Nov 15, 2019
Operator
Hello, and thank you for standing by for JD.com's Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode.
After managements prepared remarks, there will be a question-and-answer session. Today’s conference is being recorded.
If you have any objections you may disconnect at this time. I’d like to turn the meeting over to your host for today’s conference, Jia Dong.
Jia Dong
Thank you, and welcome to our third quarter 2019 earnings conference call. Joining me on the call today are Mr.
Richard Liu, JD.com Group CEO; Mr. Lei Xu, CEO of JD Retail; Mr.
Zhenhui Wang, CEO of JD Logistics; Sidney Huang, CFO; and Jon Liao, our Chief Strategy Officer. For today’s agenda, our CFO Sidney Huang, will discuss highlights for the third quarter 2019 followed by Richard Liu, our CFO.
Other management will join the Q&A session. Before we continue, I refer you to our Safe Harbor statement in the 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 a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.
Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. I would now like to turn the call over to our CFO, Sidney Huang.
Sidney Huang
Thank you, Jia. Hello everyone.
Thank you for joining us today. We are very pleased to report another strong set of results for the third quarter 2019.
Our net revenue growth continued to re-accelerate reaching 28.7%, the highest growth rate in the past five quarters, driven by our lower-tier cities and operating [ph] strategies. In particular, the growth rate for electronics and home appliance categories in lower-tier cities was more than double that of tier one and tier two cities and most other top-25 categories saw higher and accelerated growth rates in lower-tier cities as well.
Overall, over 70% of new customers in Q3 came from lower-tier cities, which is a new record. And the growth rates for both, purchase orders and GMV in lower-tier cities reached the highest levels in the past six quarters.
In terms of traffic, due to innovative marketing activities and a better user engagement through our upgraded mobile interface, the JD mobile MAU grew 36% in September, the highest growth rate in the past eight months, while our mobile DAU grew 35% in Q3, fastest in five quarter. This may surprise some people who are not familiar lower-tier city consumers and think they are only interested in low price, low quality products which have seemingly flourished on other platforms.
The reality is that consumption has to upgrade has been quietly occurring in these regions where average consumers may have relatively lower absolute income, but have somewhat similar or even higher disposable income than tier-one city residents, due to significantly lower housing costs. As these consumers learned to shop online, they gradually 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 consumers value quality assurance, everyday low prices, and first class services, especially for high-value products, such as [indiscernible] and home appliances or products where consumers pay particular attention to the quality, such as the food, baby products, home furnishing, cosmetics, and healthcare products.
For 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 positions 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 order subsidies that people have been reading about from our competitors. This time our arch rival itself confirmed publicly that subsidies cannot win sustainable business.
It has learned the hard way from its own costly experience over the years. Hundreds of millions of people may happily spend $0.99 on an import and they may spend $0.99 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 fellows on the platforms?
Are you selling authentic products? Will I get what I see or will I end up on the waitlist 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 informed service, [indiscernible] and I'll return it easily if I don’t like the product. People may not care about a service when they buy a $0.99 petty item, because they can just throw it away, but when they are buying large ticket products, they definitely care.
Here comes the hot tools. It takes years of heavy lifting, build a supply chain expertise, service capabilities, and fulfillment infrastructure needed, perfect the customer experience in those categories and in that process to optimize operating efficiency while solidifying our competitive moat.
The best example is, few years ago, when the largest marketplace platform lifted the largest offline home appliance and electronics retailer in China to jointly attack us with massive subsidies throughout the past few years, but they have failed rather miserably as we predicted three years ago, now widely reported in the Chinese press. So anyone still worrying about subsides hurting our core categories should refresh their memory and think again.
It is driven by the same retail fundamentals that we have reiterated all these years. There is no shortcut in this business.
By the same token our general merchandise categories enjoyed accelerated growth of 36% in Q3, led by FMCG products, another extremely difficult category for a pure marketplace operator to reach meaningful scale with our without significant subsidies. We are also pleased to see that net service revenue grew 47% year-over-year, the fastest in the past four quarter and contributed 11.9% of our overall revenues, driven by strong momentum from third-party logistics and advertising revenues.
