Mar 1, 2016
Executives
Ruiyu Li - IR Richard Liu - CEO Sidney Huang - CFO Haoyu Shen - CEO, JD Mall
Analysts
Eddie Leung - Merrill Lynch Erica Poon Werkun - UBS Alan Hellawell - Deutsche Bank Synthia Minx - Jefferies Sean Zhang - 86Reseach Thomas Chong - Citigroup George Meng - Goldman Sachs Vivian Hao - JP Morgan Tian Hou - T.H. Capital Robert Peck - SunTrust Jin Yoon - Mizuho Securities Jialong Shi - Nomura
Operator
Hello and thank you for standing by for JD.com's Fourth Quarter and Full Year 2015 Earnings Conference Call. At this time, all participants are in listen-only mode.
After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded.
And 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, Ruiyu Li.
Please go ahead.
Ruiyu Li
Thank you, operator, and welcome to our fourth quarter 2015 earnings call. Joining me today on the call are Richard Liu, CEO of JD.com; and Sidney Huang, our CFO.
For today's agenda, management will discuss highlights for the fourth quarter and full year 2015. Following the prepared remarks, Haoyu Shen, CEO of JD Mall will join Mr.
Liu and Mr. Huang for the Q&A portion of the call.
Before we continue, I refer you to our Safe Harbor statements in earnings press release which applies to this call, as we will make forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures; please refer to our earnings release which contains our reconciliation of non-GAAP measures to the most directly comparable GAAP measures.
Finally, please note that unless otherwise stated all the figures mentioned during this conference call are in RMB. Now, I'd like to turn the call over to our CEO, Richard Liu.
Richard Liu
Thank you, Ruiyu, and welcome, everyone. Jingdong Mall momentum continued throughout 2015 and we made excellent progress on our key strategic goals.
During the year, successful sales, even like single stake and our interrupted sales during the Chinese New Year holiday had bring new customers. And our expanding logistics network allowed us to further improve customer experience throughout China.
Today more and more customers are looking to Jingdong as they upgraded their quality of the product they buy and their overall shopping experience. Jingdong's long-term product and quality, our authentic product, and in fact reliable service has made us China's premier e-tailer.
And the international products now represent this which enables us to attract world-class products to our site. We expect this momentum to continue in 2016.
I will now turn the call over to Sidney. Thank you.
Sidney Huang
Thank you, Richard, and hello, everyone. We're very pleased with another quarter of robust growth, thanks to our highly successful Double-11 and Double-12 sales events and the rapid expansion of our customer base.
Excluding Paipai.com, our year-over-year core GMV growth was 79% in the fourth quarter, while our net revenue grew 57%, both of which accelerated from Q3 growth levels, and post our internal targets. Meanwhile China's overall consumption growth also accelerated in the fourth quarter to over 11% despite the slowing macroeconomic conditions.
We're encouraged by these trends and with our differentiated value proposition and better customer experience, we remain cautiously optimistic about our 2016 growth outlook. Our core GMV composition remains largely consistent with prior quarters.
In Q4 our core GMV from general merchandize categories grew 92% and accounted for 51% of total core GMV during the quarter. Apparel and footwear continue to be the largest general merchandise category followed by food and beverage, baby products and home furnishing categories, all growing with strong momentum.
Core GMV from electronics and home appliance products saw an accelerated growth rate of 66% during the quarter led by mobile devices and home appliance categories. Core GMV from our marketplace business grew 103% in Q4 and accounted for 45% of core GMV during the period.
The triple digit growth illustrates the strong momentum of our platform which continues to take market share from alternative marketplaces. Our net revenue grew 57% year-over-year supported by strong growth in both direct sales and marketplace businesses.
Our direct sales revenues grew 54% led by food and beverage, cosmetics, mobile and home appliance categories. Services and other revenue grew 101% year-over-year mainly contributed by strong growth and healthy monetization of our platform.
