Dada Nexus Limited (DADA) CEO Philip Kuai on Q1 2022 Results – Earnings Call Transcript

Dada Nexus Limited (NASDAQ:DADA) Q1 2022 Earnings Conference Call May 16, 2022 9:30 PM ET

Company Participants

Caroline Dong – Head of Investor Relations

Philip Kuai – Chairman & Chief Executive Officer

Beck Chen – Chief Financial Officer

Conference Call Participants

Ronald Keung – Goldman Sachs

Eddie Leung – Bank of America Merrill Lynch

Thomas Chong – Jefferies

Alicia Yap – Citigroup

Wei Xiong – UBS

Andre Chang – JPMorgan

Robin Lim – Daiwa

Wei Fang – Mizuho


Good morning, ladies and gentlemen and thank you for standing by for Dada First Quarter 20221 Earnings Conference Call. At this time, all participants are in listen-only mode. After the management prepared remarks, there will be a question-and-answer session. As a reminder, today’s conference is being recorded.

I’ll now turn the meeting over to your host for today’s call, Ms. Caroline Dong, Head of Investor Relations for Dada. Please proceed, Caroline.

Caroline Dong

Thank you, operator. Hello, everyone, and thank you for joining our first quarter 2022 earnings conference call. On the call today from Dada, we have Mr. Philip Kuai, Chairman and CEO; Mr. Beck Chen, CFO; and Mr. Jun Yang, Co-Founder and CTO.

Mr. Kuai will talk about our operations and company highlights, then Mr. Chen, will discuss the financials and guidance. They will all be available to answer your questions during the Q&A session that follows.

Before we begin, I’d like to remind you that this conference call contains forward-looking statements, please refer to our latest Safe Harbor statement in the earnings press release on our IR website.

Also, during this call, we will discuss certain non-GAAP financial measures. Please also refer to our earnings press release, which contains a reconciliation of non-GAAP measures to the comparable GAAP measures.

Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB.

It’s now my pleasure to introduce our Chairman and CEO, Mr. Kuai. Philip, please go ahead.

Philip Kuai

Thank you, Caroline, and thank you all very much for joining us today. We are pleased to announce another strong quarter and an excellent start to the year. During the first quarter of 2022, Dada Group delivered revenue growth of 74% year-over-year on a comparable net basis, fully demonstrating our resilient business model, despite pressures from the current macro environment.

So, as usual, I will first go through some key observations and highlights of our recent progress, before moving on to updates on our two platforms. Beck Chen will then go through our financial results in greater details.

In terms of the regulatory environment, the political bureau of the CPC Central Committee has recently held a meeting to analyze the current economic situation, where leadership emphasized the necessity to promote the healthy development of the platform economy, including completing the special rectification, implementing regular supervision and introducing specific measures to support the robust development of the platform economy in compliance with laws and regulations.

So under the overall guidance of the CPC and the government, Dada Group adheres to compliant operations, while driving sustainable business growth. We have been growing our business rapidly, while actively fulfilling our responsibility as a platform, making every effort to elevate the platform economy to a new level.

Since the beginning of the year, the COVID-19 outbreak in some cities, including Shenzhen, Shanghai and Beijing, have led to the initiation of containment measures, including temporary close off or lockdown. They then approved enterprise by local governments to maintain the supply of daily necessities. Data Group has been involved in anti-pandemic support initiatives.

For merchants, we strive to provide delivery capabilities to support their online operations. For consumers, we ensure price stabilities of products on our platforms.

For riders, we help eligible riders to obtain COVID travel passes and provide special subsidies. For local governments, we donated personal protection equipment, help government agencies with the distribution of supply packages to residents and engage in public welfare activities for pandemic control.

Now I would like to provide updates on our deepened cooperation with Since increased investments in Data Group has been completed at the end of February. Our omni-channel business cooperation with has further strengthened.

In the first quarter, — the GMV of Shop Now or Shop Xiaoshigou, the unified brand for all on-demand retail services within the JD ecosystem, increased by more than three times year-over-year.

