Dada Nexus Ltd (DADA) 2022 Q1 法說會逐字稿

Thank you for standing by for Dada First Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Caroline Dong, Head of Investor Relations for Dada. Please proceed, Caroline.

Thank you, operator. Hello, everyone, and thank you for joining our first quarter 2022 earnings conference call. On the call today from Dada, we have Mr. Philip Kuai, Chairman and CEO; Mr. Beck Chen, CFO; and Mr. Jun Yang, Co-Founder and CTO. Mr. Kuai will talk about our operations and company highlights, then Mr. Chen will discuss the financials and guidance. They will all be available to answer your questions during the Q&A session that follows.

Before we begin, I'd like to remind you that this conference call contains forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on our IR website. Also, during this call, we will discuss certain non-GAAP financial measures. Please also refer to our earnings press list, which contains a reconciliation of non-GAAP measures to the comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. It is now my pleasure to introduce our Chairman and CEO, Mr. Kuai. Philip, please go ahead.

Thank you, Caroline, and thank you all very much for joining us today. We are pleased to announce another strong quarter and an excellent start to the year. During the first quarter of 2022, Dada Group delivered revenue growth of 74% year-over-year on a comparable net basis, fully demonstrating our resilient business model despite pressures from the current macro environment.

So as usual, I will first go through some key observations and highlights of our recent progress. Before moving on to update on our 2 platforms. Beck Chen will then go through our financial results in greater details. In terms of the regulatory environment, the political bureau of the CPC Central Committee has recently held a meeting to analyze the current economic situation, where leadership emphasized the necessity to promote the healthy development of the platform economy, including completing the special rectification, implementing regular supervision and introducing specific measures to support the robust development of the platform economy in compliance with laws and regulations.

So under the overall guidance of the CPC and the government, Dada group adheres to compliant operations while driving sustainable business growth. We have been growing our business rapidly while actively fulfilling our responsibility as a platform, making every effort to elevate the platform economy to a new level. Since the beginning of the year, the COVID-19 outbreak in some cities, including Shenzhen, Shanghai and Beijing have led to the initiation of containment measures, including temporary closed-off or lockdown. As an approved enterprise by local governments to maintain the supply of daily necessities, Dada Group has been involved in anti-pandemic support initiatives.

For merchants, we strive to provide delivery capabilities to support their online operations. For consumers, we ensure price stabilities of products on our platforms. For riders, we help eligible riders to obtain COVID travel passes and provide special subsidies. For local governments, we donate personal protection equipment, help government agencies with the distribution of supply packages to residents and engage in public welfare activities for pandemic control.

Now I would like to provide updates on our deepened cooperation with JD.com. Since JD.com's increased investments in Dada Group has been completed at the end of February, our omnichannel business cooperation with JD.com has further strengthened. In the first quarter, the GMV of Shop Now or Xiaoshigou, the unified brand for all on-demand retail services within the JD ecosystem increased by more than 3x year-over-year.

During the first quarter, we further expanded the geographic coverage of the Nearby or Fujin tab, which is one of the major entry points of Shop Now. As a result, Nearby gained more exposures among JD users. In addition, we continue to improve the click-through rate and the conversion rate by upgrading app design and operations.

Now let's spend some time on JDDJ, the leading local on-demand retail platform in China. Since March, China's consumption growth has been under pressure due to the pandemic resurgence. However, the national policy directive towards building a large national unified market and unlocking the full potential of internal circulation is very clear. And the overall trend towards domestic consumption recovery will not change. The promotion of the deep integration of online and offline consumption to encourage the development of new consumption formats is one of the most important drivers of continued recovery and also the growth of consumption.

JDDJ has always been committed to meeting the diverse needs of consumers through innovative models. April 15 marks the seventh anniversary of JDDJ. So this year, for the first time, we launched the April 15 Intra City shopping festival together with JD.com on both JDDJ and Shop Now. During the festival, the average daily GMV of categories such as FMCG and fresh food exceeded that of the last year's Double 11 Shopping Festival while the GMV of consumer electronics, home appliance and many other categories more than doubled year-over-year.

