ZKH Group Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 22, 2025

Key Takeaways

  • Negative Sentiment: Total GMV declined 12.1% year-over-year and revenues decreased 3.7% to RMB2.17 billion, primarily due to last year’s SOE business optimizations.
  • Positive Sentiment: Excluding the impact of SOE adjustments, the platform’s underlying GMV still demonstrated year-over-year growth, reflecting core demand resilience.
  • Positive Sentiment: Gross margin on a GMV basis expanded by 0.8 percentage points to 14.8% in Q2, marking the sixth consecutive quarter of margin improvement driven by procurement efficiencies and high-margin private label products.
  • Positive Sentiment: Net loss narrowed by 20% to approximately RMB53 million, with the company achieving monthly breakeven in June while continuing to invest in AI, last-mile delivery, and overseas expansion.
  • Positive Sentiment: Overseas revenue in the U.S. surged 260% Q/Q with ~6,000 registered customers, and the firm plans to launch its European standalone site by year-end, supported by a supplier base that is 70% non-China.
AI Generated. May Contain Errors.
Earnings Conference Call
ZKH Group Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Speaker 3

Ladies and gentlemen, good day and welcome to ZKH Group Limited's second quarter 2025 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jin Li, Head of Investor Relations. Please go ahead.

Speaker 3

Good morning and welcome to our call today. With me, I have Mr. Eric Chen, our Founder, Chairman, and CEO, and Mr. Max Lai, our CFO. Today's discussion may include forward-looking statements, related factors as described in our today's press release, and we will also discuss certain non-GAAP financial measures for comparison purposes only. Please refer to the earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will turn the call over to Eric. Eric, please go ahead.

Speaker 4

大家好，欢迎各位参加ZKH Group Limited 2025年第二季度业绩发布会。面对宏观经济的挑战，凭借战略定力与高效执行，二季度我们实现了稳健的业务发展。首先，我们平台继续保持高度活跃，客户数创单季度新高，这得益于我们新客户的增长和老客户的复购率持续提升。去年下半年开始，央企业务的优化调整的影响，二季度GMV为¥2.42 billion，同比有所下降。若剔除业务调整的基数影响后，我们的GMV仍实现了同比增长。

Speaker 3

Hello everyone, thank you for joining our second quarter 2025 earnings conference call for ZKH Group Limited. Despite ongoing macroeconomic challenges, we achieved solid business development in the second quarter through strategic focus and strong execution. Customer activity on our platform remained high, with the number of customers reaching a new quality record, driven by growth in new customer acquisition and a sustained increase in repeat purchases from existing customers. Due to the business optimization initiative related to state-owned enterprise, or SOE, and central SOE customers in the second half of last year, our GMV for the second quarter declined year over year to RMB 2.42 billion. However, excluding the impact from this initiative on the total GMV base, our underlying GMV still demonstrated year-over-year growth.

Speaker 4

AI tools, last-mile delivery, and overseas business expansion.

Speaker 3

The quality of our business also continued to improve. In the second quarter, our gross margin on a GMV basis reached 14.8%, representing a 0.8 percentage point year-over-year increase. This marked our sixth consecutive quarter of year-over-year gross margin expansion, driven by procurement cost optimizations and our high-margin private label products' robust GMV growth. In terms of profitability, our net loss narrowed to approximately RMB 53 million in the second quarter, a 20% year-over-year reduction. Notably, we once again achieved monthly break-even in June, following our first monthly break-even in March this year. What's even more impressive is that we attained this milestone while continuing to invest in strengthening our core competencies, including product capabilities, AI tools, and last-mile delivery, as well as expanding our overseas business.

Speaker 4

在对中长期发展保持前瞻性投入的同时，我们亦积极通过组织架构精简、流程改善以及AI工具的推广使用来提升整体运营效率和人员效率，以增强盈利能力。例如，在二季度，我们的客服人均处理订单数同比提升48%，过舱履约费率同比下降约18%。仓管履约运营效率和成本管控已达到行业领先水平。

Speaker 3

While maintaining our forward-looking investment to support our medium to long-term growth, we have also optimized our organizational structure, streamlined processes, and promoted the adoption of AI tools to enhance overall operational and workforce efficiency, all aimed at bolstering profitability. For example, in the second quarter, the average number of orders processed per customer service representative grew by 48% year over year, while our warehouse fulfillment cost decreased by approximately 18%. Our warehouse fulfillment efficiency and cost management have now reached industry-leading levels.

