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spk11: Good morning, ladies and gentlemen, and thank you for standing by for Balsam's third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. 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. Wendy Sun, Senior Director of Corporate Development and Investor Relations at Balsam. Please proceed, Wendy.
spk03: Thank you, operator. Hello, everyone, and thank you for joining us today. Our third quarter 2023 earnings release was distributed earlier before this call and is available on our IR website at ir.baozhen.com as well as on Global Newswire Services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for download. On the call today from Baozhen, we have Mr. Vincent Chiu, Chairman and Chief Executive Officer, Mr. Arthur Yu, Chief Financial Officer and President of Baozhen E-commerce, and Ms. Sandrine Zerbe, President of Baozhen Brand Management. Ms. Chiu will review the business strategy and company highlights, followed by Ms. Yu, who will discuss the business development of Baozhen E-commerce and about our financial then by Ms. Zervik to share more about Boston Brand Management. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Security Act of 1933 as a mandate, the U.S. Security Exchange Act of 1934 as a mandate, and the U.S. Private Security Litigation Reform Act of 1995. These forward-looking statements are upon management's current expectations and current market and operating conditions and relate to events that involve no or no risk, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks and certainties or factors is included in the company's filings with the U.S. Security Exchange Commission and its announcement. Notice all other documents published on the website of the Stock Exchange of Hong Kong Limited. All information provided in this card is as of today here and is based on assumptions that companies believe to be reasonable as of this date. and the company does not undertake any obligation to update any forward-looking statements except as required under the applicable law. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. In addition, when we elect to use adjusted in place of non-general accounting principles or non-GAAP in order to reduce oral confusion, that arise from our discussions about financial related to the GAAP brand. It is now my pleasure to introduce our chairman and chief executive officer, Mr. Vincent Chu. Vincent, go ahead, please.
spk01: Thank you, Wendy. Hello, everyone, and thank you all for your time. I'm happy to share with you today several key highlights from the third quarter that demonstrate solid progress in our transformation. Our total revenue grew by 5% year-over-year to $1.8 billion, driven by incremental BBM contributions. DEC's revenue met our expectations, driven by growth in the apparel category with a 26% year-over-year increase in sportswear. In addition, we further improved our operating cash flow, even after accounting for cash outflow from BBM. This marks the first third quarter since our IPO where the company has achieved positive operating cash flow. BBM is executing well on its transformation of GAAP China and has shown solid progress towards premiumization. During the quarter, BBM's growth margin of 56% continues to outpace our initial forecast. We also opened five new stores, garnering impressive consumer feedback and high sales per square meter. On my visit to the flagship store in Guangzhou, I was highly impressed with the new gap. Competing with a large array of quality apparel brands in one of China's top 10 shopping malls, our store stood out, with notably higher brand energy and overall vibe. Furthermore, following the acquisition of Gap China, our technology innovation center quickly simplified its complex architecture by consolidating nearly 70 historical systems into one modern, integrated, omni-channel operating platform, namely the Retail Operating Platform, or ROP. architecture featuring a centralized hub instead of a traditional ERP achieves more real-time management and utilizes one pool of inventory to increase sales efficiency and the inventory turnover. This establishes a solid foundation for GAP's continuous digital transformation. In the next phase, our goal is to create an intelligent end-to-end value chain management system offering advanced CRM and data capabilities that will significantly enhance inventory of planning and private domain autonomy. In addition, we have made solid progress in business intelligence capabilities. Earlier this year, we identified an increase in demand for instantaneous data insights, which empowers brands in making well-informed decisions. This is vital given the rapidly changing dynamics within the e-commerce industry. During this year's W11 event, we introduced a suite of real-time intelligence and virtualization tools. I'm proud that in such a short span of just a few months, our BI capabilities have evolved to become a leading force in the industry. Lastly, we are very excited to announce a planned 51% equity acquisition of Location, a top tier Douyin partner specializing in apparel and accessories. We are pleased about Combining Location's exceptional expertise in daily live streaming with our leadership in creative content, compelling portfolio of brand partners, and profound e-commerce operating experiences. The synergy solicitifies our leadership in Douyin ecosystem and expands on our success in other major brand e-commerce platforms. This marks a significant milestone in our strategic transformation. Let me now pass the call over to Arthur for a review of our financials and update on our e-commerce businesses.
