Dada Nexus Limited (NASDAQ:DADA) Q2 2023 Earnings Call Transcript

But in terms of the supermarket categories, it’s like RMB 190. So maybe there will be some, for example, like preferential fee waiver to some of the customers. So for the second half, we expect the AOV of supermarket will be at least stable on a Q-on-Q level.

Operator: Thank you. Your next question comes from Alicia Yap from Citigroup. Please go ahead.

Alicia Yap: [Foreign Language] So my question is to follow up on the category demand shift. Obviously, the non-FMCG has been growing very well. Can management give a little bit more color in terms of the behavior shift, especially I think management mentioned about the big appliance seems to be one of the important driver. If you can share about the percentage of GMV coming out from the big appliance, home appliance specifically? And the second question is on the online advertising. Given the macro continue to remain weak, what are the brand willingness in terms of their ad budget spend on our platform? Thank you.

Jeff Huijian He: [Foreign Language] Thank you for your question. In terms of the category mix of consumer electronics and home appliances, we believe the contribution will further go up in the second half. The growth driver for the consumer electronics category will be brands who will introduce several new models in the second half, including from Xiaomi, Huawei and Apple. And in terms of major home appliances, the GMV for this category will remain on the fast growth trajectory, driven by further enriched product supply and the service of integrated delivery and installation. However, the mix of major home appliances and our total GMV is only in the single digits.

Beck Chen: Nothing to add from my side.

Jeff Huijian He: [Foreign Language] And to answer the second question about the online marketing services revenue. In the second quarter, our commission and online marketing services revenue combined grew by over 30% year-over-year, mainly driven by the growth in online marketing. You asked about brands potentially cutting their ad budgets and the macro environment. However, we are seeing that our revenue from brands are increasing since O2O has become the fastest-growing sales channel in China for more and more brands. So they are allocating more ad dollars on our platform. And another driver for our online marketing service revenue is the increase in our advertiser base. We are now collaborating with about 300 brands in O2O online marketing.

And in addition, the revenue growth driver for our online marketing services is ability to innovate our products and technology and marketing on top of sales growth. In Q3, we will launch key ad products, which will further drive our ad revenue growth. And in the testing period, we are seeing very encouraging results from the new products.

Operator: Thank you. Your next question comes from Lei Zhang from Bank of America Securities. Please go ahead.

Lei Zhang: [Foreign Language] Thanks management for taking my questions. And congrats on the profit breakeven. And follow this, can you share with us the second half of full year margin trend? Secondly, I want to have some updates on our cooperation with JD Group. Any new initiatives you can share? And if I may follow up on the GMV contribution from JD across different channels. Thank you.

Beck Chen: Okay. Thank you for the question, Lei. So for the first question, so the second half of this year, we will still balance the growth rate of our — and top line, especially the growth rate of JDDJ despite of the current macro outlook in China. So we will balance the growth rate and the improvement of the profitability of the bottom line. So — and this is just the first quarter for us to break even. So of course, we don’t expect to grow the bottom line profitability and margin very quickly in a very short term, especially under the current macroeconomic outlook. So we still will grow stably and grow the bottom line in a healthy way, and we will also balance the top line growth because if you don’t have any top line growth, your profitability in the long term will be also negatively impacted. And for the second question, so I will leave to Jeff for the cooperation with JD.

Jeff Huijian He: [Foreign Language] And so we just touched a little bit upon our collaboration with JD.com just now that I’ll summarize a few key initiatives now. First, we unified our brand identity under Xiaoshida, and we’ve seen an improvement in user conversion. For instance, the conversion rate in Xiaoshida tab is now 20% higher after we changed the name to Xiaoshida from City names. Secondly, we improved the price competitiveness of our Xiaoshida products by leveraging our price-based star-rating system. As of the end of Q2, the number of high-star products or the products with high competitiveness and pricing, grew eightfold sequentially. And the average exposure per item increased by more than 10%. And in terms of Dada Now, we’ve strengthened our partnership with different business groups across the JD Group to provide on-demand delivery services in multiple shopping scenarios in the JD ecosystem.

We recently began working with the front-end warehouse business unit and we’re providing the on-demand delivery service for all of its orders. And we’ve seen an increase in JD’s contribution in Dada Now’s order volume. A stable source of orders is very beneficial to our business stability and profit as well as long-term development.

Lei Zhang: Thank you for taking the question.