Earnings Call Transcript - BZUN Q2 2025

Operator, Operator

Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Second Quarter 2025 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 Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy.

Wendy Shu Sun, Senior Director of Corporate Development and Investor Relations

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, many 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, Chairman and Chief Executive Officer

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 four 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 three 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 improve 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, Chief Financial Officer

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 the healthcare 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 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 52.3% a year ago. Now please turn to Slide #5 for a walkthrough 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 one-time write-off of CNY 53 million in account receivables. Excluding this write-off, G&A remained flat compared with the same period 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 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 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, Director and Chief Strategy Officer

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 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 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 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 exceeding 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 of 48.5% for the second quarter. We saw growth across many key marketplaces, reflecting the effectiveness of our strategies among emerging channels, with Douyin and RedNote standing out as top performers. To advance best practices 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 over 20 brands across outdoor, sports, luxury, and footwear. As one of the first six 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 testament 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 on Baozun Brand Management.

Ken Huang, Chief Financial Officer of Baozun Brand Management

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 commercial rates through product planning and 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 these new Tier 1 and Tier 2 markets as strong opportunities. With encouraging store-level 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 the 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 strong consumer engagement and higher commercial rates. From a marketing perspective, we launched the successful collaboration with Melting Sadness, a renowned Chinese art brand. The collection blended Gap's timeless denim and 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 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, fostering a strong sense of family orientation and 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 a 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 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 three 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 effective marketing that has led to higher customer traffic and sales. At the same time, Hunter has continued to diversify its product metrics with new line introductions. With innovation and customer satisfaction at its core, we are confident that Hunter will continue to thrive. 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

The first question comes from Alicia Yap in Citigroup.

Alicia Yap, Analyst

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, 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 platforms. 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 timeline?

Junhua Wu, Director and Chief Strategy Officer

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 two traditional marketplaces ecosystem. The Di Wen platform and the Tencent Smart Retail business, they don't have a 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 stages with this kind of instant retail shopping, like for fast-moving consumer goods and for those cosmetic categories and alcohol categories, and especially in some home appliance categories. So we can share more information in the future. Based on the data collected from our business, we will just keep tracking the instant retail shopping in the long run.

Ken Huang, Chief Financial Officer of Baozun Brand Management

And for BBM in Q3 and Q4, I think first of all, 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 capsules to the market. And we will also launch a series of offline and online activities 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 have prepared for the next two quarters. So we remain very confident in achieving our full year operating business objectives. And as we committed before, we will make it breakeven in Q4.

Junhua Wu, Director and Chief Strategy Officer

And following Ken's prediction about Q3 and Q4, let me add something about the projection from the BEC perspective. 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 have also started to plan a big second half of this year. So for Tmall, we will see an even stronger double 11 than last year in Q4, especially where we have a deeper dive with 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 consumer profile. So we are foreseeing that this is going to be a very promising second half of this year.

Operator, Operator

The next question comes from CITIC.

Unidentified Analyst, Analyst

Congratulations on this quarter's strong performance. I have two questions. The first is regarding the e-commerce business. In the past year, major domestic e-commerce platforms have emphasized providing more benefits to the merchants. Has this reduced the operational cost for brands on these platforms? And has Baozun benefited as a brand partner? Some platforms are also prioritizing traffic allocation over absolute low price. Have you observed an increase in traffic for brand products? This is my first question. And my second question is about brand management. Does 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, Director and Chief Strategy Officer

Thank you. Let me address your first question related to BEC. Yes. The platforms are offering a rebate program in the joint business plan, JBP in short. All our brand partners are signing up for 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. From Baozun's perspective, we also signed different contracts on the JBP with major platforms like Tmall and JD regarding the paid media services. Especially, we combine a lot of our brand partners GMV-wise to get a rebate from achieving the target. So you can see that the platforms are encouraging Baozun and the brands to just keep driving the top line and maintain a healthy growth rate in the long run. So this is about the rebate program. About the platforms prioritizing traffic allocation over absolute low price, this varies across different categories. In traditional categories, heavy categories, and crowded categories like sportswear, the pricing strategy is still a competitive element across different brands. In premium and luxury categories, they maintain support for a higher quality kind of traffic. So we cannot generalize that high traffic always comes over low price. Instead, we see that different strategies apply to different categories. However, one trend we observe is that both Tmall and JD are trying to adjust and reallocate high-quality traffic to the brand, ensuring that we are not just raising prices in the long run.

Wenbin Qiu, Chairman and Chief Executive Officer

Thanks for the question. This is Vincent. I will try to answer the first part of your question about the criteria for new brands. And then maybe Ken can also add some comments about the collaboration between different brands and how BBM can utilize Gap and Hunter's experience for future brands. Yes, for the first one, we have a strategy for a brand portfolio for BBM. That means we will have multiple brands. That's why we have the first one Gap, the second one Hunter, and maybe a third and a fourth one in the future. Luckily, both Gap and Hunter were previously Baozun's e-commerce clients. After many years of e-commerce operations, we have started to work with them in a deeper collaborative manner, which includes brand management. This helps us reduce the risk when we begin to expand our business with brands and saves a lot of time and cost and learning curves. In the future, if possible, we will maintain this same approach. In BEC, we have a large client base, including hundreds of fashion and apparel brands. We also aim to cultivate some brands from generic e-commerce collaborations into brand management collaborations. So that gives us huge potential for the future. But of course, we're open to other brands as well from outside. For the criteria, I think these brands need to be energetic and have significant potential, whether online or offline in China, and they should benefit from the experience we gained from Gap and Hunter and from the market. Essentially, we want these brands to provide us with growth and, at the same time, profitability. Ken?