spk06: Thank you, Vincent. And hello, everyone. Let me do a quick review of the financials for the third quarter of 2023, after which I will discuss our BEC business in more detail. Once again, we are reporting two segments, e-commerce, which includes Belgian e-commerce, or BEC, Belgian international, or BZI, and group headquarters. and Belgian Brand Management, or BBM, which includes GAAP Greater China. Please turn to slide number three. Belgian Group's total revenues for the first quarter of 2023 expanded nearly 5% to 1.8 billion, driven by incremental BBM revenue of 298 million. Due to a weaker economic environment and a stronger seasonality, our e-commerce revenue declined to 1.5 billion. Further pursuing a high-quality business model, we scaled back on low-margin product sales and trimmed low value-added service revenues. Consequently, product sales of e-commerce decreased by 17% year-over-year. notably in appliance, electronics, and fast-moving consumer goods categories. This was partially offset by increased sales from sports, healthcare, and beauty categories. In addition, our focus on innovations enabled double-digit revenue growth in technology and end-to-end solutions within the Tencent mini program ecosystem. Our total gross profit was largely flat at 1.3 billion. Product sales gross margin for e-commerce and BBM was 13% and 56% respectively. Gross margin expansion of BBM continues to outperform our initial expectations with a double-digit year-over-year increase. Our adjusted loss from operations was $90.4 million during the quarter, of which e-commerce adjusted operating loss was $40.3 million, mainly due to weaker micro-condition and a stronger seasonality. EBM continued to show good momentum in reduction of its operating losses to $50.1 million this quarter. Gap's new China for China product launch new stock openings and new marketing strategies were quite successful. These initiatives will provide a foundation for better profitability in the coming quarters. Sandrine will cover the details later. Now turn to slide number four about our cash and cash flow status. As of September 30th, 2023, our cash cash equivalents, restricted cash, and short-term investments totaled $2.9 billion. We continue to improve working capital efficiency through back-end process re-engineering on inventory, billing, and cash collection management. This is the first time since our IPO that Baldwin has achieved positive operating cash flow. in the third quarters of the year. Now let's dive into our e-commerce business. Overall, we are making good progress in transforming our BEC business. Our transformation strategy focuses on four key areas as follows. Number one, adapting a customer first approach to meet the needs of our brand partners. Number two, enhancing the offering of omni-channel end-to-end services. Number three, focusing on high quality and high margin businesses. And number four, boosting cost effectiveness and process efficiency. At BEC, we put our brand partners' needs at the center of everything we do. During the quarter, in collaboration with Nielsen, We further upgraded our Net Promoter Score or NPS survey and spent two months conducting 40 sessions of in-depth conversations with our brand partners. We seek to locate service shortfalls and identify opportunities to enhance our services. For the third consecutive year, we have achieved an excellent NPS rating with 86% of our brand partner gave us a positive rating. Our mini-channel strategy continues to be our top priority to drive sustainable growth for our brand partners. This enables brands to improve operational efficiency and drive incremental business opportunity on different platforms. As demonstrated on slide number five, 45% of our brands engaged with us on at least two channels, showing consistent growth compared to the same period last year. In this quarter, 40% of our total GMV was contributed from non-teemo channels, among which WeChat and StowIn delivered double-digit GMV growth. Since 2019, We continue to invest in Tencent's mini program ecosystem with good results. Recently, we started to pilot operations on Tencent's video account platform with brands in the FMCG and cosmetic sectors. In the latest Tencent Smart Retail Qianyu program in October, we won three major awards. Global Operation Excellence Partner, Pioneer Award for Private Domain Training, and Pioneer Award for Video Account Operations. We are also very pleased with our progress in the Douyin ecosystem. Please turn to slide number six. Since its official launch in late August, our Creative Content-to-Commerce, or CCC, has partnered with more than 30 brands for Douyin live streaming and generating a total GMV over 100 million in the third quarter. We have been strengthening our competitive edge within the Douyin ecosystem in luxury, sport and outdoor and fashion apparel. As announced by Vincent, We are very excited about the planned acquisition of location to create an industry-leading go-in service partner, as demonstrated on slide number seven. With this partnership, we can now utilize Bodrum CCC's market leadership in creative content and ice-level campaigns, along with locations proved operational experience in daily live streaming to offer more innovative services in Douyin ecosystem to both our client partners and our own brand managed by BDM. Going