Baozun Inc. Q3 2021 Earnings Conference Call November 30, 2021 7:00 AM ET.
- Wendy Sun – IR, Director
- Vincent Qiu – Chairman and CEO
- Arthur Yu – CFO
- Tracy Li – VP, Strategic Business Development
Conference Call Participants
- Alicia Yap – Citigroup
- Thomas Chong – Jefferies
- Charlie Chen – China Renaissance
- Ashley Xu – Credit Suisse
- Joyce Ju – Bank of America Merrill Lynch
- Robin Leung – Daiwa
Good morning, ladies and gentlemen. Thank you for standing by for Baozun’s Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. As a reminder, today’s conference is being recorded.
I will now turn the meeting over to your host for today’s call, Ms. Wendy Sun, Investor Relations Director of Baozun. Please proceed, Wendy.
Thank you, operator. Thank you, everyone, and thank you for joining us today. Our third quarter 2021 earnings release was distributed earlier today and is available on our IR website at ir.baozun.com as well as on Global Newswire Services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website, where they are available for download. This presentation is also available on our webcast where we will move on the slides in synchronization with our remarks.
On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Mr. Arthur Yu, our Chief Financial Officer; and Ms. Tracy Li, our Vice President of Strategic Business Development. Mr. Qui will review the business operations and company highlights, followed by Mr. Yu, who will discuss financials and guidance. They will all be available to answer your questions during the Q&A session that follows.
Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These forward statements are based upon management’s current expectations and current market and operating conditions and relates to events that involve known or unknown risks, uncertainties and other factors 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 U.S. SEC and the announcement on the website of Hong Kong Stock Exchange. The company does not undertake any obligation to update any forward-looking statements except as required and applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB.
It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.
Thank you, Wendy. Good morning and evening everyone. Thank you all for joining us. Today we are hosting our earnings call for the first time from our new headquarter, where most of the Baozun family has finally come together under one roof.
Ever since I found Baozun back in 2007, our business expanded so rapidly, so that we are end up being spread across multiple offices for many years as you know. We call our new home a Baozun new one symbolizing the start of a new journey. And we believe being physically together will greatly enhance our people’s sense of belonging, collaboration and productivity.
As many of you already know, China’s e-commerce has recently experienced a variety of headwinds, including weak macro environment and consumer sentiment drops as well as new policies and requirements issued by the government. Despite all these short term challenges, we were able to grow our revenues and deliver a non-GAAP operating profit of RMB2 million after one-off adjustment. I’m confident with a greater resilience and the sustainability of our business.
We believe given e-commerce is rooted in daily life as Halloween slowly passes, consumer sentiments will eventually improve. And the various regulatory changes to the E commerce environment will bring upon the next phase of long-term sustainable growth. Changes and temporary challenges bring opportunities, especially for those who can identify them to be the first mover to adapt and innovate.
Let me share with you some of the opportunities we are seeing. Now please turn to Slide number 3. We continue to see the trend of consumption upgrade, especially in the Luxury and Premium sector. We believe and the nature of such growth is structural with consumption upgraded driven by rising disposable income and demand for quality and lifestyle of the younger generation. The increased online penetration of luxury has also made luxury goods more accessible. And we have laid out a healthy pipeline from global luxury brand partners for next year.
During the quarter, we onboarded 7 luxury brands and we are forecasting GMV from luxury to keep double-digit growth momentum in next few quarters. In addition, with increasing demand for premium warehousing and logistic of services, we commissioned one more brand new luxury dedicated warehouse to better support our brands.
For sportswear, despite the lingering impact from the better quality initiative, we have witnessed a modest recovery trend. Long-term wise, as the government aims to further promote sports and physical exercises in the 14th five-year plan we believe sportswear category will likely see better goals. Many leading international sportswear brands will view China as one of the most critical and strategic target markets and some are even accelerating its localization efforts as a brand of China.
In addition, we have identified what we believe to be structural growth opportunity for some sub-verticals such as outdoor sportswear and adventure sports which we will likely to be the incremental drivers.