Our non-GAAP gross margin improved to 14%, up from 12.7% a year ago, as a result of a higher GMV contribution from the marketplace. Non-GAAP gross margin on direct sales revenue declined slightly on a year-over-year basis due to a major promotional campaign for our general merchandise products which was partially offset by the improving gross margin on our electronics and home appliance businesses.
Non-GAAP fulfillment expense ratio was 8.2% in Q4 compared to 7.3% in the same quarter last year. The higher fulfillment expense ratio was mainly due to our investment in O2O and the rural area penetration.
It is also related to the lower average order value as a result of the recent category campaign discussed earlier. We're evaluating ways to improve other economics and expect to implement such measures in the coming month.
The non-GAAP marketing expense ratio was 4.3% in Q4 compared to 3.3% in the same quarter last year. The year-over-year increase was mainly driven by discretionary branding activities for the Singles Day events and for the promotion of our new internet business and internet finance business and O2O initiatives.
We believe the increased marketing spending was highly effective as demonstrated by the 71% growth in our active customer base over the past 12 months. Our non-GAAP R&D and G&A expense ratios increased 9 basis points and 21 basis points respectively, compared to fourth quarter last year.
The changes were entirely due to additional spending by our new business lines. We had an impairment charge as part of our yearend review mainly due to the discontinuation of Paipai.com and the ride downs of BitAuto and a few smaller investments.
For BitAuto the ride downs covered by the non-cash portion of the initial investment, and reflects the market correction in its stock price over the past six months as a result of the macro driven sector downturn and the company's process investment in auto e-commerce. We believe the auto e-commerce business is still in the early stage of its development cycle, and we look forward to expanding our partnership in 2016.
We remain highly confident in BitAuto management's ability to execute on its strategy and ultimately emerge out of this cyclical downturn as a strong winner. Altogether, our non-GAAP net margin was negative 1.2% in the fourth quarter which was entirely attributable to our new business lines.
Excluding internet finance and O2O, our core JD Mall business remained profitable on a non-GAAP basis in Q4. For full year 2015, our overall non-GAAP net margin was within our guidance range of breakeven to negative 0.5%.
Now let's discuss our cash flow and working capital. Our Q4 adjusted free cash flow was RMB266 million and our full year free cash flow remains strong at RMB7 billion.
Excluding impact from Internet finance which had a cash outflow of RMB14 billion in full year 2015. Inventory turnovers stayed low at 37 days in 2015 compared to 35 days in 2014, and accounts payable turnover was 45 days in 2015, four days longer than the prior year level but still significantly lower than the general industry level.
After the end of the cash flow session in the earnings release, we also disclosed the full year transaction volumes and the year-end balances of our key Internet financing business lines. I know some of our investors are increasingly paying attention to our internet finance exposure.
So let me spend a few minutes on our thoughts about this unit and a couple of credit quality data points. We've positioned our Internet finance unit as a financial technology company that strives to leverage our proprietary data and Internet technology to improve efficiency while reducing cost in financial transactions.
Centered through this strategy is our focus on developing proprietary risk management tools. We know it's hard and it will take years to achieve a convincing track record on superior risk management, but we are working very, very hard and have a decent credit record in our first two years of operation.
The accumulated non-performing assets before charge-off which is defined as receivables or loans 90 plus days past due were approximately 0.2% off the total consumer end supply chain financing volume over the past two years, and our coverage ratio defined as allowance for bet debt over non-performing assets net off charge off was over 300% as of December 31, 2015 which illustrates our prudent reserve policy. Once again, we understand it takes many years and at least a couple of credit cycles to demonstrate sustained risk management capabilities.
We did want to highlight that we are investing heavily in our risk assessment technologies and so far we have a prudent record. And this is also one of the reasons that we were able to raise over $1 billion in a Series A round recently that valued our Internet finance unit at over $7 billion in post-money evaluation.
I'm pleased to announce that we just closed the deal today. We hope the Series A round will allow the finance unit to be self-funded for its growth in 2016.