forward, we will have two primary live streaming locations in Shanghai and Hangzhou, covering a total area of over 12,500 square meters. Lastly, we value our employees as our most important asset. Throughout this year, we initiated several talent development programs over at Baozhen University. We also onboarded over 300 new graduates, injecting fresh perspectives and ideas into the organization. We are proud to be consistently recognized as the best employer for seven consecutive years. Looking ahead to the fourth quarter, our top priority is still to help our client partner to be successful in a tough market environment this year. During this year's W11, We are glad that once again, we helped many brands to become the top performer in their segment, with over half of our brand partners achieved year-over-year growth. Now let me turn the call over to Sandrine to elaborate more on BBM.
spk08: Thank you, Vincent and Arthur, and thank you all for joining us today. It is my great pleasure to speak with you. BBM is existing well on its transformation of Gap China, shifting from a discount-driven approach to one that focuses on building consumer love for our brand and products, that is, the premiumization of Gap. In the third quarter, we accomplished a wider array of successes in this direction. This includes successful new product launches, new store openings, and increased brand marketing and visibility. Together, they lead us to wide improvement in financial metrics, including higher same-store sales growth, faster inventory turnover, stronger gross margin, and better than forecasted operating loss for the third quarter, as demonstrated on slide 8. Let me now provide you with additional color on our new product launches. Building upon the foundation established in the first half of the year, this third quarter, we introduced our new locally designed China for China product, aiming to deliver the right product for the right people at the right time. This product line upgrade is a continuous process and critical to the apparel industry. Our new product line features three new segments, modern preppy, urban workwear, and premium blue, in addition to the traditional Gap logo segment. We launched these products with a comprehensive go-to-market strategy. Since the last week of September, we have elevated the Gap brand for a combination of celebrity endorsements, new store openings, new products, doing super brand day spotlights, and the I Am Gap social buzz. As of October 31st, the I Am Gap campaign has generated over 309 million impressions, while Crave Gap, Just Gap, or Xiang Gap, Qiu Gap in Chinese, it accumulated 222 million impressions across Weibo, Douyin, and Xiaohongshu. We also garnered over 100 million impressions during our Douyin Superbrand Day. in late September. During the period, we were able to grow GMV by seven times year-over-year to 56 million, setting a new record for self-broadcasting in a single day. We also topped Douyin's flagship and Men's Fashion hot list during the event. This marks a significant shift from the past, where our products, marketing, and channels were not managed in a fully integrated way. Consequently, with our integrated IMGAP message, products and channels, our new products are increasingly sold at full price and more customers are purchasing new products instead of the discounted carryover products. During the third quarter, our inventory turnover days improved to 177 days down from 220 days a year ago. In addition to the new products, we successfully opened five new stores during the quarter, including a flagship destination store in Guangzhou, as well as new stores in Chengdu, Shenzhen, and Beijing, as shown on slide number nine. These stores emphasize the product layout that is younger and more interactive. We also showcase trendy co-branded designs, as well as an upgraded segmentation for men, women, and kids. As Vincent mentioned, I am proud to share that our Guangzhou Zhengjia flagship store, situated in one of the top 10 shopping malls in China, distinguished itself with significant higher foot traffic and an elevated brand energy. To date, their total sales have exceeded our internal expectations, and we are on schedule. to open a total of 10 new stores in the second half of 2023. Benefiting from our success, ABM's gross margin for the quarter reached 56 post-royalty fees, marking a significant improvement of more than 10 percentage points from a year ago. Other key metrics, including traffic, conversion rates, average ticket value, and sales per square meter all demonstrate positive market feedback. Another indicator of premiumization is the positive shift of our consumer demographics. Please turn to slide number 10 as we have prepared a demographic analysis pre and post our IM Gap Brand Campaign. We have observed a significant increase in the contribution of new members who tend to be younger have higher consumption power and prefer to purchase new products. Notably, the important 18 to 29-year-old segment has grown by 700 basis points to 42%. As of October, we have acquired more than 28 million members, contributing to 77% of our sales, of which roughly 2.5 million are active members. we are excited about the upgraded front end of our business. Let me now talk about the progress on our back end. During the quarter, we've made rapid