Baozun Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 28, 2025

Key Takeaways

  • Positive Sentiment: Total revenue rose 7% year over year to RMB 2.6 billion, while adjusted operating income increased to RMB 59 million from RMB 10 million.
  • Positive Sentiment: The BEC segment delivered 3.4% revenue growth and a 56% year-over-year jump in adjusted operating profit to RMB 94 million, marking its strongest Q2 since the pandemic.
  • Positive Sentiment: BBM revenue accelerated 35% year over year to RMB 398 million, with offline store unit economics breaking even on its first three openings and plans to expand to 40 new locations in 2025.
  • Negative Sentiment: A one-time write-off of RMB 53 million in accounts receivable related to a 2021 arbitration was recorded as a G&A expense, reflecting no expected recovery.
  • Positive Sentiment: Group blended gross margin expanded by 310 basis points to 28.4%, supported by a 3.3% reduction in fulfillment costs and an 11.7% cut in technology and content expenses.
AI Generated. May Contain Errors.
Earnings Conference Call
Baozun Q2 2025
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen, and thank you for standing by for Baozhu's Second Quarter twenty twenty five Earnings Conference Call. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today, Ms. Wendy Soon, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy.

Speaker 1

Thank you,

Speaker 2

operator. Hello, everyone, and thank you for joining us today. Our second quarter twenty twenty five earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on PR 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 Fowzen, we have Mr.

Speaker 2

Min Sen Qiu, Chairman and Chief Executive Officer Ms. Catherine Zhu, our Chief Financial Officer Mr. Junhua Wu, Director and Chief Strategy Officer and Mr. Ken Huang, Chief Financial Officer of Baozun Brand Management. Mr.

Speaker 2

Chu will first share our business strategy and company highlights. Mr. Ju will then discuss our financials, followed by Mr. Wu and Mr. Huang, who will share more regarding our e commerce and the brand management segments, respectively.

Speaker 2

They will all be available to answer your questions during the Q and 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. Securities Act of 1933 as amended, The U. S.

Speaker 2

Securities Exchange Act of 1934 as amended and The U. S. Private Securities Litigation Reform Act of 1995. These forward looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, 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, uncertainties or factors is included in the company's filings with the United States Securities and Exchange Commission and its announcement, notice or other documents published on the website of the Stock Exchange of Hong Kong Limited.

Speaker 2

All information provided in this call is as of the date hereof and is based on assumptions that the company believes to be reasonable as of this date. And the company does not undertake any obligation to update any forward looking statement, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. You may now turn to Slide two for the executive highlights for the quarter. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr.

Speaker 2

Vincent Qiu. Vincent, please go ahead.

Speaker 3

Thank you, Wendy. Hello, everyone, and thank you all for your time. I'm pleased to share that Baozun delivered another solid quarter with both BEC and the BBM making commendable progress. Overall, our total revenue grew by 7%. Excluding one off expenses, our adjusted operating income expanded to CNY59 million, a significant improvement from RMB10 million in the same period of last year.

Speaker 3

We believe these results demonstrate the resilience of our underlying business model, highlighting meaningful profitability expansion alongside top line growth. BEC's disciplined execution is starting to yield tangible results. BEC revenue grew by 3%, while adjusted operating profits rose 56% year over year to $94,000,000 the highest second quarter level in four years since the pandemic. Amid ever changing market dynamics, has shown agility in adapting to the evolving needs of our brand partners. This profitability improvement underscores our progress in reshaping BEC into a stronger and more profitable business.

Speaker 3

With our scale and the premium client base, we are confident that these efficiency gains can translate into meaningful earnings upside. BBM continues to build and accelerate top line momentum. Revenue grew 35% year over year, up from 23% in the previous quarter. We remain on track with our merchandising, channel expansion and the marketing initiatives for Gap, driving healthy top line momentum while improving profitability. Counter also reached a remarkable milestone in unit economics from its first three offline stores opened in May and is making steady progress in category expansion.

Speaker 3

Together, we believe these achievements validate our transformation vision with BBM now established as a growth driving core division that demonstrates our ability to execute with precision. Beyond our financial results, we continue to make significant strides in technology empowerment. We remain committed to leveraging technology and data driven solutions to bridge demand and the supply chain in retail. In the first half of this year, our focus on refining the retail operating platform has enabled deeper insights into market and consumer demand trends for BBM. This enhanced intelligence allows us to optimize the decision making and improve target setting and tracking.