At the end of March 2022, the number of annual active users on JDDJ increased by 47% year-over-year to 67.9 million. During the first quarter, JDDJ continues to expand the category and merchant coverage, deepen strategic cooperation with brand and innovate in digital solutions so as to empower our partners and better serve more and more users.

Firstly, we continue to expand the category and merchant coverage. I will start with our supermarket category.

So far, we have established partnership with 86 out of the top 100 supermarket chains in China. During the quarter, we also established new partnerships with regional winners such as Pangdonglai in Hunan province. Driven by the Chinese New Year Shopping Festival and the March 8 campaign as well as enhanced user mindshare, the year-over-year GMV growth of supermarkets on JDDJ accelerated in the first quarter. In addition, the GMV of leading regional supermarket chains, such as Zhongbai Warehousing and Rainbow more than doubled on a sequential basis during the quarter.

Let's move on to the consumer electronics and home appliance category. In the smartphone subcategory, we newly launched smartphone trade-in program, which enhanced our capability to serve the full life cycle needs of smartphone buyers and improved conversion rates. In the PC and digital product subcategory, we further expanded offerings and established new partnerships with leading brands, including Iflytek (foreign language) and Nintendo.

In the Home Appliance subcategory, total GMV maintained rapid growth on a sequential basis, driven by our "One City, One Flagship Local Home Appliance Chain" strategy, and the enrichment of both major and small home appliance supplies.

In the mom-and-baby category, we have deepened our cooperation with leading chains such as Kidswant (foreign language), Leyou and Baby Room (foreign language) and strengthened the synergy with Shop Now. As a result, the GMV of mom-and-baby chains on JDDJ increased by more than 8x year-over-year in the first quarter.

Secondly, we further deepened the strategic cooperation with brands. In the first quarter, the year-over-year revenue growth of our online marketing service was around 180%. During the quarter, we have signed several new partnerships with packaged food brands such as CP Food (foreign language), Three Squirrels (foreign language) and Goodfarmer (foreign language). At the same time, as more and more brands from new categories generates meaningful sales on JDDJ, the categories of brands that we directly partner with also keep expanding. For example, in addition to the brands mentioned above, we have recently established cooperation with household product brands, including ASD (foreign language).

So innovation is at the core of our partnership with brands. In this quarter, we launched a new marketing campaign named "Deliver the Best to Your Home" or Haowu Daojia, which features monthly selection of products based on the prevailing consumption trends and help brands promote trendy bestsellers. In March, the theme of our Haowu Daojia series is organic foods. During the campaign, the sales of milk, milk powder and other products from brands including Yili, Mengniu, Wyeth and Junlebao more than doubled on a year-on-year basis.

Thirdly, we continued to innovate in digital solutions to empower retailers and brands. Haibo, our omnichannel operating systems for retailers continued to empower more merchants to carry out O2O operations across multiple channels efficiently. As of the end of March, the Haibo system has been deployed in more than 6,700 retail chain stores, including about 3,000 stores of around 50 top 100 supermarket chains in China.

To help improve our brand partners' sales efficiency, we have recently launched the Earth Grid System or Kunce system, which visualize brands online inventory down to a 3x 3 kilometers grid level, helping brands to optimize point of sales coverage and gain regional sales share. As of now, more than 30 brands in food and beverage, grain and oil, mom-and-baby care products and other categories have adopted the Kunce system.

The effectiveness of Kunce system to help brands identify sales opportunities and grow sales has been tested. Since Kimberly-Clark's adoption of Kunce system, the point of sales coverage of Kotex, one of its core products sold in CR Vanguard markets increased by more than 20 percentage points during the March 8 campaign, and the sales increased by more than 20x on a sequential basis.

Regarding our digitized in-store picking service, Dada Picking, it has been fully rolled out to all of the Walmart stores nationwide by the end of March. In addition, we have established partnership with Carrefour and helped it increase picking fulfillment rate by 20 percentage points. Dada Picking's empowerment in helping address labor shortage and digitize the picking process is highly valued by retailers. As a result, order volume maintained strong growth momentum. In the first quarter, the number of orders fulfilled by Dada Picking increased by more than 3x year-over-year.