Ken Huang, Chief Financial Officer of Baozun Brand Management

For the second part of your question, first, Gap and Hunter have built a very strong foundation, including the infrastructure, system, processes, and talent in the full value chain of apparel retail business. Secondly, for Gap, it helps to provide a foundation for future brands to easily onboard, including merchandising, channels, and marketing. For example, in merchandising, because Gap covers all categories of products in apparel, any new brand we have in the future can easily onboard their local design and local supply chain. And for channels, we can also expand faster than any other brand. For Hunter, I think it will help us establish a successful case in controlling IP rights. We can manage online and offline, expanding its business at a very quick pace. So I think that's all for how Gap and Hunter empower other brands in the future.

Operator, Operator

The next question comes from Frank Tao at CMBI.

Ye Tao, Analyst

Yes. My question is on the growth outlook of BEC business. I think you shared in previous calls that we will be focusing on driving operating efficiency improvement this year. We have noticed some improvements in the first half. Just wondering where we are 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 we are benefiting from this program and your business growth expectations in the second half.

Junhua Wu, Director and Chief Strategy Officer

Okay, Frank. So let me address your two questions. The first question is about operational efficiency improvement. From the beginning of this year, we emphasized internally based on our bottom line, optimizing our cost, driving efficiency, building a healthier organization and operational flow. That doesn't take our full time; it's more about company policy and implementation tasks. Right now, as we shared in previous scripts, in the past 618, we focused heavily on driving top line growth, especially on merchandising, peering, and quality of traffic and all those aspects to drive a better ROI. In the second half of this year, especially with Double 11 coming up, we feel very confident along with our brand partners due to our performance during 618. We are planning with better merchandising support and relatively higher support on paid media. The second question, regarding how we are benefiting as a Red Partner, we were one of the first six Red partners, specifically the only one in the fashion sports category. This recognition gives us significant credibility across different categories. Recently, RedNote announced it will be open to all categories, which means many different categories can seek great partnerships with selected partners. Baozun and our team are consistently listed as top candidates for potential clients. This provides us with greater opportunities and potential revenue growth from the RedNote stream.

Wenbin Qiu, Chairman and Chief Executive Officer

Thanks for the question. Vincent again. Yes, we noticed the rumors. We have reached some agreements with the brand and are excited. Although this brand isn't quite large yet, as I mentioned, this brand has been operating its e-commerce business with our team, and we have converted this into a brand management venture. So they are not strangers to us; they are long-term partners. We understand this brand's journey in China—its ups and downs. It's a good time for us because we have been managing two sibling brands for years. This new brand can leverage our established designing capabilities and supply chain strength that we built alongside the two brands. They can utilize our systems immediately without investing in system building. They will also learn from Hunter about establishing and strengthening core product categories and successfully marketing through RedNote, Douyin, and other channels. We are very optimistic about the potential here because the yoga and sports apparel market in China is vast. So we anticipate significant growth opportunities ahead of us.

Operator, Operator

Your next question comes from Chris Zhao in Guotai Securities.

Chris Zhao, Analyst

I have two questions. The first question is about AI application. How do we perceive the progress we made in AI this quarter? And is it mainly about increasing our revenue or reducing our costs and increasing efficiency? Are there any further directions for AI use we can assume for future development? With recent emerging models, have you noticed any better effects when applying these new AI technologies in business operations? And my second question is about the Double 11 promotion. We can see strong momentum in the 618 Festival. Do we currently have any early indication or plans for this year's Double 11 promotion?

Junhua Wu, Director and Chief Strategy Officer

Okay, Chris, let me address your two questions. The first one is related to AI. Baozun is centric-focused on technology. We employ over 800 in-house software engineers, and we invest significant resources in improving efficiency, especially leveraging AI to save costs. We are developing more internal tools focused on managing digital assets, i.e., how we can quickly use AI to create content like pictures, scripts, videos, etc. Currently, our focus on AI centers around optimizing internal efficiencies, making content creation easier for consumer interactions—these include PDPs and short video clips. We are not heavily investing in AI for revenue-driving just yet, as we believe large-scale mature models aren't quite ready to replace human expertise in areas like merchandising, marketing campaigns, and competitor analysis. So for now, AI in BEC is largely about driving efficiency in our back office. Your second question regarding the Double 11 forecast: we don't have a clear focus on Double 11 as we haven't received any information or clues about how we will start the campaign. The previous 618 was the longest recorded, so we do not have clarity on the Double 11 mechanism. However, our brand partners and we have gained confidence through our experiences in 618 and are planning on heavier inventory for Double 11 along with a higher budget for paid marketing services.

Operator, 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, Senior Director of Corporate Development and Investor Relations

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, Operator

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