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Operator: Hello and thank you for standing by for JD.Com’s First Quarter 2024 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 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: Thank you. Good day, everyone. Welcome to JD.Com’s First Quarter 2024 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 open 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 our 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, please.

Sandy Xu: Thanks, Sean. Hello, everyone, and thanks for joining us today to discuss our Q1 2024 results. We kicked off the year with encouraging momentum in Q1. Our topline growth accelerated and market share expanded while our bottom line trended healthily in the quarter. More importantly, our users showed strong enthusiasm for our further improved shopping experience and differentiated services, and our Net Promoter Score, the NPS, notably improved year-on-year. This is a result driven by our strong execution amidst evolving industry dynamics. Our teams stayed focused on our own strengths, strategies and the pace of development and continued to drive steady progress across all our strategic initiatives in improving user experience, price competitiveness and platform ecosystems.

Our strong execution is reflected in our improved category performance in Q1. To start with, our general merchandise had a great quarter as our supermarket category returned to healthy growth while fashion and home goods maintained robust momentum. Particularly, the bounce back of our supermarket category is a great example of how we are able to drive strong business performance by focusing on the key aspects of user experience, namely, product quality and selection, price competitiveness and service quality. After spending the past year on strengthening procurement capabilities and upgrading fulfillment network and operating efficiency, our supermarket category recorded double-digit GMV and revenue growth in Q1 with increased order volume and shopping frequency.

We expect supermarket’s momentum to continue throughout the rest of the year, and it will remain an important growth driver in the long run with massive TAM. Our electronics and home appliances category remained resilient in Q1. We are confident in our market-leading position and proven supply chain capabilities in this category, and we will continue to focus on our own strategies to scale the business and profits with differentiated value-add services, such as one-stop trade-in services, new product launches, more competitive price offerings and a more dynamic platform ecosystem. Now let me share some operating highlights we achieved in Q1 in executing on our strategies. First, user engagement. We are excited to see a series of positive signs in both our user base and user behavior in Q1.

Our quarterly active customers delivered another robust growth year-on-year during the quarter, driven by growth across all user groups, including new users, existing users as well as our Plus numbers. As to user behavior, shopping frequency on our platform delivered a substantial double-digit year-on-year growth in Q1, more than offsetting the decrease in average order value as a result of our low price offerings. This led to a relatively stable ARPU in Q1 compared to the same period last year. In addition, driven by our expanding user base and shopping frequency, our order volume continued to increase at a double-digit rate year-on-year in Q1, a pace we have seen for three consecutive quarters. This robust momentum with users makes us confident to say that our relentless focus in user experience are paying off.

We rolled out a number of user experience initiatives, and the team made solid progress in executing them. As such, our NPS continued to rise in Q1 on both 1P and 3P. We believe this is an important driver of our sustainable growth along the way. We are leveraging our core capabilities in supply chain to differentiate user experience on our platform. For example, the integrated trade-in services we provide in our electronics and home appliances category are at an industry-leading level. And we are further working on this to provide users hassle-free services, including coordinated delivery, installation of new devices and dismantling of used devices. In addition, our supermarket category also made full use of its supply chain to roll out differentiated services, including direct shipment from suppliers to end users, [Foreign Language] and 24-hour fresh milk delivered to users since production, among others.

Our service offerings are catching up on the 3P side as well. For example, our RMB59 threshold for free shipping now also covers almost all of the 3P products on our platform. We also made progress to expand coverage of our free doorstep picking up for return service among 3P merchants. We are encouraged to see 3P user experience on our platform continue to improve, and our 3P NPS score trended upward in the quarter. Moving on to our low-price offerings. Our price NPS continued to increase in Q1, both sequentially and on a year-on-year basis, as our improved price competitiveness increasingly resonates with users. Meanwhile, growth of our user base in lower-tier cities accelerated in Q1, exceeding our growth rate in higher-tier cities. Order volumes and shopping frequency generated by users in lower-tier cities continued to record double-digit year-on-year growth in the quarter, faster than that of our total users.