During the first quarter, we further expanded the geographic coverage of the nearby or Fùjìn we will see one of the major entry points of Shop Now, as a result, nearby gain more exposures among JD users. In addition, we continue to improve the click-through rate and the conversion rates by upgrading app design and operations.

Now, let’s spend some time on JDDJ, the leading local on-demand retail platform in China. Since March, China’s consumption growth has been under pressure due to the pandemic resurgence. However, the national policy directive towards building a large national unified market and unlocking the full potential of internal circulation, it’s very clear. And the overall trend towards domestic consumption recovery will not change.

The promotion of the deep integration of online and offline consumption to encourage the development of new consumption formats, is one of the most important drivers of continued recovery and also the growth of consumption. JDDJ has always been committed to meeting the diverse needs of consumers through innovative models.

April 15th marks the seventh anniversary of JDDJ. So this year, for the first time, we launched the April 15th Intra-City Shopping Festival together with and both JDDJ and Shop Now. During the festival, the average daily GMV of categories such as FMCG and Fresh Foods exceeded that of the last year’s The Double 11 shopping festival. While the GMV of consumer electronics, home appliance and many other categories more than doubled year-over-year.

At the end of March 2022, the number of annual active users, on JDDJ increased by 47%, year-over-year to ¥67.9 million. During the first quarter, JDDJ continues to expand the category and merchant coverage, deepen strategic, cooperation with brands and innovate in digital solutions. So as to empower our partners and better serve more and more users.

Firstly, we continue to expand the category and merchant coverage. I will start with our supermarket category. So far, we have established partnership with 86 out of the top 100 supermarket chains in China. During the quarter, we also established new partnerships with regional winners, such as Pandora and Hunan Province. Driven by the Chinese New Year Shopping Festival and the March 8 campaign as well as enhanced user mindshare, the year-over-year GMV growth of supermarkets on JDDJ accelerated in the first quarter.

In addition, the GMV of leading regional supermarket chains, such as Canghai warehousing and Rainbow Tianhong, more than doubled on a sequential basis during the quarter.

Let’s move on to the consumer electronics and home appliance category. In the smartphone sub category, we newly launched smartphone trading program, which enhanced our probability to serve the full life cycle needs of smartphone buyers and improved conversion rates.

In the PC and digital product sub category, we further expanded offerings and established new partnerships with leading brands, including iFlytek, Kurdash Zingping [ph] and Nintendo. In the home appliance sub category, total GMV maintained rapid growth on a sequential basis, driven by our One City One Flagship local home appliance chain strategy, and enrichments of both major and small home appliance supplies.

In the mom-and-baby category, we have deepened our cooperation with leading trends such as Kui Zhou, Loreo [ph] and Baby Room and strengthened the synergy with Shop Now. As a result, the GMV of mom-an-baby chains on JDDJ increased by more than eight times year-over-year in the first quarter.

Secondly, we further deepen the strategic cooperation with brands. In the first quarter, the year-over-year revenue growth of our online marketing service was around 180%. During the quarter, we have signed several new partnerships with packaged food brands such as CP Foods, [indiscernible] and good framer channel.

At the same time, as more and more brands from new categories generate meaningful sales on JDDJ, the categories of brands that we directly partner with also keep expanding. For example, in addition to the brands, as mentioned above, we have recently established cooperation with household product brands, including ASD [indiscernible] the innovation is at the core of our partnership with brands.

In this quarter, we launched a new marketing campaign deliver the best to your home or [indiscernible] which features mostly selection of products based on the prevailing consumption trends and help brands promote trendy bestsellers. In March, the theme of our [indiscernible] is organic food. During the campaign, the sales of milk, milk powder and other products from brands including [indiscernible] more than doubled on a year-on-year basis. We continue to innovate in digital solutions in our retailers and brands.

Excuse me, so who is not speaking, could you please just mute yourself, please? Thank you.

So certainly, we continue to innovate in digital solutions to empower retailers and brands. Haibo, our omni-channel operating systems for retailers, continue to empower more merchants to carry out O2O operations across multiple channels efficiently. As of the end of March, the Haibo system had been deployed in more than 6,700 retail chain stores, including about 3,000 stores of around 50 top 100 supermarket chains in China.