Speaker 3

These initiatives are driving the success of product development, while enhancing inventory efficiency and productivity. The combined strengths of BEC's resilience, BBM's accelerating growth and our technological leadership position us well to deliver sustainable long term value creation. Now I'll hand the call over to our team for a deep dive into our financials and business performance.

Speaker 1

Thanks, Vincent, and hello, everyone. Before we dive into the financial details, I'd like to quickly address the one off write off. Back in September 2021, we initiated arbitration against a distributor in healthcare and cosmetic industry, payment support. Taking a conservative and prudent approach, we had previously made a provision of $93,000,000 in 2021. This quarter based on the latest progress in arbitration, We assess the likelihood of recovery as remote.

Speaker 1

Therefore, we wrote off the remaining $53,000,000 in this specific accounts receivable. This was recorded as a one time general and administrative expense in BC's second quarter P and L. Now let me provide a more detailed overview of financial results for the 2025. Please turn to Slide number three. Baozun Group's total net revenues for the 2025 increased by 6.8% year over year to RMB2.6 billion.

Speaker 1

Of this total e commerce revenue grew by 3.4% to $2,200,000,000 while brand management revenue rose by 35.4% to $398,000,000 Breaking down e commerce revenue by business model. Services revenue increased 3.5% year over year to 1,600,000,000.0 This increase was driven by revenue growth in digital marketing and IT and online store operations. PC product sales revenue increased 3.3% year over year to five ninety nine million supported by strong performance in beauty and cosmetics and alcohol categories. BBM product sales totaled $396,000,000 representing a 35.5% year over year growth. This growth was mainly driven by the strong performance of the Gap brand.

Speaker 1

Please turn to Slide number four. From a profitability perspective our blended gross margin for product sales at a group level was 28.4%, an expansion of three ten basis points year over year. Gross profits increased by 28.1% year over year to $283,000,000 for the quarter. Breaking this down by our key business lines, gross margin for e commerce product sales expanded to 12.8% reflecting a 110 basis point improvement compared to 11.7% a year ago. This margin expansion was primarily driven by product mix diversification.

Speaker 1

Gross margin for BBM was 52% relatively flat compared with 52.3% a year ago. Now please turn to Slide number five for a walk through of our OpEx. Fulfillment cost for the quarter was reduced by 3.3% to $6.00 $6,000,000 reflecting our ongoing efforts in cost optimization. Sales and marketing expenses increased by 11% to $938,000,000 mainly due to higher spending on creative content and performance driven digital marketing during the 06/18 e commerce campaign as well as increase of front end expenses from expanding BBM's offline network. Technology and content expenses decreased by 11.7% to $150,000,000 as we continue to enhance monetization efficiency.

Speaker 1

G and A expenses rose 30.7% to $224,000,000 primarily due to the one time write off of $53,000,000 in account receivables. Excluding this write off, G and A remained flat compared with the same period of last year. Turning to bottom line items, please refer to Slide number six. During the quarter our non GAAP income from operations was $6,100,000 excluding the above mentioned $53,000,000 non recurring provision our adjusted non GAAP income from operations was $59,000,000 a sharp improvement from $10,000,000 in the same period of last year. BEC's adjusted non GAAP income from operations was $94,000,000 representing a year over year improvement of 56.4% or $34,000,000 higher than a year ago.

Speaker 1

BBM reported a non GAAP operating loss of $35,000,000 an improvement of 30% compared to the same period of last year. As of 06/30/2025 our cash and cash equivalents, restricted cash and short term investments totaled 2,700,000,000.0. Let me now pass the call over to Junghua to update you on BEC, our e commerce business.

Speaker 4

Thanks, Catherine, and hello, everyone. In the second quarter, BEC stayed focused on profitability and sustainable growth, following our phased approach, realign in Q1, stabilize in Q2 and accelerate in the second half, this quarter we delivered operating profit growth of 56.4% year over year, while sustaining top line growth of 3.4. These results were driven by our ongoing efforts to strengthen business fundamentals, enhance the quality of our distribution model and drive continuous development in our service model. In our distribution business, quality has always been our top priority, setting us apart from the border market. We believe an integrated approach, linking channel management, pricing and inventory control and marketing is crucial for building sustainable distribution partnerships in today's dynamic environment.