It is also management's intention that we gradually reduce our own balance sheet exposure and grow the business with our core technology while leveraging external funds from our partners. We will update you when we achieve more milestones.
Now let's discuss our financial outlook. We expect Q1 net revenue growth to be between 45% and 50% on a year-over-year basis.
This guidance reflects the solid growth momentum in the first two months of 2016 despite a higher seasonality pattern observed throughout the industry. For the non-GAAP net income, we expect an overall non-GAAP net margin between 0.5% and -0.5% for the full year 2016.
This guidance reflects our plan to meaningfully improve our core business margin. Our commitment to investing in internet finance, O2O and other emerging opportunities, and the flexibility to compete effectively in this highly dynamic sector.
Finally, our free cash flow outlook from the core business remains positive, given our commitment to fast inventory turnover and our lower accounts payable cycle relative to our peers. We intend to manage our CapEx at a prudent level generally within the operating cash inflows from our e-commerce business.
This concludes my prepared remarks and we can now move to the Q&A Session. Operator.
Ruiyu Li
Operator we're ready for questions.
Operator
Thank you. [Operator Instructions] We'll take our first question from Eddie Leung from Merrill Lynch.
Please go ahead.
Eddie Leung
Good evening. Thank you for taking my question.
I have a question on one of your main product categories which is electronics. We have heard from some of the old line branch [ph] about the slower growth in smartphones, as well as to some extent home appliances.
So just wondering if you could share a little bit of the outlook of these electronics pieces to us? And how you guys can maintain pretty good growth despite a potential headwinds in the electronics industry.
Thank you.
Sidney Huang
So Eddie, consumer electronics is the strongest category for the company, the company started in that category. And if you talk about cameras and computers, laptops, these categories have been the slowest growing in our entire portfolio although it's still very fast growth compared with offline retailers.
And cellphone has gone through very rapid growth in the past few years as cellphone becomes prevalent in China. The growth rate definitely slowed down; if you look at the entire market I think its flat, basically last year.
And it's not going to grow much faster this year, but as -- for online retail; we're still having a very decent growth. But it is -- I think for smartphone, the overall market has grown to a level where the growth rate is almost flat.
And as far as home appliances, I assure you, we just came back from one of our events which has kicked off, a new campaign for home appliances this afternoon was over 100 brands and suppliers. So we're seeing very good growth in that category.
We're still taking share very rapidly from offline retailers. So we're very focused on that category.
So overall, I think the entire market is definitely not growing very fast but as online retailer we're taking share from the offline guys that were seeing a much better growth in the industry overall.
Richard Liu
[Foreign Language]
Sidney Huang
JD is already the largest retailer for a lot of these electronics and appliance categories, but it's only, maybe 10% if that of the entire market. So for a few years to come our growth will still be driven by people's move from offline to online, especially from the lower tier cities.
If you go to Beijing, Shenzhen, you don't see those marketplaces in electronics anymore, but if you go to lower tier cities you're still seeing a lot of those offline markets, and we're seeing people increasingly moving to online.
Operator
We'll now take our next question from Erica Poon Werkun from UBS. Please go ahead.
Erica Poon Werkun
Great, thank you. Question is on the net margin guidance.
Just wondering if you could just elaborate a little bit more on the sources of improved profitability on the e-commerce side and then whether you can separately frame the sides for the investments needed for the Internet finance and also the O2O, the JD Daojia. And also separately on fulfillment, just wondering how much of the 3P businesses you are fulfilling in terms of warehousing and also delivery.
Thank you.
Sidney Huang
Yes, Erica, I think the operating profit from our JD Mall business will come from as we mentioned in the past release go economies. We illustrated in the past for example our 1P business gross margin remained substantially lower than offline industry leaders and part of that is well increasingly driven by our improving scale where we can secure better and better rebates from suppliers as we continue to increase in volume.