To help improve our brand partners’ sales efficiency, we have recently launched the Earth Grid System, or Kunce system, which visualize brands online inventory down to a three times three kilometers grid level, helping brands to optimize point of sales coverage and gain regional sales share. As of now, more than 30 brands in food and beverage, grain and oil, mom-and-baby care products, and other categories have adopted the Kunce system.

The effectiveness of Kunce system to help brands identify sales opportunities and grow sales has been tested. Since Kimberly-Clark’s adoption of Kunce system, the point of sales coverage of cortex, one of its core products sold in CR Rain Guards market increased by more than 20 percentage points during the March 8 compared and the sales increased by more than 20 times on a sequential basis.

Regarding our digitized in-store picking service Dada Picking, it has been fully rolled out to all of the Walmart stores nationwide by the end of March. In addition, we have established partnership with Carrefour and helped us increase picking fulfillment rate by 20 percentage points.

Dada Picking’s empowerment in helping address labor shortage and digitize the picking process is highly valued by retailers. As a result, order volume maintained strong growth momentum. In the first quarter, the number of orders fulfilled by Dada Picking increased by more than three times year-over-year.

So moving on to Dada Now, the leading local on-demand delivery platform in China. Recently, the CPC Central Committee and the State Council proposed in the opinions on accelerating the construction of a national unified market to promote innovation of technology and business model in the third party logistics industry, so as to improve logistics efficiency for the entire society.

As you know, technology-driven intra-city on-demand delivery plays a key role in the third party logistics industry. It also serves as an important infrastructure to support new consumption formats, improve consumer convenience and improve overall logistic efficiency.

Leveraging our technology advantages and on-demand delivery network coverage, Dada Now serves a wild range of customers, including chain merchants, SME merchants, individual users, express delivery companies and on-demand delivery agencies, providing them with diversified and high-quality intracity on-demand delivery services. So, in terms of business progress, I will start with our KA or key merchandise business. So based on the expansion of incorporating merchants and stores, the increase in the average delivery order per store. Revenue of our on-demand delivery service to KA merchants maintained rapid growth, increasing by about 50% year-over-year after hyper growth for multiple quarters in the past.

In Restaurant KA category, we continue to sign up new restaurant chain such as [indiscernible] and revenue generated from key beverage KA increased by more than 100% year-over-year. In addition, pharmaceutical KAs maintained impressive performance with revenue increasing by more than 100% year-over-year.

So moving on to the SME and the C2C business. Orders fulfilled increased by more than 40% year-over-year, while unit economy keeps improving significantly. For last mile service, during the recent pandemic outbreak in Shanghai, we quickly recruited and activated last mile delivery riders, leveraging our flexible cross-sourcing network. These riders played a key supplementary role in restoring JD Logistics delivery capability, while it faced shortage of in-house delivery personnel. Our efforts also help serve the bottlenecks of the last 100 meter delivery within communities, which ensures door to door delivery even during the pandemic while staying compliant with the containment measures.

So, to wrap up, despite pressures from the broader macro environment and ongoing pandemic, we have continued to make encouraging progress and deliver strong results. We will continue to execute our strategy to drive sustained returns for shareholders.

With that, I will now pass the call over to Beck Chen to go over our financials for the quarter. Thank you.

Beck Chen

Thank you, Philip. So before we go over the numbers, just a few housekeeping items in advance. We believe first – we believe year-over-year comparisons are the most useful way to judge our performance. Therefore, all percentage changes I’m going to give will be on that basis. And all figures are in Renminbi, unless otherwise noted.

Total net revenue in the first quarter increased to RMB 2 billion, aligning the revenue recognition method of Dada Now’s last-mile delivery services to a comparable net basis, pro forma revenue growth would have been 74% year-over-year. Net revenue from Data Now were RMB 623 million. The pro forma revenue growth rate was year-over-year, mainly driven by the increase in order volume of intercity delivery service to train merchants and last-mile delivery services to logistic companies.