Moreover, growth of low-ticket-sized order volume continued to accelerate meaningfully in the quarter. All this reflects our increased attractiveness to price-sensitive customers and our abilities to serve them effectively. With our 1P supply chain capabilities and enriched offerings of 3P, we are strongly positioned to pursue low price in a sustainable way. This is the essence of retail, the core of JV business model and the key competence that helps us stay ahead of price competition. Next, moving on to our platform ecosystem. We were encouraged to see our active merchant base continue to rapidly expand on our platform in Q1, driven by our effective supporting measures and optimized operating tools. Both our 3P user base and 3P order volume continued to grow at a faster pace in Q1 compared to previous quarters.

Our marketplace and marketing revenues returned to a positive growth in Q1 as we navigated one-off impacts in the past quarter. This was primarily driven by the growth in our advertising revenues while commissions remained soft due to our strategy to prioritize ecosystem development over monetization at the current stage. I want to point out that the low 3P monetization rate at the moment does not reflect the true potential of our marketplace and marketing revenues, and we anticipate more upside going forward. That said, we maintain our strategic priority of building a vibrant and thriving platform ecosystem where both our 1P and 3P merchants are adequately incentivized to better serve users. On a separate note, 2024 marks the 10th anniversary of our listing on NASDAQ.

Looking back on the past decade, our revenues have scaled up significantly by 16x from RMB69 billion in 2013 prior to our listing to over RMB1 trillion last year. Our non-GAAP net income attributable to ordinary shareholders has expanded by an even more impressive 157x from RMB224 million to RMB35 billion. The total amount we returned to our shareholders through dividends and share buybacks has surpassed the total capital raised over the course of the past 10 years. And we have created full-time jobs for over 500,000 employees with social insurance and housing fund benefits. As of the end of 2023, a 13x increase compared to 10 years ago. We are proud of our achievements in the past as we created tremendous value to our users, employees, shareholders and for society as a whole.

We have a clear vision to navigate the next decade with our ever-improving user experience, stronger price competitive [indiscernible] and thriving platform ecosystem. To conclude, 2024 is marked with our consistent strategies and continued execution. And we are pleased to kick the year off with a quarter of accelerated growth and healthy profitability. As we focus on executing our strategies, we will further improve the user experience, which leads to stronger user mindshare and user growth, thus helping to reinforce our market position and expand our market share. This will keep us on a sustainable path of healthy profit and cash flow that allow us to continue to execute and deliver for the rest of the year and the years to come. With that, I will turn it over to Ian for our financial highlights.

Thank you.

Ian Shan: Thank you, Sandy. And hello, everyone. In Q1, we delivered a solid performance on both topline and bottom line. We also [indiscernible] to return back to shareholders. Since the beginning of the year, we have repurchased a total of 98.3 million Class A ordinary shares, equivalent of 49.2 million ADS, for a total of US$1.3 billion, amounting to around 3.1% of our ordinary shares outstanding as of December 31, 2023. We have also completed our US$1.2 billion annual cash dividend payment in April 2024. This move demonstrate our commitment to creating value for our shareholders through shareholder returns, and more importantly, through our sustainable business growth over the long-term as we’ve done since our listing on NASDAQ in 2014.

With that, let me turn to our Q1 financial performance. Our net revenues grew by 7% year-on-year to RMB260 billion in Q1. Breaking down the mix. Product revenues were up 7%. Within product revenues, our electronics and home appliances category was up 5% in the quarter, thanks to the resilience of mobile phones and home appliances, but it was offset by the softness of PC due to industry headwinds. Our general merchandise category returned to a solid revenue growth year-on-year as supermarket categories rebounded to achieve double-digit revenue growth in the quarter. Other categories on general merchandise, such as fashion and home goods, also maintained strong momentum in the quarter. Service revenues grew by 9% year-on-year in Q1, primarily driven by logistics and other service revenues which are up 14% year-on-year in the quarter.

Our marketplace and marketing revenues returned to positive growth in Q1 as we got more 3P merchants and nurture our platform ecosystems. Our advertising revenues resumed healthy momentum in Q1 as we improve traffic allocation efficiency on both our platform for both 1P and 3P merchants. Commission revenue under marketplace and marketing continue to decrease at this stage due to our supporting measures to merchants to cultivate our platform ecosystem. Now let me turn to our segment performance. JD Retail revenues increased by 7% year-on-year in Q1. I would like to highlight that, even as we dedicate ourselves to low-priced offerings, JD Retail profit margin continued to increase in the quarter [indiscernible] higher 1P product sales gross margin across almost all categories.

