Metric analysis

JD.com’s growth in this key metric will delight investors

JD.com (JD 5.92%) has been working well lately. After increasing the number of active customers to half a billion in the first quarter, the e-commerce company exceeded that number several times over the following three quarters in 2021. It ended the year with a record 570 million. customers, consolidating its position as third. largest e-commerce platform in China (by active users) behind Ali Baba and Pinduo-duo.

But growing users to a new all-time high is only one aspect of JD’s success in 2021. Here are three important things investors need to know to get a better look at the tech company’s performance in 2021.

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Another year of solid growth at all levels

After posting record revenue in 2020, JD surpassed that of 2021 by posting a 28% growth in revenue to 952 billion yuan ($149.3 billion). Of this amount, product revenue increased by 25% and service revenue – which includes logistics, healthcare and advertising – increased by 45%. In short, the company recorded growth in all major segments.

Along with revenue growth, JD also reported strong free cash flow of 26 billion yuan ($4.1 billion) in 2021, though less than 35 billion yuan in 2020 – the decline free cash flow was due to higher capital investments. It’s unusual for a growing company to generate huge free cash flow, and JD is one of the few breeds.

It should also be mentioned that JD Plus members (similar to Amazon Prime subscribers) exceeded 25 million in the fourth quarter of 2021. These members spend 10 times more per year than non-Plus members, which will be an important source of future growth for JD. Thus, we can expect the company to focus on growing Plus members in the coming years.

JD Retail is progressing steadily

Once a cash-hungry company, JD Retail has become a powerhouse that not only experiences steady growth, but also strong profitability.

In 2021, this business generated 866 billion yuan ($135.9 billion), up 25% year-on-year. The operating margin also improved from 3% last year to 3.1% this year due to operating leverage. In addition, JD retail improved its inventory turnover days from 33.3 days last year to 30.3 days in 2021.

While JD Retail achieved a respectable financial performance in 2021, it also made some qualitative improvements to the strategic aspects of the business. For example, it increased the gross merchandise value of its omnichannel business by around 80% in 2021 thanks to the strong performance of its physical stores, including Freshstar and 7Fresh.

Jingxi, JD’s group shopping app targeting customers living outside of major cities in China, has also been performing commendably lately – with 40% QoQ revenue growth in Q4 2021. While it’s still early days, Jingxi could be the answer to price-sensitive consumers who value low prices over quality.

In short, JD has strategically positioned its e-commerce business to remain relevant to consumers today and in the future.

What’s next on JD’s radar?

Although he is known for his e-commerce business, JD is also good at investing and building non-e-commerce related businesses. Some of the most successful companies are JD Health, JD Logistics, and JD Technology, made up of its fintech, artificial intelligence, and cloud businesses. JD hopes that by investing in these adjacent industries, it can sustain its engine of growth for years to come.

So far, JD’s strategy has worked like a charm, as evidenced by its consistently high growth rate despite its already massive size. As a result, the tech conglomerate is always on the lookout for promising new opportunities. And two of them look very interesting.

The first company is an online pet hospital. In partnership with veterinarians and offline pet hospitals, JD Health aims to provide users with a seamless omnichannel experience. Through JD Health’s platform, pet owners can access 24/7 access to various consultation services, such as video consultation, from 5,000 professional veterinarians.

Another promising venture is its strategic partnership with Shopify (STORE 13.85%). Through this partnership, JD will help international merchants list their products on JD’s platform, enabling them to reach more Chinese consumers. It will also open its supplier network to these merchants. In addition to this, the e-commerce platform will help high-quality Chinese brands reach consumers around the world through Shopify.

Reaching more industries and customers, when done correctly, means more money. Analysts estimate that JD’s revenue will grow nearly 20% this year, opportunities on the radar could well lead it to top those metrics. With that, these new ventures should keep the business busy for quarters and possibly years to come.