There are also discretionary spending items like we mentioned on branding activities in the fourth quarter for example and also on the logistics. But we continue to improve in the lower tier cities and the rural areas.
So in 2015 it was a still investing year for a lot of those new regions, and in 2016 there is plenty of room to improve operating leverage. And so we deliberately leave a fairly large range to maintain operating flexibility in 2016 mainly for our new business lines because when you invest in the new line especially in highly competitive China internet market there is clearly uncertainty at the beginning of the year.
So we don't necessarily have a definitive range for those new investments. Now totally we do have budget but I think it is something subject to change, but overall I think we have a very strong internal budget for our core business in terms of profitability which leave us plenty of room to invest and impose new business initiative and potential special events that drive our core business.
Haoyu Shen
To your question about providing logistics to our merchants, we are delivering about 25% parcels for our third party sellers and we are serving much small percentage of their parcel on warehouse sites, at this point at a single percentage point. But as soon as the end of last year, I think we're making progress on giving people onto our warehouse parcel.
Operator
We will now take our next question from Alan Hellawell from Deutsche Bank. Please go ahead your line is open.
Alan Hellawell
Great, thank you very much. Just two quick questions.
Would love an update on your cross-border initiative, maybe it's waiting in GMV. How we should begin to think about margin structure now that we're finding ways into it?
And then, if you don't mind just following a little more on O2O operations, what your incremental geographic bridge [ph] goals are, and to what extent we feel the need to apply subsidies and whether it will be more or lessened hence relative to last year? Thank you.
Sidney Huang
For O2O, right now we are in twelve cities and we intend to penetrate the consumer base in those 12 cities before moving into new cities. So in other words we wanted to, we target to achieve enough critical mass and scale economies before expanding further into other cities.
We don't have a definitive investment amount as I mentioned earlier, but we do have clearly a competitive advantage in this area because not only we work with some of the best partners such as Tang Jiu but we also, potentially we have great supply chain promise, enough fresh food categories.
Richard Liu
[Foreign Language]
Sidney Huang
Yes, I know a lot of people are curious about auto business and some compare us to Instacart in The United States. One, very different position for us is we focus on the fresh produce category versus Instacart is delivering more broader, kind of grocery category.
So for us we focus exclusively on fresh produce and for other grocery products we can fulfill them through our own JD Mall platform.
Richard Liu
[Foreign language]
Sidney Huang
So for fresh products, especially the mid-tier to kind of the day-to-day fresh products, it is very difficult for either one 1P business or platform dismissed to operate effectively. So, we believe O2O is the only effective way to deliver these fresh products to consumer’s hand but for high-end and also organic fresh products clearly, there is a way for us to operate on a 1P basis.
Richard Liu
[Foreign Language]
Sidney Huang
Yes, so we expect O2O initiative will be a long term investment for us as we did in the past with our business lines. The biggest challenge today for our O2O initiative is the non-standardization of the fresh food packaging, so we are working with our supermarket partners to standardize some of these fresh product packaging so that we can fulfill them more effectively.
Richard Liu
[Foreign Language]
Sidney Huang
Yes, we are most pleased that you know with the initial results we can see the repeat purchase rates on JD O2O is much higher than our JD Mall traditional business. So this is very encouraging.
I think you also have a question about cross border business, we are really sorry the business in Q2 of last year and Q4 is a big quarter for cross border imports so we had very good growth actually in Q4. It’s still small business for the company.
It’s 1% of the company line now and it’s not profitable but we are looking to improve the profitability of the business this year without sacrificing healthy growth. And, the big categories are baby products, food & supplements and skincare & cosmetics and tried for selection of customers.
Operator
We will now take our next question from Synthia Minx from Jefferies. Please go ahead, your line is open.
Synthia Minx
Thank you management for giving us the opportunity and congratulations for strong results. My question is with respect to mobile, in the -- can management give us some more color on the mobile GMV contribution and the average ticket size per order; mobile compared to the PC users?
