JD Logistics Inc
HKEX:2618
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JD Logistics Inc
Earnings Call Analysis
Q3-2024 Analysis
JD Logistics Inc
In the third quarter of 2024, JD Logistics reported total revenue of RMB 44.4 billion, reflecting a year-over-year increase of 6.6%. The revenue from external customers grew by 5.9% to RMB 31.6 billion, which accounted for over 70% of the total revenue. This growth is a positive indicator of JD Logistics' performance as the Chinese economy shows signs of recovery.
The company's non-IFRS net profit reached RMB 2.57 billion, which is nearly three times higher than the same quarter last year, showcasing a remarkable increase of 205.1%. The non-IFRS net profit margin also improved to 5.8%, up 3.8 percentage points year-over-year. This marks the highest profit and margin level ever recorded for a third quarter since JD Logistics became public.
Revenue from integrated supply chain (ISC) customers amounted to RMB 20.7 billion, experiencing a year-over-year increase of 5.4%. The number of external ISC customers grew by 9.4% to 59,000, indicating the company's expanding footprint in the marketplace. Notable growth was seen as JD Logistics developed tailored solutions for various sectors, enhancing their customer base and product offerings.
A significant development during the quarter was JD Logistics' full integration with Taobao and Tmall, which positions the company to serve all major e-commerce platforms in China. This strategic collaboration is expected to provide vast service options to a multitude of merchant customers, enhancing the overall customer shopping experience and potentially driving further revenue growth.
JD Logistics has embraced technological innovation, implementing logistics large language models to optimize operations. The company continues to invest in automation and digital capacities, which is crucial for enhancing operational efficiency and managing rising customer demands effectively. This commitment to technology not only boosts productivity but also sets JD apart in a competitive landscape.
Looking ahead, JD Logistics aims to maintain growth momentum and improve customer experiences. The company plans to focus on six major industries including home appliances and fast-moving consumer goods, emphasizing customized solutions to differentiate itself. For 2025, JD Logistics expects to sustain positive revenue growth, targeting at least 100% growth in international warehouses, reflecting confidence in its expansion strategies.
JD Logistics has successfully controlled costs while growing revenues. Employee benefits increased slightly, but as a percentage of total revenue fell by 0.6 percentage points year-over-year. Outsourcing costs also saw a year-over-year decline as the company leveraged advanced algorithms to enhance logistics efficiencies. Overall, this effective cost management complements the strong profitability growth.
JD Logistics showcases robust financial performance amid a recovering economic environment. The strategic partnerships, technological advancements, and an emphasis on efficient operations create a favorable outlook for the company. Investors can find confidence in JD Logistics' ability to grow its revenue streams and maintain profitability moving into 2025 and beyond.
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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Logistics Third Quarter 2024 Results Conference Call. [Operator Instructions] Now I will now turn the call to Ms. Sean Zhang, Head of Investor Relations at JD Logistics. Please go ahead, Sean.
Thank you, operator. Good day, ladies and gentlemen. Welcome to our third quarter 2024 results conference call. Joining us today are our Executive Director and CEO, Mr. Hu Wei; and CFO, Mr. Wu Hao. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by the law.
During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and reconciliation of the IFRS to non-IFRS financial results, please refer to the announcement of financial information and business highlights for the 3 months ended September 30, 2024, issued earlier today.
For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, the management statements in the original language will prevail.
I would like to turn the call over to Mr. Hu Wei. Please go ahead, sir.
Dear investors and analysts, welcome to the JD Logistics Third Quarter 2024 Earnings Call. This is Hu Wei, CEO of JD Logistics. Thank you for joining us today. In the third quarter of 2024, as Chinese economy continued to recover and improve, we achieved high-quality growth. Our total revenue reached RMB 44.4 billion, an increase of 6.6% year-over-year. Revenue from external customers increased by 5.9% year-over-year to RMB 31.6 billion, accounting for over 70% of total revenue. Our profitability set a new record this quarter, reaching its highest level for any third quarter to date since our listing.