Moving on to our omnichannel progress. First, an increasing number of brand partners accelerating the deployment of omnichannel strategy. And in this quarter alone, we added 54 stores for non-TMALL channels. Of these newly opened stores over one third are JD sourced. We are glad to see our GMV generated on JD nearly tripled from a year ago, accounting for roughly 10% of our total GMV.
In addition, we continue to make progress in Tencent mini programs for private domain as well as other initiatives. More importantly, their recurring revenue stream of sport operation marketing from our mini program ecosystems continue to grow their stake. Of the emergent channels we have made quite some breakthrough. We are happy to be the first — to be at the forefront of action helping our brand partners to explore and expand into such the emerging channel with over two dozen of brands partners piloting there.
Our unique insights in brand value preparation and merchandize in this regard has been instrumental in delivering strong sales on some of our trial programs. In the first 9 months of 2021, we helped over our brands to generate over RMB100 million in GMV with extremely successful cases for one fast fashion brand and one FMCG brand. The trend has been encouraging month-over-month as in October alone, our brand partners generating over RMB70 million in GMV. It is a worth noting than in some of end-to-end services we have managed to hit a take rate of over 20% indicating attractive economics potential for us ongoing.
Although some emerging channels are still early phase, exploring optimum monetization models, we’re happy to see our initial channel investments already started to bear fruits. Just a rough reference, in the third quarter of revenue contribution from non-TMALL platforms, along with the associated backend services has continued to increase to more than 20%.
Now please turn to Slide number 4. On the technology front, we further upgraded our core e-commerce infrastructure to be more omnichannel oriented. Following the government’s new policies regarding data privacy, we also upgraded our system for personal identity information protection to ensure peer brand partners are compliant with the latest laws and regulations. Such upgrades applied to our order management system, warehouse and logistics management system and CRM ensures smooth order fulfillment and a stronger user engagement.
To drive business operating efficiency and flexibility, we keep making further upgrades to enable our digitalized centralized and integrated operating platforms and the middle office. For us now has a multi-level authorization system of our brand partners manage a distributed networks. And we launched Service Anywhere or S-ANY and intelligent customer service management system to unify workflow dispatching, training and resource management.
We believe S-ANY is both unique and disruptive within the e commerce Industry. And we have seen great uptake by over 300 brand stores deploying since its launch in just one month timeframe. Lastly are remote service centers in Nantong and Hefei are ramping up smoothly with over 1,000 employees move over. These regional service centers are highly complementary allowing us to attain better service quality, gain greater operational efficiency while lowering operating costs. We anticipate such initiative to save over RMB20 million in operating cost in 2022.
In addition, we received a 30% equity interest investment from Cainiao Network into Baotong, our warehousing and logistics arm. At the beginning of the year when we formulated our medium term plan, we set objectives that Baotong needs to be disruptive game, and that is needed to expand business scope to be wider and deeper, while also innovating its supply chain practices. We considered several leading players in industry to be our strategic partner, each with its own advantages and the characteristics. Ultimately, we concluded that Baotong and Cainiao are the most complimentary in terms of our capabilities and assets.
The combination elevates the partnership competitive advantage in the sports, outdoor, luxury and cosmetics industry. We believe such strategic alliances will lead to substantial cost of innovation and the greater synergistic business opportunities.
In summary, we witnessed a number of short term headwinds and we anticipate further changes as an industry best and evolves. As part of our corporate vision, we have always believed that technology empowers success, and committed to delivering quality through developing our people. One quick example is our advanced preparations for the year’s Double 11 festival, where we are facilitated more than 40 brand partners to rank number one, in order value in their specific product categories during the mega campaign.
Throughout the year, we have made considerable investment in enhancing our platform, enriching our technological capabilities as well as establishing a special force full of talents. We believe Baozun has the most comprehensive, reliable and powerful set of infrastructure in empowering our business partners. We are more confident in our competitive landscape and as a leader of brand e-commerce partner, we are well placed to navigate through these changes, adapt to the new environment and capitalize our opportunities.
At the same time, we continue to promote sustainable Baozun ecosystem for the longer term. And I’m happy to point out that this September MSCI in recognition of our comprehensive ESG initiatives, upgraded Baozun’s ESG rating to NA as demonstrated on Slide number 5. We are very proud of our team’s resilience through the quarter and are confident in the future.