And any color with respect to contributions from within the directed traffic and the conversion rate, and that will be helpful. My Second question is with respect to lower tier city expansion, maybe management can give us some more update on that front.
Thank you.
Sidney Huang
On Mobile I think we've mentioned in our release that in Q4 it accounted for 61.4% of total orders and we've had almost two months now in Q1 and what I can tell you is we're seeing continued growth in that number. And we don't disclose GMV contributions for mobile but that number is lower than the odd percentage orders because the ticket size grows smaller.
But as you can understand when it comes for increasingly high percentages towards GMV, the past [ph] order size naturally converges to the overall average. So it's going up, it's getting closer to PC numbers on the overall numbers.
And as far as contribution from WeChat and Mobile QQ with the two Tencent properties we're continuing to see good progress. In terms of order contribution and GMV contribution, especially after Double-11 because through Double-11 we have campaigned and it's a good time for us to acquire new users from these two channels.
So after that we're seeing DAU and a number of these numbers go up. And we're also seeing reasonable improvement on conversion.
So we're going to continue to focus on working with the Tencent team closely to improve the productivity of those two channels.
Haoyu Shen
And for lower tier cities, order contribution is around 45% in Q3, in Q4.
Richard Liu
[Foreign Language]
Sidney Huang
So we had a big year last year actually in penetration of lower tier cities and that's just Richard said, we are seeing this year, 2016, as the -- so the last year we really get the vast majority of the job done. And this year we'll cover 400,000 villages in China, and the total is 600,000 I believe.
Richard Liu
[Foreign Language]
Sidney Huang
This will mark by and large the end of almost 10 years of JDs continued increase in coverage of the entire country.
Richard Liu
[Foreign Language]
Sidney Huang
Once we have finished the coverage, we will work continue to reduce cost and do innovations. One example is, we've got permission from two county governments to use drones to deliver packages in China, and we hope by end of this year we have more places where we can really deliver our JD packages to our customers using drones.
Operator?
Operator
We'll now take our next question from Sean Zhang from 86Reseach. Please go ahead, your line is open.
SeanZhang
Thank you management for taking my question and congratulations on a strong quarter. I remember Richard's speech at Yapoli [ph] forum.
He said that he is expecting over 50% contribution in 1P business coming from general merchandise. And now general merchandise already contributed 51% total GMV, I want to know what percentage of 1P GMV coming from the general merchandise and is 1P general merchandise growing faster or slower than the overall general merchandise GMV.
And my second question, you mentioned you have 4 million square meter warehouse capacity right now, can you give us any color how we see this number go up next year and what kind of growth rate. That will be helpful.
Thank you.
Sidney Huang
So for 1P business, general merchandise is definitely growing much, much faster than our electronics categories. So if you look at -- I'll just quickly give you a sense.
Even within 1P general merchandise is growing at a tripe digit but the contribution today is still relatively lower but it is quickly catching up. What was the other question?
Richard Liu
[Foreign Language]
Sidney Huang
Yes, so we have got 4 million square meters and you can expect the growth pretty much consistent with our 1P business growth, as well as our development of the third-party procurement services. You can take our revenue growth rate and add a margin on top of that to estimate the warehousing square meters growth.
Operator
Thank you. We'll now take our next question from Thomas Chong from Citigroup.
Please go ahead. Your line is open.
Thomas Chong
Hi, thanks management for taking my questions. I have two questions.
My first question is, can management comment about fresh sales in these rates [ph] and what's the contribution through GMV right now? And my second question is about new initiative in payment.
Can management talk about your expectations in terms of your payment initiative and how many uses you will like to achieve for your posted ecosystem? Thanks.
Sidney Huang
Our fresh sales continue to grow very, very fast. In Q4 I think it's over 300% growth year-over-year over a small base.
And in absolute terms it's over 1% of the company's GMV. And we will continue to see very fast growth this year.
On the payment adoption rate, we do see increasing timing of our customers and bundling of their credit cuts and debit cuts to our payment solutions. So right now our focus is to mainly adoption of our consumers to -- on the JD platform, basically paying for JD purchases using JD payment.