Our non-IFRS net profit was RMB 2.57 billion, nearly 3x that of the same period last year, and our non-IFRS net profit margin was 5.8%, an increase of 3.8 percentage points year-over-year. We have consistently achieved a substantial year-over-year profit growth each quarter this year, demonstrating our commitment to enhancing our network, products and technology. Our impressive results also reflect our continually improved efficiency in utilizing core resources and effectively leveraging economics of scale.
In the third quarter, revenue from integrated supply chain customers reached RMB 20.7 billion, an increase of 5.4% year-over-year. This includes RMB 12.8 billion revenue from JD Group and RMB 7.9 billion in revenue from external ISC customers, both maintaining a steady growth trend. The number of our external ISC customers amounted to 59,000, an increase of 9.4% year-over-year. Such growth was primarily attributed to our long-term accumulation of solutions, products and insights across key industries.
Not only can we meet demands of the leading customers in various industries, but we can also rapidly develop customized products and services for small and medium-sized customers, particularly for mid-tier customers from production zones and e-commerce platforms. Our standardized warehousing and delivery products are specifically designed to effectively handle surges in the production and outbound logistics of hot-selling products, leading to notable revenue growth in fast-moving consumer goods, 3C and apparel industries this quarter.
JD Logistics integrated service capacities, centered on delivery, installation, dismantling and recycling, have become our unique competitive strength and service advantage in the home appliance logistics sector. We continue to provide omnichannel ISC services for many leading customers in the home appliance industry, effectively addressing their pain points and deepening our collaborative relationships. Bolstered by recent favorable policies, our revenue from these leading home appliance customers maintained robust growth this quarter.
It's worth mentioning that last month, JD Logistics entered a cooperation with Taobao and Tmall Group and has now been fully integrated into these 2 platforms, allowing platform merchants to choose JD Logistics as their service provider. With this integration into Taobao and Tmall, JD Logistics essentially serves all major e-commerce platforms in China. We are confident that JD Logistics' high-quality product services centered on ISC Logistics can bring a broader array of service options to numerous merchant customers and provide a better shopping experience for customers.
While continuously solidifying our leading position in China's ISC market, we're also actively expanding our international business. Through our Global Smart Supply Chain Network plan, we've established a comprehensive global supply chain logistics network with overseas warehousing capacities at its core, including cross-border transportation, local transportation and delivery network abroad. To fully enhance the service experience for Chinese go-global brands and overseas customers, we continue to expand our overseas network footprint. This quarter, we opened new warehouses in Malaysia and the United States, and we plant to more than double the gross floor area of our self-operated overseas warehouses by the end of 2025.
Thanks to our ongoing investment in and enhancement of our global supply chain capacities, we have successfully secured more customer partnerships. For instance, this quarter, we provided cross-border services for a leading e-commerce platform in South Korea, covering warehousing, cross-border trunk lines and customer clearance, while continuously exploring multi-scenario cooperation opportunities in other regions. Additionally, our cooperation with the leading Chinese cross-border e-commerce platform has expanded from overseas warehousing to cross-border transportation for small packages and more.
In the third quarter of 2024, our revenue from other customers, primarily including and freight delivery services, increased by 7.6% year-over-year to RMB 23.7 billion. In terms of express delivery services, we focused on enhancing timeliness, targeting specific scenarios such as the central business districts, hospitals and educational institutions as well as deeply engaging with production zones to improve JD Express' market perception and secure more business opportunities. Despite the relatively fierce competition in the market, our express delivery business has maintained stable profitability through effective product strategies and cost efficiency measures.
In the third quarter of 2024, JD Express added over 100 new direct flight routes in provincial cities and key cities, effectively and rapidly enhancing timeliness and expanding the coverage of our next-morning delivery by air. This has significantly boosted our service capacities and laid a solid foundation for our long-term development.
