular, users responded well to our nonstop services during the Chinese New Year holiday, an offering we've been committed to for 12 consecutive years.

Also, enabled by our supply chain strengths, our home appliance and electronics category continued to gain market share throughout 2023 despite industry headwinds. Moving forward, we will further leverage our supply chain capabilities to build up better service capabilities, penetrate into lower-tier and offline markets, and strengthen our cooperation with suppliers, which we believe will lead to a continuous expansion in market share in 2024. Moreover, we saw our supermarket category trend in the right direction as it dedicated itself to optimizing the supply chain and building a better product mix and fulfillment network. We believe there will be more upside for supermarkets in 2024. Finally, I want to highlight our commitment to shareholder returns. As announced in our earnings press release, our board has approved our 2024 annual cash dividend payment, the aggregate amount of $1.2 billion, a meaningful increase compared to 2023.

The board has also approved a new share repurchase program of $3 billion over the next 36 months. We are committed to creating more value for our shareholders. To conclude, 2023 was a year of strategic refocus and organizational upgrades, which have set the foundation for JD. 2024 will be a year of execution along the strategic roadmap that is in place. We'll continue to build upon the good foundation in user experience, low-price offerings, and platform ecosystem strategy, and we'll further build up our core capabilities in supply chain. With market share and user experience at top of mind, we are confident in making steady progress this year. With that, I'll turn it over to Ian for our financial highlights. Thank you.

Ian Su Shan (CFO)

Thank you, Sandy, and hello, everyone. We recorded a set of healthy top and bottom-line results in Q4, ahead of our expectations as we focus on user experience improvement, price competitiveness, and platform ecosystem in 2023. We are also committed to sharing our success with our shareholders. The board has approved our annual cash dividend of $1.2 billion for the fiscal year of 2023, representing $0.38 per ordinary share or $0.76 per ADS. Our dividend per ADS increased by 23% compared to the annual dividend paid in 2023. In addition, we stepped up share repurchases in Q4 and bought back 15 million ordinary shares for a total of approximately $203 million. As the existing program will expire soon, the board has approved a new share repurchase program of $3 billion over the next 36 months.

This demonstrated our dedication to returning value to our shareholders. Now, let me turn to our Q4 and full-year 2023 financial performance. Our net revenues grew by 4% year-on-year to CNY 306 billion in Q4 and CNY 1.1 trillion for full-year 2023 as we navigated a mix of macro recovery, seasonality factors, and our strategic refocus. Breaking down the revenue mix, product revenues were up 4% year-on-year in Q4 and 1% on a full-year basis. By category, electronics and home appliances revenues were up 6% and 4% year-on-year in Q4 and full-year, respectively, once again outpacing industry growth. We have seen solid market share expansion in these categories across every quarter of 2023 and continue to feel confident in this momentum going into 2024.

General merchandise revenues saw a turnaround to positive year-on-year growth in Q4 despite the impact of scaling back of Jingxi and international business, the high base in Q4 2022 due to stockpiling, and the seasonality impact of Chinese New Year shopping festival. On a full-year basis, such factors led to a 5% decline in general merchandise revenues. Taking a closer look, categories such as home goods and decoration, sports, and apparel recorded double-digit year-on-year growth in Q4. As we further enriched our product and service offerings, these categories also draw higher user traffic, conversion rate, and user stickiness in the quarter. As for our supermarket category, we believe it has bottomed out, and its growth trend will continue to strengthen in 2024, driven by its increasing order volume and user shopping frequency.

Service revenues grew by 3% year-on-year in Q4 and 18% on a full-year basis, primarily driven by the growth of logistics and other service revenues, which were up 8% and 30% year-on-year for the quarter and full-year, respectively. Marketplace and marketing revenues were down 4% year-on-year in Q4 and up 3% on a full-year basis. The soft performance in the quarter was primarily due to the decline in commission revenues as a result of our enhanced support for fast-growing new merchants. While advertising revenues also experienced one-off headwinds in Q4, mainly due to the seasonality impact of Chinese New Year shopping festival, we believe those were short-term fluctuations, and our platform is progressing well on our current strategies with a fast-expanding base of active 3P merchants and accelerated growth in both 3P users and 3P order volumes.