And I’ll pass the call over to Arthur to go through our financials. Thank you.
Okay, thank you Vincent and hello everyone. Before diving into the numbers for this quarter, I would like to talk about 3 key topics. Number one, our M&A strategy number two, the near and the long-term impact of our recent acquisitions, and number three, our prudent and conservative accounting approach.
Now please turn to Slide number 6. Firstly, I’m confident that our M&A plan is making solid progress. We target complementary business and enhanced our vertical competitiveness, expand the economies of scale, and help make our business portfolio more resilient and balanced. We believe the current tough market environment offers an excellent window of opportunities for us to seek and consuming a variety of strategic long-term focused acquisition at a favorable valuation.
The initial revenue contributions from our acquisition early this year helped drive top-line growth and balance against the market headwinds. And we will look to do more of these Baotong acquisition as opportunities arises.
And secondly, while we continue to make notable progress in our M&A strategy and integrating new acquisition, let me provide you with the anticipated near and long-term impact to our business and financial. One near term impact is that while the initial revenue contribution benefited our top-line is quarter.
The associated cost contributed to a small quarterly operating losses of RMB7 million on a non-GAAP basis. As acquisitions typically need several quarters be integrated, we anticipate an improving bottom line contribution in the future. On the positive side, we expect greater synergies and ROI, once acquisitions fully integrated, which will contribute to our financial resilience as well.
And thirdly and finally, we strive for a prudent and conservative accounting approach. In our financial reporting. Every reporting period, we thoroughly evaluate our assets and liabilities. And this quarter, we conservatively made a decision to reduce the outstanding accounts receivables of one contributor were a write-down of RMB86 million. Although we have initiated legal proceeding to collect the overdue amount, and believe we have a reasonable chance to prevail. We decided it is more prudent at this time to write-down 65% of the total amount owed to us. We believe this is a one-off adjustment and it is an isolated incident in our 14 years of history.
Overall accounts receivables are healthy and we have taken measures to strengthen risk management and quality control in the future. While this breakdown had a negative impact this quarter, it preserve the integrity of our financial reporting.
Now, let me share with you some observations on the consumption during the quarter. Please turn to Slide number 7. First to share some of the macro statistics in light of the weakening of consumption momentum in China. According to the National Bureau of Statistics of China, retail sales growth decelerated notably to 5.1% year-on-year in the third quarter, compared with 13.9% a quarter ago. While e-commerce continues to gain share of retail, the growth rate of online physical goods for the third quarter also fell to 8.7% from 13.3% in the second quarter, and 25.8% in the first quarter of 2021. Respectively in the previous two quarters, discretionary categories, including apparel and appliance struggled, while FMCG and electronic parts.
Such macro consumption trends was consistent with our financial performance, as depicted. Slide number 8. During the quarter our total GMV increased by 48% to RMB16.1 billion. However, there was a gap among performance by sectors. Electronics did extremely well, with triple-digit year-on-year increase as there was an incremental 3 key brands that launched several new SKUs during the third quarter. In fact, if we excluding that our GMV growth would have been 2% in line with our observations of weaker consumption.
In addition to electronics FMCG and luxury both delivered high double-digit growth rate. On the flip side, apparel and accessories declined by the mid-teens percentage during the quarter with consistent impact from the BCI further to the weakened consumption sentiment. Sportswear continued to show a year-over-year decline. However, the contraction rate has narrowed. And we now see a modal month-by-month recovery trend. Appliance also declined by mid-single digit.
Overall, the GMV split between categories for the first 9 months are as follows. Apparel and accessories at 40% followed by electronics at 30%, FMCG at 16% and appliance at mid-single digit. We also saw a division in our distribution and non-distribution model this quarter. Specifically, our distribution GMV declined by 13% to RMB786 million, while non-distribution GMV increased 54% to RMB15.3 billion.
Please turn to Slide number 9. Total net revenues increased by 4% to RMB1.9 billion of which our acquisitions contributed a total revenue of RMB212 million. Products sales revenues declined by 13% mainly due to the decline of key brands in the appliance category. Over planned business model transition of a new brand partner as well as our tighter control on brand and channel selection criterias for the distribution model. In light of the macro uncertainty, our strategy for our distribution model is to pursue high quality growth with a clear focus on profitability and working capital efficiency.