So moving on to Dada Now, the leading local on-demand delivery platform in China. Recently, the CPC Central Committee and the State Council proposed in the opinions on accelerating the construction of a national unified market to promote innovation of technology and business model in the third-party logistics industry so as to improve logistics efficiency for the entire society.

As you know, technology-driven intra city on-demand delivery plays a key role in the third-party logistic industry, it also serves as an important infrastructure to support new consumption formats, improve consumer convenience and improve overall logistic efficiency.

Leveraging our technology advantages and on-demand delivery network coverage, Dada Now serves a wide range of customers, including chain merchants, SME merchants, individual users, express delivery companies and on-demand delivery agencies, providing them with diversified and high-quality intra-city on-demand delivery services.

In terms of business progress, I will start with our KA or chain merchants, business. So based on the expansion of cooperating merchants and stores, and the increase in the average delivery orders per store, revenue of our on-demand delivery service to KA merchants maintained rapid growth, increasing by about 50% year-over-year after hyper growth for multiple quarters in the past.

In Restaurant KA category, we continue to sign up new restaurant chains, such as Dicos (foreign language). And revenue generated from tea beverage KAs increased by more than 100% year-over-year.

In addition, pharmaceutical KAs maintained impressive performance with revenue increasing by more than 100% year-over-year.

So moving on to the SME and the C2C business. Orders fulfilled increased by more than 40% year-over-year while unit economics keeps improving significantly.

For last-mile service, during the recent pandemic outbreak in Shanghai, we quickly recruited and activated last-mile delivery riders, leveraging our flexible cross-sourcing network. These riders played a key supplementary role in restoring JD Logistics delivery capability, when it faced shortages of in-house delivery personnel. Our efforts also helped solve the bottlenecks of the last 100-meter delivery within communities, which ensures door-to-door delivery even during the pandemic while staying compliant with containment measures.

So to wrap up, despite pressures from the broader macro environment and ongoing pandemic, we have continued to make encouraging progress and deliver strong results. We will continue to execute our strategy to drive sustained returns for shareholders.

With that, I will now pass the call over to Beck Chen to go over our financials for the quarter. Thank you.

Thank you, Philip. So before we go over the numbers, just a few housekeeping items in advance. First, we believe year-over-year comparisons are the most useful way to judge our performance. Therefore, all percentage changes I'm going to give will be on that basis. And all figures are in Renminbi unless otherwise noted.

Total net revenue in the first quarter increased to CNY 2 billion, aligning the revenue recognition method of Dada Now's last-mile delivery services to a comparable net basis, pro forma revenue growth would have been 74% year-over-year. Net revenue from Dada Now were CNY 623 million. The pro forma revenue growth rate was 62% year-over-year, mainly driven by the increase in order volume of intra-city delivery service to chain merchants and last-mile delivery services to logistics companies.

Net revenues from JDDJ increased by 80% to CNY 1.4 billion, mainly due to the increase in GMV, which was driven by increases in the number of active consumers and average order size. The increase in online marketing services revenue as a result of the increasing promotional activities also contributed to the revenue growth of JDDJ.

Moving over to the expenses side. Operating and support costs were CNY 1.3 billion. The decrease was primarily due to the decrease of rider-related costs incurred by business upgrade of our last-mile delivery services, partially offset by an increase in rider costs as a result of increasing order volume for intra-city delivery services.

Selling and marketing expenses were CNY 1.1 billion. The increase was primarily due to, firstly, the growing absolute dollar amount of incentives to JDDJ consumers. Secondly, an increase in advertising and marketing expenses to attract new consumers to JDDJ platform. And thirdly, the amortization of business cooperation agreement arising from the share subscription transaction with JD.com in February this year.

G&A expenses decreased to CNY 101 million, primarily due to decreased share-based compensation expenses. R&D expenses rose to CNY 165 million, mainly attributable to the increase in research and development personnel cost as the company continues to strengthen its technology capabilities.

Non-GAAP net loss attributable to ordinary shareholders of Dada was CNY 481 million. Non-GAAP net loss margin was 24%. On a comparable basis, net loss margin improved by about 30 percentage points year-over-year.