This again demonstrates the beauty of JD’s business model. With strong supply chain capabilities at our call, we are able to continuously extend our economies of scale and pass the benefits to our users. In addition, we continue to improve our user experience, including lowering the threshold for free shipping, improve user engagement through initiatives like our sponsorship [indiscernible]. As a result of these efforts, we achieved higher user shopping frequency and increased order volume. JD Retail non-GAAP operating profit decreased by 5% and operating margin was down 50 bps year-on-year to 4.1% in Q1, in line with our [indiscernible]. Moving on to JD Logistics. Revenues of JD Logistics increased by 15% year-on-year in Q1 with strong momentum for both of its internal and external revenues.

However, JD Logistics’ non-GAAP operating margin increased to 0.5% in the quarter, a meaningful improvement compared to a loss margin of 3.1% a year ago. This is the result of JD Logistics further optimized fulfillment network and operating efficiency, increased scale benefits as well as healthier revenue growth. Turning to New Business. Please note that, from Q1 2024, we’ll start to record Dada’s results under New Business. Therefore, this segment mainly includes JD Property, Dada, Jingxi and overseas business. Revenues of New Business were down 19% in Q1, primarily due to the adjustment of Jingxi business. Excluding the impact of the disposal [indiscernible] long-lived assets of JD Property, non-GAAP operating loss of New Business was RMB670 million in the quarter, narrowing from RMB846 million in the second quarter a year-ago.

Moving on to our consolidated bottom line. Our non-GAAP net income attributable to shareholders at the group level came in at RMB8.9 billion, a 17% increase year-on-year, with non-GAAP net margin came in at 3.4%, 30 bps year-on-year. This was primarily driven by increased gross margin, the effective investments in user experience and JD Logistics’ improved bottom line performance. Non-GAAP diluted net income per ADS grew by 19% year-on-year in the quarter to RMB5.65. So our last 12 months free cash flow as of the end of Q1 was RMB51 billion compared to RMB19 billion in the same period last year. The year-on-year increase of free cash flow was mainly due to our further optimized cash conversion cycle, improved profitability, moderated CapEx as well as seasonality factor.

Notably, our last 12 month inventory turnover reached a historical low level of 29 days in Q1 compared to 32 days in the same period last year, which also contributed to our increase in free cash flow. By the end of Q1, our cash and cash equivalents, restricted cash and short-term investments, added up to a total of RMB179 billion. To conclude, we’re encouraged by our solid results in Q1, and we are confident to deliver our operating targets while staying focused on executing our long-term strategies. 2024 not only marks the 10th anniversary of our listing on NASDAQ, it’s also a start of a new chapter for JD to serve more users and provide them unparalleled user experience by developing an ecosystem that bolsters the prosperity of both 1P and 3P.

With that, I will turn it to Sean. Thank you.

Sean Zhang: Sure. Thank you, Ian. We apologize for the breaking up for today’s call. So for the Q&A session, you’re welcome to ask questions in Chinese or English. And our management will answer questions in the language you ask. We’ll provide English translation when necessary for convenient purpose only. In case of any discrepancy, please refer to management’s statement in the original language. Okay. Operator, can we open the call for Q&A? Thank you.

Operator: Thank you. [Operator Instructions] Your first question comes from Ronald Keung with Goldman Sachs. Please go ahead.

Ronald Keung: Thank you, Sandy, Ian and Sean. I have a question on our growth and then how do we balance growth and profitability. Let me ask first in Chinese, and I’ll translate my question. [Foreign Language] Thank you, management. I have a question on our growth and then how do we balance that with profitability. We’ve seen many players this year, even our incumbents, I call them, each aiming to grow faster than total retail and aiming to sustain share. So in this overall industry, where everyone wants to grow faster than the industry, how do we see the key drivers for JD this year sustaining? We’re gaining market share across categories, electronics where there was a high base last year. How do we see this grow? FMCG and general merchandise, just talk about the supermarket growth that Sandy mentioned.