Now turning to service revenue, has increased by 17% to RMB1.2 billion benefiting from several acquisitions made earlier this year. Service revenue of our organic business declined by 4% to about RMB1 billion as BCI continued to impact sales of mainly sportswear brands. As we refer to the total outbound orders of our logistics service, it declined by more than 25% year-on-year for the quarter.
As the proportion of our conformance model reduce, our blended take rate also declined accordingly. During the quarter, the take rate for the non-distribution model was 7.8%, down from 10.3% a year ago. Looking at the take rate of the consignment model itself on a like-for-like basis it is flat year-on-year is 12.2%. During the third quarter, our overall gross profit totaled RMB1.3 billion, an increase of 12.7% year-over-year, and our gross profit margin expanded by 540 basis points to 68.6% from 63.2% a year ago.
Now let’s turn to operating expenses on Slide number 10. Fulfillment expenses were RMB634 million, an increase of 51% year-over-year. This quarter, there was an incremental fulfillment cost of RMB205 million related to our two new acquired warehouse and supply chain businesses of BolTone and Baobida. Sales and marketing expenses were RMB536 million, an increase of 6.9% year-over-year. The increase was mainly due to increase of our business scales and expansion in headcount in digital marketing services, which was partially offset by efficiency improvements.
Technology and content expenses were RMB114 million, an increase of 12.2% year-over-year. The increase was mainly due to higher staff costs for incremental IT development offset by efficiency improvement. G&A expenses increased to RMB191 million. This increase was mainly due to some of our investments in talent and sustainability, as well as a write-down of RMB86 million in accounts receivables from one specific plant that I talked about earlier.
As a percentage of GMV, we continue to optimize OpEx to drive greater operational efficiency as displays on Slide number 11. For the third quarter, total OpEx as a percentage of GMV improved by 80 basis point to 9.1% driven by efficiency gains in marketing and technology ratios. More specifically, our sales and marketing improved by 130 basis points to 3.3% from 4.6% a year ago, driven by a combination of more effective digital marketing services and lower marketing and promotional expenses in absolute dollars.
We also improved by 20 basis points from higher efficiency in technology ratio. This quarter, the total fulfillment ratio was unchanged year-over-year at 3.9%. Lastly, our G&A due to the one-off extraordinary breakdown, as well as more strategic investment in talent increased to 1.2% from 0.5% a year ago.
Now turning to Slide number 12. Reflecting the above mentioned items, our non-GAAP loss from operations was RMB84 million during the quarter and non-GAAP OP margin was negative 4.4%.
And on slide 13, let me walk you through an analysis on non-GAAP operating profits. The slide shows the breakdown of our various operating profits and the profit bridge and how they evolve year-over-year. I would like to note that this is an indicative number which aim for you to better understand our financial performance.
In red, you can see the BCI continued to have a major negative impact. As it drags down the performance of sportswear fashion apparel, along with our organic logistics business. We are encouraged to see that, where revenues from our distribution model is — well revenue from our distribution model decreased operating profits from distribution was largely unchanged year-over-year benefiting from our high-quality growth strategy. Additionally, some of our strategic investments combined for a negative variance of RMB42 million, including the temporary higher cost of concurrently occupying two headquarters during our move to new one, a small increase in talent recruitment and investment in our Douyin and the regional service centers.
In blue, we saw positive gains in digital marketing, luxury and technology. As mentioned earlier, we also have the extraordinary write-down of $86 million. Exploding wage, our adjusted non-GAAP operating profit, which is calculated based on the non-GAAP operating profit adding back the write-down of RMB86 million was a positive at RMB2 million.
Turning to Slide 14, non-GAAP net loss attributable to ordinary shareholders totaled RMB88 million and basic and diluted non-GAAP loss per ADS was both 1.121 for the quarter. Lastly, turning to Slide 15, operating cash flow for the quarter was negative 400 — was negative RMB740 million. As you know, cash flow was impacted by our need to procure additional inventory during the third quarter in preparation for the Double 11 Season in November. During the quarter, we also deployed RMB178 million for M&A activities.