On the product side, as one of the first logistics companies in China to provide hairy crab deliveries, this year, we have fully upgraded our specialized logistics solutions for hairy crabs. By increasing the number of ships in sorting centers and adding all-cargo flights in regions, including the Beijing-Tianjin-Hebei region, the Pearl River Delta and the northeastern provinces, we have achieved a rapid turnover for hairy crabs. Our services ensure delivery as quickly as the same day to Suzhou and Shanghai, by the next morning to key cities such as Beijing and Shenzhen, enhancing the shopping experience for customers. According to survey results published by the State Post Bureau of the People's Republic of China, our express delivery services consistently maintained best-in-class customer satisfaction ratings.
Moving to the freight delivery services. With the consolidation of Deppon Logistics, we ranked among the top tier in China in terms of both freight volume and revenue. Our freight delivery products are diverse and flexible, encompassing time-definite products primarily via air transport as well as solutions that integrate an array of transportation resources and innovative models. With this approach, we meet the needs of numerous customers from various production zones and vertical markets, effectively driving business growth and expanding our market share across different segments.
A highly synergized logistics network infrastructure and continuously improving technology are the key cornerstones supporting our steady development. Our network infrastructure consists of 6 logistic networks, including warehouse, line-haul transportation and last-mile delivery. As of September 30, 2024, our warehouse network covered in nearly all counties and districts in China, consisting of over 1,600 self-operated warehouses and over 2,000 third-party warehouse owner-operated cloud warehouses under our Open Warehouse Platform. Our warehouse network has aggregated GFA of more than 32 million square meters, including warehouse space managed through the Open Warehouse Platform.
We consistently prioritize technological innovation as the core of our development. We continuously integrate advanced algorithms and technology into our daily operations, driving transformations in logistics network development, site operation process, automation application and transportation scheduling. For example, we pioneered the application of logistics large language models across numerous scenarios such as abnormality control, process automation and intelligent interaction. This initiative has proven effective in preemptively identifying and preventing abnormalities and enhancing workforce efficiency.
Additionally, our ESG achievements have garnered recognition from multiple authoritative organizations. Thanks to our years of efforts in promoting carbon reduction throughout the supply chain, JD Logistics was included for the first time in S&P Global 2024 Sustainability Yearbook (China Edition). Our score in the 2024 S&P Global CSA also improved further, ranking among the top in the global industry.
Going forward, we will continue to adhere to our core operational philosophy of reducing the frequency of goods moved and minimizing the distance of fulfillment. We will focus on high-quality development, continuing to develop -- deeply cultivate our industry-specific ISC logistics capacity and enhance our digital and intelligence supply chain products. We're confident our efforts will contribute to the improvement of service standards industry-wide and the sustainable and healthy development of the industry.
Next, I'd like to invite Mr. Wu Hao to discuss the details of financial performance.
Thank you, Mr. Hu. Hello, everyone. This is Wu Hao, CFO for JD Logistics. I'm pleased to present JD Logistics' financial performance for the third quarter of 2024. In the third quarter 2024, as China's macro economy maintained its stable upward trend, JD Logistics significantly improved the profitability while driving high-quality growth. During the quarter, all of our core profit metrics improved year-over-year, reaching their best level in the third quarter since our listing.
For this quarter, our non-IFRS profit was RMB 2.57 billion, an impressive increase of 205.1% year-over-year with a profit margin of 5.8%. These results underscore our efforts enhance resource efficiency in core operations through tech innovation and consistently refine our operations. This substantial profitability improvement also expands our capacity to invest in customer experience enhancements and business growth.
In the third quarter of 2024, our total revenue reached RMB 44.4 billion, up 6.6% year-over-year. Notably, revenue from external customers reached RMB 31.61 billion, accounting for 71.2% of the total revenue, reflecting our external business' steady expansion. Revenue from ISC customers totaled RMB 20.66 billion in the third quarter, up 5.4% year-over-year. Among them, ISC revenue from JD Group amounted to RMB 12.79 billion, up 8.1% year-over-year, driven by JD Retail impressive sales momentum. Moreover, during the quarter, our revenue from external customers achieved steady growth, reaching RMB 7.87 billion, and the number of external ISC customers amounted to 59,286, up 9.4% year-over-year. As Mr. Hu pointed out, while we consistently delivered high-quality services to market leaders in diverse industries, we also swiftly developed standardized products and services to meet the needs of small and medium-sized companies, leading to a successful customer acquisition.