Speaker 4

Our goal is to elevate our role from a distribution partner to a comprehensive trade partner. To support this, we have conducted a thorough review of our partnership scope and terms. This review aligns us with our partners' evolving needs and helps identify opportunities for innovation and mature growth. Please turn to Slide number seven. During the quarter, BEC product sales grew 3.3%, driven by strong performance in beauty and cosmetics.

Speaker 4

We also achieved consistent breakthroughs in alcohol and apparel categories. While these appliance categories experienced a revenue contraction, the unit's bottom line improved significantly. This delightful trade off highlights our focus on quality growth over volume. Gross profit margin for BEC product sales expanded 110 basis points year over year to 12.8% for the quarter, demonstrating how our category mix optimization and ongoing initiatives are translating into stronger profitability. Turning to Slide number eight.

Speaker 4

Our service revenue increased by 3.5% in the second quarter, driven by solid growth in online store operations and DM and IT solutions. By integrating advanced technologies and leveraging our data and analytics, we remain committed to evolving with the market and enhancing our service offerings to better service better serve our partners. Let me use a leading sports brand as a case study to illustrate how we empower our business during the recent six eighteen promotions. By leveraging our data analytics, we gained deep insights into consumer behavior and shopping trends. This allowed us to refine consumer profiles and adjust marketing priorities.

Speaker 4

We then applied our digital marketing expertise to design highly targeted campaigns across multiple channels, including key marketplaces, social media and influencer partnerships. This strategy generated significant buzz and drove sustainable traffic into the brand. The results were remarkable with the brand achieving exceptional double digit growth during the sixeighteen promotions, far exceeded expectations. We are proud to report that the service revenue in online store operations grew across major categories with sports up to 10.8%, luxury 5.5% and other apparel at 17.6% year over year. Our omni channel initiatives also gained strong momentum in this quarter.

Speaker 4

With the multichannel rate reaching a new record high for 48.5 for the second quarter. We saw growth across many key marketplaces, reflecting the effectiveness of our strategies among emerging channels Douyin and Red Nose stood out a top performance. To advance best practice in brand e commerce, we enhanced our Douyin services to include daily live stream, storytelling, live streaming and integrated marketing campaigns. This hybrid approach engages consumers across the food consumption circle, driving brand growth, sustainable audience expansion and omnichannel empowerment with a healthy pipeline of new clients, we expect growth momentum to continue. On a red note, revenue grew triple digits, driven by rising demand across both marketing and store operations.

Speaker 4

In the 2025, we partnered with 20 plus brands across outdoor, sports, luxury and footwear. As one of the first six qualified retinal partners validated in data, content and marketing. We've earned benchmark recognition and industry awards. This recognition reinforces our leadership on this emerging platform and serves as a strong testament to our ability to innovate and adapt to new channels. In summary, Q2 demonstrates that BEC is stabilizing on a stronger foundation.

Speaker 4

Our quality and value driven, profit centric framework positions BEC well to accelerate profit generation in the second half of the year. As we navigate market complexities, we remain committed to our vision and strategic goals toward sustainable growth and long term success. Now I'll pass the call to Ken for an update to Baozun's brand management.

Speaker 5

Thank you, Tim, and hello, everyone. Please turn to Slide nine for BBM's performance in the 2025. I'm pleased to report that BBM's positive momentum continued in Q2 with top line growth accelerating further. Revenue grew by 35.4% year over year, driven by positive same store sales and contributions from new stores as well as healthy expansion across both online and offline channels. Now let me share with you our key initiatives for Gap China in the second quarter.

Speaker 5

Our merchandising strategy remains sharply attuned to market timing, helping drive consistent improvements in store traffic and the commercial rates. So displaying the product planning and the sharper segmentation, we are strengthening our ability to capture demand across categories while reinforcing the relevance of KF's core DNA. Overall, our BBM gross margin for the quarter was 52.3%, roughly flat year over year, while BBM gross profits grew by 34.5% to RMB208 million. On the channel front, we expanded our footprint with 11 new openings in the quarter for a net increase of eight bringing our total to 156 locations by the June. Several of these openings were in new markets such as Kashgar broadening gaps reach into previously untapped regions.

