Baozun Inc. (NASDAQ:BZUN) Q2 2025 Earnings Call Transcript

Baozun Inc. (NASDAQ:BZUN) Q2 2025 Earnings Call Transcript August 28, 2025

Operator: Good morning, ladies and gentlemen, and thank you for standing by for Baozun’s Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference call is being recorded. I will now turn the meeting over to your host for today, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy.

Wendy Shu Sun: Thank you, operator. Hello, everyone, and thank you for joining us today. Our second quarter 2025 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 Baozun, we have Mr. Vincent 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. Qiu will first share our business strategy and company highlights. Ms. Zhu will then discuss our financials, followed by Mr. Wu and Mr. Huang, who will share more regarding our e-commerce and brand management segment, respectively.

They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Securities Act of 1933 as amended, U.S. 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, 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. 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 statements, 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 #2 for the executive highlights for the quarter.

It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.

Wenbin Qiu: 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 BBM making commendable progress. Overall, our total revenue grew by 7%. Excluding one-off expenses, our adjusted operating income expanded to CNY 59 million, a significant improvement from CNY 10 million in the same period of last year. 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 CNY 94 million, the highest second quarter level in 4 years since the pandemic.

Amid ever-changing market dynamics, BEC 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. With our scale and 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 marketing initiatives for Gap, driving healthy top line momentum while improving profitability. Hunter also reached a remarkable milestone in unit economics from its first 3 offline stores opened in May and is making steady progress in category expansion.

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 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 decision-making and improved target setting and tracking. These initiatives are driving the success of product development, while enhancing inventory efficiency and productivity.

The combined strength 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.

Yanjie Zhu: Thanks, Vincent, and hello, everyone. Before we dive into the financial details, I’d like to quickly address the one-off write-offs. Back in September 2021, we initiated arbitration against a distributor in health care and cosmetic industry for payment. Taking a conservative and prudent approach, we had previously made a provision of CNY 93 million in 2021. This quarter, based on the latest progress in arbitration, we assess the likelihood of recovery as remote. Therefore, we wrote off the remaining CNY 53 million in this specific accounts receivable. This was recorded as a one-off onetime general and administrative expense in BEC’s second quarter P&L. Now let me provide a more detailed overview of financial results for the second quarter of 2025.

Please turn to Slide #3. Baozun Group’s total net revenues for the second quarter of 2025 increased by 6.8% year-over-year to CNY 2.6 billion. Of this total, e- commerce revenue grew by 3.4% to CNY 2.2 billion, while brand management revenue rose by 35.4% to CNY 398 million. Breaking down e-commerce revenue by business model. Services revenue increased 3.5% year-over-year to CNY 1.6 billion. This increase was driven by revenue growth in digital marketing and IT and online operations. BEC product sales revenue increased 3.3% year-over-year to CNY 599 million, supported by strong performance in beauty and cosmetics and alcohol categories. BBM product sales totaled CNY 396 million, representing a 35.5% year-over-year growth. This growth was mainly driven by the strong performance of the Gap brand.

Please turn to Slide #4. From a profitability perspective, our blended gross margin for product sales at the group level was 28.4%, an expansion of 310 basis points year-over-year. Gross profit increased by 28.1% year-over-year to CNY 283 million 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. Gross margin for BBM was 52%, relatively flat compared with 2.3% a year ago. Now please turn to Slide #5 for a walk-through of our OpEx. Fulfillment cost for the quarter was reduced by 3.3% to CNY 606 million, reflecting our ongoing efforts in cost optimization.

Sales and marketing expenses increased by 11% to CNY 938 million, mainly due to higher spending on creative content and performance-driven digital marketing during the 618 e-commerce campaign as well as increased front-end expenses from expanding BBM’s offline network. Technology and content expenses decreased by 11.7% to CNY 150 million as we continue to enhance monetization efficiency. G&A expenses rose 30.7% to CNY 224 million, primarily due to the onetime write-off of CNY 53 million in account receivables. Excluding this write-off, G&A remained flat compared with the same period of last year. Turning to bottom line items. Please refer to Slide #6. During the quarter, our non-GAAP income from operations was CNY 6.1 million. Excluding the above-mentioned CNY 53 million nonrecurring provision, our adjusted non-GAAP income from operations was CNY 59 million, a sharp improvement from CNY 10 million in the same period of last year.