In the Q1 quarter to date, we saw that marketplace and marketing revenues have resumed growth. Now, let's turn to our segment performance. JD Retail revenues increased by 3% year-over-year in Q4 and 2% on a full-year basis. Our retail segment's gross margin continued to increase both in Q4 and full-year of 2023. This was driven by our improved supply chain capabilities, which enable us to offer more value to our users while recording healthy margin expansion due to increased operating efficiency. Our strategic refocus also brought tailwinds to gross margins throughout 2023. On a full-year basis, retail's fulfilled gross margin was up 39 bps, though in Q4, retail's fulfilled gross margin was down slightly by 7 bps year-over-year due to extended free shipping offerings since late Q3.

Retail segment's non-GAAP operating margin came in at 2.6% in Q4, softer than the year-ago, but in line with our expectations as we invest in user experience and expanding user base. On a full-year basis, retail's non-GAAP operating margin continued to improve to a record level of 3.8%, beyond our expectations. We are confident that our continued focus on user experience will lead to a better market position and expanded market share in 2024, and eventually present more headroom for profit expansion. JD Logistics recorded a 10% revenue growth year-over-year in Q4 and 21% on a full-year basis. External revenues accounted for 70% of total revenues in both Q4 and full-year. In terms of profitability, JDL's non-GAAP operating margin picked up meaningfully, with a 73 bps expansion year-over-year to 2.8% in Q4 and 22 bps expansion to 0.6% on a full-year basis.

Before moving on to the next section, please note that following Dada's announcement in January, we are reporting the aggregated results of Dada and new business on the other segment this time. We've adjusted the results of this segment in Q4 to reflect Dada's impact. Revenues of the segments were down 9% and 11% year-on-year in Q4 and full-year, respectively, primarily due to Dada's impact and the scaling back of Jingxi and international business. Excluding the disposal gain and the impairment loss of long-lived assets of JD Property, non-GAAP operating loss of the segments was CNY 474 million in Q4 and CNY 1.5 billion in full-year, both representing substantial narrowing on a year-on-year basis as a result of the scaling back of Jingxi and international business.

Moving to the consolidated bottom line, in Q4, we recorded CNY 8.4 billion non-GAAP net income attributable to ordinary shareholders, with non-GAAP net margin expanding 16 basis points to 2.7% on a full-year basis. Our non-GAAP net income attributable to ordinary shareholders was CNY 35.2 billion, and the non-GAAP net margin was up 55 basis points year-on-year to an all-time record of 3.2%. We continue to generate healthy cash flow. Our last 12-month free cash flow as of the end of Q4 was CNY 41 billion, an increase of 14% from a year ago. This was driven by our improved profitability and further optimized cash conversion cycle. By the end of Q4, our cash and cash equivalents, restricted cash, and short-term investments added up to a total of CNY 198 billion.

To conclude, we have taken proactive actions and delivered a set of solid financial and operating results in Q4 and full-year of 2023 amid evolving external environments and our business refocus. Going into 2024, we are well set to continue to execute the strategies we have in place. We feel confident in making further progress toward our operating priorities of user experience improvement and market share expansion, and we are committed to sharing our success with our shareholders. With that, I will turn it over to Sean. Thank you.

Sean Zhang (Director of Investor Relations)

Thank you, Sandy and Ian. For the Q&A session, you're welcome to ask questions in Chinese and English, and our management will answer your questions in the language you ask. We provide English translation when necessary for convenience purposes only. In the case of any discrepancy, please refer to our management statement in the original language. Okay, operator, we can open the call for Q&A session.

Operator (participant)

The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. Your first question comes from Ronald Keung with Goldman Sachs.

Ronald Keung (Head of Asia Internet Research, Executive Director, and Managing Director)

[Foreign language] Sandy, Ian, Sean [Foreign language].

Speaker 7

Thank you, Sandy, Ian, and Sean. I have two questions. One is that JD and other e-commerce companies have focused on defending market share, reigniting growth as kind of key focuses in this increasingly zero sum e-commerce market. So how will management strive to balance between growth and absolute profit or growing profits in the year ahead? And with that, with the profits and kind of cash flow generation, then we've seen the regular dividend of $1.2 billion in 2023. We've seen the free cash flow for the business was nearly close to $6 billion in 2023. So do we see room to further increase total shareholder return given the strong free cash flow of the business in the years ahead? Thank you.

Sandy Ran Xu (CEO, and Executive Director.)

[Foreign language] Ronald, [Foreign language].