improvements to the local supply chain with localized capacity, accounting for almost 100% local sourcing. This agile supply chain has enabled us to reduce our design to shelf lead time from the previous three to six months to just a matter of weeks. In addition, we also quickly upgraded the IT systems with the help of Baozun technology. With the completion of phase one of ROP, our retail operation platform, we are preparing for phase two where we aim to deploy Baozun's big data capabilities to develop an intelligent end-to-end value chain management to drive omnichannel inventory and CRM efficiency. This enhancement will empower us to make more agile decisions on merchandising, marketing, and inventory management. This will be a key emphasis in GAP's journey towards online merch offline growth and a major milestone for BBM at large. As you can see, in the first half of 2023, we substantially upgraded GAP's supply chain, significantly increased store efficiency and strategically recruited talent for all key positions. In the third quarter, we successfully launched our new locally designed China for China products, opened new stores and elevated GAP's marketing. We will continue to expand our product portfolio and open additional stores in Q4. We are confident about where GAP is heading. Lastly, Our recent acquisition of Hunter is proceeding as planned with the establishment of the joint venture of Authentic Brands Group. Given the positive momentum of the brand, we are optimistic about its development plan. We look forward to sharing more with you on our next call together. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.
spk11: Thank you. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Alicia Yap with Citigroup.
spk10: Please go ahead. Hello, thank you. Good evening, management. Thanks for taking my question. Congrats on the solid results. I have two questions. First is, would management able to share with us what have been the notable changes that you observed during this year's Singles Day promotion period. For example, you know, the consumer consumption patterns, you know, how brands promotion efforts and even some of these large e-commerce strategy, anything that you know that's a big change this year. and also the marketing campaigns that you help out the brands to execute is effective in driving the intended sales or getting the GMB or the results that the brands want. Any positive or negative surprise that you see that you're able to share with us? you know, for example, any brands that, you know, particularly has a standout in their GND or even, you know, the new user growth or anything, anything that you can see on positive or negative that you can share. And then very quickly on second question, is any preliminary view that management can share how next year, 2024, the growth rate that Baozhong can achieve? Thank you.
spk06: Thank you, Alicia. It's a long question. Let me try to share some of the observations for this year's W11. So first, I think the overall traffic in the traditional platform like Tmall and JD is lower than the previous years. But on the other hand, there are more traffic shifting to the social media and content-based platform such as Douyin. That's number one. Number two is we have seen an increased competition among the different e-commerce platforms, offering better price transparency with a better overall customer experience, like how to return the goods, how quickly the product can be delivered. So that's a key observation. And then from a brand perspective, This leads to a record high cancel and return rate for all platforms, which causing the issues and causing the financial impact to the brands. What Bodrum has been helping the brands are three things. The first one is during and before and during the double 11 campaign, we helped the brands to create a overall strategy for all channels. So that helps the brand to know what they do for the different channels at the different periods of the promotion. And secondly, given our capability to offer an end-to-end service, including operation customer service and logistics and warehouse, we can link all the service together using our system capability to provide a better overall customer experience. And also helping the brand to create a better efficiency. For example, during the W11, the cancel rate has been high and return rate has been high. But with our system capability, we are able to very quickly release the canceled item back to the shelf, allowing the brands to sell the product without losing the opportunity during the W11. And finally, it's our support to the brand on the good data insights, which is helping the brand to make real-time changes and shifts on the different phases of the campaign, helping them to achieve a better result. So overall, I think we have met and for some brands exceeded our own goals internally. But from a financial perspective, because of the high return and cancel rate, we are waiting to see how much impact that will have on us. In regarding to your second question in terms of the next year, given the foundation we laid out on e-commerce for this year, we believe we will have a positive growth both top line and bottom line for the next year. We are in the process of finalizing our annual operating plan for next year, and I will be able to share more in our next call.
