Vipshop Holdings Limited

ladies and gentlemen good day everyone and welcome to vip shop holdings limited first quarter 2025 earnings conference call at this time i would like to turn the call to miss jessie chang vip shop's head of investor relations please proceed thank you operator hello everyone and thank you for joining vip shop's first quarter 2025 earnings conference call

With us today are Eric Shen, our co-founder, chairman, and CEO, and Mark Wong, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include and are not limited to those outlined in our safe harbor statements in our earnings release and the public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this poll, such as non-GAAP operating income, non-GAAP net income attributable to VIP shop shareholders, and non-GAAP net income per ADA, are not presented in accordance with the U.S. GAAP. Please refer to our earnings release for details relating to the reconciliation of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen.

Good morning and good evening, everyone. Welcome and thank you for joining our first quarter 2025 earnings conference call. Our first quarter results came in largely as expected. We continue to make progress on our path to return to growth. Our team stayed ahead of trends to offer more unique and quality of price seasonal items that were more relevant to customer preference, we see apparel category achieved positive growth in the first quarter. Super VIP membership extends its double-digit growth. In the first quarter, active SVIP customers increased by 18% from a year ago and accounted for 51% of our online spending. This hardcore cohort of customers show clear strength in terms of sales and revenue growth. We are keeping a close eye on the broader customer trend. We still see customers show more willingness to spend on family and seasonal essentials, and they are gradually catching up on spending in most discretion categories. We remain anchored to the value proposition of discount retail for brands. Certainly upon our long standing merchandising strategy, we are also making change throughout the organizations in how we align with those priorities. Operator in greater synergy and the driver unique compelling customer value. Our teams are restricted in the way that are more aligned and efficient so that they can act with speed to turn potential into growth. We will highlight the strategic priorities to grow the share of brand supply at exceptional value to invest in custom engaging initiatives that drive traffic, frequency, and multi-category purchases. and to speed up technology advancement that's driven value creation for business. Starting with merchandising, we are focused on the brand and the products where we have made the biggest differences for customers. It's key factors in driven traffic and customer growth. That's why we believe in the power of merchandising capabilities. which we are leveraging to quickly adapt to trends across fashion appellants, as leisure and family lifestyle categories, continuously giving customers more reasons to stay here. One of the best examples in our Made for VIP shop business, which continued to outperform in the first quarter, a total of more than 200 brands joined this program by the end of March. We are close to the brand partner in transforming customized offering based on customer insights and changing trends. We are moving fast to deliver a more compelling brand of quality and value. We also have a prominent channel for Made for VIP shops. We expect it to become the to-go place for customers to discover affordable, on-trend products that they cannot find anywhere else. In the first quarter, we also unveiled more unexpected high fashion selections to keep customers coming back to see what's new. Customers were overjoyed with some of the best deals they got, such as Beverly Coach and more. or through the invite only provides sales. We are trying to gain traction with customers as a place for fresh sales and the trailer hunting. Turning to customers, we aspire to bring together the best of what they want in the unique shopping experience. On top of the compelling Alloy product offering, customers know that we stand behind what we sell. That's why our SVIP customers are clearly growing more attracted to our platform because of the affordable and reliable nature in our business. We have planned to make the loyalty program bigger and better. We are focused on how we could further differentiate it. For example, our customers are often family shoppers who love travel. So new as second quarter, SVIP members receive more relevant and rewarding life privileges such as Gold Card upgrade for Changlong theme park and hotel accommodations and so on. We are also increase the power of AI throughout the customer experience in many ways. We will be improve our AI powered algorithm to enhance the logic behind the search and the recommendations. We were leveraging general AI to create high-impact content, including smart mix-and-match content that make product page more compelling, and automatic customer review summary that highlight key insights to help shoppers. We also applied AI to customer service, handling product inquiries, generating personalized recommendations, and potentially acting as a smart shopping assistant. Also, by leveraging general AI, we generate target marketing creatives for diverse platforms and audience, helping enhance customer acquisition efficiencies. So we will continue to invest in opportunities for long-term success. We look to set ourselves apart, provide more than what customers expect, and building the unique experience. Against a backdrop of ongoing uncertainty, I'm confident in our team who have