(BZUN) 2022 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Second Quarter 2022 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's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy.

女士們，先生們，早上好，感謝您在寶尊 2022 年第二季度收益電話會議上的支持。 （操作員說明）作為提醒，今天的電話會議正在錄音中。我現在將會議轉交給今天的主持人，寶尊企業發展與投資者關係高級總監孫文迪女士。請繼續，溫蒂。

Thank you, operator. Hello, everyone, and thank you for joining us today. Our second quarter 2022 earnings release was distributed earlier and is available on our IR website at ir.baozun.com as well as on GlobeNewswire services. They have also posted a PowerPoint presentation that accompanies our comments to the same IR site where they are available for download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman, and Chief Executive Officer; Mr. Arthur Yu, Chief Financial Officer; and Ms. Tracy Li, our Vice President of Strategic Business Development. Ms. Qiu will review the business operations and the 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 [derain] the meaning of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995.

謝謝你，接線員。大家好，感謝您今天加入我們。我們的 2022 年第二季度財報發布較早，可在我們的 IR 網站 ir.baozun.com 以及 GlobeNewswire 服務上獲取。他們還在同一個 IR 網站上發布了一個 PowerPoint 演示文稿，該演示文稿伴隨我們的評論可供下載。今天寶尊的電話，我們有董事長兼首席執行官邱文森先生； Arthur Yu先生，首席財務官；和我們的戰略業務發展副總裁 Tracy Li 女士。邱女士將回顧業務運營和公司亮點，然後是於先生，他將討論財務和指導。在隨後的問答環節中，他們都可以回答您的問題。在開始之前，我想提醒您，本次電話會議包含前瞻性陳述 [derain] 1934 年《證券交易法》和 1995 年《美國私人證券訴訟改革法》的含義。

These forward-looking statements are based upon management's current expectations and current market and operating conditions and relates to events that involve no or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the U.S. SEC and announcement on the website of Hong Kong Stock Exchange. The company does not take 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 and the comparators are on a year-over-year basis. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.

這些前瞻性陳述基於管理層當前的預期以及當前的市場和經營狀況，並涉及不涉及或未知風險、不確定性和其他因素的事件，所有這些都難以預測，其中許多超出了公司的控制範圍，這可能導致公司的實際結果與前瞻性陳述中的結果存在重大差異。有關這些及其他風險、不確定性或因素的更多信息，請參閱公司向美國證券交易委員會提交的文件以及香港聯合交易所網站上的公告。公司不承擔任何更新任何前瞻性陳述的義務，除非法律要求和適用。最後，請注意，除非另有說明，本次電話會議中提到的所有數字均以人民幣為單位，比較數據為同比。現在很高興向大家介紹我們的董事長兼首席執行官邱文森先生。文森特，請繼續。

Thank you, Wendy. Hello, everyone, and thank you all for joining us. As you know, in April and May 2022, there was strict COVID lockdown in many key cities of China, including Shanghai, where Baozun’s headquartered. In the face of COVID-related logistics interruptions, our team quickly mobilized infrastructure to minimize disruptions and maintain operations. Overall, as shown on Slide #2, our total net revenue declined by 8% year-over-year, while services revenue increased by 7% and demonstrating once again our resiliency to macro uncertainties. The pandemic has accelerated the need to cope drastic interruptions and the urgency of digital transformation across a wide range of brands that we serve. Please turn to Slide #3. The sailing trend in the rapid convergence between online/offline or OmO, Baozun's omni-channel solution enable OmO by integrating brand partners resources, including digitized advertisers of brick-and-mortar stores, mobilized sales associates, and share inventories. That has become the lifeline of e-commerce during the strict COVID lockdown.