BEC’s adjusted non-GAAP income from operations was CNY 94 million, representing a year-over-year improvement of 56.4% or CNY 34 million higher than a year ago. BBM reported a non-GAAP operating loss of CNY 35 million, an improvement of 30% compared to the same period of last year. As of June 30, 2025, our cash and cash equivalents, restricted cash and short-term investments totaled CNY 2.7 billion. Let me now pass the call over to Junhua to update you on BEC, our e-commerce business.

Junhua Wu: Thanks, Catherine, and hello, everyone. In the second quarter, BEC stayed focused on profitability and sustainable growth following our phased approach, realigned in Q1, stabilized in Q2 and accelerate in the second half. This quarter, we delivered operating profit growth by 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 broader 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.

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 #7. During the quarter, BEC product sales grew 3.3%, driven by strong performance in beauty and cosmetics. We also achieved consistent breakthroughs in alcohol and apparel categories. While these apparel 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 #8. 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 618 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 top priorities. 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 618 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 omnichannel initiatives also gained strong momentum in this quarter, with the multichannel 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 RedNote stood out as top performers. 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 full 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 RedNote, revenue grew triple digits, driven by rising demand across both marketing and store operations. In the first half of 2025, we partnered with 20-plus brands across outdoor, sports, luxury and footwear. As 1 of the first 6 qualified RedNote 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 casement to our ability to innovate and adapt to new channels. In summary, Q2 demonstrates that BEC is stabilizing on a stronger foundation.

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 towards sustainable growth and long-term success. Now I’ll pass the call to Ken for an update to Baozun brand management.

Ken Huang: Thank you, Junhua, and hello, everyone. Please turn to Slide #9 for BBM’s performance in the second quarter of 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. Our merchandising strategy remains sharply attuned to market timing, helping drive consistent improvements in store traffic and the commercial rates through displaying the product planning and the sharper segmentation. We are strengthening our ability to capture demand across categories, while reinforcing the relevance of Gap’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 CNY 208 million. On the channel front, we expanded our footprint with 11 new openings in the quarter for a net increase of 8, bringing our total to 156 locations by the end of June. Several of these openings were in new markets such as Kashkha, broadening Gap’s reach into previously untapped regions. We also expanded further into emerging cities, including Ningbo, Foshan and Nanning, as we view this new Tier 1 and Tier 2 markets’ strong opportunities. With encouraging store level, unique economics, we are adjusting our store opening plans to emphasize local partnerships, leveraging an 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 1 cities. At the same time, our e-commerce channels delivered strong momentum, fueled by our tailored segmentation approach. This included product and consumer segmentations, targeted marketing and optimized operational execution, which led to a strong consumer engagement and higher commercial rates. From a marketing perspective, we launched the successful IP collaboration with Melting Sadness, a renowned Chinese art brand. The collection blended Gap’s timeless denim, comfort with Melting Sadness’ playful artistic spirit. At the heart of this collaboration is a message, every day needs a Gap moment, aimed at building a stronger emotional connections with consumers.

In celebration of Children’s Day, we also rolled out our Brannan Bear campaign, featuring our beloved character designed to spark joy and creativity in children. We created a series of key activities in Brannan features — featured booklets, fostering a strong sense of family orientation and the community. Looking ahead, we are preparing an even stronger lineup of marketing activities for the second half of 2025, with the aim of further enhancing Gap’s brand 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 126 days, representing more than 20% year-over-year improvement. This progress reflects display 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. Together, these actions provided a solid boost to operating performance. On a non-GAAP basis, BBM’s operating loss narrowed further to CNY 35 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 celebrated its offline expansion with the simultaneous opening of 3 flagship stores in Shanghai, Zhangyuan, Hangzhou, MixC and Beijing Sanlitun, each achieving profitability in its first quarter, an impressive start. The brand has gained market attention with stylish products, well-designed store displays and the effective marketing that has led to a higher customer traffic and sales.