spk10: Thank you.
spk07: Thank you, Alicia.
spk11: Our next question comes from Thomas Chong with Jefferies. Please go ahead.
spk09: Hi. Good evening. Thanks, management, for taking my questions. My first question is relating to GAAP. Can management comment about the strategies and investments that we should expect over the next few years, and in particular, how we should think about the revenue scale and the timing to achieve a break-even? And my second question is back to the e-commerce business in the domestic market. about the omni-channel strategies. Can management comment about the future mix for Timor and the Long Timor channel? Thank you.
spk06: Okay. Thank you. Maybe, Sandra, you can go for the first one. I will cover the second one.
spk08: Okay, sure. Okay. Thank you, Jeffries, for your question. So, in terms of strategy, we're going to pursue what is at the heart of BBM. So at the heart of BBM is really China for China and technology empowerment. So we are already on a good track on these two, but we are continuing. And in the specific case of GAP, we will also pursue the premiumization trends that we have engaged in, thanks to our control of supply chain and to our absolute control of discounts. So this will continue with more to come in terms of products, more to come in terms of opening new stores. As you noticed, we started to open five new stores in the third quarter. We have another five planned in the next quarter. And this trend will continue over time and in 24 and beyond. And we are confident that we can actually stick to our initial plan, which was to significantly reduce the loss this year, further halve it next year, and be breakeven in 2025.
spk06: Thank you, Sandrine. On the second question regarding domestic and international brands, so basically our observation is In the recent years, the domestic brands have captured more market share in the middle to low price range segment in each category. At the same time, international brands still dominate the high price range segment with a better overall brand attractiveness, better overall customer experience, and more product innovation and introduction. For Baozhen, we see opportunity in both the international and domestic brand partners. For the international brands, they would like Baozhen to play a role as a strategic partner, offering them an end-to-end one-stop solution, including help them to design a strategy for the overall China e-commerce and then help them to execute. So this is something Baldwin is very uniquely positioned to provide. For domestic brands, given they are close to China, some of the operations they normally do in-house, but they come to Baldwin asking for help on the value added service, such as the digital marketing, the warehouse management and technology. So with the China e-commerce ecosystem becoming more and more to specialize in each of the services, we believe we have opportunity in both international and domestic brands.
spk03: OK, operator, maybe next one, please.
spk11: Yes, our next question comes from Sophie Horn with CMBI. Please go ahead.
spk02: Okay, thank you. Thank you for taking my question. I have two questions here. Number one is regarding the Hong Kong location acquisition. So what is the rationale of location acquisition, and how do we look at this synergy in the live streaming e-commerce segment and the financial impact from this deal? And the second question is regarding our live stream e-commerce update. We have made progress in Douyin ecosystem for brands. So can you help us to understand the ROI difference between Douyin channel and the Tmall channel and how to improve it? I remember you mentioned that luxury brands performed well in Douyin ecosystem. And what about other categories? Thank you.