External revenue has now contributed 40% to JD Logistics' total revenues at stand-alone basis, up from less than 20% just two years ago. It has grown more than 300% from the same quarter of 2017.
When we decided to expand logistics into a self sustained business supported by its consistently topline customer satisfaction scores in the industry. In the third quarter, our growth margin was 14.9% compared to 15.4% in the same quarter last year.
This reflects the reinvestment of the first half one-time gains that I mentioned on our last earnings call. Yet, we have reinvested roughly 40% of the 1.8 billion nonrecurring gains from the first half through the gross margin in Q3 to drive our lower-tier cities strategy.
It worked very well and you have to admit it is a much more effective strategy than massive subsidies by some of our peers. The higher sales we achieved will give us further economies of scale, in both procurement and operating efficiency, which will afford our customers even more pricing benefits, setting an even higher bar for competitors, while driving our further growth and margin expansion next year.
This is the beauty of our 1P business model, a self reinforcing virtuous cycle. And it has worked extremely well for all the number one party retailers either by country or by category around the world.
You have to be number 1 to enjoy this virtuous cycle and you have to have a lower cost structure than everyone else. JD.com is number one in China and [indiscernible] and the snowball is just beginning to roll.
Another aspect of the snowball effect is operating leverage. During the third quarter our fulfillment expense ratio improved by 91 basis points 6.5%, 37.4% in the same quarter last year.
The improvement was driven by economies of scale as JD Logistics expanded its external order volume rapidly. [Indiscernible] operating margins and JD's 1P fulfillment expense ratio.
Our marketing on the G&A expense ratios also improved meaningfully in the same quarter driven by highly effective management and operating leverage from higher sales. As a result, non-GAAP operating margin reached 2.2% in the third quarter setting a new record.
JD Retail in particular achieved a record segment operating margin of 3.3% and it was achieved in a quarter of heavy investment. I hope this solid performance can be gained [indiscernible] on our path to our committed high single digit long term profit margin for JD Retail business.
Our free cash flow also increased significantly year-over-year during the quarter, driven by lower CapEx, and the proceeds from the Phase one closing of the GIC logistics Core Fund. In our free cash flow table, as I mentioned in recent quarters, with JD Logistics, JD Property Management Group was formed to pursue financial returns as property managed business.
We have broken out related CapEx into a separate line specifying the available for sale nature, which has been reported net of related proceeds on the sales. This is the second time when we recorded a negative cash inflow on this line following the first time in Q1 this year.
We hope to see more cash inflows from the business in the future. For the trailing 12 months, our free cash flow was RMB15.6 billion, 50% higher than our non-GAAP net income in the same period which was another bright spot in our business.
Now, let's discuss our fourth quarter financial outlook. We expect net revenues to grow between 21% and 25% on a year-over-year basis in light of a highly successful Singles Day promotion season.
While taking into account the potentially slowing national retail sales post based on the MDS report published yesterday. On the bright side, our October growth remained resilient and we are clearly gaining market share.
Finally, with better than expected earnings in the third quarter, we're raising the full-year non-GAAP net income guidance to be between RMB9.8 billion and RMB10.5 billion. Reflecting Q4 seasonality and the continued reinvestment of the first half one-time gains discussed earlier.
At the midpoint of this guidance we would grow our 2019 non-GAAP net income by over 200% from the 2018 level and grow a CAGR of 43% from the 2017 level. More importantly, this robust earnings growth is on top of our ongoing reinvestment in our core business which positionsJD.com to enter 2020 with tremendous growth momentum.
This concludes my prepared remarks and I will now turn the call to Richard for a few quick remarks.
Richard Liu
Yes, okay. Thank you, Sidney.
Hello everyone. I would like to take this opportunity to give you a brief introduction of our strategic plans in 2020 and for this year, as you have seen that we have achieved a promising result in terms of our revenues and nice margins as well as cash flow.
And for the next year based on the treatment of the previous three factors, we will continue to work on increasing our G&B [ph] and customer space as well as technology services. And we believe that only by improving every aspect of the four elements will achieve full quality growth of the whole company.