In the third quarter of 2024, despite the traditional off-season and fierce market competition, our revenue from other customers, primarily including express and freight delivery services, maintained a healthy growth, increasing by 7.6% year-over-year to RMB 23.73 billion.
This quarter, we continued to strengthen our delivery tonnage and customer experience. Building on JD Airlines' expanded flight routes, we have broadened the coverage of next-morning delivery services, reinforcing our competitive edge in the time-definite express delivery market. Thanks to our enhanced product capacities, a proven track record of high standard services and our dedicated sales team, we have successfully secured new business opportunities across multiple production zones.
For example, with our newly upgraded specialized solution for hairy crab logistics, we effectively delivered hairy crabs from regions like Liaoning, Shandong and Jiangsu to locations nationwide. In addition, we have broadened our collaborations with multiple leading e-commerce platforms. Recently, we have been successfully integrated into Taobao and Tmall platforms, extending JD Logistics' reach to encompass nearly all major e-commerce platforms in China. We believe these partnerships will propel the continued growth of our diverse portfolio of products and services.
With respect to freight delivery services, we rank among the top tier in China in terms of both freight volume and revenue. Our freight services meet a wide range of timeliness and service requirements for customers, supporting our deepening market penetration across different freight delivery segments.
In addition to revenue growth, the profit growth trajectory we established in the first half of 2024 continued into the third quarter. Our gross margin was 11.7%, up 3.8 percentage points year-over-year, representing our strongest third quarter gross margin since our listing.
Next, let's turn to the main costs of the revenue. First, employee benefit expenses were RMB 14.6 billion in the third quarter, up 4.8% year-over-year. The increase was mainly attributable to the year-over-year increase in the number of our frontline operational employees in delivery and warehousing, with the number increasing from 410,000 at the end of the third quarter last year to 440,000 at the end of this year. The increase in the number of operational employees was attributable to the additional of our own employees to key operational processes such as warehousing and last-mile delivery aimed at upgrading our products and services and elevating customer experience.
For example, we consistently expanded the coverage of next-morning and next-day delivery and enhanced our express pickup capacity. Moreover, as we continued to enhance automation, we integrated innovative technologies such as logistics large language models into our business processes, meaningfully improving workforce efficiency. In the third quarter, employee benefit expenses amounted for 32.8% for total revenue, down 0.6 percentage points year-over-year.
Second, our outsourcing cost was RMB 15.0 billion in the third quarter, up 2.7% year-over-year. It accounted for 33.8% of total revenue for the quarter, down 1.3 percentage points year-over-year. Transportation-related expenses are the primary component of our outsourcing cost. Since the beginning of this year, outsourcing cost as a percentage of total revenue has consistently declined year-over-year each quarter. We have achieved this improvement by leveraging advanced algorithms to consistently optimize vehicle scheduling. This has maximized our productivity by consolidating shipments, streamlined routes and reducing transfer points. Additionally, we actively expanded and improved the efficiency of our self-owned vehicles, comprehensively lowering transportation costs.
Third, our total revenue (sic) [ rental ] cost was RMB 3.1 billion in the third quarter, down 0.6% year-over-year. As we continued to promote sites integration and optimize network structure, we improved utilization efficiency in our sites. Our total rental cost accounted for 7.0% of our total revenue in the third quarter, down 0.5 percentage points year-over-year. Apart from the major costs mentioned above, we continually advanced management and control refinements through technological empowerment, enhancing operational excellence. Our depreciation and amortization costs of other -- and other costs as a percentage of total revenue decreased by 1.4 percentage points year-over-year.