Speaker 7

Thank you. Thank you, Ronald. I will answer your first question and Ian, Ian takes your second question. So the questions on the growth and versus profits have always been a good question. And in 2023, while firmly focusing on the health of our business, we made many efforts and took actions to further enhance our user experience, low-price mind share, and platform ecosystem. So for example, last year we stepped up our efforts on user shopping experience and services by introducing or expanding a series of differentiated shopping and customer services, such as our price guarantee service, a free doorstep pickup service for returns and exchanges, this service expanding from our 1P to our 3P businesses, and also a refund without return services and more.

We've seen an accelerated growth in quarterly shopping users in Q4, especially in the number of new users, and we expect the growth trend to continue in Q1. At the same time, any major drop of our profits, which also reflects our efforts on maintaining the balance between revenues and profits. Also, we continue to optimize procurement costs and expand our range of low-cost products. In addition, we have introduced a series of measures, including the CNY 10 billion discount program, the CNY 9.9 items with free shipping channel, and the lower order value threshold for free shipping. Our goal is to provide high-quality products at affordable prices to increase user purchase frequency. We believe that continuous improvement of user experience will promote healthy user growth and purchase frequency, which in turn will help us to increase business scale and market share.

Sandy Ran Xu (CEO, and Executive Director.)

[Foreign language].

Speaker 7

From a platform ecosystem perspective, we have seen more and more new merchants are joining JD's marketplace, and the number of active merchants whose business is growing on our platform is increasing at an accelerated rate. Their participation has greatly improved the diversity of product offerings on the platform, leading to accelerated growth in both the number of users and orders on our marketplace. In 2024, we will prioritize improving user experience, price competitiveness, and platform ecosystem. We will make unswerving efforts to execute on these key areas with confidence that we will continue to gain market share.

Sandy Ran Xu (CEO, and Executive Director.)

[Foreign language].

Speaker 7

So here I want to reemphasize that our business model decides that business efficiency comes from enhancing business scale and technological development. So with these enhancements, we receive increased revenue that we can invest in enhancing user experience. This in turn leads to increased user engagement, shopping frequency, and user growth, ultimately resulting in business scale growth. So this creates a sustainable and virtuous cycle, although it may not have a significant impact on profits. So this is the point we constantly communicate with our directors, and this is the logic of our business model. So the profits are a natural result of our expanding market position and value creation for our users. So during this course and cycle, our management team will strive to maintain a balance and a good pace between investment and growth while creating good returns for our shareholders. Thank you.

Sean Zhang (Director of Investor Relations)

[Foreign language] Ronald, [Foreign language].

Speaker 7

This is Ian Shan. Thank you, Ronald Keung, for asking about shareholder returns. So I'd like to take this opportunity to update investors on our current thoughts and moves. Firstly, JD focuses on the long-term healthy development of our business, aiming for healthy scale expansion and stable growth in profits and cash flow. On top of this, we're committed to long-term shareholder return and will continue to give back to our shareholders in various ways. Our balance sheet is strong, and we believe that maintaining a good return to shareholders and continuous investment in our business are not contradictory.

company's value creation with shareholders.

We have just announced an annual cash dividend of $1.2 billion. This is thanks to last year's rapid earnings growth, which yielded solid returns for our shareholders. So over the past three years, we have returned a total of $4.2 billion in dividends, and we plan to continue paying annual dividends going forward, sharing the company's value creation with our shareholders.

value with shareholders.

Also, our board of directors have approved a new repurchase program to buy back to $3 billion worth of company shares over the next three years. We will firmly execute the buyback and communicate with investors regularly. We believe that investors will recognize the company's tangible efforts to share its value with shareholders. Thank you.

Okay, thanks.

Operator (participant)

Thank you, Ronald.

Your next question comes from Kenneth Fong with UBS.

Sean Zhang (Director of Investor Relations)

Xu，Ian Shan，Sean Zhang，[Foreign language].

Speaker 7

Thank you, Management, for taking my question. My first question is on the platform ecosystem. We have been investing to build our 3P ecosystem, judging from the total and active merchants, we have received very solid results. Can Management share with us under what circumstances we will start to accelerate monetization of the 3P merchants? And also for 2024, any change and update for our 3P strategy? And my second question is for overseas. We see a lot of e-commerce platforms investing overseas. Can Management share with us your thoughts on our overseas expansion? Thank you.