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 Hunter 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 stronger seasonal activations in Q3 and Q4, we remain confident in achieving our full year targets. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.

Operator: [Operator Instructions] The first question comes from Alicia Yap in Citigroup.

Q&A Session

Alicia Yap: I have two quick ones. The first one is that if you can share with us the percentage of the contribution from your various platforms, which including coming from the Tmall and also the non-Tmall platforms. And then related to that is also how do we see the impact from the recent step-up of the instant retail shopping competitive landscape by all these e-commerce platform. Wondering if Baozun’s business and also the store operations or anything that has affected the Baozun business at all. If you can share some color on that. And then second question is related to your strong growth of your BBM business. So do you anticipate the strength of that momentum will further continue in the coming quarters? And is there any time frame for the profitability time line?

Junhua Wu: Thank you, Alicia, for the question. So I believe the first question is related to BEC. So let me address that first question. So for the past 618 promotion, we definitely see a lot of GMV growth on Tmall and on JD, especially those 2 traditional marketplaces ecosystem. And the Di Wen platform and the Tencent Smart Retail business, they don’t have the very strong 618 mindset. So let’s focus on Tmall and JD. So Tmall growth, I don’t have a 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, they maintain a very strong GMV growth in the 618 campaign. So back to the question about the instant retail shopping.

So we realize that instant retail shopping has been 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 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. So based on the data collect of our business, and we will just keep tracking the instant retail shopping in the long run.

Ken Huang: And for BBM in Q3 and Q4, I think first of continuing to expand our stores offline, both Gap and Hunter. And the second way, we will continue to improve our products in Q3. For Gap, we are 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 2 quarters. So we remain — still remain very confident for — to achieving our full year operating business objectives. And our breakeven point, we — as we committed before, we will make it breakeven in the last quarter, Q4. Thank you.

Junhua Wu: 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 618, and that has raised a lot of confidence for all of our brand partners. And they’ve also starting to plan a big second half of this year. So for Tmall, so we will see, compared last year, an even stronger double 11 in this Q4 and especially where we have 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 are foreseeing that this is going to be a very promising second half of this year.

Operator: The next question comes from [indiscernible] of CITIC.

Unidentified Analyst: Congratulations on this quarter’s strong performance. I have 2 questions. The first is regarding the e-commerce business. In the past year, major domestic e-commerce platform have emphasized providing more benefits to the merchants. Has this reduced the operational cost for brands on these platforms? And Baozun 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 product? This is my first question. And my second question is about brand management that Baozun plan to pursue further brand acquisitions or deepen collaborative partnerships. 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?

Junhua Wu: 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, JBP in short. So all our brand partners, they are signing up the JBP 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. And from the Baozun perspective, we also signed up different contracts on the JBP with major platform like Tmall and JD regarding the paid media services. And especially, we combine a lot of our brand partners GMV-wise to get rebate from the — 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 the — about the rebate program. And the — about the platforms are also prioritizing traffic allocation over absolute low price. 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. But one thing for trend is like both Tmall and JD, they are trying to adjust — reallocate a high-quality kind of traffic to the brand to make sure that we are not keep raising on price in the long run.

Wenbin Qiu: Thanks for the question. This is Vincent. I will try to answer 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, yes. So for the first one, yes, we have a strategy of a brand portfolio for BBM. 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 2 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.

So I think this help us reduce the risk when we started 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 are still doing the same thing. In BEC, we have a quite large client base, including hundreds of fashion apparel, accessories brands. 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. 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 for the market.

So basically, we need these kind of brands to give us growth and, in the meantime, profitability. Ken?

Ken Huang: And for the second part of — second question, I think first, Gap and Hunter has been 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 onboarding their local design, local supply chain. And for the channels, if we have any new brands, we can also expand faster than any other brand. And for Hunter, I think it will also help us to establish the successful case to have the controlling IP rights.