And in the past six years, we have been investing heavily on the investment of our technology services, and this has been quite larger than the growth of our revenues and we will - and for this year you have seen significant growth on the revenues of our technology services, has actually achieved three digit growth this year. And in the future for the next five years we will continue to - we'll continue to gain the benefits and the improvement on the revenues of our technology services, and this will be even bigger than our overall revenue growth.
And we believe the technology services revenue will be the key engine for the increase of our revenues and net income. Yes.
We have two strong beliefs, and no matter at our JD Retail, Logistics, and the JD Digits, the technology is our key driving forces. Only through technology will bring us long-term core competitiveness.
Technology will always help us to bring up our users' experience, lower the costs, and improve our operating efficiency. And the second belief is that we strongly believe the income from tax technology services will bring even further benefits and returns and profits for our stakeholders.
And overall, we believe for the next year no matter it's on the revenues and on the profits we will achieve even better results. Thank you, every one.
Sidney Huang
We can now move to the Q&A session.
Operator
The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions.
We will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed.
Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Ronald Keung from Goldman Sachs.
Please ask your question.
Ronald Keung
Thank you. Thank you, Richard, Xu Lei, Wang, Jia Dong, Sidney, and Jon, very strong results.
And further accelerating of revenue, particularly for the 1P retail and profitably, so would love to hear, just your thoughts, particularly as Richard talked about the 2020 strategy, just what do we see as the positive and maybe less positive drivers just into the 2020 1P growth? I could think of a larger base, I could think of 5G.
So anything that you see other drivers for next year's 1P growth, particularly for electronics, appliances, and FMCG. My sense is mostly whether we are targeting a similar growth as last year sort of above 20%, any color on that would be great?
Thank you, management.
Richard Liu
Still I ask, JD Retail, let me just give you two reasons for the positive development of our 1P business. First JDA's A) Retail & Company, based on the capacities of our very strong supply chain, so maybe in the past, now, or in the future, we will continue to improve our ability on the supply chain and working together with our partners to increase our efficiencies and lower the cost on the supply chain side to provide unique advantages to this market.
And secondly, we attach great importance to users experience, and we believe as a retailer ensuring users experience is a must. And for this year we have done a lot of work, overall across the company to ensure the enhancements of users experience and through our NPS monitoring we have seen users experience has very tangible progress and we are continuing our investments on improving the users experience not only on the new customers, and also our existing customers, we are working on every front to ensure they have unique experience shopping on our platform.
So in all, supply chain and our commitment to our users experience has ensured our 1P business' faster development. Thank you.
Operator
Your next question comes from the line of Eddie Leung from Bank of America. Please ask your question.
Eddie Leung
Hi good evening guys. Thank you for taking my questions.
Two quick questions about the lower-tier city competitions. Number one, about the user, just wondering are we seeing similar users using different apps, but buying different products or are we seeing a more unique user segment that coming to JD?
And then, secondly, how our cooperation with our [indiscernible] and now the offline retail partner network can help us in the competition in the long-tier cities? Thank you.
Richard Liu
Since our Jingxi platform, which is mainly the new channel, we target the lower-tier city customers has been introduced to online by the end of October, it has been less than two weeks that is online. So based on the current results, I would just share a few observations.
And for the Jingxi platform includes two access points, one is the first tier access point on WeChat and another is a standalone app we introduced a month ago. The characteristics of the users of Jingxi, the majority of them are coming from the lower-tier cities and their shopping behavior is more social, in-house and have a very high conversion rate, but in terms of their app value and stickiness is relatively low, compared to the main sites.
And in terms of the product, Jingxi product is quite different from our main sites. On JD's main sites the products is mainly brand products.
On Jingxi platform, we are developing products based on China's own manufacturer potential. Now we are working over hence industrial bouts and in the future is going to develop into 1,000 industrial [ph] to identify the high quality manufacturers and help them to bring products on the Jingxi platform it need of the customers from the local [indiscernible].
And also we realize the Jingxi users, their shopping preferences is rather complicated. They like to be more interactive and having more entertaining and gaming factors in their shopping behavior is not rather a very simple buying habit.
So by using these features we will work on our own product as well as WeChat market functions imitate their buying behaviors on our platform. We also want to share with the development and expansion of JD platform.