謝謝你，溫蒂。大家好，感謝大家加入我們。如您所知，2022 年 4 月和 5 月，包括寶尊總部所在地上海在內的中國許多主要城市都實施了嚴格的 COVID 封鎖。面對與 COVID 相關的物流中斷，我們的團隊迅速調動了基礎設施，以盡量減少中斷並維持運營。總體而言，如幻燈片 #2 所示，我們的總淨收入同比下降 8%，而服務收入增長 7%，再次證明了我們對宏觀不確定性的彈性。大流行加速了我們服務的眾多品牌應對劇烈中斷和數字化轉型緊迫性的需求。請轉到幻燈片#3。在線上/線下或OmO快速融合的趨勢下，寶尊的全渠道解決方案通過整合品牌合作夥伴資源，包括實體店的數字化廣告商、動員銷售人員和共享庫存，使OmO成為可能。在嚴格的 COVID 封鎖期間，這已成為電子商務的生命線。

We also benefited from the deployment of our intelligent customer service management system, S-ANY, which can support remote execution and enhance quality. With S-ANY, our staff can lock into the system from anywhere and the system will keep monitoring real-time data of customer service behavior across channels. With our seamless integrated technology, we are pleased that Baozun has become brand de facto aid and relief when it comes to overcoming uncertainties and challenges like COVID lockdowns. And as always, we kept developing additional services. For instance, we upgraded digital content and enabled more virtual reality functions for one leading sportswear brand and also launched short video services, leveraging our multi-regional service centers network. All these efforts helped enrich consumer experience and empower many of our brand partners through success during the 618 campaign.

我們還受益於智能客戶服務管理系統 S-ANY 的部署，該系統可以支持遠程執行並提高質量。使用S-ANY，我們的員工可以從任何地方鎖定係統，系統將持續監控跨渠道的客戶服務行為的實時數據。憑藉我們的無縫集成技術，我們很高興寶尊在克服 COVID 鎖定等不確定性和挑戰方面已成為品牌事實上的援助和救濟。和往常一樣，我們不斷開發額外的服務。例如，我們為一個領先的運動服飾品牌升級了數字內容並啟用了更多的虛擬現實功能，並利用我們的多區域服務中心網絡推出了短視頻服務。所有這些努力都有助於豐富消費者體驗，並通過 618 活動的成功為我們的許多品牌合作夥伴提供支持。

Now, please turn to Slide #4 to share more about our progress on business development. During the quarter, luxury and the premium brands continue to surge forward. And we also added more subcategories, including outdoor, cosmetics, and fast-moving consumer goods, thereby enhancing our diversification. Overall, we added a net of 10 new brand partners in the second quarter, and the total number of brand partners for store operations increased to 355. While we prioritized the new partnerships, we inspire existing partners to launch more channels. By the end of the second quarter, we operated approximately 40% of our brand partners in omni-channel approach compared with about 33% a year ago, making a milestone in our omni-channel vision.

現在，請轉到幻燈片#4，分享更多關於我們在業務發展方面取得的進展。本季度，奢侈品和高端品牌繼續飆升。我們還增加了更多的子品類，包括戶外用品、化妝品和快消品，從而增強了我們的多元化。總體而言，我們在第二季度淨增加了 10 個新品牌合作夥伴，門店運營的品牌合作夥伴總數增加到 355 個。在優先考慮新合作夥伴的同時，我們鼓勵現有合作夥伴推出更多渠道。截至第二季度末，我們以全渠道方式運營約 40% 的品牌合作夥伴，而一年前這一比例約為 33%，這在我們的全渠道願景中具有里程碑意義。

This August, our capabilities and track record helped us gain greater recognition in the Tencent mini program e-commerce ecosystems. We were honored to be accredited by Tencent as a partner of excellent category for e-commerce operator and independent service vendor, or IV, for Tencent Club Mall, an outstanding category for business development partner, which with these recognitions, we became the only service partner that's in top listed in both -- that is published in both Alibaba Tmall and Tencent mini program e-commerce ecosystems. We are now further collaborating with Tencent on several initiatives, such as in traffic acquisition and smart new retail. Next, our momentum towards our vision of technology empowers in the future success. We are seeing strong demand from our clients for technologies and solutions to manage not only retail but also distribution network. For example, our big successful project with leading electronics giants, continue to expand.

