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Hello, and thank you for standing by for JD.com's Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. 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, Jia Dong.
Thank you, and welcome to our fourth quarter and full year 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, our CFO; and Jon Liao, our Chief Strategy Officer.
For today's agenda, JD.com Group CEO, Richard Liu, will discuss highlights for the fourth quarter and full year 2019, followed by Sidney Huang, our CFO; and 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 CEO, Richard Liu.
Hello, everyone. This is Richard. Since day 1 of the coronavirus outbreak, we have done our utmost to help people in Wuhan and throughout China. Contributing as much aid as possible, we are in a unique position with our [ super large supply chain ], logistics and technology. And we feel a strong sense of responsibility to provide robust support. Let me make a few moments to introduce what we call a -- what we have been doing and its significance. Just before the Chinese New Year, we put together a team specifically tasked with leading our efforts in assessing the epidemic. This team had [indiscernible], the most protective equipment and medical supplies, established a dedicated express route, which, in part, relieve supply to assist Hubei province, provide support to people in heavily affected areas and other supportive policies to merchants on our platform. JD took immediate action in donating critically needed medical supplies to hospitals and charity organization in Wuhan, including a large amount of face masks and protective medical materials that were in urgent demand and short in supply. In addition to ensuring timely supply and the delivery of daily necessaries for [ a month's ] need. JD Logistics opened a dedicated channel for relief materials across the country to assist Wuhan. As of now, we have transported over 15 million items of medical emergency materials, to respond to the urgent needs for prevention and continuous request by Hubei government. JD Logistics applied our advanced supply chain technology and experience and build the supply chain management platform to help manage emergency supplies and ensured their delivery to the frontline in Hubei. And at the same time, it is next-generation technologies, such as AI, big data and IoT, have been quickly deployed into our sudden emergency and epidemic prevention solutions to support the work of Hubei local government and their policies. Ensuring the health and safety of our employees is always our top priority. All of JD's frontline employees were provided with masks, [indiscernible] and other protective equipment immediately after the outbreak. Beyond employee care, JD Health are operating with over 30,000 doctors, launched free 24/7 online medical consultation and psychological consulting services to people across China. Regarding our merchants, we have offered a series of all-new policies, including subsidies, fee reductions, waivers and other benefits to help them at the time.
When SARS occurred 17 years ago, JD was a very small company, and we personally experienced then just how devastating epidemic situations can be to both businesses and people's lives. That's why today, we will do everything we can within our power to serve our customers and as well as society. We sincerely hope the epidemic will be over soon but regardless of circumstances, we will always seek to improve the service experience for our customers and create value for our customers. This is a brief summary of how we are doing our part to provide aid during the epidemic.
There's one more thing that I'd like to draw our attention to. Today, we have announced that our CFO, Sidney Huang, will retire this coming September. Though this will come as news to you, it's something we've been planning carefully and are in a good position to action this year.
Just a few words about Sidney. His professional expertise, integrity, humility and fairness have all earned him respect from my side and from others throughout the company since he joined us in 2013. Along the way, he has overcome countless challenges and [ risk incidents ], many of JD's most important milestones, including our successful IPO in the U.S., another remarkable expansion of our business.
On behalf of JD, I would like to sincerely thank Sidney for his hard work for the past 6.5 years, and I wish him and his family all the best.
Sandy Xu, who some of you may have met already, is a positive to be Sidney's successor. Sandy is a seasoned business leader with impressive credential, combined with her broad international perspective, I am confident that she will be a great CFO for JD going forward. Thank you.
Now, I'd like to turn it over to Sidney.
Thank you very much, Richard, for the kind words. Hello, everyone. Thank you for joining us today. I'll go through the quarterly updates and financial outlook before giving a few words on the succession plan.
We are pleased to deliver another strong set of results for the fourth quarter of 2019. Our net revenue growth exceeded the high end of our guidance, reaching 26.6%, driven by a highly successful Singles Day promotion season. And our previously announced reinvestment strategies focusing on everyday low prices, enhance the user engagement and logistic services in lower-tier regions.