Speaker 4

接下来, 我将具体介绍一下二季度我们在国内和海外业务的表现。国内业务方面, 我们的双平台模式持续释放协同效应。ZKH平台深耕大中型企业客户, GBB平台赋能中小微企业客户, 以满足和覆盖不同类型客户的需求。首先, 关于ZKH平台, 从客户维度来看, 二季度行业大客户GMV和成交客户数分别同比增长约11%和22%。其中汽车、新能源、电器装备制造业及物业文旅行业的GMV增长超过15%。这得益于我们持续建设完善行业和客户商品池, 通过AI技术洞察客户需求, 实现精准选型和推荐, 从而深挖客户口袋深度。

Speaker 3

Next, I would like to provide a detailed update on our domestic and global business performance in the second quarter. Starting with our domestic business, our dual platform model continued to generate strong synergies. The ZKH platform remained focused on serving large and medium-sized enterprise customers, while the GBB platform empowered SME and micro-enterprise customers, enabling us to meet the needs of a diverse customer base. First, let's discuss the ZKH platform. From a customer perspective, in the second quarter, GMV from industry key accounts rose by approximately 11% year over year, and the number of these transacting customers increased by around 22% year over year. Notably, GMV in sectors such as automotive, new energy, electrical equipment manufacturing, property management, and tourism grew by more than 15%.

Speaker 3

These results were driven by our ongoing efforts to curate and refine industry-specific and customer-specific product pools, leveraging AI technologies to gain deeper insights into customer needs and provide tailored product selections and recommendations, thus further increasing customer wallet share.

Speaker 4

在区域中小型客户方面，我们服务区域化的组织管理和网格化的人员布局继续发挥作用。二季度，区域中小型客户的GMV和成交客户数分别录得约7%和13%的同比增长。其中，广东、安徽、河南、上海、江苏、浙江等多个重点区域GMV同比增长超过10%。这一成果源于我们持续强化对区域客户的服务能力，加速了区域客户的覆盖和获取。

Speaker 3

For regional SME customers, our region-based service and grid-based staffing strategies continue to yield strong results. In the second quarter, GMV from regional SME customers grew by approximately 7% year over year, and the number of these transacting customers grew 13% year over year. Key regions, including Guangdong, Anhui, Henan, Shanghai, Jiangsu, and Zhejiang, each saw GMV growth of over 10%. This achievement stemmed from our efforts to enhance our service capabilities for regional customers, accelerating both coverage and customer acquisition.

Speaker 4

在国外的客户方面，受去年下半年开始的业务优化调整的基数影响，二季度GMV同比下降超过50%。如我们在前期季度的财报会议中提到，该业务优化和调整已完成，影响逐渐消退。二季度国央企业务环比录得回升。我们有信心，基于我们供应链优势和给客户创造的价值，国央企客户业务将逐步恢复增长态势。

Speaker 3

For SOE and central SOE customers, GMV in the second quarter declined by over 50% year over year, primarily due to a high comparison base from business optimizations in the second half of last year. As mentioned in previous earnings calls, these business adjustments are now complete, and their impact is subsiding. Our SOE and central SOE business recorded sequential growth in the second quarter. We remain confident that, building on our supply chain advantages and the proven value we deliver to customers, this business segment will gradually regain growth momentum.

Speaker 4

hardware products to micro and small enterprises and C-end customers.

Speaker 3

Turning to the GBB platform, we drove continued scale growth with a rapidly increasing number of transacting customers in the second quarter. Profitability also improved thanks to broader coverage of SMEs and micro-enterprises and our strategic focus on higher margin MRO categories. The GBB platform's gross margin expanded by 1.4 percentage points year over year, and gross profit rose by more than 23%. Recently, we have been further sharpening GBB's strategic focus, placing greater emphasis on construction materials and hardware, a large and underserved market. By leveraging our online marketing channels and supply chain advantages, we aim to deliver high-quality, competitively priced construction materials and hardware products to both B2B micro-enterprise customers and B2C individual consumers.