As of March 31, 2022, the company had CNY 4.6 billion in cash, cash equivalents, restricted cash and short-term investments. Pursuant to our USD 70 million share repurchase program announced in March, as of April 30, 2022, we had repurchased approximately USD 17 million of ADSs under this repurchase program.

In terms of the outlook for the second quarter of 2022, we expect total revenue to be between CNY 2.25 billion and CNY 2.35 billion, representing a pro forma growth rate of 59% to 66%, adjusting '21 Q2 and '22 Q2 Dada Now last-mile revenue to be a comparable net basis. In addition, we expect the pro forma net loss margin based on comparable net basis revenue in the second quarter of 2022 to continue to significantly narrow year-over-year and achieve sequential improvement for the fifth consecutive quarter.

This concludes our prepared remarks. And operator, we are now ready to begin the Q&A session. Thank you. Thank you.

(Operator Instructions) First question comes from the line of Ronald Keung of Goldman Sachs.

Congratulations on the solid results in the first quarter. So I want to ask about the recent COVID impact. If you could give us any anecdotes in Shanghai, in Beijing and overall, just looking at our second quarter guidance, which underlying implies a 59% to 66% growth. Is there any specific growth rates that we're expecting for JDDJ? And how have we adjusted our business models or products or availability of inventory in this COVID season?

Sure. Ronald, so I will give you my answer and see if Beck have anything to add. So yes, as you have already seen that in Shanghai, Beijing, Shenzhen, among others are having COVID outbreak in the last few months. And we have been approved by the local government in almost every city as a key company for daily supplies under the COVID situations. And we see our social responsibility and I think there's a huge social responsibility as well as the business responsibilities.

There cities under a different level of lockdown, and we are seeing different impacts. I will give you examples. In Shanghai, for example, Shanghai is having an extreme lockdown. So by the end of March, the supply chain of the merchants are pretty much shutdown. And most of the supermarket stores are off-line. And also under the requirement from the government, the eligible riders are also in extreme shortage for at least a few weeks. So certainly, there are a lot of challenges for our business.

So then, with the supply chain improvement and also the COVID situation is getting better, our business is also recovering quickly. So we are seeing that in the next few weeks, our business will return to normal. And I think that's a very extreme case. Certainly, the most extreme case in the last 3 years, we have ever seen.

For the other cities, for example, Beijing, in Beijing, although we are also seeing some COVID outbreaks, but the logistics and supply chain are rather stable and has not impacted too much. So in cities like Beijing, our business grew very quickly in the initial phase and then it got down to a rather normal phase.

And some other cities, where we see some random COVID cases, I think the city governments are controlling pretty well, and our business has not been much impact. So that's the business impact.

At the same time, in order to provide more protection and also to encourage the riders to work, so there is some additional COVID-related subsidies or expense for the riders. I think those are also temporary.

And I think in the long term, this kind of COVID situation is helping us for customer education. So now I think literally in most of the cities, customers are familiar with on-demand delivery and home delivery business and e-commerce business. I think in the long term, it will have positive impact, given this kind of customer education. Yes. Let's see, if Beck have anything to add.

Yes. In consideration of all those challenges right now based in China, we still believe our 2 platforms, both Dada Now and the JDDJ will experience higher than the market average growth rate of the benefits. And for example, for the guidance, we've been giving -- for the second quarter of 2022, we already consider all those impactors and factors during this quarter. So it's a fair expectation right now.

And any specific on the JDDJ growth expectations?

Yes. So JDDJ, in second quarter, we believe that it will still grow very quickly compared to the -- right now, the market average, as you can see, the statistics released -- data released by the National Bureau yesterday. So there are a lot of challenges in China right now. But still we believe JDDJ is experiencing higher than average growth rate. And for the second quarter, we believe that it will still grow like the same similar speed about the total net revenue growth rate of Dada.

Next question comes from the line of Eddie Leung of Bank of America Merrill Lynch.

Just a follow-up question on the longer-term outlook after this COVID lockdown. You guys mentioned about potential better education of consumers. So could you talk a little bit about how you think about the competitive landscape might change after the recent lockdowns and the potential impact on the ticket size that you guys have been seeing? And then a separate quick question on the cooperation with JD. Could you remind us the contribution of the JD channels to your GMV in the first quarter?