The strong top line growth was accompanied by robust user growth and strong traffic momentum. In particular, we saw 28 million net additional customers since September 2019, reaching a total of 362 million active customers in the past 12 months. This is our biggest quarterly net addition for the past 3 years.
In the meantime, our mobile DAU grew 38% in Q4, the fastest in 8 quarters. We continued to make progress in lower-tier regions across China through innovative marketing activities, more diverse product offerings and improved logistics services.
Similar to Q3, over 70% of new customers in Q4 came from lower-tier cities. Category-wise, general merchandise achieved accelerated growth of 37%, the highest growth rate for the past 4 quarters, led by food and beverage, fresh produce, cosmetics, health care and home products.
Net service revenues grew by 44% year-over-year and contributed 12.3% to our overall revenues, driven by strong momentum from third-party logistics and advertising revenues. For the full year of 2019, our net revenues increased by 24.9% to RMB 577 billion or USD 83 billion and continued to outgrow the industry across most major categories, thanks to the continuously improving and differentiated customer experience.
In particular, gross margin -- gross merchandise -- general merchandise revenues grew by 34% during the year as we successfully cultivated customer shopping behavior in traditionally off-line focused categories, such as FMCG. Net service revenues grew over 44% and contributed 11.5% to our total revenues in 2019, up from 9.9% in 2018, as we leveraged our supply chain and technology capabilities to better serve our business partners.
Fulfilled gross margin, defined as revenue minus costs and fulfillment expenses and divided by revenue, remained relatively stable at 7.6% in the fourth quarter compared to the same quarter last year, despite heavy reinvestments in everyday low prices and logistic service level in lower-tier regions. On a full year basis, fulfilled gross margin expanded 88 basis points in 2019, which we believe was a better measure of the improving fundamentals across varying categories, driven by economies of scale and technology-based efficiency.
Specifically, the fulfillment expense ratio in the fourth quarter was 6.4%, down from 6.6% in the same quarter of 2018. For the full year of 2019, the fulfillment expense ratio improved 52 basis points to 6.4%, the best level in 6 years since our IPO. Even though we have been providing the most competitive compensation benefits to our logistic staff, who have now become the hallmark of JD.com's premium service to consumers nationwide.
Our marketing expense ratio was 4.8% in the fourth quarter of 2019, comparable to the same quarter last year. And the full year marketing expense ratio in 2019 was 3.9%, down from 4.2% in 2018, reflecting our more refined marketing strategy with improving ROI.
Our R&D and G&A expenses in the fourth quarter was relatively stable compared to the prior year quarter. On a full year basis, R&D and G&A expense ratios improved 9 basis points and 17 basis points, respectively, compared to 2018. As a result, our non-GAAP operating income increased 125% to RMB 704 million in Q4. On a full year basis, our non-GAAP operating income jumped 364% to RMB 8.9 billion, and our GAAP operating income reached RMB 9 billion, slightly higher than the non-GAAP measure as we conservatively excluded the RMB 3.9 billion gain on sale of development properties during 2019. This is nevertheless a core income for our logistics asset management business, so it is part of our new business operating income.
From the group level, we continue to exclude it from our non-GAAP operating income and non-GAAP net income due to its relatively nonrecurring nature at this time. On a segment basis, non-GAAP operating income of JD Retail Group increased by 95% to RMB 13.8 billion in 2019, with an operating margin of 2.5%, up 92 basis points from the 2018 level. The non-GAAP expense ratio dropped to 12.3%, the lowest level in 4 years.
Moving to the bottom line. Our full year non-GAAP net income attributable to ordinary shareholders increased by 211% to RMB 10.7 billion in 2019, mainly supported by our expanding fulfilled gross margin and improving operating efficiency, both driven by economies of scale. On a GAAP basis, net income attributable to ordinary shareholders reached a record RMB 12.2 billion, which included RMB 3.5 billion of fair value change in long-term investments.