navigated through several years of volatility to keep pace with customer trends, double down on execution of strategy, and regain close track. At this point, Let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Thanks, Eric, and hello, L1. In the first quarter, we sustained solid profitability despite sales pressure due to muted sentiment on discretionary spend. As we prudently increased investment in building customer and brand momentum to seize growth opportunities, margins softened modestly compared with a year ago, but still held up healthily within our expectations. It underscored our capacity to drive operational efficiency, build on years of efforts in refining internal management. As Eric mentioned, we are driving important teams within the organization for our long-term success. It will be an enhanced mindset across the business. to find growth, synergy, and efficiency opportunities we can take to the bottom line. We will remain focused on executing these strategic priorities with greater agility while maintaining discipline. Turning to our shareholder return program, our full year 2025 commitment remains unchanged. returning no less than 75% of the 9 billion RMB full year 2024 non-GAAP net income to shareholders. Year to date, we have returned over 400 million US dollars to shareholders, which include approximately 250 million US dollars in annual dividend distribution. and over $150 million in share repurchase. Now, moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers present below are in人民币, and all the percentage change are year-over-year change, unless otherwise noted. Total net revenues for the first quarter of 2025 were 26.3 billion RMB compared with 27.6 billion RMB in the prior year period. Gross profit was RMB 6.1 billion compared with RMB 6.5 billion in the prior year period. Gross margin was 23.2% compared with 23.7% in the prior year period. Total operating census decreased by 1.6% year over year to RMB 4.0 billion from RMB 4.1 billion in the prior year period. As a percentage of total net revenues, total operating census were 15.3% compared with 14.8% in the prior year period. Fulfillment expenses decreased by 4.8% year-over-year to RMB 1.9 billion from RMB 2.0 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.2% which remains stable as compared with that in the prior year period. Marketing expenses increased by 6.0% year-over-year to RMB 732.1 million from RMB 690.9 million in the prior year period. As a percentage of total net revenues, marketing expenses were 2.8% compared with 2.5% in the prior period. Technology and accounting expenses decreased by 6.8% year-over-year to RMB $449.1 million from RMB $481.9 million in the prior period. As a percentage of total net revenues, technology and accounting expenses were 1.7%, which remains stable as compared with that in the prior year period. General and administrative expenses increased by 2.3% year over year to RMB 950.8 million from RMB 929.1 million. in the prior year period. As a percentage of total net revenues, general and administrative expenses were 3.6%, compared with 3.4% in the prior year period. Income from operations was RMB 2.3 billion, compared with RMB 2.8 billion in the prior year period. Operating margin was 8.7%, compared with 10.0% in the prior period. Non-GAAP income from operations was RMB 2.6 billion, compared with RMB 3.1 billion in the prior period. Non-GAAP operating margin was 10.0%, compared with 11.1% in the prior year period. Net income attributable to VIP shop shareholders was RMB 1.9 billion, compared with RMB 2.3 billion in the prior year period. Net margin attributable to VIP shop shareholders was 7.4%, compared with 8.4% in the prior year period. Net income attributable to VIP shop shareholders per diluted ADS was RMB 3.72 compared with RMB 4.18 in the prior year period. Non-GAAP net income attributable to VIP shop shareholders was RMB 2.3 billion compared with RMB 2.6 billion in the prior year period. Non-GAAP debt margin attributable to VIP shop shareholders was 8.8% compared with 9.3% in the prior year period. Non-GAAP debt income attributable to VIP shop shareholders per diluted ADS was RMB 4.43% compared with RMB 4.66 in the prior year period. As of March 31st, 2025, the company had cash and cash equivalents and a restricted cash of RMB 28.9 billion and short-term investments of RMB 192.3 million. Looking forward to the second quarter of 2025, we expected our total net revenues to be between RMB 25.5 billion and RMB 26.9 billion, representing a year-over-year decrease of approximately 5% to 0%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We kindly ask analysts to translate questions into Chinese if you are bilingual. Please stand by while we compile the Q&A roster.

Thank you.

We'll now take our first question. First question is from Thomas Chong from Jefferies. Please go ahead.

Good evening. Thank you, Manager Cheng, for accepting my question. My first question is that in the past few months, has there been a big change in consumer sentiment? Especially when we look at our current GMV in Q2, the quarter-to-date trend, can you share it with us? And then, can you share with us Thanks management for taking my question. My question is about the recent consumer sentiment Can management comment about the monthly GMV trend so far we are seeing in Q2, given a lot of events happening like tariffs, MAPCO headwinds, etc., and how we should think about the revenue and the earnings outlook for the full year 2025? And my second question is about the upcoming Juneteenth campaign. Can management comment about the latest sentiment and how the event is different from last year or similar to last year from an industry perspective? Thank you.