Sean Zhang (Director of Investor Relations)

[Foreign language].

Speaker 7

Thank you, Kenny. To your first question about platform ecosystem, as I have previously mentioned, JD's platform ecosystem includes both our self-operated and third-party models. The two are complementary to each other and jointly contribute to create good user experience. Our net promoter score has improved substantially in Q4. For both 1P and 3P, we have been investing in platform ecosystem as a long-term strategic direction. So there is still a lot of room for improvement in our 3P business development. Our first step is to increase the number of merchants and their product offerings. We need to attract more merchants and help them succeed on the platform in order to enrich the platform's product offerings for our shoppers and foster positive business competition across the platform.

Over the past year, we have increased our efforts to recruit merchants, simplified their onboarding processes, and provided more support and fee reductions for small and medium-sized merchants. To date, the number of effective merchants on our platform is close to 1 million, reaching the goals we set for ourselves at the beginning of last year. The number of active merchants has accelerated. More and more new merchants are finding effective ways to do business on our platform and continue to grow.

Sean Zhang (Director of Investor Relations)

[Foreign language] 3P [Foreign language] GMV [Foreign language].

Speaker 7

At the same time, we've received positive feedback from users. The number of shopping users and order volume on 3P platform continues to grow, with users' NPS for 3P rising at the same time. Both our 3P and overall GMV have gradually entered a trajectory of healthy growth.

Sean Zhang (Director of Investor Relations)

[Foreign language]. 2024[Foreign language].

Speaker 7

Building JD's unique platform ecosystem is a long-term project. We're still in the early stages. Our focus is not on a fast monetization of 3P in the short term. Instead, our priority in 2024 will be to attract more merchants, especially the small and medium-sized merchants in the industrial belt, to enrich our product offerings. At the same time, we will continue to foster merchants' growth, the platform's governance, and operating tools. We will also further optimize the traffic distribution mechanism to create a clear growth path and a fair business environment for merchants, and to provide better user experience on 3P platform, promoting a prosperous growth of both our 1P and 3P businesses.

Sean Zhang (Director of Investor Relations)

[Foreign language].

Speaker 7

We believe that by creating a platform ecosystem offering a wide range of high-quality goods and improving user product matching accuracy, we can attract more users and meet diverse needs. This will create a virtuous cycle that helps merchants succeed, and as a natural result, 3P monetization will increase. Such a virtuous cycle will form one of the key drivers of our long-term revenue and profit growth. We're at a good shape now and not in a rush to increase monetization in the short term, but the trend of steady improvement remains unchanged in the long run.

Sean Zhang (Director of Investor Relations)

[Foreign language] Q4 [Foreign language].

Ian Su Shan (CFO)

In addition, marketplace and marketing revenues experienced short-term fluctuation in Q4. This was primarily due to our efforts to develop the platform ecosystem. We launched a set of supporting initiatives, including commission-free offerings for new merchants and proactive commission reductions in certain categories and programs. These initiatives resulted in a decline in commission revenues. Additionally, advertising revenue growth slowed slightly in Q4 due to the late start of the Chinese New Year brand promotion compared with the previous year and a high base of the previous year driven by people's stockpiling behavior in December. With the ease of seasonality factors in Q1, we expect that advertising revenues will return to healthy growth. And overall, looking at 2024, as user and traffic improve, we expect growth of our ads revenues to gradually accelerate. Thank you.

[Foreign language].

Speaker 7

So, hi, Kenny, let me share some thoughts regarding our overseas business strategies.

So first of all, we are always on the lookout for overseas opportunities and take pilot steps to establish our presence. Given that our business model and advantages are distinct from other platforms, our approach to global expansion will likewise be different. We aim to leverage our competitive strengths to establish our international presence. As you know very well, JD's business model is built on supply chain capabilities and centered around user experience. Supply chain is the cornerstone of our international business development, and we will continue to focus on this to expand our capabilities on the global market.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

Yeah, to share some examples, for JD Retail, our outbound e-commerce platform is actively improving shopping experience by offering high-quality products and services to global users. In the meantime, it also assists Chinese companies in expanding their business and brands to overseas markets.