Our free cash flow for the trailing 12 months also set a new record of RMB 19.5 billion, driven by over RMB 20 billion of operating cash flow and over RMB 2 billion of net cash flow from our logistics property management business. Our trailing 12-month free cash flow was 86% higher than our non-GAAP net income in the same period.
In summary, JD.com finished a remarkable year with robust revenue growth, solid profitability and free cash flow and most importantly, accelerating user growth. This is supported by our customer-centric focus, evidenced by the continuously improving net promotion scores, our #1 internal KPI as well as our persistent investments in tech-based infrastructure and in our people. This long-term approach to running our business has also proven its unique advantage as we provide aid and support in the battle against the coronavirus during recent weeks.
Thanks to our use of investments in our self-operated proprietary supply chain and logistics network, JD.com was able to resume full operations very quickly after the Chinese New Year and has been in a unique position to provide broad product selection and uninterrupted timely service to our customers in most parts of the country as people turned to e-commerce for daily groceries and other necessities. We are very privileged to have been a unique force in fighting this challenging battle. As a result, while large ticket durable goods and discretionary products have been negatively affected by the outbreak, the consumer staple categories, such as groceries, fresh produce, health care and household products, are in greater online demand during the past 5 weeks. And JD.com was among the few companies and in many cases, the only major platform that could fulfill the orders. Although these are not the most profitable categories and we also implemented strict policies to prohibit any price increases during this time, we're happy to be in a position to support people's livelihood in this difficult time and become a lifeline for millions of our existing and new customers.
Now on the financial outlook. It is obviously difficult to assess, given the uncertain nature of the coronavirus situation. However, based on the past 2 months' preliminary results, we do expect our net revenues to continue growing in double digits in the first quarter, thanks to the resilience of our unique business model. In fact, the level of user activities on our platform has accelerated in recent weeks. Daily active customers and the number of fulfilled orders have both been growing at a faster pace than the level in the prior year. So we hope after the COVID-19 is over, we can quickly resume the robust growth momentum as well as the improving margin trend. With the greater consumer mindshare we have earned during this turbulent time with our existing and new engaged customers, we are more confident about our market position and our mid- to long-term growth prospects.
Lastly, regarding the CFO succession plan. I would like to point out this is a preplanned and a well-prepared transition. Many of you have met with Sandy in the 3 international NDRs we conducted together last year. She's a highly seasoned financial executive and has also earned tremendous respect internally through her outstanding contribution to JD Retail's financial and operational improvement in 2019 as JD Retail's CFO. So I feel fortunate to have been able to pass my role into good hands before I reach 55, the ideal retirement age I had planned for myself.
It's been truly an honor to have served JD.com over the past 6.5 years and work with so many talented colleagues who have grown the company by over 700% in 6 years. And I want to thank Richard for giving me this invaluable opportunity and for the friendship and trust we have built along the way.
This concludes my prepared remarks, and we can now move to the Q&A session.
[Operator Instructions] Your first question comes from the line of Eddie Leung of Bank of America.
Best wishes to everyone, and thank you, Cindy (sic) [ Sidney ], for all the help in the past. Now just a follow-up question on what you guys mentioned in the past about your strategy in fourth quarter and perhaps near term before the outbreak. I remember you guys mentioned that in the near term, you would plan to reinvest your onetime gains in the first half of 2019 in sales and marketing in the fourth quarter. So just wondering how much in the fourth quarter was specific because of these initiatives? And how much was on an ongoing basis?
And then, secondly, I also remember one strategy you mentioned would be to drive the value-added services, such as advertising revenues and logistic revenues, and would not be aggressively pushing for commission rates or the supplier volume rebates and hence, potentially the so-called commission rates or first-party gross margins might not be growing very fast. So just wondering, could you give us an update on the 3P commission rates as well as the gross margin trends of your 1P business, given your strategy mentioned before?
Okay. Thank you, Eddie. Let me try to answer your questions. The -- this is Sidney. Yes, we have mentioned in the prior earnings call that we had a onetime gain in the first half. We also have mentioned in our last earnings call that we have spent part of it in Q3. And basically, we have spent the remaining balance in the fourth quarter. So that's why you see that our fulfillment gross margin didn't really expand much as we reinvested. But our operating margin for Q4 still improved from the same quarter last year, because Q4 was seasonal quarter that we'll be basically giving priority to promotions and giving back to customers. So it's not a quarter to pursue profitability, to begin with.