我回答一下,就是2025年的 The overall consumption trend we see is that in January and February, it is actually very normal. It is because the consumption of the Spring Festival was a lot in the last year. So January and February are very normal. In March, it is a little better. The situation in April and May looks a little better than in March. So this is the overall consumption trend we see at present. Then, in addition, we look at our own income. Then, because we are actually in Q1 and Q2, we are actually in negative growth. Then, the negative may be negative growth from 0 to negative 5. But we hope that in the second half of the year, for example, in Q3 or Q4, we will turn positive. That is, how do we turn it back? Then, we hope that the time will also turn positive. Then the other is the whole year's profit estimate. We think we actually have some ways to grasp the profits, which is that we are also relatively stable. So in theory, we ourselves think that this year's profit rate is actually not much different from last year's profit rate. 那么整体我们说的今年就哪怕生意不好 就是或者说上半年我们是零到负 下半年可能会好一些 那么我们认为整体的GMV 不会这种大起大落 也不会跌得很厉害 那么我们说争取转正 那么利润方面我们相信是稳定的 Then the second one is about 618. Because now, all the e-commerce companies in 618 have been doing it for a long time, for another month. Then we basically started on May 17th. Everyone does it for a month. So now, in fact, China China China China China Then it includes that everyone is not saying that you have to choose some really good and valuable things to buy. Then it is what we are talking about. Everyone who has no value buys less. So we actually see the overall trend of consumption in China. We say that everyone is more and more like that. It's not like buying all the time. Then it may really be choosing valuable or your own must-haves to pay for these bills. So this is a general description of me.

Okay. Regarding your first question on consumption, I think in the past few months, we do see signs of improvement in overall consumption sentiment. After muted start in January and February, actually we do see some modeling improvement in March in terms of sales, and into the second quarter, April plus May to date, we see actually even better sales momentum. And for the 2025 full year outlook, we maintain our view that we are going to continue in the second half, in the third quarter or the fourth quarter after a negative five to zero growth trend in the first half. And on margins, we have a good command of our overall profitability because of our disciplined investment and also management. So we maintain our new margins as well. We believe that on a full year basis, our net margins will be largely comparable as we had achieved in 2024. And in terms of the second question on the June 18th promotion, Actually, you may have noticed that the industry promotion has been quite lengthy. It lasted for a month, and consumers are growing accustomed to these promotions and subsidies. Everything is readily available. They actually don't have to stock power, anything, but they do look for value, they focus on deals. So they are still responding to promotions. They do have a shopping need in terms of family and seasonal essentials, but the overall trend becomes quite normalized for everybody. So for the IP shop, we just focus on providing unique quality and off-price value for money deals for consumers.

Thank you.

Thank you. We'll now take our next question. This is from Alicia Yap from Citigroup. Please go ahead.

Hi, thank you. 沈总,马总,Jesse, 晚上好,谢谢接受我的提问。 我其实是有个问题,有两个问题, 一个是关于虽然我们的业务没有直接跟这个跨境电商啊, 这个关税没有一个直接的关联啊, But I'm just curious to know if there are some, because in April or these two months, some are originally foreign trade, some clothes and clothes from the export market. In April or May, did any of them temporarily turn to the domestic market to sell? and affect some of the needs of users to move to other platforms. The second question is, I don't know if we are considering the second listing in Hong Kong. Let me translate it for you. Thanks management for taking my question. Have a questions related to the tariff. Understand that our business does not have a direct collaborations with the cross border sales and also the tariff. But just wonder if some of these access supply from apparel that's supposed to aim for the export market that were temporarily diverted to the domestic market in April or the last couple months that actually attract away some of the user demand to the competitor site. Second quick question is that just wondering if our management or company have any view about potential secondary listing in Hong Kong. Thank you.