Speaker 4

Our long-term goal is to reach approximately 30%.

Speaker 3

In the second quarter, we have also achieved significant progress in product and AI capabilities. In terms of product capabilities, we launched our smart manufacturing base in Taicang, Suzhou. As an integral part of our strategic smart manufacturing initiatives, this facility will further enhance our capabilities in product research and development, testing, and production. We believe it will serve as a key driver in strengthening our private label product development capabilities and their competitiveness. During the quarter, GMV from private label products rose to RMB 210 million, a growth of 25% year over year, and its contribution to our total GMV increased to 8.7%. Looking ahead, we remain committed to our long-term target of increasing the share of private label products in total GMV to approximately 30%.

Speaker 4

在AI方面，我们看到AI在物料管理、产品选型推荐、销售转化、数据标准化、流程效率提升等方面，已成为这些业务指标增长的一个越来越重要的驱动力。在二季度，我们继续推进AI智能化建设，特别是在数据建设方面。我们致力于提升商品数据质量，包括丰富商品属性参数、规范属性规则、优化图片质量等，并成功对超过100万的商品数据完成高质量数据标注。结合我们在AI大模型和算法层面的深度优化，经标注的产品线业务指标显著提升。我们也在构建一套从数据增长、标注、治理到应用的商品数据管理全生命周期平台，目标在今年实现高质量商品数据的大幅增长。在AI时代，构建行业最全面、最专业的工业用品大数据库，即ZKH Data Dictionary，为工业领域客户提供更专业的数据服务。

Speaker 3

Moving on to AI, we've seen that AI is becoming an increasingly important driver of growth across various business metrics, including material management, product selection and recommendation, sales conversion, data standardization, and process efficiency improvement. In the second quarter, we continue to advance our AI infrastructure with a particular focus on data development. We are consistently improving the quality of our product data by enriching attribute parameters, standardizing attribute rules, and optimizing image quality. We've completed high-quality annotation for over 1 million product data points. In combination with our deep optimization of LLMs and algorithms, these annotated data sets have led to significant improvement in key business metrics. Furthermore, we are building a comprehensive product data management platform that spans the entire data lifecycle, from collection and annotation to governance and application.

Speaker 3

Our goal is to achieve substantial growth in the generation of high-quality product data this year and to establish the industry's most comprehensive and advanced large-scale database for MROs, which we call the ZKH Data Dictionary, providing our industrial customers with highly specialized data services.

Speaker 4

海外业务方面, 首先, 在美国和欧洲市场, 我们实现本土经营战略, 以供应链优势精选高性价比商品和创新科技优势切入市场。截至6月底, 我们美国独立站NorthSky平台的注册客户数达6,000个, 以及上线SKU数量达600个, 覆盖约12个产线。下半年, 我们会继续增加上线SKU的数量, 以进一步提升产品覆盖度和客户体验。在销售收入方面, 二季度美国销售收入实现环比增长260%。

Speaker 3

Turning to our overseas business, we have adopted a localized operating strategy in both the U.S. and European markets, capitalizing on our supply chain strength, a curated portfolio of high-quality and cost-efficient products, and innovative technologies to accelerate market entry. By the end of June, our U.S. standalone website, NorthSky, had attracted approximately 6,000 registered customers, with around 600 SKUs launched across a dozen product lines. In the second half of the year, we will expand SKU base to enhance product coverage and customer experience. In terms of sales performance, our U.S. revenue grew by 260% in the second quarter from the first quarter.

