To The Moon

$JD.com(JD)$ post Q3 earnings before the market on November 18th. Should it be a surprise?

• The total revenue was 243.54 billion yuan, a year-on-year increase of 11.35%, which was the same as market expectations;
• Active accounts were 588 million, a year-on-year increase of 6.54%, which was the same as market expectations
• In terms of sub-projects, JD.COM's retail revenue was 211.92 billion yuan, a year-on-year increase of 7%, less than the market expectation of 220 billion yuan, and its operating profit was 10.93 billion yuan, a year-on-year increase of 37.6%, higher than the market expectation of 9.8 billion yuan;
• Jingdong Logistics' revenue was 35.77 billion yuan, up 39% year-on-year, higher than the market expectation of 33.10 billion yuan, operating profit of 253 million yuan and loss of 30 million yuan higher than the market expectation.
• The revenue of new business was 5 billion yuan, down 13% year-on-year, which was far from the market expectation of 7.08 billion yuan, but it also turned losses into profits.
• Under another classification method, the sales of JD.COM products were 197 billion yuan, a year-on-year increase of 5.9%, which was less than the market expectation of 2013 yuan
• The growth rate of net services was 46.5 billion yuan, up 42% year-on-year, higher than the market expectation of 41.2 billion yuan.

Comparing with $Alibaba(BABA)$ , JD's sales are much self-determined.

Some highlights

First, the synergy of services and products is increasing, creating the second curve.

Retail business miss the consensus, while Services beat. JD Logistics performs far stronger than market expectation in terms of revenue and profit. Products sold were divided. Service revenue increased by 42%.

JD.COM's supply chain efficiency and operation quality tops the peers, including logistics and Dada, who played a pivotal role in the recovery.With its own e-commerce platform, the synergy is quiteobvious.

Alibaba's Cainiao Logistics also performs growing good this quarter.

Second, electronic products are strong, while general merchndise sank

Apple released new product in Q3, gave JD more flexible in its electronic products. In terms of categories, the growth of electronic products Q3 is 7.6%, which is also higher than market expectations.

But general merchandise slowed down, with a year-on-year growth rate of only 3.4%, the lowest in history. Macro environment could matter, but the threat are more from the peers, etc, $Pinduoduo Inc.(PDD)$ $KUAISHOU-W(01024)$

Live streaming often use JD platform's price to compare, which naturally cuts the market share of JD.COM.

At present, the "new retail" launched by JD.COM in various channels is even publicized at a higher cost, which must have seen the shortcomings of this area.

1. Building your own retail platform is more conducive to the improvement of profit margin;
2. It is more important for users to remember the platform than the brand;

Third, reducing costs will become the most practical way to survive.

In this quarter, JD.COM's retail revenue was 3.7 worse than the market expectation, but its operation cases were 12% higher than the market. Other logistics, new business and Dada all reflected that the profit growth was higher than the revenue.

The growth rate of operating costs was 10.5%, slightly lower than the growth rate of revenue of 11.4%, and the gross profit margin was higher than the market expectation.

Other expenditure items, except R&D expenditure, are increasing (only2%), the rest of the market, administrative costs are shrinking, thus increasing operating profit.

This quarter, all big companies have a similar awareness that reducing costs and increasing items will help them spend the winter better.