We will also identified those quality products and since we have very premium service ability to give them more presence on our main sites and we believe there is a group of lower-tier city customers they are also having the willingness and need to shop on the site in the long run. And I just want to respond a little bit more our relationship with Tencent.
Tencent is our shareholders and very important partners and some of you have realized at the end of October, WeChat has made certain rules to prevent some over a promotional activities to impact social interaction behaviors WeChat, and these rules I think for the long term is a good sign, because for us we always emphasize on the users experience, and this will help us to guarantee these aspects. Thank you.
Sidney Huang
So I'll just add one more point, Eddie's first question, whether users, lower-tier city users are buying from different apps for different categories or just stick to one app. Our survey, before we got more data from Jingxi, our survey in the lower-tier cities suggests that majority of the lower-tier city users do use multiple apps, basically use multiple platforms and that they will pick the platform based on the categories there are buying.
So that's the current observation. In the Tier 1, Tier 2 cities, you may see relatively more users stick to one app for majority of their purchases.
Now with our Jingxi application, basically we are creating a dual brand strategy, where our main app AD [ph] app will continue target the higher income consumers in the lower-tier cities, while the Jingxi app will target the relatively lower income consumers in those regions. And we can also then gain more insight on the lower-tier city consumers so that we can better target them for promoting our JD main app, our core category of product.
Eddie Leung
That's very helpful, thank you guys. See you soon.
Sidney Huang
You're welcome.
Operator
Your next question comes from the line of Alicia Yap from Citigroup. Please ask your question.
Alicia Yap
Hi, good evening management. Thanks for taking my questions and congratulations on the strong set of results.
My question is related to your C2M initiative on the appliance brands. What are some of your differentiator on attracting the brands to partner with JD?
And given the C2M model is also getting more competitive, if competitors going after the same brands will that have any negative impact to JD margins? And for - on related question is that for the same appliance brands is the C2M SKU has a higher or lower margin than the standardized SKU?
If you could share also roughly the percentage of GMV coming from C2M category this quarter and how much you expect that to grow into? Thank you.
Richard Liu
Yes, let me share with you some deals and achievements that we have made on C2M so far. And two to three years ago, we have started our C2M model and this is started in the categories of IT products and have achieved amazing success.
And all this IT categories, actually our platform over 70% of products are C2M to JD and these has not only impacted our platform, but actually have quite deep influence to the China's IT industries online and offline. And for this year we have also made our strategic proposals, so for the categories, especially on the two categories on home appliances and FMCG products.
And compared with other online platforms, I believe there are two advantages to produce C2M products on JD platform. First of all, we are a company driven by technologies.
We have a vast data in returns of our users comments and the searching data and viewing data, and combining all these data and working together with our partners will help us to generate the more to tailor-made products in a timely manner. And secondly, per se JD is a retail platform and especially our 1P business.
So this gives us an advantage to work closely together with our brands, our partners together on producing those C2M products and in between we have our capacities on the supply chain, these give us a better responsibility and capacity to produce the most - to produce the most effective products together with the partners and the partners will become more and more willing to work with us to reach success. And so, we have to realize that for different categories and industries, the purpose to produce C2M products will be different and some of them are doing C2M products to avoid price conflicts and by doing C2M and more tailor-made products will help them to reduce the complex or conflicts opportunities.
And for some other brand partners, they want to go deeper into China's market to the lower-tier cities and we know that based on our traditional supply chain this is not an easy way. And for JD, we would like to be the company on this process with our partners to together reach new users in the lower-tier cities together.
That's why, based on our powerful supply chains it will be very unique opportunity for the partner - for our brand partners to work with us to be more attractive, which our customers in the lower-tier cities. And in terms of the above margin, because different brands have different goals and different formats it's very difficult to give you a unified measurement, but generally speaking, the C2M price, it's very competitive, and there is always ways we can also make reasonable interest the benefit and profits out of that.
And the overall, you have already seen the success as we made on the IT categories, and it has occupied a strong market share, and we believe this will be copied in other categories as well. And in the future we'll continue our efforts on C2M and increase the proportion of products on our platform.