Total financing cash outflow was RMB739 million, mainly due to our execution of share repurchase program. This may, our board of director authorized a share repurchase program, allowing us to repurchase up to $125 million worth of our shares. As of September 30, 2021, we completed the full purchase totaled 18.6 million ordinary shares, with average cost of $6.7 per ordinary share each ADS represents 3 Class A ordinary shares.
As of September 30, 2021, our cash and cash equivalent totaled RMB2.8 billion. Importantly, as discussed earlier, our warehouse and logistics entity Baotong received the investment payments from Cainiao Network in late October. Therefore, we believe we have sufficient cash for normal operations and pursuing additional strategy and to pursue additional strategic opportunities. As we are confident with our comfortable cash position, I’m pleased to announce that the Board of Director has approved an additional share repurchase of up to $15 million over the next 12 months.
That wraps up my financial review for the third quarter. And concludes our prepared remarks. Thank you, everyone. Operator, we are now ready to begin the Q&A session.
Certainly. [Operator Instructions] Your first question comes from the line of Alicia Yap from Citigroup. Please go ahead.
Hi, good evening management. Thanks for taking my questions. The first question that I have — actually, I think you explained very well, the discrepancy between the GMV growth especially on the non-distribution GMV versus the service revenue growth this quarter. But I think my follow up questions on that is when can we expect the discretionary category like the apparel or the sportswear to cover to a more normalized level, which could help our service revenue to grow more in line with the non-distribution GMV growth?
And then secondly, also on the single day performance. I think you announced about 16.3% year-over-year growth during the single day performance. So should we expect these more or less the 4Q GMV gross to be? Or any colors on the service revenue for 4Q as far as the margin direction for 4Q as well. Thank you.
Okay, thank you, Alicia. I will take your question. On the first one. You were talking about this force coming back to the normal growth. Back in quarter 2, when we communicated to the market. We thought the BCI could be one-off impact and in Q3 and Q4 it will getting back to normal. And our current assessment is that it take longer than our expectation to get back to normal.
So even though the decline trends has coming back to narrow down from Q3 to — from Q3, and also will going to further narrow down in Q4. We expect this trend to continue into the next year, at least a quarter 1 and quarter 2. Our current view is maybe from the quarter 3 onwards, we could see some positive kind of trend on the sports and apparel.
And also, I would like to add, so despite we have some headwinds on the sports and apparel, we do have some positive gains from the luxury, and also FMCG. And in this quarter, we have seen a good growth on the GMV on the luxury. And we recently has wins quite a number of luxury brands. So we anticipate the strength of luxury will continue in the next few quarters. And also, our omnichannel strategy has helped us to grow FMCG and some other category, which also can help us to balance the impact from the sport. So that’s on the first question.
So on the second question, regarding to the single day performance, we’re still — as I mentioned overall, we still see some headwinds in the quarter 4. So from a GMV perspective, we think quarter 4 will be a low-teens kind of growth in the GMV. So we saw this fall, an apparel will slowly recover.
But overall, it will slowly recover, but within the sports, there are some highlights or some of the spotlights we would like to highlight, which is some subverticals, such as the outdoor or the winter sports. Because we will hold the Winter Olympics next year. We see that from some of the brands we do. We see some good growth. And also as I mentioned, the luxury will continue its very strong trend into the quarter 4. So that’s the overall what we have seen.
Thank you. Your next question comes from the line of Thomas Chong from Jefferies. Please go ahead.
Hi, good evening. Management thank you for taking my question. I think management has mentioned in the prepared remarks about the non-TMALL GMV trend. Can you comment about how we should think about the mix between TMALL and non-TMALL over the next couple of years?
And then my second question is more about the cooperation with Cainiao. Can you share with us more about the strategies going forward and the synergies that we should expect? Thank you.
So, I will take the question on the TMALL and non-TMALL and probably comment a little bit on Cainiao. So in terms of the TMALL, so as I mentioned earlier, for this quarter, we have seen the TMALL has seen some other weakness. And if we take out that one specific electronic brands, for the first time, the non-TMALL has surpassed 50% of overall GMV. So that’s a trend we have seen very clearly i.e. people are starting to explore more opportunities in terms of the non-TMALL channel.