On your second question -- I don't know if I get your question right but yes, we -- if you're asking about our strategy between commission and advertising, we are giving certain merchants on volume-based discounts. And we are not at a stage to provide or pursue commissions but rather, encouraging merchants to be more active by spending more on advertising, whereby driving traffic and growth. So that strategy has not changed.
I see. Could you also talk about the gross margin trend of your 1P business? Similarly, I think you guys mentioned that probably, it would not be appropriate to push for higher supplier rebates in the near term as you want them to spend more marketing dollars.
Sure. Yes. So if it's on gross margin, we are planning this on a full year basis. So if you look at our full year gross margin, it was definitely -- showed improving trend. But as I mentioned in prior calls as well as on this call, we would like investors to pay more attention to fulfilled gross margins, which is gross margin minus fulfillment expense ratio. This is because different categories have different gross margin and fulfillment cost characteristics. Some categories may have higher gross margin but also higher fulfillment expense ratio. So if you want to understand and also analyze the different products, categories or analyze the company's overall margin -- gross margin trend, it would be better to look at a fulfilled gross margin, which, as I mentioned earlier, improved 88 basis points for full year 2019.
Your next question comes from the line of Ronald Keung of Goldman Sachs.
Congratulations on the strong results for Richard, Xu lei, Wang Zhenhui, Sidney and Liao Jon. So my question would be on the virus impact and kind of the longer-term implications of that. So we've heard some of the near-term strengths in user growth. And just thinking on a longer-term perspective what's our strategy in retaining these users, particularly maybe for some first-time users that came to your platform over the past month buying JD supermarket and buying groceries, what's our strategy in retaining those customers for long-term growth? And would management aim to provide maybe a full year profit guidance? I'm thinking would it -- is it managed plant and maybe guide this only after a settling of the virus outbreak? Or any color on the full year profit guidance would also be appreciated.
Sure. Yes. So let me take a first shot and then see if other management will have anything to add. So -- yes. So on the long-term outlook for how we can leverage this increasing user base, our strategy has always been the same, is to provide differentiated customer experience through our everyday low prices, through our best-in-class service level, through expanding product categories and better interactive user engagement. So that strategy has never changed. And we do hope through this latest event, through this coronavirus outlook, some of our advantages becoming more recognized by our consumer base. So this is -- you will never exactly know what will happen. But on the other hand, we do become definitely more confident in our ability to attract and retain our customers. And then on the margin, as I mentioned earlier, we do hope once the coronavirus situation stabilize, we will resume our increasing margin trend. So yes, we will be giving the margin -- full year margin outlook once we have better clarities on the corona situation. And that the trend will be consistent for the periods post the coronavirus.
[Interpreted] Xu Lei from J.D. Retail. Let me share with you some observations we have seen during this coronavirus period on our performance of our businesses and our future prospects. And indeed, this coronavirus has -- the market has taken a hard hit. There's a lot of challenges. For example, the consumers' demand has been oppressed and limited for the short period of time. However, we also see some good signs such as we see more -- old customers are returning to our platform, and some inactive users on our platform are becoming more and more active. We are wakening them up.
And from the current traffic structure, we can see that there are more and more newcomers. New users are being more active and doing repeated purchases on our platform. And in the future, by leveraging our refined operating with these existing and new users, to improve their users experience and increase their stickiness with our platform.
And also because of the epidemic situation, we have fully demonstrated the competitiveness advantage of our business model. More and more merchants have realized that the significance to strengthen collaboration with us. We have been working more deepen in terms of stocking their products in other warehouses and working to develop the omnichannel collaboration. And all these efforts has been accelerated after the epidemic.