And we can write from online to — both online and offline and expand its business in a very quick pace. So I think that’s all for Gap and Hunter’s empowerment to other brands in the future.

Operator: [Operator Instructions] The next question comes from Frank Tao at CMBI.

Ye Tao: Yes. My question is on the growth outlook of BEC business. I think you shared on previous calls that we will be focusing on driving operating efficiency improvement this year. We have noticed some [indiscernible] results in the first half. Just wondering where are we in the progress now, and we have seen some new acceleration 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. 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.

Junhua Wu: Okay, Frank. So let me address your 2 questions. The first question is related on the operational efficiency improvement. So from the beginning of this year, so we really emphasized 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 operational flow. That doesn’t take our full time. So it’s more like the company policy and implementation job. So right now, just — as we shared an example in the previous kind of the script, so we — in the past 618, 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, this is our day-to-day job is driving the top line in this year. So in the second half of this year, just like I just said, foreseen the coming Q3 and Q4, so we drove a lot of confidence along with our brand partners in the past 618. And with a higher growth, we are planning with a better merchandising support, a relatively higher support on paid media and et cetera. So the second half, especially in the coming Double 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 Red Partner or you want to know how are we benefiting from RedNote itself?

Ye Tao: From the RedNote partner as you have been selected the first batch of Red partners, yes.

Junhua Wu: Yes, that’s right. That’s right. So we were the first — 1 of the 6 Red partner, especially the only one in the fashion sports category. That happened in the first month of the past 6 18. So this gives us a lot of credentials across different categories. The day before yesterday, RedNote just announced to release, to open the gate to all those categories, which means that a lot of different categories can be open to RedNote and Red Cat initiatives selecting great partners. So Baozun and our team is always listed on the top of the selection, just like our 6-star TP partner in Taobao and Diamond in Douyin and also the first plus service partner on JD. So we will be very exposable to all those potential clients, 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 RedNote to Tmall, especially driving transactions in seating, 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 RedNote stream. And also meanwhile, we can link to our business directly from the Red Cat initiative. Hope that makes sense to you, Frank.

Ye Tao: Yes. Got it. Super helpful. So a quick follow-up, if I may. We saw some recent rumors regarding a Yoga brand onboarding. Just wondering, can you elaborate more on the collaboration approach between you and this brand?

Wenbin Qiu: 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 has also operated the e-commerce business first by our team, and then we convert this into a brand management brand. So it’s not a stranger to us. It is a long-time friend already. We know a lot of this brand already, ups and downs in China. I think it is a very good timing because, right now, we have operated the 2 brands, 2 brother, sisters in the past years. So this new brand can benefit from a lot of good things. For example, the designing power and also the supply chain capability, which we built alongside with the 2 brands can benefit this new baby.

And also we have all the systems 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 of products, how we market this through RedNote, 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. So the potential is so big, and we are just a baby. So that means a huge potential ahead of us. Yes, it’s true. Thank you.

Operator: Your next question comes from Chris Zhao in Guotai Securities.

Chris Zhao: I have 2 questions. The first question is about the 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 cost and like increasing efficiency? 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 these kind of AI new technology and models in the business operation? And my second question is about the Double 11 promotion. So we can see that we experienced strong momentum in 618 Festival. So do we currently have any early indication or plan for this year’s Double 11 promotion?

Junhua Wu: Okay. Chris, let me address your 2 questions. The first one is related to AI. So Baozun, we are centric focused on our technology. So we have over 800 in-house software engineers. So we spent 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, et cetera. So we are not 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 model and the AI agent, it’s not quite mature enough to replace the human kind of 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. That’s question number one. The second question is related to the forecast of Double 11. We do not have a very clear focus on Double 11 because we haven’t received any information or clues about how we will start the Double 11 campaign and how that’s going to end. So the past 618 was the longest 618 for the history. So we have no idea about the mechanism of the coming Double 11. 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 618 to the Double 11. 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 11.

So we can share more information later on maybe in the next quarter. 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.

Wendy Shu Sun: 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.