Speaker 4

同时，我们正积极筹备开展欧洲市场，计划今年年底欧洲业务和独立站将开始运营。在美国和欧洲以外的市场，例如东南亚、南美、非洲、中东市场，我们已联合中国大客户，服务他们出海的策略，定点服务他们在当地工厂的MR采购需求。截止目前，我们在泰国、印尼、马来西亚、墨西哥、阿联酋等10个国家已开始接收这些中国大客户在当地工厂的订单。我们的目标是为全球客户提供优质稳定的工业品供给，因此我们积极拓展多元化供应网络。目前，针对海外市场，海外供应商占比已达70%。供应链布局趋于动态平衡，有效规避潜在地缘政治风险，标志着我们在全球采购体系构建上取得实质性进展。

Speaker 3

We are also actively preparing for our entry into the European market, with our European business operations and standalone website expected to launch by the end of this year. Beyond the US and Europe, we are pursuing a strategy of partnering with major Chinese customers to support their overseas expansions in regions such as Southeast Asia, South America, Africa, and the Middle East, providing targeted services to fulfill their MRO procurement needs in local factories. To date, we have begun receiving orders from these Chinese customers' overseas plants in 10 countries, including Thailand, Indonesia, Malaysia, Mexico, and the UAE, to provide global customers with a high-quality, reliable supply of MROs. We are actively diversifying our supplier network. Currently, 70% of our suppliers for overseas business are based outside of China, creating a more balanced and resilient supply chain and mitigating potential geopolitical risks.

Speaker 3

This achievement marks meaningful progress in the development of our global sourcing system.

Speaker 4

总体而言, 过去几个季度, 我们在业务调整的背景下依然保持稳健发展, 国内业务盈利能力进一步提升, 海外业务也取得了阶段性进展, 充分体现了我们的执行力和MRO行业的韧性。接下来, 我们将继续聚焦于产品数字化、履约交付等核心竞争力的建设, 加快拓展海外业务, 推动公司长期可持续发展, 并为股东创造持久价值。下面, 请我们的CFO Max Lai介绍我们的财务业绩。谢谢大家。

Speaker 3

In summary, we have sustained growth despite recent quarter's business adjustments. We have continued to strengthen profitability in our domestic operations while driving meaningful progress in our overseas business, demonstrating our ability to execute and the inherent resilience of the MRO industry. Looking ahead, we will remain focused on advancing our core capabilities across products, digitalization, and fulfillment, while also accelerating the expansion of our global footprint. These efforts will support our company's long-term sustainable growth and deliver enduring value to our shareholders. Now, I'll turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone.

Speaker 4

Thank you, Eric, and thanks everyone for making time to join our second quarter earnings call today. I'm pleased to walk you through our solid financial performance, highlighted by enhanced revenue quality and optimized operational efficiency. Let me start with the top-line performance. Both GMV and revenues came under pressure in the quarter, with GMV declining by 12.1% year over year to RMB 2.42 billion and total revenues decreasing by 3.7% to RMB 2.17 billion. This was largely due to last year's high comparison base, which includes low-margin business from SOE and central SOE customers with extended credit terms that we have seen optimized. However, excluding these factors, our underlying GMV still showed year-on-year growth. We anticipate these challenges will continue to ease, setting the stage for a potential turnaround in top-line growth in the second half of this year.

Speaker 4

Turning to business quality, our business quality remains strong and healthy. Our gross margin was at 16.5%, slightly down from 17% in the previous year, primarily due to lower revenues from our marketplace model, which carries a 100% gross margin under the net revenue recognition basis. However, on a GMV basis, our gross profit margin continued to improve, expanding by 84.6 basis points year over year to 14.8%. Specifically, gross profit margin for our product sales 1P model increased by 45.2 basis points to 16% on ZKH platform and 137.6 basis points to 7% on GBB platform. Additionally, the takeaway of the marketplace model 3P model rose by 206.7 basis points to 14.2% year over year. These gains reflect our successful business optimization, procurement efficiency, and focus on high-margin private label products. On operational efficiency, we made solid progress.