Our expectation is, this a trend will continue at least going into the early part of next year. We believe this represents a lot of opportunity for Baozun. We have from the last two years continued to make investments into the omnichannel technology. We laid out the team to do more business, the mini program and also on Douyin AND Jingdong. As Vincent mentioned earlier, in this quarter, we made some solid progress in Douyin now operating about 20 kind of the [indiscernible] on Douyin in which we are quite satisfied with.
So going forward. I think this trend will continue. And I think Baotong we have prepared pretty well for this trend.
So in regarding to Cainiao. Our cooperation with Cainiao will bring to two synergies. So, the first synergy is we have comparable. I mean, we have a very much kind of capability. So from a Cainiao perspective, they are doing a lot of business based on a volume basis. And also, they do quite the standard logistics and warehouse products. For Baotong, we are focused on the premium, and were focused on customized kind of solution for the large brands.
So when we combine together, we will be able to depend on each other to further strengthen our capability. And we could introduce the business to each other from Cainiao to Baozun, we think from a sports, luxury and cosmetics, which is what ultimately is really strong on we will get some synergy from the Cainiao Network. So that’s under capability.
On top of the capability, we also containing in some resource efficiency. So as we know, Cainiao of operate a national network of a large — I mean, a market bigger kind of scale in terms of logistics and warehouse. And by utilizing that, I think they can further reduce our cost base and improve our capital efficiency when we make investments into the new warehouse. So that could also help Baotong to grow into a much bigger and much efficient business.
So based on those 2, we think that could be a pretty good in terms of going forward.
Yeah. Some more, words to say about the Cainiao corporations is that, we view cooperation with Cainiao as a big business development opportunity for us as well. Because by working with Cainiao closely. I think we can have much more BD opportunities for the categories including sports, luxury, apparel, cosmetics these kinds of categories. So in this case, we work with Cainiao closely deliver a better and comprehensive solutions to the industry. So potentially we can work through some much more the potential brands in the captioned different categories.
Thank you. Your next question comes from the line of Charlie Chen from China Renaissance. Please go ahead.
Thank you. Thank you management for taking my questions. I have a 2 questions. One related to GMV and the other related to take rate.
So the first one is regarding the GMV from the distribution business, we can see there is a slight decline of the GMV year-on-year for this quarter. So we understand the company is doing some strategic optimization. So how should we think about the negative impact going forward for the GMV from a distribution business?
And my second question is related to the take rate. So I can see for the non-distribution business GMV growth actually significantly outpaced revenue growth. So we understand that we are still on the investment stage for non-TMALL channels as an omnichannel efforts. How do you think about this? Or what do you think would be a reasonable estimate we can see meaningful improvements of take rate as a result of the long-term investment seeing some returns? Thank you.
Okay. On the GMV, as you mentioned we do have seen some decline of the distribution model. But there are 3 main drivers behind this fact. The first one is we have initiated some of the business model change along with a brand partner or distribution. We convert the distribution model into the service fee model, which for the brands and also for Baozun it’s actually a good thing because it improved our capital efficiency. So we don’t need to use our own cash to host the inventory. So that’s the first factor.
The second factor is things about of 18 months ago, we initiated a high-quality growth strategy. And in this quarter specifically, we stopped some low return kind of low profits of the distribution business so that’s we don’t want to do that type of business, especially during the weak market performance we concerned quite a lot about kind of the quality of that type of revenue.
And thirdly, as we all know, one small home appliance brands made a quite a significant contribution to our overall distribution revenue. And for this quarter, as one brand shows a low single-digit year-on-year decline, which also contributing to this fact. So that’s the reason behind the decline of the distribution model.
Going forward, we will focus on quality. So if we see good business or good category, which provides us with a good profitable return which is a distribution model, then we definitely would like to do it. Because the positive side of the distribution model is it shows a higher client stickiness with the brand partner. So if we have a chance to do it, we will use that model to do the profitable business. So that’s our strategy going forward.