In terms of expenses, our operating expenses in the third quarter of 2024 were RMB 3.16 billion, up 4.3% year-over-year and accounting for 7.1% of total revenue, down 0.2 percentage points year-over-year. Among them, sales and marketing expenses were RMB 1.39 billion, accounting for 3.1% of total revenue, down 0.1 percentage points year-over-year. Sales and marketing expenses accounted for 4.4% of revenue from external customers, down 0.1 percentage points year-over-year. We maintained moderate achievements (sic) [ investments ] in key resources such as sales and marketing personnel to drive business growth.
In the third quarter of 2024, our R&D expenses were RMB 910 million, up 5.3% year-over-year and accounting for 2.1% of total revenue, maintaining largely flat year-over-year. We have allocated our R&D resources to strengthen our end-to-end automation, digital and intelligence capacities, including ongoing exploration of cutting-edge scientific applications in diverse logistics scenarios. As one of the logistics industry pioneers in large language model adoption, we have successfully implemented these models across various business scenarios, including abnormality control and process automation, driving cost savings and efficiency improvements. We are poised to expand our AI applications going forward.
Our general and administrative expenses were RMB 860 million, up 5.8% year-over-year and accounting for 1.9% of the total revenue, remaining largely flat year-over-year. Our general and administrative expenses have maintained a relatively stable trend.
In terms of the profit, please also consider our non-IFRS measures, which we believe may better reflect our core operations. Both non-IFRS profit and non-IFRS EBITDA exclude items that we believe are not indicative of our core operating performance to help investors and other users of financial information better understand and evaluate our core operating results.
In the third quarter of 2024, our non-IFRS profit was RMB 2.57 billion, up substantially 205.1% year-over-year with a net increase of RMB 1.73 billion. Non-IFRS profit margin was 5.8%, up 3.8 percentage points year-over-year. With our non-IFRS profit margin improving year-over-year for the seventh consecutive quarter, we delivered the highest third quarter profit and margin since our listing. The improvement in non-IFRS profit margin was primarily attributable to the impact of the year-over-year increase in gross margin. Now IFRS EBITDA for the third quarter was RMB 5.73 billion, an increase of 49.3% year-over-year, with non-IFRS EBITDA margin of 12.9%, up 3.7 percentage points year-over-year.
With strong year-over-year growth in free cash flow and ample cash reserves, we are well positioned to support the company's long-term business development needs. In the third quarter of 2024, considering lease-related payments, we recorded a net inflow of RMB 2.7 billion in free cash flow, an increase of nearly RMB 700 million year-over-year, primarily driven by enhanced operations and year-over-year profitability improvement. Our capital expenditure was RMB 1.4 billion for the third quarter. Going forward, we will enhance the ROI of our resource investments based on our business development needs, making prudent and effective capital expenditures to strengthen our middle- and long-term capacities, improve our network structure and enhance operational efficiency.
Before we wrap up, I would like to express our heartfelt thanks to our shareholders for their enduring support and trust in JD Logistics. Moving ahead, we will remain focused on cost, efficiency and experience. Specifically, we will improve our product capacity centered around ISC, reinforcing our differentiated competitive edge to capture market perception and elevating our service capacities across diverse industries and scenarios to drive business expansion and healthy growth. Additionally, we will solidify our profitability through ongoing optimization of business operations and technological empowerment, creating greater value for shareholders.
Thank you. That concludes my prepared remarks. Now we can start the Q&A session.
Thank you, Mr. Wu Hao. This concludes our prepared remarks. We would now like to open the call to your questions. Please start the Q&A session when ready. Thank you.
[Operator Instructions] The first question comes from the [indiscernible] from the security department of the United States bank.
My question is on the 2025 profit growth. I know that you do not lay out the guidebook. But in 2024, we saw some provision policies of new-for-old devices. So we are going to check with you about the 2025 growth outlook. The next question is about the cost management. In this year, you have a very good performance on controlling the cost. So what is the take on the 2025 and in the upcoming days and years?