We're still in the early stage for all these efforts. At the same time, we're increasing our efforts in inbound cross-border business. JD Worldwide has established three direct procurement centers worldwide so far to improve cross-border supply chain efficiency, offering consumers in China a wider range of imported products at lower costs while ensuring product safety.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

For JD Logistics, it has established a strong overseas supply chain starting from warehouse and now expanding to overall supply chain services. Currently, it operates nearly 90 bonded overseas and direct mail warehouses, managing a floor area of almost 900,000 square meters. This enables JD Logistics to serve a large number of overseas customers, as well as Chinese brands expanding abroad. Also, JD Property is expanding its business in Southeast Asia and Europe, with a focus on markets such as Vietnam, Indonesia, Singapore, the U.K., and the Netherlands.

Its customers include international logistics and FMCG giants, as well as emerging Chinese companies going overseas. As I mentioned, both JD Logistics and JD Property, they are more enterprise service facing. So for the C-side customers, they don't have a very strong impression or experience so far.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

So we also introduced an omnichannel retail platform in Europe called Ochama. This business leverages JD's advanced automated logistics technologies and global supply chain capabilities to provide high-quality shopping experience for customers across 24 European countries. Not only does Ochama serve European local brands and merchants, it also provides a dependable path for Chinese brands and merchants to expand their business abroad. But certainly, Ochama is still our project in the incubation stage.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

And next, we will continue to focus on these areas, the business layout that we are good at with the strengths to expand our global capabilities.

Thank you, Kenny. We can have the next question.

Operator (participant)

Your next question comes from Alicia Yap with Citigroup.

Alicia Yap (Managing Director, and Senior Equity Analyst)

[Foreign language].

Speaker 7

In light of the shift of the consumption preference and also the rational spending behavior amid this soft macro sentiment, will JD need to or plan to adjust any specific strategy to fulfill the demand shift? If so, what could be the change and growth initiative? What is management expectation for China overall retail sales growth rate this year? How much higher can JD outperform the overall retail sales growth by? Will JD reinvest to aggressively growing new user in lower tier city? Will that mostly come from additional subsidy or through the improvement of product offering? Do you have a target KPI set for the numbers of new customers that you plan to acquire this year?

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

Thank you, Alicia. As you said, we've seen consumers have become more rational in spending. They pay attention to both the quality and the cost effectiveness of the products. They really value the good products with a reasonable price. At the same time, they do care about shopping experience. So last year, we took proactive steps in response to consumer trends. While striving to provide users with better shopping experience and differentiated services, we expanded our platform ecosystem and the low-cost mindshare. We also studied the latest consumption trends and insights, and we work closely with brands and merchants to jointly develop new products that better meet new user demands. So overall, we see our performance so far has met our expectations. In 2024, we will stick to our current strategies and firmly focus on execution and optimization without making major adjustments.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

Yeah, we will continuously improve user experience and services and strengthen our core competitiveness to further underpin users' mindshare towards our fast delivery and high-quality reputation. At the same time, we will also optimize procurement costs and enrich our low-priced product offerings, and to let people better feel our price competitiveness. And on the side of product diversity, we will continue to expand our merchant base and also improve the richness of the low-priced products on our platform.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

So in 2024, we've seen there will be a number of economic stimulus plans and consumption promotion policies coming into place, including the encouragement of the trade-in consumptions, etc. So we are seeing this is a healthy recovery trend of the overall economy and consumption, and this will also help us to help in some of our advantageous categories.

Overall, we are optimistic for this year's overall retail sales, and we're confident that we will maintain a faster growth rate than that and continue to gain market share. Thank you.

Sean Zhang (Director of Investor Relations)

Alicia [Foreign language]

Speaker 7

For the second question on user growth, we will actively drive up user growth and their purchase frequency. Throughout the past year and this year, we have prioritized improving user experience to achieve high-quality growth. We will continue to improve the diversity of product offerings and promote low-price strategy and expand product pool for users from lower tier markets to better meet their shopping preferences. This helped us to enhance user product matching efficiency and user retention rate. Additionally, we continuously enhance services safeguarding users' shopping experience during and after sales, like the free doorstep pickup services for returns and the lower threshold order value for free shipping, etc. We believe that subsidizing and other marketing activities are all tools for user operation. These measures can serve some special purposes in certain periods of time and should only be used in a targeted and disciplined way.