This is a Tracy. I would like to add up one another point. So when we talk about the emerging channel like going and TikTok operation, what do we observed in the past few months is, for this channel, the take rate and also the revenue portion is positively or even higher than the TMALL channel. Because right now, as in the early stage of the channel development part, a brand is heavily rely on partner like Baozun to further develop the consumer value and also to improve the ally compare with TMALL channel. So at that part, which means besides the operation part, we can combine the digital marketing and also the technology into the total take rate, which means our revenue income part.
So that is I think, one of the positive we can see the trend on going forward. Yeah,
Okay. And also, I would like to add, for some of our business model take rate is not the only major. We actually look at the profit, but operating profits contributing to the bottom line. So for example, as I mentioned in the past, for the mini program. In this quarter, we’re actually doubled our revenue year-over-year. And for the mini program, we are making the profits for this quarter. So we focus on not only the take rate, but the profitability of the kind of the business.
Thank you very much.
Okay, thank you.
Thank you. Your next question comes from the line of Ashley Xu from Credit Suisse. Please go ahead.
Thanks, management for taking my questions. Firstly, want to get management’s preliminary view on our next year’s outlook given the currently challenging macro environment. And my second question is related to our operation on JD. Understand there has been quite some positive progress there. I want to check on the key categories where brand types, we are cooperating on this platform? And at the same time, what types of model are we deploying there? Thank you.
Yeah, so for the Jingdong part, I think Jingdong’s e-commerce operation logics are more similar to TMALL’s partially adopted Jingdong’s top economy environments buildup which is the main focus for this year next year for Jingdong. So I think Baozun’s operational experience can effectively improve the service capability of the non-standard category like fashion, luxury, beauty, home and others which all of these mentioned is our main focus, fashion, luxury beauty and home these kind of non-standard category.
And also I think our value of this not just about the marketing, consumer acquisition, but also the after sales consumer — customer service and also how to assist the platform in operating their tailor made solution for the — I mean pop up flagship stores. So this is the direction for the next year regarding the cooperation within Jingdong. And you can see from the Double 11 actually we have doubled the brands participating the Jingdong’s Double 11 this year and also is resulting 100% YoY growth compared with last year’s in terms of the transition. So the momentum is promising.
And even in this — I mean, right now actually we’ve been positively prepared for Double 12 for Jingdong platform too. I think the momentum is keep the same pattern. Thank you.
Okay. In terms of the outlook for next year, we are currently in the process of doing our ideal operating plan. So at this moment, we only have a direction in terms of both the GMV we continue to see get our portfolio of brands, we continue to see a healthy growth year-over-year maybe towards a high-teens to even the 20%-ish mark.
But in terms of the revenue and profits, I think there are still a lot of moving space. So, like I mentioned, we can see a recovery in terms of the overall economy and also the BCI impact start from Q3 and Q4 next year. Then from a revenue perspective, we could see a kind of a double-digit growth on the revenue. And in terms of the profit, while we keep making the profit improvement. We think our profitability will in line with our revenue growth to the same percentage.
Having said that, we will also look into other M&A opportunity for inorganic growth. And also we will look into other opportunities to make investment into the future for example, some technology to further enhance our omnichannel. So, there are still some moving parts at this moment. So, once we completed any operating plan in the next few weeks, we will be able to give the market a little bit more guidance.
Sure, thank you.
Thank you. Your next question comes from the line of Joyce Ju from Bank of America. Please go ahead.
Thanks management for taking the questions. My question was related to first is our future M&A strategy in terms of like for the rest of the years or next year. If we have seen other areas, we’d probably want to invest in the future. And second thing just want to understand the connectivity impact between Ali and Tencent and how this affected our operations for brands? Thanks.
So, I will do the M&A strategy first. And then maybe Tracy can comment on the connection between TMALL and Tencent. So on the M&A overall we see the current market environment provides some real attractive valuation on some of the target. And given our cash position, we’re actively looking for using the inorganic growth to create value for our shareholder and ensure our future growth.
So the opportunity were looking for in the 4 areas. So the number one is we still think the kind of the TP industry or the service provider industry needs to further consolidation. So, in this quarter in Q3, we actually completed our acquisition of eFashion, which is another e-commerce service provider. We have seen some early signs the integration could lead to some great synergy. So we will continue on that i.e. e-commerce service provider consolidation. So that’s number one.