Speaker 4

Operating expenses decreased by 5.6% year over year to RMB 454.2 million, making up 19.8% of total revenues, down from 20.2% in the prior year period. This improvement was achieved even with approximately RMB 25 million in overseas business-related expenses, which were almost absent in the prior year period. Breaking this down further, fulfillment expenses were RMB 90.8 million, down 8.4% year over year, reflecting lower employee benefits and warehouse rental costs. Sales and marketing expenses declined by 5.3% to RMB 149.3 million, primarily driven by lower employee benefits and travel expenses. R&D expenses increased by 7.9% to RMB 41.5 million, primarily attributable to higher employee benefit expenses. General and administrative expenses were RMB 147.3 million, down 7.3% year over year, mainly due to lower share-based compensation and credit loss allowance, partially offset by higher employee benefits.

Speaker 4

It is worth noting that our G&A expenses also include salaries for product line personnel and other related costs, which support the development and enhancement of our product competitiveness. Turning to probability metrics, while our loss from operations increased modestly to RMB 72 million, we see positive signs of improvement. Non-GAAP dividend loss narrowed to RMB 38.7 million from RMB 47.1 million, with margin improving to negative 1.8% from negative 2.1%. Net loss decreased to RMB 53.5 million from RMB 66.3 million, with the net loss margin improved to 2.5% from 2.9%. Lastly, an update on our share buyback activity. On the 13th of June 2025, our board approved a new share repurchase program, authorizing up to $50 million for the buyback of ADS. As of 20th August 2025, we have repurchased approximately 2.65 million ADS for about $9.18 million under the two programs.

Speaker 4

We remain committed to actively buying back shares, subject to market conditions and other considerations, as part of our ongoing commitment to returning value to our shareholders. In conclusion, the shift towards high-margin private label products, combined with gradual easing of prior challenges, positions us for a return to top-line growth in the second half of this year. Our investment in AI and process optimization are already delivering tangible improvements and gains. Recent interest from capital markets highlights growing confidence in our business model and long-term potential. For instance, around 8 million ADS were traded through blockchains on the 7th and 8th of August 2025 between new institutional investors and a PIPO shareholder, reflecting a significant endorsement of our market positioning. This transaction also represents a disciplined and professional full exit by this PIPO shareholder, structured to facilitate orderly price discovery and address a technical overhead.

Speaker 4

Looking ahead, our priorities remain focused on maintaining financial stability and achieving near-term profitability in our domestic operations in China, while positioning us for sustainable long-term growth. Thank you. I would like to open the call to Q&A. Operators, please go ahead.

Speaker 3

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. The first question comes from Liu Chang and Deutsche Bank. Please go ahead.

Speaker 2

谢谢管承接受我的提问。我的问题是关于增长的。我们知道中国的MRO市场规模巨大, 然后线上采购的这个渗透率还在早期, 还有很大的增长空间。但我们看到在过去几个季度, 公司的业务增长是承压的, 其中的原因有几个, 可能是受到国央企业务的优化调整。那随着这个调整的影响逐渐消退, 公司对未来短中长期的业务增长有什么具体的策略? 然后也请管理层介绍一下今年下半年的业绩展望。 Let me, my question is regarding growth strategy. The Chinese MRO market is huge, and online penetration is still in its early stage, suggesting significant room for growth. However, we have observed that the company's business growth has been under pressure in the past two quarters, primarily due to the optimization and adjustment of business from SOE. As the impacts of this adjustment gradually diminish, what strategies does the company have for short, mid, and long-term business growth? Also, can management provide an overview of the company's business outlook for the second half of this year? Thank you.