Let me answer the first question. The second question, Mark, is that because we don't have an export, we actually have little impact on the impact of tariffs. There may be some health care products, health care products made in the United States, that are affected, but they are not big. Some products made in the United States, because they are not produced in the United States, so the tariffs are not added, that is, no tariffs will be added. Taiwan Taiwan Taiwan Taiwan Taiwan Including what we see now, the tariffs are a little less tense than before. But in the future, these foreign trade companies will also take two paths. So to give some more time, I believe that there will be more foreign trade companies with better supply chains that will also see China's domestic market as a candidate or a plan. So what we currently see is that the overall foreign trade transition and domestic sales Let me translate.

In terms of the tariff question, we have very limited exposure to exports. And we do have a very limited amount of, you know, direct purchases from the U.S. market, mostly health care products. or non-US origin products. But overall, the exposure is very small. And in terms of export companies trying to divert their export goods to domestic markets, we do see that because in April, we have already started to work with these export companies trying to see the possibilities to help them gain access to our customers on VIP shop. But it takes time because there are a lot of different standards for export and versus domestically manufactured products in terms of brand trademark and quality certification, et cetera. We believe over time, export companies, especially those with quality supply chain capabilities, will choose the domestic market as one of the options for them to gain a wider base of consumers within China. And we are trying to grab any opportunities arising from that in terms of you know, getting access to quality brand supply, etc. But it takes time.

Okay. Alice, thanks for your question regarding the Hong Kong listing. And we have been closely following changes in the capital market developments and evaluating the option of Hong Kong listing internally. So we'll keep the market posted if there's any progress. Thank you.

Thank you.

We'll now take our next question. This is from Wei Xiong from UBS.

Please go ahead. Thank you management for taking my questions. I have two questions. The first one is regarding our SVIP program. we can see the SVIP member growth has been very steady over the past few quarters. Can we please update our strategy here to further drive the SVIP growth going forward, and do we have any goal for the second half and next year? And second, just a quick one, could management update the competitive landscape change you have seen over the past few weeks, over the past few months amid the macro uncertainty for the e-commerce competition? Thank you.

Actually, I will answer the first question first. Actually, the growth of SBIP is still very good. We ourselves think that this year, anyway, it is no problem to maintain double-digit growth throughout the year. So, including our past Q1, it is really good. Currently, looking at Q2 data, it is really good. And our policy is relatively stable. So, actually, we ourselves think that the growth of SBIP is not a problem. In addition, we are also thinking more about 好东西那么想着说如何独家卖给我们的SVIP或者先卖给我们的SVIP 那么因为我们说的就是想积累更多的给SVIP的独特价值让他觉得忠诚那么包括那个独有的体验 那么等等啊那这样的话呢我们相信就是我们把这些做得更好相信 更多SVIP会来包括SVIP的留存的每年的留存会更高 So we are also actively thinking about various ways to accumulate our SVIP amount. We believe that because these SVIP sales have already accounted for 51%, the future may be higher. So we actually need to take good care of these SVIP users. The second is about the pattern of the industry. Now everyone knows that the industry is actually very twisted. Then the e-commerce industry is even more complicated. So we say we want to survive in the entire e-commerce industry. Then we think we still insist on our special sales. That is to say, because we were originally from a discount, including what we said was online. Then we actually have to be more determined to make good brands. 我们说更好的价格 包括很好的服务是必须的 所以说我们其实现在就不管外界怎么卷 比如说包括有很多模式 卖直播也好 货架电商也好 我们认为说其实我们还是坚定的 在我们自己现有的业务上继续深挖 继续积累我们的优势 尤其是跟品牌这种合作的优势 我们说更好的 China China China China China China

First off, SVIP customers, we do see very solid momentum in the growth of SVIP customers, and it has extended double-digit growth for several quarters, and it continues to be so in Q1 and Q2 to date. And we think we have a very strong confidence that we can continue to achieve double-digit growth for SVIP customers for the full year of 2025. And of course, we are also working on a lot of initiatives to drive the SBIP customer growth, especially in terms of merchandising. We're trying to provide more unique, exclusive, off-price product offerings all through invite-only private sales to attract customers. more SVIP customers. And by doing so, we believe that we will increase retention of SBIP customers as well and we do believe that over time SBIP contribution in terms of online spending will grow from the current 51% to even a higher level in the foreseeable future. And second, in terms of industry dynamics, apparently it's a very hyper-competitive environment. We believe that the only way for VIP shop to survive and to compete and to win in this e-commerce sector is to remain anchored to the value proposition of discount retail for brands. And although there are a lot of business models in terms of how to sell the products, including live streaming platforms or shelf-based e-commerce. But the long-term factors that drive consumers in terms of where they choose to shop has always been great merchandise, great prices, and great services. So we will continue to deepen our initiatives to enhance supply view from merchandise to value to customer engagement. We believe that by remaining highly focused in discount retail for brands, we will gradually become the online outlet and the gateway for consumers to access deep discount product offering. We believe we have the capabilities and the capacity to compete in the wings in this market.