And in terms of the categories, we see a very faster growth in the categories of consumer goods, fresh produce and health-related products. And through this epidemic fight, we believe that more and more people, including the customers, industries, even the government, will pay more attention on the significance the Internet and e-commerce can play into stabilizing this market, especially for the fresh produce and health-related categories. And through our services to provide high-quality and low-cost services, we will provide more value to the society.
Thank you. Next question.
Your next question comes from the line of Jerry Liu of UBS.
And Sidney, wish you all the best on your upcoming retirement. My question is still on margins. First is in the first quarter, just given the virus outbreak and some of the relief programs we have, where should we expect margins? I know this is a bit of a one-off situation. And then if we look longer-term at more normalized margins, can we talk about what will drive JD Retail fulfilled margins higher and also an outlook on logistics -- logistics margins?
Okay. So maybe I'll talk about the short-term and long-term margins on retail and then maybe Zhenhui will talk a bit on the logistics side.
So yes. Q1 is very difficult to assess, given -- during the epidemic, obviously, we were -- we spared no cost, no effort to support the local people in Hubei, for example, donated a lot of materials, provided logistics services for free. So various initiatives clearly will impact the bottom line. But on the other hand, based on the current situation, actually, we do believe our margin situation, while not as good as, obviously, in the prior year quarter, but we should perform relatively, on a relative basis, compared to other companies in general that we should do relatively better. That's all I can say at this point. So I don't think you need to worry about dramatic losses. You don't need to worry about too big volatility. But there's clearly some negative impact. And -- but we are holding up relatively, just relatively well.
On the long term, we continue to drive growth, drive -- at the same time, drive our scale. And as we communicated in the past that with the scale and customer base, that we can have more creative ways to enhance margin, most likely from our better relationship with the suppliers, with customized products, as Xu Lei mentioned in the past quarters. We can do more of those direct from factory to consumers actually in our mature categories. And we have done a lot of that, made a lot of progress in 2019. And we expect to make more progress this year. So that will be one. And then two will be on the logistics side with the scale economies, we can also have better and better unit economics on the fulfillment side so we can drive fulfilled gross margin.
[Interpreted] Zhenhui of JD Logistics. As we just already mentioned, the epidemic situation is still ongoing. As all of you have already seen that JD Logistics has done a tremendous job in fighting against this epidemic. No matter is from our CSR responsibility or our fulfillment commitment, we are doing our best.
You've seen that tens of thousands of our JD Logistics staff has been working relentlessly and stay in their position to fulfill all the orders to our consumers, including those preventative medical supplies and emergency supplies to the epicenter of Hubei Province. And at the same time, the health and safety of our employees is always our top priority. Since the outbreak of the epidemic, we have immediately supplied all kinds of preventative equipment to our frontline employees. I do believe as the epidemic situation is getting better, more and more customers will be -- our brand and reputation will be widely recognized by more and more customers. And this will ensure our longer-term sustainable value and growth. We have done compares with 2018, for 2019, we have been -- made a lot of improvement in our margin. And for this coming year, we're going to do the same to improve our margins.
Your next question comes from the line of Thomas Chong of Jefferies.
I have a question about JD Logistics. Can management comment about our future strategies in expanding our competitive strengths compared to peers? And my second question is relating to social e-commerce, Jingxi. Can management talk about our target for this year? And how we should think about the MAU and the annual customer growth for this year?
[Interpreted] This is Wang Zhenhui. And in terms of the JD Logistics market positioning, we have positioned ourselves as a comprehensive logistics solution provider with the supply chain at our core. And this has been based on our nationwide 6 major logistic networks. And all this make us very different from other logistic players on the market.
And we have 3 purposes and identifiers for our business models. And for the first, we strive to provide the premier and the best users experience for our customers. And secondly, by leveraging our integrated logistics solution with our warehousing and our delivery and together with our transaction flows, we will provide -- we will short the link between the product to reach our customers and improve the link -- the distance of the link as much as possible. By Q4 in 2019, we are managing over 16.9 million square meters of warehouse across the country. And thirdly, which take us apart from other competitors is that our logistic and business growth is driven by our technology based on supply chain technologies.