Net revenues from JDDJ increased by 80% to RMB 1.4 billion, mainly due to the increase in GMV, which was driven by increases in the number of active consumers and average order size. The increase in online marketing services revenue as a result of the increasing promotional activities, also contributed to the revenue growth of JDDJ.

Moving over to the expense side. Operations and supporting costs were RMB1.3 billion. The decrease was primarily due to the decrease of rider-related costs incurred by business upgrade of last-mile delivery services, partially offset by an increase in rider cost as a result of increasing order volume for interest achieved delivery services.

Selling and marketing expenses were RMB1.1 billion. The increase was primarily due to firstly the growing absolute dollar amount of incentives to JDDJ consumers. Secondly, an increase in advertising and marketing expenses to attract new consumers to JDDJ platform, and thirdly, the amortization of the business cooperation agreement rising from the share subscription transaction with in February this year.

G&A expenses decreased to RMB101 million, primarily due to decreased share-based compensation expenses. R&D expenses rose to RMB 165 million mainly attributable to the increase in research and development personnel cost as the company continues to strengthen its technology capabilities.

Non-GAAP net loss attributable to ordinary shareholders of DADA was RMB481 million. Non-GAAP net loss margin was 24%. On a comparable basis, net loss margin improved by about 30 percentage point’s year-over-year. As of March 31, 2022, the company had RMB4.6 billion in cash, cash equivalents, restricted cash and short-term investments. Pursuant to our US$70 million shares [indiscernible] or the dilation announced in March as of April 30, 2022, we had repurchased approximately US$17 million of ADCs under this repurchase program.

In terms of the outlook for the second quarter of 2022, we expect total revenue to be between CNY2.25 billion and CNY2.35 billion, representing a pro forma growth rate of 59% to 66% and adjusting ’21 Q2 and ’22 Q2 that announced last mile revenue to be a comparable net basis. In addition, we expect the pro forma net loss margin based on comparable net basis revenue in the second quarter of 2022 to continue to significantly narrow year-over-year and achieved sequential improvement for the fifth consecutive quarter.

This concludes our prepared remarks. And operator, we are now ready to begin the Q&A session. Thank you.

Question-and-Answer Session


Thank you. At this time, we would like to begin the Q&A session. [Operator Instructions] First question comes from the line of Ronald Keung of Goldman Sachs. Please go ahead.

Ronald Keung

Thank you. Thank you, Philip, Beck, Jun and Caroline. And congratulations on the solid results in the first quarter. So I want to ask about the recent COVID impact, if you could give us any anecdotes in Shanghai, in Beijing and overall, just looking at our second quarter guidance, which underlying implies a 59% to 66% growth. Is there any specific growth rates that we’re expecting for JDDJ, and how have we adjusted our business models or products or availability of inventory in this COVID season? Thank you.

Philip Kuai

Sure. Hi Ronald. So I will give you my answer and see if Beck have anything to add. So, yeah, you have already seen that in Shanghai, Beijing, Shenzhen, among others are having COVID outbreaks in the last few months. And we have been approved by the local government in almost every city as a key company for daily supplies under the COVID situation. And we see our social responsibility and very — I think there’s a huge social responsibility as well as the business opportunities.

There cities under a different level of letdown, and we are seeing different impacts. I will give you examples. In Shanghai, for example, Shanghai is having an extreme locked down. So by the end of March, the supply chain of the merchant are pretty much shut down. And most of the supermarket stores are offline. And also under the requirement from the government, the eligible writers are also in extreme shortage for at least a few weeks.

So certainly, there are a lot of challenges for our business. But then with the supply chain improvement and also the COVID situation is getting better. So our business is also recovering quickly. So we are seeing that in the next few weeks, our business will return to normal. And I think that’s a very extreme case, certainly the most extreme case in the last three years, we have everything.

For the other cities, for example, Beijing, in Beijing, although we are also seeing some COVID break, but the logistics and supply chain are rather stable. And it has not impacted too much. So in cities like Beijing, our business grew very quickly in the initial phase and then it got down to a rather normal phase.