Thank you.

We will now take our next question. This is from Jialong Shi from Nomura. Please go ahead.

Hi, Mr. Shen, Jessie, and Peter. Good evening. Thank you for accepting my question. I would like to ask a few questions. First, can you share with us the trend of S-VIP's latest purchase frequency and its ARP trend? In addition, I would like to ask about the trend of our latest quarter return rate compared to the previous few quarters. Thirdly, I would like to understand that although our current operating environment has various challenges, the management level has to share 75% of the profits from last year to shareholders. I have three questions. And the first question is, what is the latest trend? Excuse me, what is the latest trend? What is the latest shopping frequency R pool trend for Super VIP members? And the second question is, what is the latest trend for your return rate? And third and last question is, despite all these challenges for the e-commerce industry, just wonder if management still maintains the previous capital return guidance for this year. Thank you.

Okay, I will answer the first question about SVIP. Our SVIP is relatively stable. Then we look at their ARP. In fact, the ARP of a year will actually fall. So the main reason is that our new SVIP will be more. New SVIP increases more. So if we look at the same SVIP in the past two years, we are slightly down. That is to say, its ARP is slightly down. So if you look at the total SVIP, it will fall more than this. So in general, we look at Svip's loyalty, the number of visits, the number of purchases, etc., is that it will fall a little bit than it used to be, so there is not much change, so we are actually thinking about how to get better things to satisfy these consumers, including that is what we are talking about, personalization, promotion, including that is to say, let him No matter how tough it is, I think so. You have a很多品類因為我們很多品類呢也有但是呢就是有些品類不是我們的強項所以說我們其實也在想更多的滿足消費者的需求那麼第二個問題就是關於退貨率那麼我們其實退貨率 Taiwan Taiwan In the last 6-7 years, the number of stores has increased by more than two times a year. However, I estimate that the entire Chinese e-commerce consumer needs e-commerce services more and more. Therefore, the number of stores has increased by more than two times a year. The third point is about... I will ask the CFO to answer.

Okay, first let me translate your first two questions. In terms of SBIP operating metrics, it has been quite stable. And otherwise, we do see a small decline because of the dilutive impact from new SBIP customers who need time to run up their spending. But if you look at the two-year cohort of SBIP customers, actually the upward decline is much smaller. And we are trying to leverage more unique and exclusive merchandising to increase the loyalty, frequency, and across category purchase opportunities for SBID customers. And we do see a lot of potential there because many of our SBID customers are family shoppers who look to shop across categories for the whole family. And it's just a matter of to optimize our personalized recommendation and to increase these, to translate these across category purchase potential into growth. In terms of return rates, overall the return rates have been stabilized. I think in the past quarter it has increased by a little bit over to a percentage point, we have a very stable return policy for customers. And in the past six to seven years, we have been adhering to that policy. So that's why our return rate has moderated over time to a low single-digit increase every year. rather than dramatic increases on some of the other platforms.

Okay, Jiang, regarding your third question, let me give you a full picture for this point. So although we are facing short-term pressure and the dynamic industry change, we have a solid business model with disciplined operations and a solid execution. So we are confident that we can achieve relatively stable and healthy profit in the cash inflow. So we have returned over $3 billion to shareholders since April 2021 in the form of buyback and dividends. And year-to-date, we have returned over $400 million to shareholders, which include approximately $250 million in annual dividend distribution and over $150 million through our buyback program. So I would like to emphasize for 2025, as we mentioned before, we are going to return no less than 75% of our full year 2024 non-GAAP net income to shareholders in discretionary share repurchase and dividend distribution.

Thank you.

Thank you. We'll now take our next question.

This is from Eddie Wang from Morgan Stanley. Please go ahead.