Sure, Eddie. So again, I will give you my answer and see if Beck have anything to add. So for the long-term outlook after COVID, you mentioned the ticket size. We are seeing our basket size keep growing for the last few quarters, and the trend has been pretty stable and due to a few reasons, one is the product varieties keep improving, and also the customer experience improving. So we are seeing that the basket size has been continuing to grow.

In terms of the competition, I think after this COVID outbreak, lot of smaller competitors or smaller companies will have serious challenges. And overall competition, I think, will be reasonably reduced. In other words, I don't think the subsidy wars or anything like that will happen in the foreseeable future. I think people in the market will be more reasonable or even conservative in terms of burning cash for unreasonable competition.

At the same time, I do believe that the strong players in the market will take the advantages and grow the business well, partially due to the customer education and also the entire market being more rational.

I would like to give you some of the updates regarding our cooperation with JD. So after the further investment from JD completed, there are a few key initiatives we have been working on with JD. So firstly, from the product and technology side, we've been working very closely to improve the product performance of this Shop Now, especially the search engine improvements and also the Nearby tab improvement, so we're happy to see that we're getting more traffic and improving the conversion rate.

At the same time, it's the first time that we are working with JD Group for brand marketing and some advertising together, especially during the important festivals. For example, like the April 15, our anniversary and also in the upcoming June 18 festival, things like that, we will work closely with JD for brand promotion, therefore, to improve our mindshare for the customers regarding the on-demand retail. At the same time, we are opening up more cities on Nearby tab in Q1. And we will continue to push this in the foreseeable future and to cover the entire country as much as possible. Yes, that's the key initiatives and see if Beck has anything to add.

Yes. So in terms of the JD contribution, so for the JD channel in Q1, it contributed a little bit more than 50%. And I believe there is some seasonality there. So in Q2 and going forward, we believe that the contribution will keep to grow.

Our next question comes from the line of Thomas Chong from Jefferies.

I have a question regarding the unit economics for JDDJ. Can management comment about how we should think about the Q2 sequential trend for the different parts for the revenue and the expense side? And on the other hand, can you also get more color about the competitive landscape for Dada Now, in particular, the key accounts, the KA side?

Okay, Thomas. So let me take the first question, and I believe Philip can take the second question very well. So for JDDJ UE or we call it like JDDJ direct margin, we believe that in Q2, we can achieve the positive direct margin as we have expected in previous quarters. And actually, in March, I think for monthly, like the direct margin level of JDDJ it's already breakeven. So in Q2, we are on the track to achieve a positive direct margin. And going forward, we believe that it will keep to be positive.

Yes. And for our KA business, we're happy to see that our KA business has been growing very fast in the last couple of years. At the same time, improving the delivery qualities and the customer satisfaction and to strengthen our market leadership. So as a result, we are getting more and more leading the recognition from the leading customers. And this year-over-year, the whole year, we anticipate that our KA business will grow 40% year-over-year for the whole year.

At the same time, because of the COVID impact, the cost and expense around the riders might have some incremental cost, partially preventing us from further improvement of the margin. While we anticipate by the second half of this year, while the COVID impacts are slowing down, and the KA business will improve from the increased density of the orders as well as all the technology-driven improvement and operational improvement we have been doing. So we are confident with both revenue growth and margin improvement.

Next question comes from the line of Alicia Yap from Citigroup.

Congrats on the very solid results despite the challenges. I have a couple of questions. One is, can management elaborate a little bit mix of the FMCG versus the non-FMCG for JDDJ in the first quarter and also your expectation for the second quarter and also the AOV difference? Do you expect a material change to the mix due to the COVID lockdowns and some of the consumption behavior shifted?

And I think can you remind us the 1Q, first quarter JDDJ direct margins? I think you mentioned second quarter is still on track for profitability. And then follow-up questions on your second quarter guidance. I know management mentioned you have factored in the impact from the COVID. So is the second quarter guidance assuming the second half of May will be recovering and not getting worse and then June will be normal?