Speaker 4

好的, 大家都知道过去这几个季度呢, 我们的业绩呢, 成长确实是受到很大压力。 在这个过程中呢, 我们调整了很多我们认为对长期来讲价值不高的一些业务。那这些被调整的业务呢, 曾经一度占到我们的GMV的20%左右。所以在过去几个季度, 我们是消化了这个20%的这个业务。之所以能在调整这20%的业务, 没有导致业绩下滑, 实际上主要是靠我们新的客户, 我们那些重要的K客户和大量的中小客户的增长来实现的。那为了下一步的这个业务增长呢, 我觉得我们的策略是非常清晰的。一个方面呢, 继续加大和覆盖大量的中小型客户, 尤其是利用线上的这个技术能力。 当然另外一方面呢, 覆盖更多的大型的K客户。中国制造业的千强呢, 我们已经开发了, 有670家是我们的客户。 我觉得这些客户呢, 口袋深度, 他有机会进一步加大, 他远远的还有非常大的潜力。那另外呢, 还有300多家的客户呢, 也有待我们进一步的开发。 这是关于 大型客户和中小型客户。那另外一方面呢, 还有公妈妈。我们公妈妈呢, 现在更加聚焦于五金建材类的产品。 这样的话, 我们希望能在服务B端小客户和C端客户方面呢, 实现一个很好的进展。那稍微中长期一点的市场呢, 我觉得是海外市场。 我们 从 在海外市场、欧美市场的拓展, 包括现在东南亚等等, 跟随大客户出海的策略。 我相信在下半年都会逐渐见到这个效果。那预判未来的这个业务的增长的情况呢, 实际上我们已经 看能够看到到六七月份开始, 我们的总的业务呢, 基本上因为调整的原因呢, 已经基本是到触底了。8月份呢, 我们观察每天的订单和发货的情况呢, 逐渐开始有正向的增长。所以我们是有信心的, 下半年实现整个业务的恢复性正增长, 我们相信是没有问题的。 这是我对你这个问题的回答。

Speaker 2

Thank you very much for that question. Yes, indeed. Our performance for the last few quarters has been under a lot of pressure, primarily due to the aforementioned business adjustment and optimization. We decided to optimize this part of the business because we didn't believe it was going to be very valuable and meaningful for our long-term competitiveness. This part of the business used to account for more than 20% of our total GMV. As we were phasing out this 20% of GMV, the reason our total GMV didn't decline severely was primarily due to the fact that we added a lot of new large customers as well as SMEs, and the business from these two groups have more than made up for the loss from the adjusted and optimized business.

Speaker 2

It's been very clear that our business has been driven primarily by these two groups of customers, and we are greatly increasing the number of SMEs thanks to our online technologies and capabilities. We're also trying to cover more key KAs or key accounts, large customers. Out of the top 1,000 manufacturer customers in China, we have already covered 670 of them, and we are proactively increasing our watershare with them. There's a lot of potential to tap in there. We are proactively reaching out to penetrate the other 300 as well. In terms of another aspect, which is GBB, our GBB platform has been focusing more on construction materials and hardware in order to serve the needs of SMEs and consumers better.

Speaker 2

Of course, from our perspective, in order to grow more sustainably and strongly in the mid to long term, a lot of the growth drivers will come from overseas markets, including Europe and America. Our investment efforts in those overseas markets, I believe, will start to show effects starting the second half of this year. Starting June and July this year, our performance from the central SOEs and local SOEs have pretty much bottomed out in June and July. Starting August, we have seen from data that things started to turn around and rebound. We are very, very confident that recovery and the growth, positive growth for the second half is very likely.

Speaker 3

Liu, did that answer your question? Did you have a follow-up?

Operator

Yes, that answered. Thank you.

Speaker 3

Thank you. The next question comes from Xiaodan Zhang at CICC. Please go ahead.

Speaker 1

大家好, 我叫王强, 好, 谢谢我的提问。那我们看到在这个发激烈的平台竞争中, 大家非常关心企业的可持续性和成果。那除了规模, 我们认为在中国MRO的赛道, 证婚行构建的真正难以被模仿和超越的竞争力或者说非常有趣的, 那公司也一直强调长期和竞争力的建设的投入。那一次管理层最受的大概就是经营出了两个投入, 以及他们对业务风险所带来的费用和成本。那我发现另一档问题, in the increasingly competitive landscape of platforms, there is significant concern about the long-term competitive advantages of enterprises. Beyond scale, what do you believe are the true competitive barriers or moats that ZKH has built in the China's MRO sector that are difficult to imitate or surpass? The company has consistently emphasized the construction and investment in the long-term for competitiveness. Please share specific investments made in these areas, as well as variants that play a result on that business development. Thank you.