And some other cities, once we see some random COVID cases, I think the city governments are controlling pretty well, and our business has not been much impact. So that’s the business impact. At the same time, in order to provide more protection and also to encourage the riders to work. So there’s some additional COVID related subsidies or expense for the riders. I think those are also temporary. And I think in the long-term, this kind of COVID situation is helping us for customer education. So now I think literally in most of the cities customers are familiar with on-demand delivery and home delivery business and e-commerce business. But I think in the long-term, it will have positive impact given this kind of customer education. Yeah. Let’s see if Beck have anything to add.

Beck Chen

Yeah. So yeah, in consideration of all those challenges right now based in China, we still believe our two platforms, both Dada Now and JDDJ will experience higher than the market average growth rate of the benefits. And for example for the guidance, we’ve been giving — for the second quarter of 2022, we already consider all those impactors and factors during this quarter. So it’s a fair expectation right now.

Ronald Keung

Thank you. And any specific on JDDJ growth expectations?

Beck Chen

Yeah. So JDDJ in second quarter, we believe that it will still grow very quickly compared to the — right now, the market average, as you can see, the statistics released — data released by the National Bureau yesterday. So there are a lot of challenges in China right now. But still, we believe JDDJ is experiencing higher than average growth rate. And for the second quarter, we believe that it will still grow like the same — similar speed about the total net revenue growth rate of Dada.

Ronald Keung

Great. Thank you, Philip. Thank you, Beck.


Thank you for the questions. Next question comes from the line of Eddie Leung of Bank of America Merrill Lynch. Please go ahead.

Eddie Leung

Good morning, guys. Just a follow-up question on the longer-term outlook after this COVID lockdown. You guys mentioned about potential better education of consumers, so could you talk a little bit about how you think about the competitive landscape might change after the recent lockdowns and the potential impact on the ticket size that you guys have been seeing? And then a separate quick question on the cooperation with JD. Could you remind us the contribution of the JD channels to your GMV in the first quarter? Thank you.

Philip Kuai

Sure, Eddie. So again, I will give you my answer and see if Beck have anything to add. So — for the long-term outlook, after COVID, you mentioned the ticket size, we are seeing our basket size keep growing for the last few quarters. And the trend has been pretty stable due to a few reasons. One is the product varieties keep improving and also the customer experience improving. So, we are seeing that the basket size has been continuing to grow.

In terms of the competition, I think after this COVID outbreak, a lot of smaller competitors or smaller companies will have serious challenges. And the overall competition, I think, will be reasonably reduced. In other words, I don’t think the subsidy awards or anything like that will happen in the foreseeable future. I think people in the market will be more reasonable and more — or even conservative in terms of burning cash for unreasonable competition.

At the same time, I do believe that the strong players in the market will take the advantages and grow the business well, partially due to the customer education and also the entire market being more rational.

I would like to give you some of the updates regarding our cooperation with JD. So, after the further investment from JD completed, there are a few key initiatives we have been working on with JD. So, firstly, from the product and technology side, we’ve been working very closely to improve the product performance of this shop now, especially the search engine improvements and also the nearby tariff improvement, so we’re happy to see that we’re getting more traffic and improving the conversion rates.

At the same time, it’s the first time that we are working with JD Group for brand marketing and some advertising together, especially during the important festivals. For example, like the April 15th, our anniversary and also in the upcoming June 18’s festival. Things like that, we will work closely with JD for brand promotion, therefore, to improve our mind share for the customers regarding the on-demand retail.

At the same time, we are opening up more cities on nearby tab in Q1. And we will continue to push this in the foreseeable future and to cover the entire country as much as possible. Yes, that’s the key initiatives and see if Beck have anything to add.

Beck Chen

Yes. So, in terms of the JD contribution. So, for the JD channel in Q1, it contributed a little bit more than 50%, 5-0, 50%. And I believe there is some seasonality there. So in Q2 and going forward, we believe that the contribution will keep to grow.