Okay. So yes, let me take the questions about the numbers. So first, about supermarket categories, so most of the supermarket categories right now is consisting of FMCG products. So for supermarket categories, it contributes about 60% of the total GMV in Q1. And we believe that the overall FMCG percentage will slightly go down in Q2 because the non-supermarket, non-FMCG products will grow more quickly. And for the AOV, first of all, for our overall marketplace AOV is still like keeps at more than RMB 210 for Q1. And specifically, for supermarket categories AOV, it's increasing to over RMB 160, so it's growing Q-on-Q or year-over-year.

And we believe that all of those impacts from the COVID things will also contribute to the increase of the AOV in the longer term and also our diversification of new categories will also contribute to the growth of AOV as well.

So in terms of the direct margin in Q1, it's slightly like minus 0.1% for the whole quarter, but in March, we believe we already achieved breakeven. And for the Q2 guidance, Alicia, you mentioned, so basically, right now, we think we are considering all those factors already -- which already happened in the first half of this quarter. And we -- actually, we are considering that it will not adhere to a rate as like what happened in April in Shanghai.

Our next question comes from the line of Wei Xiong from UBS.

I wanted to follow up on the COVID impact that you mentioned. I wonder compared to what we experienced in 2020, could you guys comment on how this round of COVID could affect maybe consumer behaviors longer term? And how are we positioned differently this time to be better accommodated to the situation? And another question from me is on the upcoming 618 shopping season. How do we see the participation from merchants this year? And any promotion strategy or campaigns that we want to highlight that you guys can share would be appreciated.

Sure. Yes. I'll have my answer and see if Beck has anything to add. So the consumer behaviors from the COVID, I think the overall governments measures against COVID continued to optimize, and we are now having more and more frequent COVID tests and also the other measures. One of the things we observed is that customers might go to restaurants less frequently than before, even after COVID. And as you may have noticed, in many cites, including Beijing and others, once there's COVID cases, the government will ask the restaurant to stop having the dining service and has to do the takeaway mode. And we're also noticing that more and more customers are now cooking at home.

So I think all of those will have positive impact on the supermarkets, FMCG and the fresh food categories. And the more customers will be used to use the home delivery service rather than go to restaurants or go to the offline supermarkets. That's our observation.

And in terms of the June 18, I think, first of all, the macro environment slowdown might have some impact on the willingness to spend for the customers. But at the same time, I think customers have been -- like in Shanghai and other studies, customers has been locked down for quite a while. And they really like to spend some money and to get some pleasure. So we are conservative but positively conservative about the June 18. And we are working very closely with JD.com together to do our best in June 18.

And another thing of collaboration with JD is that during this Shanghai lockdown and other city outbreak, JD among other e-commerce players noticed that the warehouse model during the extreme situations might have some challenges, especially during like the extreme lockdown. But for JDDJ, because we are decentralized and all the inventories located in each city and it's local e-commerce. So it's more resilient, and it's easier to respond to those challenges. So we are working very closely with JD to develop new strategies and initiatives to react to the situation. And I think this June 18, we are quite looking forward to it.

Next question comes from the line of Andre Chang from JPMorgan.

My question is on the merchant side. So with all the macro headwinds and the COVID impact, although we also see some merchants being more cautious about spending now for the year. So I wonder if the company also sees this kind of trend? And if so, any measures to mitigate that? And if you take this a little bit at a higher level, are we seeing our monetization model across marketing new riders because of this like extra expense for riders, et cetera, monetization mix changing?

Sure. Yes, I'll have my answer first. So our observation and our interaction with the supermarkets told us that most of the supermarkets are having some challenges, but many of them are actually having a better time for the business comparing to the last couple of years. One of the reasons we read from the situation is that the community group buying, the irrational competition and the subsidy wars from the community group buying has been slowing down significantly. So this actually helped to improve the life of supermarkets.

At the same time, based on our interaction with the consumer brands, I think overall, they're doing fine. They're not having like too much challenges at the moment. So I think overall, the foundation of the business is quite solid. And at the same time, people are looking for more effective channels to do business for the brands and the merchants are looking for effective channels, and we are the effective channel. So that's why we're happy to see that both the brands and the merchants are willing to spend more on our platform. And they are expecting like a greater growth and contribution from our platform. So we are quite positive about that.