Speaker 4

好的, 谢谢。跟传统的贸易商五金店相比呢, 我们在人才的储备、IT数字化的能力、产品的竞争力, 尤其是全国供应链的能力, 我相信我们都有绝对的竞争优势。我就不详细的具体讲了。跟其他的电商平台, 我觉得我从三个方面来解释我们的核心竞争力。第一条呢, 我认为就是我们的产品专业的产品竞争力。这个产品专业竞争力呢, 首先体现在品类的聚焦, 因为历史的原因, ZKH Group Limited在化学品方面、备品备件、加工制造真正的MR领域, 我们是有绝对的优势的。第二个, 我们公司拥有一个600个人的专业的产品专家团队, 我相信这是在国内的MR行业里面, 我们的人才队伍绝对是领先的。第三个是关于MR产品的创新和研发, 我们拥有一支MR产品的研发队伍, 尤其是我们建设了太仓的智能制造中心。这样的话, 我们不仅能够做产品的选型、检测推荐, 同时呢, 我们也将具备产品的创新能力。我觉得这几点加在一起, 会让我们在专业的产品竞争力方面形成非常大的优势。请翻译。

Speaker 2

Okay, so compared to traditional trading companies and hardware stores, we have absolute advantages when it comes to things like our product capabilities, our IT capabilities, and our nationwide supply chain, as well as our talent reserves. I'm not going to delve into the details, but compared to other MRO e-commerce marketplaces, I would like to focus on three areas where we have an edge. First is our product capabilities. Due to historical reasons, we are very versed when it comes to real industrial-grade MROs. These are real MROs by definition. Specifically, we have an absolute advantage when it comes to things like spare parts, chemicals, and manufacturing. Second, we have a 600-strong team of product experts, and we absolutely take a lead in the industry. They are very specialized and have specialized know-how about various industries and products.

Speaker 2

Thirdly, we have very strong R&D capabilities, and our Taicang factory is definitely going to increase our advantage. This plant in Taicang enables us to do innovation of products, as well as product selection, testing, and recommendations. That was the end of the answer.

Speaker 4

这个。

Speaker 2

The second point I would like to stress is our digitization and AI capabilities. We have a data dictionary built based on 17 million SKUs of MRO, and this database is still quickly expanding. I believe firmly that in the future, in order to have success in the MRO space, having a highly sophisticated and large database for the MRO vertical definitely lays the groundwork. We also have a very large, very large MRO IT team, about 200 something people. They include algorithm engineers, data engineers, development engineers from both front and back ends, and system maintenance engineers. Among the MRO companies in China, we have one of the largest IT teams. With these two aforementioned points, we will be able to build a very strong edge when it comes to AI product capabilities and digitization.

Speaker 2

This will propel us to become an MRO company, and it's not an MRO company in its traditional sense, but rather an MRO company that is truly digitized and smart and AI enabled.

Speaker 4

第三条呢, 我觉得就是我们的海外市场的拓展能力。那我们也是中国第一家到美国, 马上就要到欧洲这些发达国家的市场拓展, 在本地拓展MR市场的这样一家公司。同时呢, 我们也开始在世界各地服务中国的大企业出海。那从另外一方面呢, 我们也基本上建起了在全球采购的这样一个能力。所以呢, 我们应该是率先有着机会成为一个中国的全球化的MR的公司。我相信这也是基于我们的人才的优势能够建立起这样一个核心竞争力。那总结来说呢, 基于以上三点, 我们证婚行呢, 坚持真正的长期主义, 真正为我们的客户创造价值, 打造一个人才队伍领先的企业文化聚焦于客户价值的这样一家企业。我相信这是我们真正更加长久的核心竞争力。

Speaker 2

My third point is our capabilities when it comes to expanding our business overseas in overseas markets. We are the first Chinese MRO company that set up shop in the U.S., and we are soon going to do that in Europe as well. We have built our abilities to source products globally. We are also tracking large Chinese companies and follow them wherever they go to serve them locally there. We are soon going to become the first Chinese company that is going to become a truly global MRO company thanks to our advantages in talent. Based on these aforementioned three points, we are truly upholding long-termism, and we are creating value for our customers, and we truly value talent. These points are our true moat, and we believe these are very difficult to emulate and be surpassed.

