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JD's B2B Sales Strength To Keep Revenue Growing

Dec. 08, 2018 4:40 AM ETJD.com, Inc. (JD)BABA, PDD, CHL25 Comments
Li Li profile picture
Li Li


  • Decline in active customer count masked strong growth in JD's B2B sales, which doesn't contribute to active customer count.
  • JD's offline franchise model is a cost-effective way to grow sales fast with low fixed asset investment risks.
  • JD is undervalued considering its stakes in JD Logistics and JD Finance, its net assets, cash flow, and its warehouse and land holdings.

JD.com (NASDAQ: JD) released Q3 earnings report on November 19. It shows active customer count for the quarter declined by 8.6 million, while total revenue is up 25.1% yoy. Excluding the 49.4% increase in net service revenue, net product revenue grew by 22.8%. The decline in active customer count most likely is due to the weak demand for big ticket items amid the macro economy slowdown, and the front-loading of sales to the previous quarter leading into the company's big annual June 18 promotion.

Yet, how did they manage to sell more products to fewer customers? One key contributor is the growth of their business customers, including JD convenience stores, JD electronics and appliance stores, and other third-party stores that may or may not share JD branding.

One evidence is that JD xintonglu ("new road" in Chinese), their arm for handling sales and logistics to convenience stores, JD branded or not, reported sales increased by 10 folds during the Nov. 1-Nov. 11 Singles' Day sales event (report only available in Chinese), and sales by JD electronics and 3C stores increased by 422% for the same period year over year (report only available in Chinese).

Another eye-catching development recently is that on Nov. 27, China Mobile's (NYSE:CHL) subsidiary in the Jiangsu Province announced (report only available in Chinese) that it will use JD's systems to order, manage, and deliver merchandise, mostly cellphones and accessories, sold through its more than 20,000 stores in the province. China Mobile is China's largest cellular carrier, and JD has over half of the market share in online cellphone sales and the best logistic networks in the country. China Mobile will be able to lower cost, and JD will be able to further expand its market share through such deals.

Like these China Mobile shops that are

This article was written by

Li Li profile picture
RIA, I have 15 years investment experiences in the stock market. Qualitative and quantitative analysis are my hobby and forte. I advocate value investment and emphasize risk-adjusted reward approach. I believe Fed model or more broadly opportunity cost of investment forms the framework of equity assessment. I believe current PE is only a valid tool for stock selection if future earnings in a cycle will not stray too far downwards from current earnings.

Analyst’s Disclosure: I am/we are long JD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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