Yes. And also, in terms of the direction of the monetizations, so we believe that the marketing revenues, marketing fees is still the most important one to help us to increase the overall monetization rate just like before we mentioned. And so during this year, we believe that still the online marketing revenues on a year-over-year basis will grow very quickly, significantly. So it doesn't impact our methodology of the growth of JDDJ's revenue.

Management, I will take the next question from Robin Leung of Daiwa.

I just have a follow-up question on the COVID impact. Which factors having the biggest impact on Dada? Because I believe there's -- the first impact would be the supermarket in the off-line because of the lockdown measures and also there is some impact on the trucking logistics and also some of the riders cannot fulfill the orders because they could not come out from the residential areas. So if there is another round of lockdown measures, how will Dada cope with the challenges?

And my second question is compared to the past pandemic cycles, are we observing better user retention this time because I think we face less competition from community repurchase versus the last 2 years? And in terms of the user acquisition cost, should we expect it to be less as we could realize some cost savings from the JD channels?

Okay. Okay. So first of all, the COVID lockdown, I think the Shanghai lockdown is very, very extreme. And personally, I don't think we will be seeing that kind of lockdown anytime in the foreseeable future. And I think more and more local governments are now having especially the frequent COVID tests and other measures to reduce the total lockdown risk. So we are quite positive about that.

And even for Shanghai and some other cities, I think now the government realized that the supply chain around 4 supermarkets are so important. And -- also, personally, I'm quite positive that the supply chain will have less and less impact even during some kind of COVID measures in the future.

And for the riders, we have been always working closely with the local government to improve the rider management and the supervision in order to follow the COVID guidance. And I think overall, we are comfortable with our operations and the shortage of riders are rather temporary and not as severe as people might imagine in most of the cities. So we are comfortable with that.

And in terms of the active customers, by the end of March, our active customers grew by 47% up to nearly 68 million active customers. So we are happy to see this active user base continue to grow. And at the same time, for the user acquisition, because we are increasing our entry points on JD.com and strengthening our collaboration with JD.com. I think the user growth, especially in the JD ecosystem will continue to be improved in the foreseeable future with the cost reduction or relatively stable.

Can I follow up on the user retention?

Yes, so the user retention and also the user retention frequency has keep improving over the quarters. And we are seeing that especially the per user purchase or the dollar amount that user purchase on our platform keeps growing. So the wallet share that we have of the users keeps improving, and we are comfortable and confident to see that wallet share keep improving in the future as well.

In the interest of time, the last question comes from Wei Fang of Mizuho.

Can you talk about the advertising yield for the quarter within your total monetization rate? And given the recent lockdowns, any changes to your prior 2022 unit economics outlook? And secondly, on the supermarket, in light of the more rational competition from the C2B business model, how should we think about the impact on your monetization rate?

Okay. So the advertising revenue in Q1 is like growing by about 180% year-over-year. And also the monetization rate of online marketing further increased to 3.4% compared to 3.2% in Q4 last year. So it keeps improving. And like we have talked in the previous calls that we believe for the whole year, the monetization rate of online marketing still have the potential room to grow by 20 to 30 basis points, and it will be our major driver to grow the overall monetization rate.

And we believe that for the other 2 major items, including delivery fees and the packaging fees we received from the consumers and the commissions we received from the merchants, we can maintain those 2 commissions or either the fees at a similar level as last year in consideration all those like the multi-category product diversification.

So like I have said, we are still on track to grow the monetization rate. And in the same time, we will keep to -- on a year-over-year basis and also on a Q-on-Q basis, we will keep to optimize on the cost side, mainly including the consumer incentives and operation and rider cost. So overall, in Q2, we can achieve quarterly positive unit economics -- quarterly positive direct margin. And going forward, it will keep to grow in the positive way.

With that, that concludes today's question-and-answer session. I would like to hand the call back to Ms. Caroline Dong for our closing remarks.

Thank you, operator. In closing, on behalf of Dada's management team, we'd like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us directly. Thank you for joining us today. This concludes the call.