Speaker 5

We also expanded further into emerging cities including Ningbo, Foshan and Nanning as we view these new Tier one and Tier two markets as strong opportunities. With encouraging store level unique economics, we are adjusting our store opening plans to emphasize local partnerships leveraging asset light approach to secure premium locations. Our revised plan now targets 40 new stores for full year 2025 with our direct stores primarily focused on Tier one cities. At the same time, our e commerce channels delivered strong momentum fueled by a tailored segmentation approach. This include the product and consumer segmentations, targeted marketing and optimized operational execution, which led to a strong consumer engagement and higher conversion rates.

Speaker 5

From a marketing perspective, we launched a successful IP collaboration with Merge Ensemis, a renowned Chinese art brand. The collection blended gets timely standing comfort with Melting Zenith's playful artistic spirit. At the heart of this collaboration is a message, every day needs a get moment aimed at building a stronger emotional connections with consumers. In separation of Children's Day, we also rolled out our Brandon Bear campaign, featuring a beloved character designed to spark joy and creativity in children. We created a series of kids activities and the brand new features featured booklets fostering a strong sense of family orientation and the community.

Speaker 5

Looking ahead, we are preparing an even stronger lineup of marketing activities for the 2025 with the aim of further enhancing Gap's branded resonance and driving continued growth. In the second quarter, we also achieved solid improvements in efficiency. Inventory management was a standout, with days of inventory reduced to one hundred and twenty six days, representing a more than 20% year over year improvement. This progress reflects disciplined demand planning, tighter alignment between merchandising and the supply chain and a stronger sell through on core product lines. We also realized additional operating savings through efficiency enhancements and leaner back office spending.

Speaker 5

Together, these actions provided a solid boost to operating performance. On a non GAAP basis, BBM's operating loss narrowed further to million, a 30% improvement from the same period of last year. Lastly, to share some exciting updates on our brand, Hunter. This past May Hunter accelerated its offline expansion with the simultaneous opening of three flagship stores in Shanghai, Zhangjian, Hangzhou Mixie and Beijing Sunny Chuan, each achieving profitability in its first quarter, an impressive start. The brand has gained the market attention with stylish products, well designed store displays and the effective marketing that has led to a higher customer traffic and sales.

Speaker 5

At the same time, Hunter has continued to diversify its product metrics with new lines introduction. With innovation and customer satisfaction at its core, we are confident that Kontoor will continue to strive. In summary, Q2 marked another strong quarter of progress for BBM with accelerated top line growth and solid execution across merchandising channels and marketing. Gap is strengthening its brand resonance through localization and global collaboration, while Hunter is scaling with a sharper brand identity. With continued operational discipline and the stronger seasonal activations in Q3 and Q4, we remain confident in achieving our full year targets.

Speaker 5

That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q and A session.

Operator

The first question comes from Alicia Yap and Citigroup. Please go ahead.

Speaker 6

Thank you. Good evening, management. Thanks for taking my questions. I have two quick ones. The first one is that if you can share with us the percentage of the contribution platforms, which including coming from the Tmall and also the non Tmall platforms?

Speaker 6

And then related to that is also how do we see the impact from the recent step up of the instant retail shopping's competitive landscape by all these e commerce platform? Wondering if Baozhuun's business and also the store operations or anything that has affected the Baozhu business at all, if you can share some colors on that? And then second question is related to your strong growth of your BDM business. So do you anticipate the strength of that momentum will further continue in the coming quarters? And is there any timeframe for the profitability timeline?

Speaker 6

Thank you.

Speaker 4

Okay. Thank you, Alicia for the question. So I believe the first question is related to the BEC. So let me address that first question. So for the past sixeighteen promotion, we definitely see a lot of GMV growth on Tmall and JD, especially those two traditional marketplaces ecosystem.

Speaker 4

And Douyin platform and the Tencent Smart Retail business, they don't have the very strong sixeighteen mindset. So let's focus on Tmall and JD. So Tmall growth, I don't have the specific number on Tmall percentage proportions over JD, but I believe that the GMV growth of Tmall is like 2x or 3x compared with JD. So we see that Tmall and JD maintain a very strong GMV growth in the 06/18 campaign. So back to the question about the instance retail shopping.