How do we – drivers to grow faster than industry. And from user and frequency perspective, existing and new users. And how do we balance this growth and profitability, our targets for margins, as more players reinvest for growth? Thank you.

Sandy Xu: [Interpreted] Thank you, Ronald, for your question. So first of all, to the point that China has a vast consumption market and this market continued healthy growth. And in the meantime, China consumption market is fragmented with over 300 cities in China boasting population of over 1 million people. So in 2023, we see that China penetration of online physical goods sales to at around 30%. So this is a figure expected to rise as the e-commerce platforms, we enhance our efficiency and evolve our business models. And category wise, we see certain categories, such as computers and home appliances, have a higher-than-expected potential to further penetrate online. Despite that we think these categories already have a relatively high online consumption rate.

And moreover, significant room for online penetration exist in some other categories, like we can see supermarkets, home goods, automotive, sports and outdoors, and services. These categories have a large potential to continue online penetration, and these are also among the fastest-growing categories on our platform. So with that, I want to say that we believe we are still facing a massive total addressable market. So in terms of JD’s core competitiveness, and like for JD, we are the China’s largest retailer. Leveraging our 1P business, we’re able to leverage our supply chain capabilities to provide users with premium and differentiated user experience and to excel in cost and efficiency management, which also paved the way for us to develop our platform ecosystem.

So as discussed last quarter, over the past year, we centered around user experience, low price offerings and platform ecosystem, and we have taken a set of proactive moves with a focus on business health, including enhancing our [indiscernible] reducing procurement costs; and introducing various customer service upgrades, such as lowering threshold for free shipping, upgrading the 1-week price guarantee service, offering free doorstep pickup for returns and implementing refund-only policies, among others. So all our efforts of improving user experience has picked up with some positive changes on user growth and engagement. So in this Q1, both JD Groups and JD Retail’s quarterly active numbers experienced double-digit growth, continuing the trend of high growth rate from Q4 last year.

So at the same time, we’ve also observed a clear uptick in users’ shopping frequency as they engage more actively on our platforms. Furthermore, our NPS has shown consistent improvement. So in Q1, our NPS saw meaningful improvement on both 1P and 3P side on a year-on-year basis as well as sequential basis. While the influx of the numerous users to our platform as we pushed forward our platform ecosystem last year led to some fluctuations in our NPS, whereas our ongoing improvement in platform governance and risk control have driven upward trend in user satisfaction. So in summary, our efforts have yielded some promising outcomes as we see users’ mindshare resume momentum towards JD in terms of our ability to provide more diverse, affordable and high-quality products at faster speeds that gives us the confidence to achieve our long-term growth trajectory and market expansion.

Ian Shan: [Interpreted] So this is Ian to address the second part of your question. To follow up on what Sandy just said, we’re confident that our 2024 full year growth will outpace China’s total retail sales of consumer goods, and we will deliver stable profits for both JD Group and JD Retail. And on top of that, we will remain committed to our disciplined investments aimed at enhancing user experience and expanding our market share. So in JD’s view, business growth and profitability is more reinforcing than contradictory. JD’s business model is based on supply chain with user experience at the core [indiscernible] enhancing both supply chain efficiency capabilities and user experience. So we firmly believe that our long-term sustainable profit will stem from our strong market position and exceptional user experience.

So for JD.Com, from our perspective, we believe that by constantly dedicating energy and resources to enhancing product, price and service, we can deliver superior user experience, and this in turn drives up GMV growth and expand our market share. And as our business size expand and the market position gets enhanced, our advantage in supply chain and efficiency is further strengthened, which leads to healthy profit growth. And this enable us to continue to invest in product, price and service to constantly improve user experience. This forms a virtuous cycle among business growth, user experience enhancement and long-term profit growth. So last year, much of our efforts was directed towards internal enhancements, including boosting operational efficiency, streamlining workflows and enhancing long-term cost-competitiveness.

And through this process, we identified significant opportunities to further improve our operating abilities. And we believe that strengthening these capabilities is crucial for our success in enhancing profits and long-term competitiveness. So in terms of our business focus and investment. Since last year, we’ve been working on several key initiatives. We’ve lowered the threshold for merchants to onboard our marketplace, while we helped to enhance – we enhanced the support measures for SME merchants. In addition, we’ve provided them with a range of effective tools to operate our platform. Therefore, we are able to increase the variety of product choices available to our customers. And regarding user experience enhancement. We’ve implemented a series of gradual updates of various customer services.