We do have some initiatives pondering of which so far the external merchants but it's still in fairly early stage.
Thomas Chong
Thanks.
Operator
Thank you. We'll now take our next question from George Meng from Goldman Sachs.
Please go ahead.
George Meng
Thanks management for taking my question. I actually have a follow-up question from last quarter.
So last time you guys mentioned about your Omnichannel offering to your brand partners such as some of the apparel brands to help them do O2O basically. I think now you took this one step forward by signing a strategic cooperation agreement with Leaning [ph] last December.
So can you elaborate a little bit more on this, what's the progress so far and what's your plan going forward? Is it just O2O or eventually we also used JD logistics for all of its fulfilment including warehousing for both online and offline.
And do you also have plan to sign similar contract with more brands going forward? And if so, I think you just mentioned you have 4 million square meters of warehouses and the sixth Asia number one warehouses self-built.
So can you update us on the proportion between self-built and rent warehouses? I mean in the past I think you have -- and the Asia number one already online in Shanghai, and now you have six.
Does that mean the warehouses in Shenzhen, Wangjing and Guangdong are all online now? Thank you very much.
Sidney Huang
The collaboration with Leaning is -- we took over their note in China logistics for logistic services to their stores and also to their resellers. And we also -- if they are successful, we also intend to build those out in other regions for them and we're also probably help them with e-commerce logistics as well.
So the initiative last time as far as working with the apparel brand stores leveraged the inventory for e-commerce. We continue to do that and continue to make progress.
And if you look at our entire floor space, which is almost 4 million, still a pretty small percentage is self-built which is Asia number one, and we have six online now. As we have more of these warehouses come online as a percentage, we'll go up.
I think we mentioned we have six now in production that -- these warehouses are built and they do come online in phases. For example; in Wuhan [ph] we do have a few structures in production right now but we're still building more structures.
So it's sort of via phased process.
Richard Liu
[Foreign Language]
Sidney Huang
Richard just added that in most of these sub-cities where we build Asia number one they do come in phases; phase 1, phase 2, phase 3. Really we paced that according to our sales growth.
Operator
We'll now take our next question from Vivian Hao from JP Morgan. Please go ahead.
Your line is open.
Vivian Hao
Hi, thank you for taking my question. I have two questions here.
Given the headcount expansion your fulfilment personal, how do we see the fulfilment cost as a percentage of revenue trending this year. And also do we consider engaging cross-sourcing logistic partners for JD Daojia to be more cost efficient?
My second question is on the margin dilution that you mentioned during the prepared remarks from O2O and Internet finance. Do you provide more color on the respective margin profiles for the business and also what is the revenue contribution from O2O and JD Finance respectively?
Thank you.
Haoyu Shen
As far as the logistic cost as a component of percentage revenue, it goes up but we on a day-to-day basis we manage logistic cost per order. So in R&D terms, we continue to see that number go down which is quite amazing considering we've already have -- we are the leading e-commerce operator in China.
But as we have more innovation in our processes, and as we grow in our scale, we continue to see logistic cost per order go down, as a percentage of revenue then it relates to basket size. As we mentioned, in Q4 we're seeing -- we would get our previous campaign on consumables which can't have a small basket size.
So as we -- as the mix shifts in our categories this will drive the change of basket size. But also as Sidney mentioned, we are looking into different ways to encourage customers to increases the basket size so that our economics will be better.
We were very vigilant on these metrics.
Sidney Huang
On the respective margin profiles, as I mentioned that in Q4 excluding Internet finance and O2O, our core business net margin -- non-GAAP net margin was positive. So because it was fairly steep loss in Q4 on a non-GAAP basis you can have a sense that basically that entire loss was attributable to those new business lines.
So you get a sense the extent of investments we are making in those two businesses. And also we mentioned that for 2016, on a core business basis, our operating margin is budgeted to improve significantly from the current level for JD Mall business.