I want to take the questions about the 2025 outlook as well as the new-for-old home appliances policy, what is the impact on JD Logistics about the revenue. In 2024, we want to make growth momentum stable. With that being said, we want to further improve the customer experiences. For example, the ISC supply chains will be focused on the 6 major industries, the home appliance space, the fast-moving consumer goods, the fresh goods, the 3C, you name it. We want to improve the capacities in different segments with better solutions being rolled out. That is how we can differentiate ourselves in the market and win the market competition. That is how we could provide better experiences to customers and win new customers. That is what we're going to do to improve the ISC supply chain.
And next, about the faster delivery, we want to be more efficient. We want to help the customers to enjoy their products in a faster manner. That's why we will further optimize our logistics routes. We will add more operational employees to improve the general experiences and the efficiency. We want to make it high-quality experiences. We want to improve the general growth of the customers as well.
Thirdly, in terms of the freight, all the brands under JD Logistics are in the leading position right now. We will follow the requirements of specific markets, and we will offer different products such as air transportation. We will go with the terminal-to-terminal transportation services and solutions. We will do further innovation to meet the diverse requirements from different markets.
In terms of national market expansion, we want to maintain positive growth. We want to ensure positive revenue as well in 2025. We will expand international warehouses, and we want to maintain 100% of the growth. In terms of the customer experiences, the product strategies as well as optimize the routes and more, we will be more detail focused. We will be very confident in the future growth momentum. This is the answer for the first question.
For the new-for-old home appliance policy and what its impact on us and how we are going to address that, what will be the impact on revenue? Since Q3, we are seeing the release of this policy. Ever since September, we realized it is a very good news. Home appliances is not a fast-moving consumer good. If we are using the package, for instance, it's not going that fast. Yes, the industry is getting better. But in terms of the impact for us, in terms of the retail services, external customers, we are gaining different product types, different appliance. We are covering the major appliances. The room-temperature transportation and coaching, I don't think there will be a major impact on us.
I want to have a follow-up question.
I want to add more comments on the cost control. The gross margin and net profit compared to last year improved. So the specific data, we are at very rational stage within the industry. We will never stop to find a better operational model, innovative technologies and new adoptions. Again, we will further improve this efficiency. However, please be noted, in terms of the profitability, we are overperforming the commitment -- the committed profitability. And now we are at a very rational stage in terms of the total industry.
At present, we are at a very rational stage. In the upcoming days, we're focused on the growth by capturing more market chances, and we will have more measures to control the cost. I wish that, that will be the major cornerstone to further optimize the profitability. As Mr. Hu mentioned, we will handle national resources as well. We're putting more efforts in international markets to grab the market.
Next question from Goldman Sachs line.
The first question is on the profitability, and I want to know more about the Q4 profitability growth trajectory. And in Q4, we are seeing better outcome in this Q4, the season for the highest cost efficiency. I want to check with you about the Q4 profitability.
And with that being said, I also want to ask a question about the collaboration between Taobao and Tmall. It is for -- are you going to find more chances with the ISC or the retail part? Now we are seeing so many Tmall flagship stores. If they are using JD Logistics compared to retail services, what will be the differences in terms of the customer experience? Or would there be any difference in terms of customer experiences?
Thank you for the question. In 2024, the overall annual growth momentum was not changed. According to the Q1 to Q3 growth momentum, you are going to make a prediction on Q4. When it comes to Q4, in terms of the profitability, we expect the best performance among the entire year. At present, we could safely find the outcome of this optimized strategy. The profitability is growing positively in Q3 compared to Q4, demonstrated a little bit of differences. By the end of September, some of the portfolio companies experienced the alleviated stock price. We are not going to conclude, would this be well maintained in Q4? I believe that Q4 profitability will be very much stable with little bit of changes.
For the collaboration with Taobao and Tmall, I want to invite my colleague, Hu, to give you the analysis.
ISC or retail, that is your concern. I want to share with you the launch product. I found that we have some scenarios in Taobao and Tmall, be it for the business or for the retail side or we are seeing the ISC on our 4-in-1 strategies. I don't think there is fundamental differences.
The next question is about the customer experience. For both -- for us, we are having transparent partnerships. If a customer is choosing to collaborate with JD Retail or you could find product in Taobao and Tmall, the product services vary because you have different products. But if you choose the same product, we will offer the same experience -- customer experience.
