JD-SWR conference call: The hundred billion subsidy has a significant boost effect on low-frequency users. The most important KPIs for the second half of the year are GMV, profit, and cash flow.

On the evening of August 16, the JD-SWR announced its second-quarter financial report. Many financial indicators such as revenue for the quarter exceeded market expectations. However, in the current relatively weak economic environment, investors lack confidence in the JD-SWR's future performance, and U.S. stocks are now before the market. Fall by more than 3%. In the earnings call, JD-SWR executives said that the mall sector in the second quarter still faces the adjustment of business and commodity structure, the slow return of consumption after the outbreak, as well as high inventory during the outbreak and other difficulties, so the short-term growth rate encountered some challenges. However, the company believes that meeting the diversified needs of different users through a rich supply of merchants and commodities will become an important growth driver for the continued improvement of JD-SWR revenue and profits. The following is a transcript of the call: ## Question 1: The growth rate of live products in the first quarter was very good, what do you think of the management? What are the prospects? A: In the second quarter, despite continuing to face a series of challenges in the external environment, JD-SWR still firmly implemented our low price and open ecological strategy, and at the same time, we are constantly promoting the optimization of our organizational structure. These measures have exceeded our original expectations. In the overall environment of consumption pressure in the second quarter, we can also see that JD-SWR consumption mode is actually very resilient. Through the continuous strengthening of supply chain capacity, we can ensure that the supply of goods can be more stable, the price is more competitive, and the service is more secure in the whole promotion season. All these have driven our core advantage categories, especially the live category, to continuously gain market share. In the second quarter, there was double pressure on the whole real estate industry and durable goods consumption. In fact, the market of home appliance industry in the whole industry was under great pressure. However, the performance of JD-SWR home appliance category was obviously better than that of the industry, and the market share was still further expanding. The growth rate of JD-SWR mobile phone in the second quarter also reached double digits, which was better than the overall performance of the industry, This is mainly due to the strong user mind established for a long time, A sound national service network and service capabilities, as well as the ability to build the supply chain advantages over the years. In the second half of the year or the third quarter, it will take some time for consumption to recover, and then there is also a mismatch in the high-temperature season this year, and there is also some uncertainty about the pace of new mobile phone sales. These macro and industry factors will actually affect our performance in the quarter and the second half of the year. We also believe that in such an environment, JD-SWR supply chain capabilities will be further released, and our operational resilience will be stronger. Therefore, we are still confident that the advantageous categories, including home appliances and mobile phones, will still maintain the leading advantage in the industry, which is better than the performance of the industry. In the future, JD-SWR will continue to upgrade and improve our categories and businesses, enrich the number of merchants and products, and continue to strengthen our own supply chain capabilities and compliance capabilities. I believe that such as the landing of the strategy, the effect of organizational structure adjustment is gradually reflected, and the mall business will return to a healthier growth momentum in the second half of the year. ## Question 2: In the context of macro and business adjustments, what is the management's expectation for the mall's growth rate in the second half of the year? What KPIs will it pay attention to? First, the tens of billions of subsidies have a positive impact on users' shopping frequency and cross-category shopping, and at the same time have a relatively large pull-up effect on the activation of new users, especially low-frequency users. Second, since the beginning of the year, we have simplified the process of entering merchants, and then increased support for merchants, including reducing operating costs, providing more operating tools, and clearer operating rules. Rapid growth in the number of new merchants. Q2 The number of merchants has achieved a year-on-year growth of more than three digits. Through a rich supply of merchants and products, we can meet the diversified needs of different users. This is also an important growth driver for our continued increase in revenue and profits. Third, while improving supply chain capabilities and promoting low-price mentality, we also provide consumers with excellent services, which is our core advantage. This is evidenced by the continued acquisition of market share in the dominant category, while supply chain capabilities have helped us continue to improve our performance gross margin. The most important KPIs will still return to **GMV, profit and cash flow * *. At present, there are many uncertainties in the macro and industry environment, but we see that the health of our business is improving, and then we will firmly implement our long-term strategy, and then we are confident that our core business will maintain a steady growth momentum. ## Question 3: Strategic Planning for the Growth of the Number of Platform Merchants Answer: There are three major links in specific merchants and category specific measures. First, when merchants enter, we will increase our investment promotion efforts for merchants, and then lower the entry threshold for brands. At the same time, we will greatly simplify our entry and distribution process and reduce the fixed cost of merchants. In terms of operation, we will promote fair competition among all subjects on the platform, including competition between self-employed and third-party merchants, as well as between third-party merchants. The most important thing is to clarify the value proposition of our platform, apply it on the traffic side, and at the same time carry out effective publicity to merchants, and then create a clear growth path for merchants on JD-SWR platform. In the tool segment, we will continue to optimize the merchant's operating tools, and then provide better data support, and then the merchant will improve its operating capabilities, and then operate efficiently and profitably. ## Question 4: In the first half of the year, which adjustments have met expectations and which aspects need to be improved? Answer: Some progress has been made in the active price adjustment strategy and brand ecological construction. The effect of the big promotion grew faster than expected, proving the attractiveness of the low-price strategy, but it will take a longer period of time to gradually change the user's mind. In terms of the prosperity of the platform merchant ecology, it takes time to accumulate, and the traffic distribution mechanism and rules also need to be adjusted gradually. So far, JD-SWR have made good progress in attracting investment and entering merchants. Next, we still have a lot of room for improvement in the platform's operating rules and traffic distribution algorithm mechanism. ## Question 5: What is the focus of the new business in the future? Answer: We always focus on the improvement of supply chain capacity, the construction of open ecology, and then the building of long-term capacity such as instant retail. Real-time retail, including the recently upgraded hourly service, is one of our most important strategies for new retail formats at present, while innovative retail services include the integration of some front-end warehouses and other services, which more promote the coordination of the supply chain. At present, these services are basically still in the pilot stage, and more are exploring models. Supply chain coordination needs to be promoted from city to city, and the overall investment is controllable, it will not affect full-year profits or earnings trends. ## Question 6: How to differentiate from other platforms after focusing on the low price strategy? From a JD-SWR point of view, we have always focused on the supply chain infrastructure. We are also constantly building core capabilities around the supply chain and user experience. On the one hand, we ensure high-quality, low-cost and stable supply of goods. These commodities are accurately matched to suitable users, providing users with a better shopping experience, and constantly winning the trust of users. Not only e-commerce platforms, the retail business has historically focused on low prices since its birth, so this is why we have made cost efficiency experience our core business philosophy. From a JD-SWR perspective, **we are very much looking forward to more users making cross-brand comparisons before buying, as we are very confident in our supply chain capabilities and the low cost and quality service that our proprietary scale advantage brings. **Focusing on the user mind of" how fast, good and economical ", on the one hand, JD-SWR will continue to strengthen and consolidate our advantages, continue to play and strengthen our experience in fast and good aspects, and continue to strengthen the trust of users. On the other hand, we will gradually make up for our own shortcomings, **by introducing more merchants to enrich our platform ecology, improve the diversity and richness of supply to meet the different needs of users. At the same time, in this process, we have also done a lot of work to ensure and improve the user experience, such as: 1) Maintain strict entry barriers and product management for platform merchants; 2) Improve the scale effect of self-operated business, Drive the continuous reduction of procurement costs to give benefits to users, and at the same time improve the self-operated service standards to ensure the best user experience of JD-SWR self-operated. * *