Speaker 4

Shopping. So we realized that instance retail shopping is being very popular recently, especially between different big ecosystems. So also we have a lot of different categories. So our FMCG category is doing a lot of test the water stage with this kind of the instant retail shopping like for fast moving consumer goods and for those cosmetic categories and alcohol kind of the categories and especially in some kind of the home appliance categories. So we can share you with more information in the future.

Speaker 4

So based on the data collect of our business and we will just keep tracking the instance retail shopping in the long run. Thank you.

Speaker 5

And for BBM in Q3 and Q4, I think first, we are continuing to expand our stores offline, both Gap and Hunter. And the second, we will continue to improve our products in Q3 for Gap, we're going to introduce Capsule to the market. And we will also launch a series of activities of offline both offline and online with some celebrities and offline pop up stores to enhance our connection with our consumers through music and dance. So these are all the activities we prepared for the next two quarters. So we remain still remain very confident for to achieving our full year operating business objectives.

Speaker 5

And our breakeven point, we commented before, we will make GAAP breakeven in the last quarter Q4. Thank you.

Speaker 4

And following by Ken's prediction about the Q3 and Q4, let me add up something about the projection of the from the BEC perspective. So as we all know that we had a strong 06/18 and there has raised a lot of confidence for all our brand partners. And they've also starting to plan a big second half of this year. So foreseeable, so we will see a compared like last year, an even stronger 11 in this Q4 and especially where we had a deeper dive with a high quality of the traffic, Tmall and JD are engaging with us and the more back end tools we can target to a very accurate more accurate consumer profile. So we foreseeing that this is going to be a very promising second half of this year.

Speaker 1

Thank you.

Operator

The next question comes from Jiawei Yin of CITC. Please go ahead.

Speaker 7

Good evening, management. Thank you for taking my question. Congratulations on this quarter's strong performance. I have two questions. The first is regarding the e commerce business.

Speaker 7

In the past year, major domestic e commerce platform have emphasizes providing more benefits to the merchants has this reduced the operational cost for brands on these platforms and has Baozhu benefited as a brand partner. Some platforms are also prioritizing traffic allocation over absolute low price and have you observed increase in traffic for brand products? This is my first question. My second question is about brand management. Does Baozun plan to pursue further brand acquisition or deepen collaborative partnerships?

Speaker 7

And could you share the criteria for selecting such brands and how the operational experience gained from managing Gap and Hunter in recent years will be leveraged to support new brands in the future? Thank you.

Speaker 4

Thank you. Let me address your first question related to BEC. Yes, so the platform is offering a rebate program in the joint business plan, JVP in short. So all our brand partners, they are signing up the JVP contract with the platform. Consider if you reach a certain level of your GMV, you can have a specific percentage of your rebate, especially within your platform commissions.

Speaker 4

And from the Baozhuang perspective, we also signed up different contracts on the JVP with a major platform like Timo and JD regarding the paid media services. And especially, we combine a lot of our partners GMV wise to get rebate from achieving the target. So you can see that the platforms are encouraging Baozun and the brand to just keep driving the top line and maintain a healthy growth rate in the long run. So this is about the rebate program. And about the platforms are also prioritizing a traffic allocation over absolute low price.

Speaker 4

So this is very different from different categories. In the traditional category and heavy categories and very crowded categorized sportswear is the pricing strategy is still a competitive element across different brands. In the premium and luxury category, they do maintain a support for a higher quality kind of traffic. So we cannot say in general, you are providing high traffic over the low price, not the other way. So I think by differentiating different kind of the attributes in different categories, So things are very different.

Speaker 4

But one thing for trend is like both Tmall and JD, are trying to just reallocate a high quality kind of traffic to the brand to make sure that we are not keep rat racing on price in the long run. Thank you.

Speaker 3

Thanks for the question. This is Vincent. I will try to ask the first part of your question about the BD criteria for the new brands. And then maybe Ken can also add some comments for the collaboration between different brands and how BBM can utilize Gap and Hunter's experience for the future brands. So for the first one, yes, we have a strategy of brand portfolio for BBM.

Speaker 3

That means we will have multiple brands. That's why we have the first one, Gap, second one, Hunter and also maybe the third and the fourth one in the future. Yes. I think the for the luckily all these two brands Gap and Hunter was previously Baozun's e commerce clients. And after many years of e commerce operations, we then start to work with them in a deeper collaboration manner, which is brand management include everything.