Sean Zhang (Director of Investor Relations)

[Foreign language] Q4, [Foreign language]

Speaker 7

And we saw healthy growth in the number of users in Q4, including new users experienced strong growth while existing users maintained steady growth. Users from lower tier markets also achieved an accelerated growth. User purchase frequency showed a healthy growth, particularly among existing users. Furthermore, user satisfaction rate has improved with NPS of both self-operated and the marketplace achieving an increase year-on-year.

Sean Zhang (Director of Investor Relations)

[Foreign language].

Speaker 7

So far in Q1, we've seen user growth has maintained such momentum. This year, JD was selected to be the exclusive interactive partner for China Media Group's Spring Festival Gala. During the show, we offered a variety of gifts to viewers home and abroad, reaching a wide range of new users. On the outlook of the whole year, we're confident in user growth.

Okay, thank you, Alicia. Let's have the last question.

Operator (participant)

Thomas Chong with Jefferies.

Kenneth Fong (Managing Director, and Head of China Internet Research)

[Foreign language].

Speaker 7

Thanks, management, for taking my question. My first question is about the consumer sentiment in 2024 and how should we think about the trend for different product categories. My second question is related to our thoughts about the competitive landscape in 2024. Thank you.

Ian Su Shan (CFO)

[Foreign language] Thomas. [Foreign language]

Speaker 7

Thank you, Thomas, for your question. So by 2023, we have seen the society and economy had returned to normal. Although the consumption market showed a recovery trend, people's spending ability and confidence still needed a boost. As we enter 2024, in the current two months, as we can observe, the country's national economy is on track for recovery. With the expected effects of the micro-stimulus plans and consumption promotion policies, we believe the momentum of consumption recovery and expansion will be further consolidated or strengthened.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

As from JD's perspective, in 2024, we maintain the confidence to outperform the overall broader market and taking a longer-term view. We believe that most people's desire for a better life remains unchanged.

Our business model aims to provide better services and quality products with greater value for money, which has made us unique advantages to satisfy diverse users' needs in various shopping scenarios.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

So from the industry perspective, as we have seen that the proportion of online retail sales of physical goods continues to, for some industries, they have enjoyed a high penetration rate, whereas for other industries such as supermarkets, sports, furniture, and home, automotive, and other industries, their online sales penetration rate still has plenty of room to improve.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

And for the category perspective, in 2023, we continue to be the market leader in electronics categories and deliver a faster growth rate than the overall market in this area, even though this industry is facing challenges last year.

So overall, we are confident to maintain a faster-than-industry growth rate in these categories, especially as you see the government is promoting the trade-in of consumer goods and stimulating the consumption of electronics and other products. So we're confident to maintain a strong growth in this category.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

And the competition in the supermarket category is expected to intensify in this year, with various players adopting different strategies. JD's supermarket business has undergone some adjustments in the past year. These include a focus on core businesses, improvements in supply chain capabilities, and enhanced fulfillment efficiency through warehouse network reforms. And these strategies are gradually coming to fruition, and there's been a positive trend of growth recovery for the supermarket category.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

And on the fashion and home segment, this more heavily depends on the development of our third-party merchants.

Due to our unique business models, the way we foster these two categories will be with a different approach. So far, we have seen our open ecosystem strategy has yielded some initial results, and users are becoming more and more aware of JD Fashion and JD Home. We're confident that we will continue to experience healthy growth for these two categories in 2024.

Ian Su Shan (CFO)

[Foreign language].

Speaker 7

So for the question about industrial competition, which is the internal question here, we believe that China's retail supermarket consumer market is vast, and various platforms and business models will coexist. And as we see ourselves, JD, it's a retailer, and then this market is quite dispersed. We think the key for a long-term success here is to satisfy user experience and create win-win collaborations with all kinds of our partners.

So in that part, we will stick to our strategies and continue to gain market shares. We're optimistic that all the changes we made in the past year will gradually come to show some effects and fruitions. Also, last year, our different JD's teams have come up with innovative tactics and techniques to improve conversion rates and reduce operating costs. Therefore, we think by firmly executing our established strategies, we are on the right track to deliver results this year. At JD.com, we position ourselves as a supply chain-based company. We have these strengths and capabilities to withstand and navigate through different economic cycles and to deliver good results this year. Thank you.

Operator (participant)

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

Sean Zhang (Director of Investor Relations)

Thank you. Thank you, everyone, for joining us today on the call and for your questions. If you have further questions, please contact me and our team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

Operator (participant)

Thank you for your participation in today's conference. That concludes the presentation. You may now disconnect.