Thank you.
Sidney Huang
So just to put in lay man's terms, just to give you an example, on C2M margin, it's a triple win situation. So for example, because a lot of the brands will try to protect their offline retail network, so they will monitor the sales price, which limits our ability to give more value to consumers.
So for select - only very large brands can do that. And then at the same time, they would also resist giving us even lower procurement price just to prevent us from starting lower price to consumers.
But by C2M we can really breakthrough both. One is that because it's a customized product, so we wouldn't interrupt the brands offline retail channels, so we can price the products lower to give consumers more benefit.
Two is that because of that same reason and we tend to buy a very large volume for the C2M products, so we can get it even lower procurement price, so we can also maintain very healthy margins and while we can also support the brands to sell much larger volumes through our powerful channel. So it's a triple-win situation for the C2M.
Alicia Yap
Thank you.
Operator
Your next question comes from the line of Thomas Chong from Jefferies. Please ask your question.
Thomas Chong
Hi, good evening. Thanks management for taking my questions.
I have a question about JD Logistics. Can management comment about the strategy in 2020 and how we think about the top line and the margins as we go through the year, any color would be great?
Thank you.
Richard Liu
On the way of JD Logistics, next year our JD Logistics strategy will continue to focus on the efficiency increase and users experience enhancement. And we'll also step up our efforts on reaching the lower-tiers markets by expanding our logistics network.
And we will also work further improvement of our products and our capacity to support our open the external market. And we will also invest for the - we'll also step up efforts on our technology to deployment and the revenues from technology will continue to grow next year.
And for our external orders revenues from external orders has accounted for over 40% of the overall revenues of JD Logistics. For the next year, [indiscernible] in terms of the fulfillment of the profits, we will seek further improvement in stability.
As we have seen the results from this quarter, our fulfillment fee ratio has been jumped [ph] thanks to our increasing scale. And since we're continuing to going down into the lower-tier cities, we'll also have some short-term impact on our cost.
But in the long run, we believe the fulfillment fee, are still having the space to improve. Thank you.
Thomas Chong
Thank you.
Operator
Your next question comes from the line of John Choi from Daiwa. Please ask your question.
John Choi
Good evening and thank you for taking my question, and congratulations on a great set of results. I have a question on the user growth and obviously, as we go into, on lower tier cities, we started to see user growth acceleration.
Can management give some color on what kind of user growth momentum we'll further see throughout 2020 and onwards or how - much opportunities do you see if you compare to yourself and your peers? And secondly, just quickly, Richard, I think, mentioned about the technology.
Given that industrial internet is one of the key themes that allow the other internet companies talking about. Can you provide us like how this will change our business strategy for JD and what are the areas that we are looking into?
Thank you.
Richard Liu
On the question about users growth. And as I mentioned in the last quarter's call, we are targeting our efforts for the user growth on the growth new customers acquisition and old customers maintenance.
On the first half of the year, we have done a series of internal optimization. And under existing customers, we are setting up our efforts on their operations to increase their activity on our platform, and on their maintenance on our platform.
Their arch value and the satisfaction rates keeps going up. And also I want to emphasize that we focus on benevolent growth of our users and we want to acquire new [indiscernible] and sustainable way and we believe that eventually the quality of the users will be manifested through our careful, healthy fostering process.
And the maintenance of our users, what we pursued is the indicators are proving all as strong. It's not only a mere number improvement to say - to see how many users we have acquired in a short period of time.
Thank you.
Sidney Huang
So Lei Xu was travelling, so I don't know if he has heard the question. But I can quickly share that the technology services we have in mind is more about the retail structure that we have accumulated over the years.
Before we had retail as the service concept, so much of the technology know-how is already being transformed into solutions and we have seen demand from the industry for the solutions. So those could be clearly the starting point.
There will be more in the pipeline that we will discuss more when we have products available.
Operator
Your next question comes from the line of Tina Long from Credit Suisse. Please ask your question.
Tina Long
Hi, thank you Management for taking my questions and congratulations again on the results. I have a one quick follow up on Jingxi first.