Speaker 3

So I think this help us reduce the risk when we start a new business with these kind of brands, save a lot of time and cost and learning curve. So this is a very good methodology. So in the future, if possible, we're still doing the same thing. BEC, we have quite large client base, including hundreds of fashion, apparel, accessories, So we can also do this again, cultivate some more brands from a kind of generic e commerce collaboration into the brand management collaboration. So that gives us a huge potential in the future.

Speaker 3

But of course, we're open to other brands as well from the outer world. So for talking about the criteria, I think firstly, these kind of brands need to be energetic, have a big potential no matter online, offline in China and also can benefit from the experience we gained from Gap and Hunter and also suitable for the market. So basically, we need these kind of brands to give us growth and in the meantime profitability. Yes, Ken?

Speaker 5

And for the second part of second question, I think first, Gap and Hunter, perhaps BBM to build a very strong foundation infrastructure, including the system and process, the talent in the full value chain of apparel retail business. And second, I think for Gap, it helps to provide a foundation for the future brands to easily onboard including merchandising channels and marketing. For example, the merchandise part, the product part, just because Gap covers all categories of products of apparel. So if we have any new brand in the future, we are happy easily on boarding their local supply chain. And for the channel, if we have any new brands, can also expand faster than any other brand.

Speaker 5

And for Hanta, I think it will also help us to establish the successful case to have the controlling app rights IP rights and we can run it from online to both online and offline and expand its business in a very quick pace. So I think that's all for Japan Hunters empowerment to other brands in the future.

Speaker 7

Thank you. Very clear.

Operator

The next question comes from Frank Tao and CNBI. Please go ahead.

Speaker 8

Yes. Thank you. Thank you for taking my question. Good evening management team. My question is on the growth outlook of BEC business.

Speaker 8

I think you shared on previous calls that we will be focusing on driving operating efficiency improvement this year. We have noticed some cheerful results in the first half. Just wondering where are we in the progress now and we have seen some reacceleration in top line growth. How should we expect the trend in the second half? And a related question is that you've been selected as one of the first batch of service providers in the cooperation between RedNote and Tmall.

Speaker 8

Just wondering if you could share with us some insights on how are we benefiting from this program currently as well as your business growth expectations in the second half? Thank you.

Speaker 4

Okay, Frank. So let me address your two questions. The first question is related on the operational efficiency improvement. So from the beginning of this year, so we laid the emphasis on internally based on our bottom line, optimizing our bottom line and optimizing our cost and drive a lot of efficiency, building a healthier organization and operation flow. That doesn't take our full time.

Speaker 4

So it's more like the company policy and implementation job. So right now, just we as we shared an example in the previous kind of the script, so we in the past sixeighteen, so in the leading Germany sports brand, we focus a lot on driving the top line growth, especially focused on the merchandising peering and the quality of the traffic and all those kind of the traffic structure and how do we drive a better ROI. So basically, is our day to day job driving the top line in this year. So in the second half of this year, just like I just said, foreseeing the coming Q3 and Q4. So we drove a lot of confidence along with our brand partners in the past six eighteen.

Speaker 4

And with the higher growth, we are planning with a better merchandising support, a relatively higher support on the paid media and etcetera. So the second half, especially in the coming 11/11 is going to be very promising. That's my first question addressable. The second one is, let me clarify the second one. So you want to know how are we benefiting from the fact we were awarded as a rep partner or you want to know how are we benefiting from Red Node itself?

Speaker 8

From the rental partner. As we select the first batch of the partners.

Speaker 4

That's right. That's right. So we were the first one of the six rep partner, especially the only one in the fashion sports category. That happened in the first month of the past six, twenty eighteen. So this gives us a lot of credentials across different category.

Speaker 4

The day before yesterday that Red Node just announced to release to open the gate to all those categories, which means that a lot of different categories can be opened to RedNote and Redcat initiative selecting great partners. So Baozhu and our team is always list on the top of selection, just like our as a six star TP partner in Taobao and a diamond in Douyin and also the first plus service partner on JD. So we will be very exposure to those potential clients and which means that we are selectable for a lot of high quality clients. And especially when everybody is being very confident about the new initiatives and the new consumer experience from retinal to Tmall, especially driving transactions and seeding, heating and for new arrivals and for those great content designing. So we believe that with this early bird kind of initiative and award, so we can have a higher revenue coming from the retinal stream.