And based on the 3 points I just mentioned, that enables us to provide whole year, very sustainable and good quality services to our customers and our clients, even in -- during this epidemic turbulent time. And in future, we'll continue our competitiveness in all these areas, especially to enhance user's experience and putting more value to our clients.
[Interpreted ] This is Xu Lei. I'll answer the question about the social e-commerce.
And on the rating platform, we have the first-tier and the second-tier access. Now for the second-tier access, it's reflected as the Jingdong shopping tab, which is extension -- actually it's extension of our main site model.
And for the first-tier entry point, which we have already presented in the last quarter and we branded our Jingxi platform, which is the channel we targeted mainly to the lower-tier markets. And through a few years of development on Jingxi platform before the epidemic outbreak, the sales -- the orders on Jingxi platform has exceeded 1 million every day, daily orders have exceeded 1 million orders. And we have seen that most of the new customers coming to Jingxi platform are from lower-tier cities. Their shopping behavior is more like social interactions, being more impulsive in shopping decisions and have a very high conversion rate.
And however, compared with the other main site users, Jingxi platform's new users in terms of the stickiness and their repeated shopping tendencies are still relatively low. And in the future, in addition to the new customer acquisition efforts we will do on Jingxi platform will also pay more attention on the whole life circle -- life cycle of user's experience on this platform.
And besides the user's differentiation, there's some other differences compared with our main site because all this shopping behaviors is based on social e-commerce engagement through those more interactive marketing tools. This will help us to reach further to those new customers in the third to fifth-tier cities.
And the second difference is the Jingxi platform will be helpful for us to extend our products in the long tail and helped us find new supply chains. And so far, we have collaborated closely with the manufacturers from over 100 industrial belts. And in the future, we will develop this number to 1,000 industrial belts. And different from our existing supply chains for the main site region but most of the suppliers are from the selling locations. The Jingxi platform supply chain will be mainly supplied by those industrial belts, which is the manufacturer and the producers. So because of this difference, in the future, we will work more closely with JD Logistics to fulfill the whole process of supply chain.
And also, we have observed a very explosive growth of the mini apps on the Weixin platform. So in addition to developing our own mini apps on our Weixin platform, we will also leverage the advantages of our technologies and our products to be more interactive with other mini apps on WeChat.
Your next question comes from the line of Tina Long of Credit Suisse.
And best wishes to Sidney. I have 2 quick questions. The first one is on the first quarter guidance. So we guided for at least 10% revenue growth. Can we get a little bit more details of splitting like categories as well as 1P versus 3P? Because it seems that because of the logistic constraints, probably some merchants are having difficulty selling products. So are we also giving them some support and also that impacts the revenue growth from the 3P part?
And second question is on the logistic as well. So can you probably give us update on the order -- the percentage of order from external orders as of 2019 as well as probably our target for 2020? And in terms of the logistic segment margin, because in third quarter 2019, we have already achieved OP margin level breakeven for that particular quarter. So probably, can you give us some update on the full year margin level or the -- yes, margin level for logistics part and as well as 2020's target?
Okay. Thank you, Tina. So for Q1 guidance, at this point, it's -- we sort of mentioned some of the FMCG categories, fresh produce, home products, health care products, these are the categories growing much, much faster than usual. And we are actually very strong in all of these categories from an online platform perspective.
So we have seen a lot of growth, a lot of new users coming into these categories. So this is what we have seen so far. Now the coronavirus situation in March is still unknown. So we have tried to take into consideration the potential downside. But so far, we've been doing relatively well, again, just on a relative basis, and we guided double-digit revenue growth. So that's mainly on our 1P business.
3P, depending on the type of merchants, obviously, if the merchants relying on third party logistics, then it would be very difficult at this point for them to fulfill. And if they have used JD Logistics, then their operation is much less impacted. So that's basically on the Q1 guidance.
On the logistics, we have not disclosed the order numbers in 2019 and also outlook for 2020 because the number of orders have become very -- depending on the type of products. And also now, we have 2 platforms of both our main app and also Jingxi. So the characteristics of the order volume are very different. So when you look at the number of orders, it actually doesn't help providing useful information unless you actually dig lot deeper into the different types of the orders.