But we wanted to remain some flexibility at the beginning of the year in terms of deep channel investments in those new areas.
Richard Liu
[Foreign Language]
Sidney Huang
So as the core of retail e-commerce business improves its profitability, and then we also think that the new business -- the absolute loss, the absolute investment for these new business in absolute terms will not increase a lot year-over-year. So combined these two dynamics, you will see our overall profitability of the company will improve overtime.
Richard Liu
[Foreign Language]
Sidney Huang
Recently two couriers, major couriers in China, I think they are called STO and YTO, went top in China so we did get a chance to see the numbers. If you look at their number their price per parcel on average in China is about RMB13 per parcel -- over RMB13 per parcel.
And if we look at our internal numbers, as far as delivery is concerned, it's lower than that. So we are very encouraged by these numbers and we are more convinced than before that because of our scale, because of our innovation, internally in-house with the very good decision we made years ago.
Operator
We'll now take our next question from Tian Hou from T.H. Capital.
Please go ahead. Your line is open.
Tian Hou
Good evening Richard, Haoyu and Sidney. The question is related to your crowd-funding business and we witness that Taobao also had research business and the reason to be growing better rapidly.
So how do you see this online crowd-funding market is evolving in the future? And what is JD.com's advantage over others?
So that's number one question. I have a second one following on the JD Finance.
I remember one quarter I asked the question regarding how to record GMV revenue from JD Finance. At that time the revenue was recorded as something against the cost and as JD Finance has developing in the maxi mode variety, and I wonder how do we look for the GMV revenue from JD Finance now.
Thank you. That's all of my questions.
Richard Liu
[Foreign Language]
Sidney Huang
So for crowd-funding I'll take a shot first. We have both protocol from the end actually entire [ph].
So for product side, we do have a 1P platform to support the latest innovative products that are on our corresponding start-up business. And we are the pioneer in this business, so despite of multiple players in the market, we continue to be confident in maintaining our market leadership.
For equity crowd-funding then this is more about clinical system that you built around this business by introducing various third-party service providers, like marketing firm spending, design firms. So we have built an ecosystem to support our crowd-funding partners, our equity crowd-funding partners to develop their business.
Now having said that, this is still fairly new business, so we're not saying that this is what we have clearly no one can claim victory. I think every player still has a clear chance to try their best and become a leader in the industry.
So we will see in the next few quarters how we continue to develop this business. For GMV from our internet finance business, only the crowd-funding product side will be recorded in GMV terms, none of the other businesses will be part of the GMV that we disclosed.
And they are -- internally we look at gross transaction volume which we have to disclose in earnings release, the financing side. So if gross transaction volume not -- for especially on the supplier side.
From revenue, if it's the interest income from supplier financing it will continue to be recorded as a reduction to cost. If it's interest from consumers and yes, that will be recorded as part of revenue but because right now the interest level has been fairly low, we have just B&G started differentiated pricing -- this is risk-based pricing.
So at this point the revenue contribution is still very, very small.
Operator
We'll now take our next question from Robert Peck from SunTrust. Please go ahead.
Robert Peck
Hi, thanks for taking my question. Sidney, I was wondering two items higher level.
One, could you talk about any impact if any from just the general economy slowdown or gyrations in the stock markets on GMV growth? And then number two, your competitor talked about the impact of whether during the quarter, I was wondering if you could give us any quantification on the impact if any at all on weather.
Thanks so much.
Sidney Huang
Sure. So we -- I mentioned at the beginning of my remarks that despite of the economic slowdown, the consumption growth and the overall consumption growth in China was still quite healthy with expirating rage [ph] of plus 11% in the fourth quarter, up from plus 10% in the previous nine months.
So that is a good validation of our assessment in the past that despite of the macro slowdown the consumption growth remains healthy and we -- I mentioned a few drivers enough for that in the past. But again, there could be a lagging effect of the macro slowdown on the consumptions.