Speaker 4

And also meanwhile, we can link to our business directly from the Red Cat initiative. Hope that makes sense to you Frank.

Speaker 8

Yes. Got it. Super helpful. A quick follow-up if I may. We saw some recent rumors regarding a Yoga brand onboarding.

Speaker 8

Just wondering, can you elaborate more on the collaboration approach between you and this brand? Thank you.

Speaker 3

Okay. Thanks for the question. Vincent again. Yes, we also noticed that we have already reached some of the agreement with the brand and we are quite excited, although the brand right now is not so big. And just as what I just said, this brand is also operated the e commerce business first by our team And then we convert this into a brand management brand.

Speaker 3

So it's not a stranger to us. It is a long time friend already. Yes, we know a lot of this brand already, ups and downs in China. I think it is very good timing because right now we have operated the two brands, the two brothers and sisters in the past years. So this new brand can benefit from a lot of good things.

Speaker 3

For example, the designing power and also the supply chain capability, which we built alongside with the two brands can benefit this new baby. And also, we have all the system in place, so they don't need any efforts in system building. They can use all the things immediately. And also, they can also learn from Hunter how we build, how we strengthen build and strengthen, establish a clear core category and products, how we market this through Reynolds, Douyin and other channels and then how we expand the category into others. So we are quite excited to see the potential because yoga and other sports apparel industry is huge in China.

Speaker 3

So the potential is so big and we are just a baby. So that means huge potential ahead of us. Yes, it's true. Thank you.

Speaker 8

Yes, got it. Very clear. Thank you, Vincent and Junghua.

Operator

Your next question comes from Chris Chou and Huotai Securities. Please go ahead.

Speaker 7

Hi, thank you management for taking my question. I have two questions. The first question is about AI application. How do we think about the progress we made in AI this quarter? And is it mainly about increasing our revenue or reducing our costs and like increasing efficiency?

Speaker 7

Are there any further direction we can assume for the AI use in the development in the future? And with some new models emerging recently, have you noticed any better effect when applying this kind of AI new technology and models in the business operation? And my second question is about the Double eleven promotion. So we can see that we experienced strong momentum in six eighteen Festival. So do we currently have any early indication or plan for this year's Double eleven promotion?

Speaker 7

Thank you.

Speaker 4

Okay, Chris. Let me address your two questions. The first one is related to AI. So, know, Baozun, we are centric, focused on our technology. So we have over 800 in house software engineer.

Speaker 4

So we spend a lot of resources in the increasing the efficiency, especially leveraging AI to save our bottom line. So now we are developing more internal tools focused on the digital assets kind of the management, like how can we quickly using AI to just make sure we can drive content like pictures, like scripts, like video, something like that. So basically our focus on AI is more from the internal driving efficiency, making creating content, especially for the consumer facing part and the PDP and the short video clips, etcetera. So we are now spending a lot of resources on driving leveraging AI to drive revenue because we believe that AI and not to mention the big scale, large scale mode and the AI agent, it's not quite mature enough to replace the human kind of the expertise, especially in different categories like merchandising, like marketing campaign, like competitor analysis, something like that. So AI for now for BEC is more focused on driving efficiency in our back office.

Speaker 4

That's question number one. The second question is related to the forecast of Double eleven. We do not have a very clear focus on Double eleven because we haven't received any information or clues about how we will start the Double eleven campaign and how that's going to end. So the past sixeighteen was the longest sixeighteen for the history. So we have no idea about the mechanism of the coming Double eleven.

Speaker 4

The things we can share is a lot of our brand partners and us are being confident, leveraging a lot of expertise and experience we learned from the past six eighteen to the Double eleven. So more and more brands are planning, putting more inventory for the Double 11 and allocating a higher relatively higher paid marketing services budget to Double eleven. So we can share more information later on maybe in the next quarter. Thank you.

Speaker 7

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Wendy Sun for any closing remarks.

Speaker 2

Thank you, operator. On behalf of the Baozun management team, we would like to thank you again 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.

Operator

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

Powered by Quartr