JD.com, Inc. (NASDAQ:JD) Q3 2019 Earnings Conference Call - Final Transcript

Nov 15, 2019 • 07:00 am ET


JD.com, Inc. (NASDAQ:JD) Q3 2019 Earnings Conference Call - Final Transcript


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Sidney Huang

discovered the different value propositions unique to different e-commerce platforms. For JD.com, our obsession with customer experience since day one continued to help us to win over the better half of middle class consumers even in those lower tier cities.

It is a universal truth that middle class customers value quality assurance, everyday low prices and first-class services, especially for high-value products such as 3C and home appliances or products where consumers pay particular attention to the quality such as food, baby products, home furnishings, cosmetics and healthcare products so that we thank our competitors for not only introducing e-commerce to many first-time users but also providing easy benchmarks for us to readily differentiate and secure the most valuable customers. This can be validated by our average ticket size of over RMB200 in lower-tier cities, very important indicator for the quality and sustainability of our customer base.

Thanks to lower tier city consumers, our market leading position in the electronics and home appliance categories has been further strengthened with the revenue growth rate accelerating to 22% in the third quarter, the fastest in the past five quarters amid everlasting competition and a slowing industry which grew in low single digits in Q3 according to China's National Bureau of Statistics. In other words, we have been taking tremendous market share during the quarter.

Some of you may wonder what happened to all the subsidies that people have been raving about from our competitors. Well, this time our arch rival itself confirmed publicly that subsidies cannot bring sustainable business. This it has learned the hard way from its own costly experience over the years. Hundreds of millions of people may happily spend RMB0.99 on an impulse and they may spend RMB0.99 every day on petty items just for fun. But for serious purchases, most consumers don't just look at price alone. They will evaluate at least two other elements before any large purchase decisions. The first is trust. Can I trust the sellers on the platform; are you selling authentic products, will I get what I see or will I end up on a wait list for months before getting that discounted item. The answers are mixed at best on the overcrowded marketplace platforms.

The second is service. Do you have professional in-store service for large appliances and I'll return it easily if I don't like the product. People may not care about a service when they buy a RMB0.99 petty item because they can just throw it away. But when they are buying large ticket products, they definitely care.

Here comes the hard truth. It takes years of heavy-lifting to build the supply chain expertise, service capabilities and fulfillment infrastructure needed to perfect the customer experience in those categories and in that process to optimize operating efficiency while solidifying our competitive moat. The best example is, three years ago, when the largest marketplace platform listed [Phonetic] the largest offline home appliance and electronics retailer in China to jointly attack us with