Speaker 1

Thank you, that's very clear.

Speaker 3

The next question comes from Ella Ji with China Renaissance. Please go ahead.

Speaker 1

感谢管理层接受我的提问。我的问题是关于你们的海外业务的。那咱们的海外业务在美国已经运营超过半年了，接下来呢，也会拓展欧洲和东南亚的业务。那请问公司相比当地的玩家，公司的主要竞争优势是什么？在拓展海外业务的时候，咱们遇到的最大的挑战和挑战是什么？然后相对应的策略，以及有没有海外业务营收规模的规划和时间表。 so my question is regarding your overseas business. your US business has been running for over half a year, and you also plan to expand to the European and the Southeast Asia market. what are the main competitive advantages of ZKH comparing to the local players? what are the biggest challenges, as well as the strategies to, to counter with those challenges? And then lastly, is there a timetable for the revenue and maybe profit of overseas operations? Thank you.

Speaker 4

好的, 谢谢。我们在前面也介绍过, 我们海外市场的拓展呢, 有两种业务模式。一种业务模式呢, 是到欧美等发达国家市场呢, 到本地化的经营, 在本地服务当地的客户, 建立自己的电商平台。这是一种业务模式。那另外一种模式呢, 服务中国大企业出海。前面也提到, 我们的业务已经开始在泰国、印尼、马来西亚、墨西哥等地呢, 开始接受客户的订单。我觉得这里面呢, 这两个业务模式呢, 最挑战最大的还是第一个业务模式, 在当地创立一个电商服务平台, 打出自己的品牌。我觉得这里面最大的挑战就是我们在当地的知名度, 因为我们是一个新兴创业的公司, 这是一次再次的创业, 一个是知名度的挑战, 另外一个是需要一定时间的学习的挑战。如果谈论我们的竞争优势的话, 我觉得最主要的一点优势就是我们供应链的优势, 相对来讲成本的优势。但是我觉得作为我们中国的企业的出海, 有另外一个非常重要的优势, 就是我们中国人的这种创业精神, 我们中国的高的效率和快速的反应的能力。我觉得这一点跟其他任何国家的企业相比较, 我们的优势也是非常明显的。那关于未来业务的规划呢, 经过一段时间的学习和实践呢, 我觉得我们正在逐渐进入加快业务成长的阶段。我相信呢, 进入到下半年, 包括在美国的市场, 包括在跟随大客户业务, 在大客户出海这两个市场方面, 都会实现逐渐加快的业务的进展。请翻译。

Speaker 2

Thank you very much for your question. When it comes to our overseas expansion, we primarily adopt two models which were mentioned in my presentation earlier. First is to go into advanced economies and to do localized operations there, namely to set up our own e-commerce marketplaces. Second is to follow Chinese large customers wherever they go. Like was mentioned earlier, we already started receiving orders from plants of Chinese customers that have set up shop in geographies such as Thailand, Indonesia, Malaysia, and Mexico. I believe, relatively speaking, out of the two models, model one is the more challenging one because we have to build our own brand there, right? Being a new startup from China, our reputation locally, we have to build that from scratch.

Speaker 2

The learning curve is going to be pretty steep, so it's going to take some time for us to learn about the local cultures and the customers. Our advantages come from different places, primarily because we have a strong supply chain and relatively low cost. Another factor which is equally important and cannot be neglected is entrepreneurship from being Chinese. Being Chinese and being a Chinese startup, we have a high efficiency and we are very quick to react to things, and these things make us stand out among companies globally. We have already passed some learning periods and we are already entering a phase of acceleration. I believe in the second half of this year, both models, model one and model two, will start to pick up some pace and truly accelerate.

Speaker 3

Did that answer your question, Ms. Li?

Speaker 1

Yes, thank you.

Speaker 3

That concludes the question and answer session. I would like to turn the conference back over to management for any additional or closing comments.

Speaker 1

Thank you once again for joining us today. You can find the webcast of today's call on ir.zkh.com. If you have any further questions, please feel free to contact us. Our contact information can be found in today's press release. Thank you and have a great day.

Speaker 3

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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