So we remain still, that's how we remain cautiously optimistic about our outlook. Yes, the weather I think -- there are certain people who asked this question last time as well, I -- but we haven't seen any meaningful impact from weather and personally, I don't even know it's a cold winter, it's a warm winter because people [indiscernible].
Operator? Operator, next question please.
Operator? Operator, are you still there?
Operator
Apologies. Our next question comes from Jin Yoon from Mizuho Securities.
Please go ahead.
Jin Yoon
Good evening guys. Just a couple of things, starting with the gross margins, with high competition and lower end handsets hurting gross margins in 2015, could we assume as an anniversary this year 1P gross margin should improve throughout '16.
And second question is I think you said you finished your round of financing for your internet finance business. Can you talk about what percentage of that business do you own and is there a floor to that number going forward?
Thanks.
Sidney Huang
Right, for 1P gross margins, I think overall we expect upward trend in 2016, whether it's through mobile phone which has meaningful contribution but it's not something that would be -- that would actually impact the overall trend. But overall, we do see gross margin, both gross margin and operating margin to improve for our core e-commerce business.
For our internet finance you can have a quick calculation. We raised a RMB6.65 billion on top of RMB40 billion in pre-money evaluation.
So we -- that's about 15% equity stake to the external investors and we maintain 85% at this point.
Haoyu Shen
Just a more color on the title [ph]. We look at these by category, we look at each category to say that we want to -- every time we want to see gross margin improvement on each category.
But at the end it's a weighted number, so it depends on the mix shift because different categories do have different gross margin profile. So at the end it's a weighted number.
We do see -- for example, in Q4 we had a big campaign on our consumables and there is some gross margin pressure for that category and we'll continue to see pretty intense competition as we're seeing that category sell, it will be asset per share for that category.
Operator
We'll now take our next question from Jialong Shi from Nomura. Please go ahead.
Your line is open.
Jialong Shi
Hi, good evening management. Thanks for taking my call.
I have a question about your internet finance business. And I understand quite a few Chinese companies are now doing this internet consumption loan or high internet finance business.
So I was wondering, compared to your competitors what are JDs competitive edge is this internet finance business and also how much of your Q4 GMV is linked to the consumption loan you provide for your customers? Thank you.
Richard Liu
[Foreign Language]
Sidney Huang
So for all new products or just as products in general, JD focuses on improving customer experience. So if you look at our Jingdong pie chart, the consumer financing product, it definitely improves the overall user experience on JD shopping.
So that's very, very important aspect. We also mentioned about risk management which we focus our large part of our R&D on the risk management.
So we hope it will be a differentiated advantage. We also have with JD Mall business, we have unique consumer insight and which can help us in close building the risk management model but also developing more uniquely customer-friendly products.
So Richard mentioned the last point is we have our own internal strict guideline on what kind of products we will develop. In the past couple of years when there is a huge rush to P-to-P products and we stayed away from that business and never already get close to it because it didn't really match or fit our internal risk management appetite and policy.
Richard Liu
[Foreign Language]
Sidney Huang
So in addition to our customer-first philosophy, our JD Finance business definitely is embracing the innovative spirit and coming up with actual credit through number one. We are the first company to introduce consumer financing for Jingdong buy for e-commerce.
And we are the first in introducing product crowd-funding and also equity crowd-funding business in China. So if -- we intend to continue to innovate and already generate the part of our surprises to our consumers.
And if we can achieve that we are confident that our JD Finance business will bring just like JD Mall offering significant value to our shareholders.
Operator
We are now approaching to the end of the conference call. I will now turn the call over to JD.com's Ruiyu Li for closing remarks.
Ruiyu Li
Thank you, operator. Thank you for joining us today.
Please feel free to contact us if you have any further questions. Thank you for your continued support.
And looking forward to talking with you in the coming months.
Operator
Thank you for your participation in today's conference. This concludes the presentation.
You may now disconnect. Good day.