These include lowering the threshold for free shipping services for 1P, improving the functionality of our one-week price guarantee feature, introducing free doorstep pickup for return services for both 1P and 3P, and implementing refund-only policies and more. And these industry-leading service innovations have resulted in a notable increase in user satisfaction, as evidenced by our rising NPS. So to conclude, from the long-term perspective, we will consistently leverage the advantage we have in our 1P and continue to promote our platform ecosystem to strengthen the virtuous cycle between our business scale and profit growth, and we are confident to achieve that objective in the long-term. Thank you.

Operator: Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Alicia Yap: Hi. Thank you. [Foreign Language] Good evening, management. Thanks for taking my questions. Congrats on the solid results. First question is, if the appliance trade-in policy were implemented amid the conscious consumption spend remain, will the policy effective enough to boost consumer to really spend? And what could be the incremental growth JD expects to be able to enjoy from the trade-in policy? From second question is management previously noted that FMCG will be an important category to support growth for JD this year. Other than low base and easier comps, do you think consumer will really spend more income on FMCG category? If consumer demand remains last year, will FMCG still be the key growth driver this year? Do you anticipate JD to take more share in this category? Thank you.

Sandy Xu: [Interpreted] Thank you, Alicia, for your question. First on the trade-in service. So as you know, that it has been about a decade since China last introduced nationwide trade-in initiatives. So for many Chinese households, it is now time to replace their home appliances and other durable goods. And these old products are often low in functionality, high in energy consumption and may pose risks to health and safety. However, due to the high cost of replacement, many families continue using them for the moment. So this round, the introduction of a new trade-in policy, offers incentives to address this long-standing demand. It will encourage Chinese families to trade in their old items for new ones at a lower cost, thereby enhancing the overall quality of life for many people.

So currently, we’ve seen that governments at all levels are actively promoting the implementation of trade-in policies. So we see the Ministry of Commerce has released the action plan to promote trade-ins for consumer goods, while local governments are also conducting research and making arrangements, and we’re also coordinating with different levels of government. And we look forward to the introduction of additional trade-in subsidizing measures that will directly benefit Chinese consumers. Meanwhile, JD, we have collaborated with over 100 brands, including the top brands, like Haier, Midea, Gree, and so on, to launch Trade-in Alliance or Household Appliances and Home Goods. And this alliance has so far launched trade-in subsidizing promotions in 20 cities and regions across China, with the goal of offering more cost-saving and hassle-free trade-in services to consumers nationwide.

So over the years at JD.Com, we’ve also been building and refining our trade-in service capabilities and leveraging our strengths in supply chain, in logistics and services. We continuously elevate the trade-in service experience to new heights. So we introduced integrated one-stop trade-in service, which includes free doorstep pickup, dismantling, handling of the old goods and free delivery and installation of new goods, et cetera. And moreover, there are no restrictions on the trade-in items, original purchase channel, brand, age or condition. So with these offerings, JD has shortened the trade-in process, no more than 2x of user home visits. So this is a very unique strength we can provide our services to our users because we are not only having our retail services, but also logistics services.

And on the back end, we have also done a lot of work over the years to provide the systematic support. So all of these infrastructures and abilities enable us to provide such a seamless trade-in services to our consumers today. So since 2023, more than 16 million users have chosen JD to trade-in their old appliances for new ones, and first-time users of our trade-in service has also recorded a 200% year-on-year increase. So in 2023, our trade-in program accounted for mid to high single-digit percentage of JD’s home appliances sales. And with the government active promoting this initiative this year, we anticipate more incremental sales to our home appliances category. And this trade-in-driven sales are expected to comprise a higher percentage of our overall sales in this category.

And about the FMCG question. So first of all, I want to share from the consumption trend standpoint, the overall FMCG sector maintains positive growth momentum. According to the Q1 NPS data, FMCG categories, particularly basic living goods, have shown robust growth. And FMCG and fresh produce are the two sectors that enjoy a rapid increase – that enjoy rising sales, whereas they have relatively low online penetration. So we’ve seen a lot of online platform and e-commerce players, and we are steadily capturing our market share from traditional offline markets. And in light of JD’s Q1 data, the anticipated swift rebound of FMCG played a significant role in driving the overall growth of our general merchandise sales and revenues, leading to our general merchandise growth rate outperforming the corresponding industry growth released by NBS.