Eddie Leung

Okay – Thank you Philip, Jun and Beck.


Thank you for questions. Our next question comes from the line of Thomas Chong from Jefferies. Please go ahead.

Thomas Chong

Hi. Good morning. Thanks, management for taking my questions. I have a question regarding the unit economics for JDDJ. Can management comment about how we should think about the Q2 sequential trend for the different paths for the revenue and the expense side. And on the other hand, can you also get more color about the competitive landscape for Data Now in particular, the key accounts, the KA side. Thank you.

Beck Chen

Okay, Thomas. So let me take the first question, and I believe [indiscernible] take the second question very well. So for JDDJ UE [ph] or we call it like JDDJ margin, we believe that in Q2, we can achieve the positive direct margin as we have expected in previous quarters. And actually, in March, I think for monthly, like the direct margin level of JDDJ, it’s already breakeven. So in Q2, we are on the track to achieve a positive direct margin. And going forward, we believe that it will keep to be positive.

Unidentified Company Representative

Yes. And for our care business, we’re happy to see that our care business has been growing very fast in the last couple of years. At the same time, improving the delivery qualities and the customer satisfaction and to strengthen our market leadership. So as a result, we are getting more and more leading — the recognition of — from the leading customers. And this year-over-year, the whole year, we anticipate that our KA business will grow 40% year-over-year for the whole year.

At the same time, because of the COVID impact, the cost and expense around the riders might have some — might have some very incremental costs, partially preventing us from further improvement of the margin. While we anticipate by the second half of this year, while the COVID impacts are slowing down, and the KA business will improve from the increased density of the orders as well as all the technology-driven — technology-driven improvement and operational improvements we have been doing. So we are confident with both revenue growth and margin improvement.

Thomas Chong

Thank you.


Thank you for questions. Next question comes from the line of Alicia Yap from Citigroup. Please go ahead.

Alicia Yap

Hi. Thank you. Good morning, management. Thanks for taking my questions. Also congrats on the very solid results despite the challenges. I have a couple of questions. One is, can management elaborate a little bit the mix of the FMCG versus the non-FMCG for JDDJ in the first quarter and also your expectation for the second quarter and also the AOV difference? Do you expect a material change to the mix due to the COVID lockdowns and some of the consumption behavior shifted?

And I think, can you remind us the 1Q — first quarter JDDJ direct margin? I think you mentioned second quarter is still on track for profitability. And then, follow-up questions on your second quarter guidance. I know management mentioned, you have factor in the impact from the COVID, so is the second quarter guidance assuming the second half of May will be recovering and not getting worse and then June will be normal? Thank you.

Beck Chen

Okay. Okay. So, yes, let me take the questions about the numbers. So, first, about the — to supermarket categories, most of the supermarket categories right now is consisting of FMCG products. So for supermarket categories, it contributes about 6-0, 60% of the total GMV in Q1. And we believe that the overall FMCG percentage will slightly going down in Q2, because the non-supermarket, non-FMCG products will grow more quickly.

And for the AOV, first of all, for our overall marketplace AOV, is still like — keeps us more than RMB 210 for Q1. And specifically, for supermarket categories AOV, it’s increasing to over RMB 160. So it’s growing Q-on-Q or year-over-year. And we believe that all of those impacts from the COVID things will also contribute to the increase of the AOV in the longer term and also our diversification of newer categories will also contribute to the growth of AOV as well.

So in terms of the direct margin in Q1, it’s slightly like minus 0.1% for the whole quarter. But in March, we believe we already achieved breakeven. And for the Q2 guidance, Alicia you mentioned, so basically, right now, we think we are considering all those factors already — which already happened in the first half of this quarter. And we — actually, we are considering that it will not adhere to a rate as like what happened in April in Shanghai

Alicia Yap

I see. Okay.

Beck Chen

Yes. That’s all.

Alicia Yap

Okay. Thank you, Beck. Thank you.


Thank you for the questions. Our next question comes from the line of Wei Xiong from UBS. Please, go ahead.