The second thing is we will look into the capability enhancement. So in this quarter, we completed the kind of 2 logistics deals, and also we completed one deal on the digital marketing. So that helped us to build our capability to provide a better solution to our brand partner to enhance our stickiness with a customer and also to win more business. So that’s the second one.
The third one is we want to use the investments to improve our cooperation and the business with our brands. So for example, in early this year, we make investments into the Fosun Fashion Group. And with the 5 brands in Fosun Fashion Group, they all have seen some positive year-on-year improvement. And our cooperation with a brand partner has been very — will help making some really good progress. So, we will continue on that.
And finally, we will be looking for some overseas expansion opportunity through both organic and inorganic. So that overall is our plan strategy for the M&A in the next year or so. And I also would like to add, so after we start to do more structured M&A, we have internally build a strong team of experienced people. And we believe we will be able to capture this opportunity in the following year.
And regarding the Tableau and TMALL breakthrough. We do see there’s a lot of improvement on the consumer journey, especially about shared links and also in the payment level regarding the Friends Pay. But actually, I think there has not seen essential changes in the user behavior, which means right now, it’s hard for us to validate the positive impact on traffic and conversion itself. In the longer run, we do believe that because we know Tableau has many potential plans in the data level interaction that will be carried out next year.
So I think potentially it will bring a new wave of the traffic for e-commerce, especially the social app user base is much bigger consider this point. Yeah. Thank you.
Thank you, can we move to the next question? Management can we move the next question?
Yes, go ahead. Last one please.
Thank you. Your next question comes from Robin Leung from Daiwa. Please go ahead.
Hi, management. Thanks for taking my question. This Robin asked me on behalf of John Choi. Could management share the number of new brand partners that Baozun added in this quarter in addition to those 54 new stores in the non-TMALL channels. So, will these new brands be able to offset some of the weakness in the first half of 2022? Thank you.
Okay, thank you for the question. I think we currently — I mean, from the last quarter, we communicated to the market we will stop to gaining guidance or digging the numbers on the numbers of brands. That partly because after we have done several acquisitions, we found there are several different brands being operated by the acquired company which is very different from our overall standard [ph]. So therefore, we will not state that.
But what we are currently have seen is there are some good brands we have able to gain from this quarter and we have seen some of the major brands. In total we have gained 29 brands net addition in this quarter. So, that’s the overall number we have gained in this quarter.
We also have seen — on top of the new brands we also have seen — we have added another 122 stores, which many of them coming from our existing kind of brand partner, which shows our existing brand partner are opening more stores. A lot of them are in the omnichannel. So for example, our existing TMALL brand partner opening JD, or new mini program stores. So that’s contributed to the 122 additional stores.
So going forward as we mentioned earlier, the omnichannel strategy will further expand. We think we will continue to see more stores being added in the coming years? Tracy, you want to add something?
Yes. Actually, I think in numbers wise we definitely are higher — much higher than last year, I mean the numbers. But the pattern is different because this year, most of our new clients is concentrating on the luxury and this kind of category, which means we need longer time to prepare for the open up, which means we could see in the Q2 and even Q3 but we have seen in — I mean maybe Q1 next year or Q2 next year.
So you can see Vincent just published some memory in the Q1 next year, we’re going to open over 20 stores in luxury. So that is actually the effort we invested this year. And also on the other party is I think for the emerging channel like TikTok and Jingdong, this more like extend our current brands into the new channels. So we call it the existing client new channels. And on this part, we have a very steady growth this year. Because actually I think the infrastructure investment including technology and logistics have helped us more to help our client to open their omnichannel strategy. So all of this will also be contributed in the Q4 and also in the Q1 next year. Yeah, thank you.
Thank you. As there are no further questions at this point of time, I would like to hand the call back to management for any closing remarks. Thank you.
Thank you, operator. In closing on behalf of the Baozun management team, we would like to thank you for your participation into this call. If you have any further questions, please feel free to reach out to us. Thank you again for joining us today. This concludes the call.
Source: Seeking Alpha