And in terms of our strategies for the supermarket categories. We’ve seen significant enhancement in this category as we delve in deeper into each subcategory to enrich product offerings and reduce procurement costs and pass on the benefits to our consumers. And additionally, to address user demand and consumption pain points, we are exploring various measures, such as open sourcing of products, customize the development of new products, to provide consumers with high-quality products, competitive prices and excellent services. So at the same time, our logistics fulfillment network reform has also empowered us to lower the threshold for free shipping and tailored to the characteristics of different product categories. We are undertaking fulfillment network reforms as JD’s business scale and category mix have evolved significantly over the past years.

We’ve adjusted the algorithm and design of fulfillment network every few years. So for instance, our unique city-based warehouse model offers a superior shopping experience compared to the industry-wide sending nationwide from one place model. However, our city-based warehouse model requires us to improve scale efficiency, to reduce parcel moving times from one place to another and reduce the delivery distances through algorithm upgrades and thereby continuously reducing overall fulfillment costs. So all-in-all, we believe the essence to continue to promote the growth of the supermarket category is to return to the essence of retail, which is to focus on the better cost efficiency and user’s experience. So looking ahead, so despite fierce competition in the supermarket categories and the industry players adopting various strategies, we remain confident in the growth potential of this category and view the supermarket category as a crucial driver of our overall growth.

Thank you.

Sean Zhang: Next question, please.

Operator: Thank you. Your next question comes from Kenneth Fong with UBS. Please go ahead.

Kenneth Fong: Hi. Thank you. [Foreign Language] Thank you, management for taking my questions. I have two questions, the first one on content. JD has been trying different means on the e-commerce content that have been very innovative and differentiating versus our peers, like merchandise; live streaming; and recently, WeChat AI live streaming. They have reached very positive results. Can management share with us the progress and upcoming strategy for content investment into our core e-commerce platform? And my second question is about shareholder return. We have substantially stepped up shareholder return and repurchase US$1.2 billion worth of shares last quarter. How should we think about the pace, the scale and the sustainability of the buyback going forward? Thank you.

Sandy Xu: [Interpreted] So thank you, Kenny. Let me share some thoughts on live streaming and content ecosystem. So for JD Retail, we announced our commitment to strengthen our content ecosystem at the beginning of the year, aiming to offer users more diverse and comprehensive content experience alongside our superior shopping experience. Because we believe that by offering premium content, we’ll attract new traffic to JD’s platform and reduce our user acquisition cost and the benefit of our platform ecosystem. And we also believe that rich content also play a crucial role in increasing user engagement and time spent on our platform and consequently enhancing our traffic distribution efficiency and conversion rates. So our attempt on live streaming, as what you mentioned with the popular sessions led by our category managers during the Singles Day brand promotion; and our recent showcases featuring an AI digital representative of our founder, Richard, exemplify our commitment to content innovation, leveraging our JD’s technological capabilities.

And notably, Richard’s avatar live streaming, which marks the industry’s first live streaming hosted by an AI avatar of an entrepreneur, drew over 20 million views within the first hour, which also showcases our AI and other capabilities and these applications in the e-commerce scenarios. So moving forward, we will persist in making technological investments centered on JD’s core business, including our large language model, et cetera. So we’re still at the early stage of our content ecosystem building, and we hope to provide greater exposure and more traffic to high-quality and original content and its creators, so thereby adding value to our consumers by helping them discover products and make informed shopping decisions.

Ian Shan: [Interpreted] So, thank you. To answer your question on the shareholders’ returns, I would like to draw your attention to our three years plan for the US$3 billion plan. And so far, we still have around US$2.3 billion as we scheduled in the years ahead. And year-to-date, we repurchased a total of the 98.3 million Class A share – ordinary shares equivalent to 49 million ADS for a total of $1.3 billion in open markets from both NASDAQ and Hong Kong, accounting for approximately 3.1% of the total ordinary shares outstanding at the end of 2023. So in the long-term, our returns will focus on our sustained and healthy business growth, profitability and dividends, share buybacks, et cetera. So we will continue to reward our shareholders through various means and sharing the success of JD’s business.