This is from Eddie Wang from Morgan Stanley. Please go ahead. The first question is, can we do more in the editor? And how big of a positive effect does it have on our entire GNV and income? This is the first question. The second question is, I saw that Shanshan recently posted a RAID. So I want to ask, Thank you management for taking my questions. I have two questions. First is about the trading policy. I noticed that we have a channel on the app which is focused on the trading program. So just wondering what kind of the sales and incremental sales or GMV actually coming from the trading program and how should we expect this benefit in the second quarter and the second half. And second question is, I just noticed that we have issued a rate for the Shanshan online. So is there any kind of the change of the Shanshan strategy after we get the funding front rate?

Thank you. 我回答第一个问题,Mark回答第二个问题。 就是第一个因为国补呢,就是说其实主要是补在家电上面的。 我们其实家电那个其实整体的生意不强啊, 尤其是用户的对微品会卖家电的感知呢很一般。 所以说我们其实看到国补呢, So first on the trading program,

You know, the trading program mostly covers home appliances, which is not a strong suit for the IP shop. And also, consumers don't feel a lot buying home appliances on the IP shop. They don't have that kind of mind shift. So, in total, we expect any contribution from the trading program will be around 1% of our total GME. So, it's not going to have a meaningful impact on our financial performance.

Okay. Abby, thanks for your second question regarding the Shenzhen Outlet Race program. And outlet business in China is huge and fast-growing. The outlet's business is a long proven and profitable offline business. Which positioning is also discount retail for brand? Well, VIP Shop is also a leading online discount retailer for brand. So definitely, we have huge synergies with outlet's business, not only from the brand partner side, but also from the user side. At the end of last quarter, we have 20 Shanshan outlets. We are one of the largest outlets group in China. And the underlying assets, Ningbo Shenzhen outlets, has been in operation for 14 years and is one of our best and popular outlets in Shenzhen Group. So we have submitted the REITs application documents to the China Securities Regulatory Committee and the Shanghai Stock Exchange for their review and approval. And the REITs could be regarded as a financing platform. We can raise funds by enrolling more outlets projects into RACE. And the funds can be used to reinvest into new outlets projects and merge and acquisition existing projects, so which will help us to expand our outlets business more efficiently. Thank you.

Thank you.

Thank you. We'll now take our next question. This is from Roger Duan from Barclays.

Please go ahead. Thank you, management, for taking my question. My question is on sales marketing and margins for this year. Management previously mentioned that we want to have GMV return to positive growth in the second half of the year. while also maintaining a quite stable margin profile for the remainder of the year. So my question is on how should we think about your marketing campaign cadence and the balance between spending on marketing and maintaining a margin profile for the year? Thank you.

. . . . . . . . . For example, when we talk about Q1 and Q2, we are actually growing well in terms of new customers, but we haven't seen that we have spent a lot of money. In fact, we adjust a lot of space inside, including how users get to see our brand, see our customer sales, instead of saying that we are going to pull customers today. In fact, in the future, it is also a principle in terms of old customers. So in theory, we still keep our own rhythm and don't overdo it in terms of controlling market costs. Then the other is to say that the market makes a sound, for example, we do a lot of TV dramas, including us in that a lot of that accurate investment, including us recently, for example, with a lot of these media that are now more solid, and so on. Then we are actually thinking about all kinds of ways, that is, we are looking for that, that is to say, 就是说最有价值的或者说成本还过得去的 那么有我们讲的有回报的 而且呢以后这种客户还比较健康的寻求这种投资 所以说总体而言呢我们对市场费用的花费我们还是有把握的

In terms of market spend, actually, market spend has been very measured, and we are going to do that for the rest of the year. If you look at our numbers in 2024, market spend is a percentage of total revenue was 2.7%. In Q1, it was 2.8%. So for the full year, we believe it's going to be within 3%. And we continue to evaluate the effectiveness of our marketing initiatives from a lot of perspectives, especially the LTV side. So we don't believe that marketing spend is the only way to drive customer growth. I would leave a combination of merchandise, value, and services to help drive customer growth. If you look at our Q1 and Q2 growth in new customers, actually they're growing nicely, but we actually don't spend so much on marketing. are trying to diversify our marketing channels, including branding through TV sponsorships, and target marketing on a lot of external channels. And we are also expanding our partnerships with major media outlets. And we are trying to look for the most valuable channels for us to invest. that we can have the best ROI and also have a sustainable growth in high quality customers. So basically, we have a very good command of our marketing stand and we don't think it's going to be a drag for our margins.

Thank you.

Due to time constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Jessie for any closing remarks.

Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.