So I think, especially with social commerce, what I can tell you is for -- on Jingxi, for example, the number of orders are very large but average ticket size is very low. So you really have to -- I think in the end, you look at the revenue, look at the GMV contribution.
And on logistics margin, we also look at on a full year basis. So in Q4, we also made some extra investments in customer experience, especially in the lower-tier markets. And we also enhanced the service level across the country. So Q4 was on a relative basis. We did make some extra investments. But on a full year basis, as Zhenhui mentioned earlier, we saw very meaningful improvement on logistics margin. And he also expects the margin will further improve in 2020.
Your next question comes from the line of Alicia Yap of Citigroup.
Congratulations on the solid results. And Sidney, congrats on your planned retirements and also congrats, Sandy, for taking on the new role. My question is some follow-up questions on the first quarter top line guidance. So Sidney, just wanted to make sure your 10% at least, your 10% growth is only based on 2 months of the indication that you could see until yesterday and you have not factored in the growth potential in March. And then just on roughly, even advertising -- will advertising be negatively impacted in the first quarter? And should we assume -- is it fair to assume electronics will be the only category -- so the electronics and appliance will be the only category that experienced a year-over-year decline? The rest of other categories will actually still have the year-over-year growth and maybe some categories will exceed the growth rate that we experienced in the fourth quarter.
And just lastly, similar on the top line is that -- I understand you won't give guidance beyond 1Q, but given the demands and the softness in the big-ticket item likely to be temporary, do you expect a strong pickup in the second quarter, especially with your June 18 promotional campaign, especially for those big-ticket items that is delay purchasing?
[Interpreted] Xu Lei from JD Retail on the advertising question. And overall, we have seen during this epidemic period of time, thanks to our 1P business, the advertising business actually see quite strong growth. And secondly, since last year, we have been working more closely with some of our merchants and -- to support their warehousing and stocking collaboration with us. And this has already been done in early 2020. And this has also enabled us to -- enable the 1P business and products to have an amazing performance during this epidemic time.
And for most of our suppliers and merchants, most of them are midsize or large companies. So relatively speaking, there are immunities abilities to -- in these epidemics, especially their supply chains, it's more resilient than those SMEs. And on the advertising industry, we have seen, overall, across the country, this industry has taken a hard hit, and this loss has already been reflected. However, thanks to JD's business models and our advertising business is very closely related to our sales, and we also leverage our advantages of our self-operated model with our merchants. We have seen a strong advertising demand from our 1P merchants during this period of time.
And in the -- and specifically, the category of home appliances, as many of you have seen that their performance has been quite negative in this special time. However, there are 2 good signs we can see in this category. First of all, we believe the consumer's demand for home appliances are still there. This has only improved by some of our surveys and interviews with our customers. And we believe as the epidemic situation gets under control, the demand from consumers will come around.
And indeed, there are like bigger challenges for those home appliances that need to have the home delivery services and installations. But according to our statistics, as the epidemic situation is getting better, for some regions, the need for these home appliances has been coming back. And this will be on a better track as the situations get under control.
And in 2019, we do see the growth performance of the home appliances across the industry is not satisfying. However, the growth in this category on JD platform is much higher than the whole industry. Though this category has been suffering from the more challenges and difficulties during this epidemic time, we will make some adjustment properly. However, we are confident that there will not be a negative growth for the year.
Let me also add a couple of data points. So because Alicia, you actually were referring to electronics categories and the concern whether it would be a negative growth quarter for -- in Q1. While Xu Lei mentioned the large appliances were negatively affected, but there are actually some of the small appliances, such as those used in kitchens were actually doing quite well as people now all stay home and cook their own food.
And also, another bright spot is the computers and laptops because now, students are all staying home and studying remotely. And we actually saw pretty healthy demand for the computers and the laptops. So I do not see the electronics as a whole category which would be negative in Q1. In fact, we should see -- we should still see positive growth even for electronics during the first quarter.
All right. 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.
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.
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]