Operator: Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong: [Foreign Language] Thank you, management for taking my question. My first question is about industry and industry competition. How should you think about this year 618? And also, how should we think about the industry landscape? How is different versus the previous year? And my number two question is about our ecosystem strategy. Can management comment about the 3P merchants economic contribution in the coming quarters? Thank you.

Sandy Xu: [Interpreted] So thank you, Thomas. Let me share some plans of the upcoming JD618 grand promotion. So this year’s grand promotion’s theme is quality and affordability. We’ve noticed the trend in the market where many low-priced products appear identical. So as we continue to implement our low-price strategy, our focus for this year’s shopping festival is to highlight JD’s ability to offer differentiated good products at inexpensive price with excellent service. And this year’s promotional approach and pace will have some difference from the previous years. And all arrangements will be centered on enhancing user’s experience. And the event will kick off at 8 PM on May 31 with products readily available for immediate purchase.

And we will also remain committed to cultivating strong partnership with our brands and suppliers to further solidifying JD’s market presence and users’ mind share. And we will also step efforts to support SME merchants and to support more than double number of merchants to achieving over 1 million sellers and to support more partners to achieve their growth objectives. So overall, we are optimistic about the overall performance of this year’s 6/1 promotion. And we believe that, with different market players, we have different strategies in the everyday sales and during the grand promotions. What make JD standout is still our advantages in supply chain and the reliabilities we can offer to our users. So we firmly believe that JD’s business model, based on robust supply chain and the user-centric experience, is resilient and sustainable across various economic cycles.

And we’re confident in our ability to consistently gain market share over the long-term with this business model. Thank you.

Operator: Thank you. We are now…

Ian Shan: We haven’t taken the second part of Thomas’ question. [Interpreted] To address the question about platform ecosystem. So our initial focus is to expanding our ecosystem scale by attracting merchants. We are actively working on onboarding more merchants and support them in improving their business performance on our platform by offering a diverse range of products on our platform to our customers. And over the past year, we’ve successfully attracted a significant number of new merchants by continuously streamlining our onboarding processes, reducing their store operating costs, improving operational efficiencies and providing traffic support. So in this quarter, the number of prospective merchants on our platform exceeded 1 million with a number of active merchants experiencing accelerated growth for four consecutive quarters.

And admittedly, our merchant count may not be as high as some other platforms and we remain committed to further enhancing our merchant recruitment efforts and supporting their activities on our platform. And we anticipate continued growth in the number of merchants in the following quarters. So for the second phase of the platform ecosystem building involves encouraging user participation. Ultimately, we aim for it to become a natural process, a natural choice for our users to purchase either self-operated or third-party products. Thus far, we’ve observed favorable interactions between our users and third-party offerings. In Q1, we achieved accelerated growth in both 3P transaction users and 3P order volume. Meanwhile, NPS for 3P has continued to improve.

Since the second half of last year, we’ve been collaborating with our merchants to pioneer service innovations. This has led to the implementation of services, like late delivery compensation, refund-only policies and free doorstep pickup for returns and more services, all of which have constantly elevated our shopping experience for our POP users. And lastly, we also believe that we will witness an increase in POP sales and revenues. And the prerequisite for this to happen is so we can truly help our merchants to scale up their businesses. From the rapid expansion of merchant members to active user participation and to rapid growth of POP GMV, all of this will require time and patience. With the gradual improvement of our platform ecosystem in the long run, the proportion of our 3P orders and GMV will eventually surpass that of our self-operated products, and this will also be a natural choice by our users.

Leveraging our 1P business and the collaboration with merchants from our 3P marketplace, we are able to foster a thriving platform ecosystem and providing richer supplies of high-quality goods and to increase the engagement of our users on our platform so as to achieve a virtuous cycle. And we believe this virtuous cycle will be an important driver for the continued growth of our long-term revenues and profits. Thank you.

Sean Zhang: Thank you, operator. So thank you, everyone, for joining the call today, and thanks 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 to you again next quarter. Thank you.

Operator: Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.