Next question comes from the CITIC Bank line.
Congratulations for the great performance in Q3. I have 2 questions. The first question is on the future input to generate rational profitability in Q3. I want to ask you and invite you to share with more about the details in terms of the profit. Do you mean that there will be a slight increase in Q4 or all the way down to 2025? Your order profitability were maintained. That's what we see right now.
The next question is about the home appliances. I want to ask you about the proportion of the revenue. And I also want to check with other profitability.
In terms of the profitability, there is no limit for growth, but profitability has a limit, and each industry will find something rational range. When we are hitting the rational range, we're not going to find a major slide forward from 2023 to 2024. And beyond that, we are adding more resources in some of the market segments, and we are winning more in October in the hairy crab market in Jiangsu province. We did a wonderful comeback. By winning faster growth, we have more pickup sets. We have more air flight routes, and we have won more collaboration with the outlets and shops. Our competitors experienced a decline in their business performance.
My point is as long as we are finding good market segment, by building more resources, we can have a faster win by winning the market penetration and revenue. On that front, we are not going to emphasize on the further optimization of the process. Otherwise, it will compensate or compromise our capacities.
With that being said, I want to share with you more about the home appliance industry. It is a major commodity. It's a major product. The proportion would not be that high. It is a durable product. It is not a fast-moving product. It's not like the small package. Home appliances, in terms of the unit volume, will not be as many as the faster delivery. In terms of the profitability of the home appliances, we have seen better profitability. But still, we are seeing single-digit growth, better than fast delivery, but not that high.
Next question, Thomas from Jefferies.
Two questions. The first question, the number of customers. Over the last few quarters, you shared with us the growth of the customer numbers. My question is, when you collaborate with Taobao and Tmall, would there be any obvious increase in terms of the customer number? And I also want to check with you about the ARPA. In the upcoming years, would there be any improvement?
The next question is also related to the partnership with Taobao and Tmall. Have you done any calculations about the attributed revenue from those 2 platforms? Or do you have any calculations or KPIs on the attributed revenue?
Thank you, Jefferies, for the questions. The first question, about the ARPA and numbers of the customers, we could expect that there will be a sustained increase. More customers are willing to collaborate and use JD Logistics, and we could see the growth in 2024, the stable growth for the ARPA. In 2024, we are introducing a lot of new customers. They are still in the initial client being updated. So we are finding the limitations in terms of the ARPA. It's a little bit of a drag. However, as we are collaborating with more ISC customers, the ARPA will pick up. The ARPA value will be increased, but they will need some time to make it happen.
In terms of the collaboration with Taobao and Tmall, due to some historical reasons, the base number was very small. We accumulated a small number of customers who adopted JD Logistics. Some of them are big names. They preferred to collaborate with us, JD Logistics. At present, the initial growth did not come from the new package. Instead, some customers preferred to work with us. But due to some policy limitations in the past, they could only work with us through the TikTok. After this November 11 buying festival, they could work with us in a more convenient manner. Those are the initial customers we collaborated, we've been having an agreement in the past. Those are the existing customers that we could ensure growth.
For -- with that being said, we have some customers who are talking to us. We will gradually improve this good growth in customers. Since we have had a very small customer base, we will find the obvious growth, but it will not be that big. I don't think it's a number that we are proud to be -- brag. I believe that penetration rate will be very high. We will improve the penetration rate, and we are able to grab for the proportion in the market. We'll improved the market proportion fundamentally and substantially.
As Mr. Wu mentioned, the top-notch business began to be attracted about us, the -- where we are now collaborating with Taobao and Tmall, and we have our strengths on ISC. I believe that we will improve the customers on Taobao and Tmall, and I believe that is a great chance we should never lose.
Due to time's sake, this is the end of the Q&A session. Now we are going to welcome Ms. Sean Shibiao for additional remarks or closing remarks.
Thank you once again for joining us today. If you have any further questions, please contact our IR team directly. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]