spk06: Okay, thank you for the question. We believe the overall trend for the e-commerce in China will have more social and content-based e-commerce. So that's the trend we see. And based on that view, we think the capability to produce high-quality live streaming and content is a must to have in the upcoming years. So based on that rationale, We searched the market. We want to find the best match between Baudrin's capability and also the service provider we are looking for. So we found Location, which is an innovative and very solid business with a very deep experience and know-how on how to run the live streaming in both the Tmall and STOIN platforms. And also after our initial working with Location, it's a well-run business with a healthy profit margin and a talented core team. So we believe the combination between Boldrin and Location will be able to utilize the good system and infrastructure of Boldrin, the very deep relationship and all-mini-channel relationship Boldrin has with brands, and also the location's high-quality live streaming operations capability, and also their Hangzhou facility. We think combining those two, we'll be able to make us one of the best creative content and live streaming service providers in China. And we think this capability will help us to provide the value-added service for our high-end brands. The second question about ROI, we think the ROI for both the Douyin channel and Tmall channel is currently under the pressures. So that's because for both the Douyin and Tmall, we need to know in terms of how to define a successful strategy to improve ROI. So if we think from the brand perspective, how to differentiate the merchandising strategy, how to attract the traffic, how to do the digital marketing in those two different platforms will determine how good a ROI is about. So that's why we think offering a good capability and working closely with the brand will be able to improve the ROI for both brands. So in those two platforms, you will be able to improve the ROI if you do a very good operation.
spk07: Okay?
spk02: Okay, thank you, Eric.
spk07: Thank you.
spk11: Our next question comes from Colin Chan with City Securities. Please go ahead.
spk05: Good evening, management. Thanks for taking my question and congrats on the solid results this quarter. I have two questions about BBM. The first question is about GAAP. It has been around three quarters after the acquisition of GAAP China. And looking back on the past quarters, what operation results are beyond your expectation and what are below your expectation? And the second question is also about gaps. How to evaluate the improvement of gap results? And what are the key metrics to follow other than the gross profit margin? And when we're talking about to cut the, to cut the, to maintain the price of gaps and But in China, especially this year, people are talking about the consumption downgrade. So what's your observation when you are doing this kind of improvement of gas? And that's all. Thank you.
spk08: Okay. Thank you for your question, Colleen. So first, after three quarters, not exactly three quarters, because actually we took over in 1st of February, We can say that most of the operational results exceed our margin, exceed our expectations, particularly when all the indicators that point to better attraction of the brand, which means primarily, obviously, this margin that we discussed earlier, which has increased much more significantly than we even expected. expected, but also the inventory turnover that has been also a very, very strong improvement. At the same time, by saying this, I'm showing you some metrics that we consider as very important. The inventory turnover, the same store sales growth, the conversion rates, these are all metrics that we look very carefully at because at the end of the day, this indicates if the brand is attractive for a consumer or not. If a consumer comes to a shop and buy a brand only because it's discounted, it's actually not a good sign. So from the beginning, we've been extremely attentive to these metrics because this is actually how to get back on track to be a positive brand, a brand that attracts consumers. And on all these matters, we are actually quite satisfied. And it's usually beyond expectation. Now, where it's a little bit slower is on the online part of the business, where obviously it takes longer time to achieve this with consumers. All the more so as we used to be, Gap used to be very much a Tmall online business. And we saw, as mentioned by Arthur, a lower traffic in general on Tmall and JD. And this obviously has also been a negative factor for our online business. So that's to answer the first part of your question. Now, answering the second part of your question, obviously we do pay attention to our top line, but our top line, we prefer to look at it primarily in same-store sales and same-channel sales to see the progress. then gross margin is fundamental. Without a proper gross margin, you actually cannot do anything. We also, if I stick to financial metrics, inventory management and inventory days of turnover, very important as well, because this is a precondition for the gross margin to remain healthy and control, obviously, of cost. And on all this, we are quite... happy with what has happened so far, and these are the metrics we will continue to look at going forward. Now, to answer the third part of your question, although we have a premiumized gap, we haven't turned it into a luxury brand by far. What we've done really is to make sure that a larger percentage of products are sold at full price instead as being fully discounted from the first day. And I think that even in the current circumstances of a slower economy, we can see that this is a winning strategy. And in fact, I would say that the consumers today are not so much chasing bargains, but they are really looking for value for money. And value for money is not just a question of money, it's also a question of value. And what we can see is that if we give consumers at a reasonable price, a price that reflects the value in the product, the product he or she wants with the quality he or she expects, the design he or she expects, then this is what they consider to be value for money and this works. That's about the way I would answer your three parts of questions.