Wei Xiong

Hi, management. Thank you for taking my questions. I wanted to follow-up on the COVID impact that you mentioned. I wonder compared to what we experienced in 2020, could you guys comment on how this round of COVID could affect maybe consumer behaviors longer term? And how are we positioned differently this time to be better — to be better accommodated to the situation? And another question from me is on the upcoming 6/18 shopping season. How do we see the participation from merchants this year? And any promotion strategy or campaigns that we want to highlight that you guys can share would be appreciated? Thank you.

Philip Kuai

Sure. Yeah. I’ll have my answer and see if Beck has anything to add. So the consumer behaviors from the COVID, I think the overall government measures against COVID has been – continued to optimize – and we are now having more and more frequent COVID test and also – also the other measures. One of the things we observed is that, customers might go to restaurants less frequently than before, even after COVID. And as you may have noticed, you mentioned it including Beijing and others, once there’s COVID cases, the government will ask the restaurant to stop having the dining service, and has to do the takeaway mode.

And – and we’re also noticing that more and more customers are now cooking at home. So I think, all of those will have positive impact on the supermarkets, FMCG and fresh food categories, and the more customers will be used to use the home delivery service rather than go to restaurants or go to the offline supermarket. That’s our observation.

And in terms of the June 18th, I think first of all, the macro environment slowed down might have some impact on the willingness to spend for the customers. But at the same time, I think customers have been – like in Shanghai and other cities. Customers have been locked down for quite a while. And they really like to spend some money and to get some fresh air.

So we are conservative, but positively conservative about the June 18th. And we are working very closely with together to do our best in June 18th. And another thing collaboration with JD is that, during this Shanghai lockdown, and other city outbreak, JD among other e-commerce players noticed that, the warehouse model during the extreme case, extreme situations might have some challenges, especially during the extreme lockdown. But for JDDJ, because we are decentralized and all the inventory located in each city and this local e-commerce. So it’s more resilient, and it’s easier to respond to those challenges. So we are working very closely with JD to develop new strategies and initiatives to react to the situation. And I think this June 18th, we are quite looking forward to it.

Wei Xiong

Thank you. Very clear.


Thank you for the question. Next question comes from the line of Andre Chang from JPMorgan. Please go ahead.

Andre Chang

Thank you management for taking my question. My question is on the merchant side. So with all the macro headwinds and the COVID impact, we also see some merchants being more cautious about the spending for the year. So I wonder if the company also seen this kind of trend if so, any measures to mitigate that — and if you take this a little bit at a higher level, are we seeing our monetization model across marketing new riders because of this like an extra expense rider, et cetera, mix — monetization mix changing? Thanks.

Philip Kuai

Sure. Yes, I’ll have my answer first. So our observation and our interaction with the supermarkets told us that most of the supermarkets are having some challenges, but many of them are actually having a better time from — for the business comparing to the last couple of years. One of the reasons we read from the situation is that community grew by the unrational competition and the subsidy awards from the community group buying has been slowing down significantly. So this actually helped to improve the life of supermarkets.

At the same time, based on our interaction with the consumer brands, I think overall, they’re doing fine. They’re not having like too much challenges at the moment. So I think overall, the foundation of the business is quite solid.

And at the same time, people are looking for more effective channels to do business for the — like brands and the merchants are looking for effective channels. And we are the effective channel. So that’s why we’re happy to see that both the brands and the merchants are willing to spend more on our platform, and they are expecting like a greater growth and contribution from our platform. So we are quite positive about that.

Beck Chen

Yes. And also, in terms of the direction of the monetization, we believe that the marketing revenues, marketing fees is still the most important one to help us to increase the overall monetization rate and just like before we mentioned. And so during this year, we believe that still the online marketing revenues on a year-over-year basis will grow very quickly, significantly. So it doesn’t impact our methodology of the growth of JDDJ’s revenue.


Thank you. Do you have the follow-up questions. Mr. Chang, if there are no further questions, I will move on. Management, I will take the next questions from Robin Lim of Daiwa. Please go ahead.