So I want to know - I know that we recently launched it, but I want to know in 2020, have we earmarked like meaningful amount of sales and marketing expense to promote it? Will that have any impact on the overall sales and marketing ratio?
And my main question is actually on the GP margins. I understand that the third quarter GP margin was impacted because of reinvestment of the first half one off gain.
So I want to know after we reinvest all the gains for the remainder of the year, in 2020 are we going to see a uptrend of GP margin from a year-on-year perspective? Yes, thank you.
Richard Liu
JD retail, on the question about Jingxi, the Jingxi platform is one of our business models to reach for the market. And as I mentioned that we will seek different ways and different models to grow our markets.
So the Jingxi platform will not make a great impact of our marketing fee next year. As I just said, in our last question, we are seeking a comprehensive improvement indicator.
So we won't just pursue like why indicator growth for that.
Sidney Huang
And so on the second question, generally, obviously we haven't done our 2020 budget process. So, I can't give you a definitive answer.
But in general, all else being equal, gross margin should expand and for the same categories because of the economies of scale as we mentioned in the past. So I just wanted to also point out that the gross margin and expense line, sometimes you should look at particularly.
I'll give you one example and sometimes and more often than not, lower price if used effectively can be the best marketing spending. In other words, you can save marketing costs by promotion and so sometimes lower gross margin could mean more marketing expense as well.
Clearly, that's what happened in Q3. Our marketing expense ratio actually decreased by 0.6%, more than compensate the gross margin shortfall.
So you really have to look at this growth margin and expense lines in a holistic fashion.
Tina Long
Thank you.
Lei Xu
Just add a few things from Xu Lei. And I just want to add that since the end of last year, we have made our strategies to grow our business based on quality development and sustainability.
So you have seen from all the numbers of the past three quarters this year, these are all the demonstrations of our commitment on a quality growth. And in the future we will speak through this principle to achieve quality and sustainable growth.
Thank you.
Operator
Your next question comes from the line of Natalie Wu from CICC. Please ask your question.
Natalie Wu
Hi, thanks for taking my question and congratulations on the solid results. Just curious, can you share something with us about the incremental margin profile by your lower-tier cities orders?
And also about the take rate on Jingxi, I wonder is there a difference versus your [indiscernible] platform? Thank you.
Sidney Huang
Yes, let me quickly answer the first question. We haven't really internally analyzed in a very detailed way.
But we have the same price in lower tier city and higher tier cities, and cost structure is also similar. So, you know, in general the cost structure and the margin profile should be a lot similar.
But there are differences in, for example, category, consumption pattern that might be different, so, we - but we have not analyzed this in more detail, but they should be more or less similar.
Natalie Wu
But what about the fulfillment advantage?
Sidney Huang
Fulfillment expense in terms of order density clearly our tier one city will enjoy most benefit. But we have covered 99% of counties and districts, and we don't necessarily have the same fulfillment promise in the very remote areas.
We do cover 90%, roughly 90% of the orders within 24 hours and they tend to be in tier one, tier two cities and in major town areas in the most populated lower tier cities. So it's actually well designed to optimize the cost structure in the lower tier city as well.
Lei Xu
As sharing on the city logistics as on this question, it is true that different categories will have different performance in the lower tier cities. For example, for iPhone and Huawei smartphone, the growth mainly comes from the lower tier city.
And for the big sized refrigerators, lower tier city customers like them pretty much, very much because they have a larger house. And also for the luxury products, the lower tier city customers buy more and more on our platform because the traditional channels do not support their purchase needs.
But all these examples can now get the conclusion that the lower tier cities like the big ticket products, so we have to really analyze it with different categories. Thank you.
Natalie Wu
And what about the take rate on Jingxi?
Sidney Huang
Right now it's 0.6% covering the payment cost.
Richard Liu
And for the take rate in the Jingxi platform, in general, we will have a very low take rate to encourage merchants on our platform. Most of the products will have 0.6 and for some of the products will be above 1 point.
Natalie Wu
That is helpful, thank you.
Operator
Thank you. We are now approaching the end of the conference call.
I will now turn the call over to JD.com's, Jia Dong for closing remarks.
Jia Dong
Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions.
Thank you for your continued support and we look 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.