spk05: Very clear. Thank you very much.
spk11: Again, if you'd like to ask a question, please press star then 1. Our next question comes from Jack with Altair Securities. Please go ahead.
spk04: Hi, good evening, management. Thanks for taking my question. I have a small question regarding M&A strategy. We have seen some progress on gap business after our acquisition. So could management share some thinking on the M&A strategy going forward? Thank you.
spk01: OK. Thank you, Jack. This is Vincent. I will answer this question, and then, Sandrine, maybe you want to add some comments off that. For the M&A strategy, I think we have two parts and one important consideration. One part is about the BBM. I think for the BBM M&A for potential brands, number one is that we think Right now, Gap and Hunter is very important for us. So the first thing we need to do is to make Gap Turnaround a successful one. And, you know, to have Gap and Hunter, you know, with all the potentials they have, to turn this to a very positive opportunity for us. That is number one. Number two is that we will still be very active in exploring potential brands, but we will be very selective for brands. The brand and the opportunity has to be good and then has synergy, meet our criteria. So it will be a very selective way for us to acquire new brands. For BEC, you know, we are acquiring necessary capabilities from, you know, other companies or vendors. Just like location, we just have done. So in this direction, I think we will be also very selective. And I think right now most of the capabilities of Baozun are very good. and we're strong enough in different aspects. So I think maybe only for those very selective opportunities we consider to acquire in the future. So overall, I think the one principle for us, which is very important, is synergy. No matter it is a brand or it is a company with a special capability we are going to acquire, it has to have a very strong synergy to the existing business. no matter it is a brand business or it is an e-commerce business. So that is the overall strategy for M&A. So, Sandrine, you want to add something?
spk08: No, I think I may just say that, yes, of course, we want to, number one, prove the turnaround of the brand, specifically GAP. Number two, we really want to be very selective and also to be true to our key criteria, which is China for China and technology empowerment. So we want to really select brands where these two drivers will make a huge difference.
spk07: Okay.
spk11: This concludes our question and answer session. I would like to turn the conference back over.
spk03: I could actually just see Thomas back on the queue, maybe the last one, please.
spk11: Sure, it looks like we have a rejoiner here. We will now take a question from Thomas Chong with Jefferies. Please go ahead.
spk09: Hi, good evening. So, I may ask a quick follow-up question. I think it's more relating to the trend for our take rate. Can management comment about how we should think about it in the near term and the long term? Thank you.
spk06: Okay, thank you, Thomas. I will take this one. In terms of the take rates for the e-commerce services, what we observe is some of the basic services like the store operations, the customer service, the take rate is under pressure and has a trend to reduce. Our reaction to that is we want to improve our internal efficiency through the economy of scale to make sure we keep competitive in terms of the price we offer to counter the impact of drop the take rate. At the same time, we see the take rate for the value added service has been really, for some really high quality service, we see the take rate is really firm. So that's why we shifted a lot of our efforts into creating a good quality, higher value added service in our BEC kind of the service offerings. And at the last, we think from this year, we start to do high-margin, high-quality product sales business. And we believe with more control for the product sales business, we will be able to positively contribute to the gross margin and also to the net profit, despite a very high pressure on the take rate. Got it. Thank you.
spk07: Thank you.
spk11: This now concludes our question and answer session. I would like to turn the conference back over to Wendy Sun for any closing remarks.
spk03: Thank you, operator. On behalf of the browser management team, we would like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us Thank you for joining us today. This concludes the call.
spk11: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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