Robin Lim

Hi. Thanks management for taking my questions. I just have a follow-up question on the COVID impact. Which factors have been the biggest impact on Dada? Because I believe there’s — the first impact would be the supermarket in the off-line because of the lockdown measures and also there is some impact on the trucking logistics and also some of the riders cannot fulfill the orders because they could not come out from the residential areas? So if there is another round of lockdown measures, how will Dada coup with the challenges?

And my second question is compared to the past pandemic cycles. Are we observing better user retention this time because I think we face less competition from community repurchase versus the last two years? And in terms of the user acquisition cost, should we expect it to be less as we could realize some cost savings from the JD channels? Thank you.

Philip Kuai

Okay. Okay. So first of all, the COVID lockdown, I think the Shanghai lockdown is very, very extreme. And personally, I don’t think we will be seeing that kind of lockdown anytime in the foreseeable future. And I think more and more lockdowns are now having especially the frequent COVID test and other measures to reduce the total lockdown risk. So we are quite positive about that.

And even for Shanghai and some other cities, I think, now the government realized that the supply chain – for supermarkets are so important. And so also Personally, I’m quite positive that the supply chain will have less and less impact even during some kind of COVID measures in the future.

And for the riders, we have been always working closely with the local governments to improve the rider management and the supervision in order to follow the COVID guidance. And I think overall, we are comfortable with our operations and the shortage of riders are rather temporary and not as severe as people might imagine in most of the cities. So we are comfortable with that.

And in terms of the active customers, by the end of March, our active customers grew by 47% up to nearly 6,800 — sorry, 68 million active customers. So we are happy to see this active user base continues to grow. And at the same time, for the user acquisition, because we are increasing our entry points on and strengthening our collaboration with I think the user growth, especially in the JD ecosystem will be – will continue to be improved in the foreseeable future with the cost – with the cost reduction or relatively stable.

Robin Lim

Okay. Can I follow-up on the user retention?

Philip Kuai

Yeah, so the user retention and also the user retention frequency has been, has keep improving over the quarters. And we are seeing that especially the use – per user purchase or the dollar amount that user purchase on our platform keeps growing. So the world is share of our – that we have of the users keeping proving, and we are comfortable and confident to see that wallet of share keep improving in the future as well.

Robin Lim

Thank you very much.


Thank you for the question. In the interest of time, the last question comes from Wei Fang of Mizuho. Please go ahead.

Wei Fang

Thank you for taking my question. Can you talk about the advertising yield for the quarter within your total monetization rate – and given the recent lockdown side, any changes to your prior 2022 unit economic outlook? And secondly, on the supermarket in light of the more rational competition from the B2B business model, how should we think about the impact on your monetization rate? Thank you.

Beck Chen

Okay. So the advertising revenue in Q1, it’s like growing by 180% year-over-year. And also the manufacturing rate of online marketing is further increased to 3.4% compared to 3.2% in Q4 last year. So it’s keep improving. And like we have talked in the previous calls that, we believe for the whole year, the monetizing rate of online marketing still have, the potential room to grow by 20 to 30 basis points and it will be our major driver to grow the overall manufacturing rate.

And we believe that for the other two major items, including delivery fees and the packing fees, we received from the consumers and the commissions, we received from the merchants, we can maintain those two commissions or deliveries at a similar level as last year in consideration all those like the multi-category product diversification. So like I have said, we are still on track to grow the monitoring rate.

And in the same time, we will keep to on a year-over-year basis and also on a Q-on-Q basis, we will keep to optimize on the cost side, mainly including the consumer incentives and operation and rider cost. So overall, in Q2, we can achieve quarterly positive unit economic — quarterly positive direct margin. And going forward, it will keep to, grow in the positive way.


Thank you for the questions. With that, that concludes today’s question-and-answer session. I would like to hand the call back to, Ms. Caroline Dong for our closing remarks.

Caroline Dong

Thank you, Operator. In closing, on behalf of Dada’s management team, we’d like to thank you for your participation in today’s call. If you require any further information, feel free to reach out to us directly. Thank you for joining us today. This concludes the call.

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