今年八月，我們的能力和業績幫助我們在騰訊小程序電子商務生態系統中獲得了更大的認可。我們很榮幸被騰訊評為電子商務運營商和獨立服務商優秀類別合作夥伴，或IV，騰訊俱樂部商城，業務發展合作夥伴優秀類別，憑藉這些認可，我們成為唯一的服務商在阿里巴巴天貓和騰訊小程序電子商務生態系統中均排名第一的合作夥伴。我們現在正與騰訊在流量獲取、智慧新零售等多項舉措上進一步合作。接下來，我們朝著我們的技術願景邁進的勢頭將助力未來的成功。我們看到客戶對管理零售和分銷網絡的技術和解決方案有著強烈的需求。例如，我們與領先電子巨頭的大型成功項目，繼續擴大。

During the quarter, we completed a nationwide integration in Mini Program and the JD [Tmall] for all of its over 3,000 stores, enabling us to generate license revenue in recurring stream. We're now in the next phase of incorporating Tmall and [Jingdong] to this digital platform to fully integrate business flows from factories to stores and to consumers. Another example is one, we were recently secured a world-leading sports equipment retailer to co-build its digital operating platform. Thus far, we have established a business pipeline with over a dozen of brand partners in technology integration. We believe as brand partners elevate the efforts in digital transformation, technology remains the backbone of our widening competitive advantages.

本季度，我們完成了全國3000多家門店的小程序和京東[天貓]的整合，使我們能夠產生經常性的許可收入。我們現在正處於將天貓和[京東]整合到這個數字平台的下一階段，以充分整合從工廠到商店和消費者的業務流程。另一個例子是，我們最近獲得了一家世界領先的運動器材零售商，共同構建其數字運營平台。至此，我們已經與十幾家品牌合作夥伴建立了技術整合的業務管道。我們相信，隨著品牌合作夥伴加大數字化轉型力度，技術仍然是我們不斷擴大競爭優勢的支柱。

Now, move on to our progress in logistics and supply chain businesses. Despite the disruptions in some areas during the COVID lockdown, we not only were able to uphold operations at our own warehouses, but also guided our brand partners to quickly transit from a centralized warehouse into a great managing system. We further deepened our cooperation with Tmall to leverage its established infrastructure and network. During the quarter, we started to manage Tmall's warehouse in the apparel category, got some business referrals in luxury and the premium sector, and launched more RFID-based solutions for some of our key sportswear brands. Motivated by these early synergies, we will appease the existing line to further streamline and advance additional strategic objectives.

現在，繼續我們在物流和供應鏈業務方面的進展。儘管在 COVID 鎖定期間某些地區出現了中斷，但我們不僅能夠在我們自己的倉庫中維持運營，而且還引導我們的品牌合作夥伴快速從集中式倉庫過渡到一個出色的管理系統。我們進一步深化與天貓的合作，利用天貓成熟的基礎設施和網絡。在本季度，我們開始管理天貓在服裝品類的倉庫，在奢侈品和高檔領域獲得了一些業務推薦，並為我們的一些主要運動服裝品牌推出了更多基於 RFID 的解決方案。在這些早期協同效應的推動下，我們將安撫現有生產線，以進一步精簡和推進額外的戰略目標。

And during all the external uncertainties, we were able to demonstrate our resiliency and accountability. Meanwhile, we are executing our midterm plan with discipline and strategically investing in our business transformation to expand our total addressable market. For example, please turn to Slide #5. In brand management, we see a natural move to expand upstream in the value chain, leveraging our digitalization capabilities and growing penetration of e-commerce and marketing insights, brand management enhanced value proposition from end-to-end solutions, which will also, in turn, enhance our strategic thinking and cultivate a brand-oriented service philosophy.

在所有外部不確定性中，我們能夠展示我們的彈性和責任感。與此同時，我們正在有紀律地執行我們的中期計劃，並戰略性地投資於我們的業務轉型，以擴大我們的總目標市場。例如，請轉到幻燈片#5。在品牌管理方面，我們看到了向價值鏈上游擴展的自然趨勢，利用我們的數字化能力以及電子商務和營銷洞察力的不斷增長，品牌管理通過端到端解決方案增強了價值主張，這也將在反過來，提升我們的戰略思維，培育品牌導向的服務理念。

Since last year, we initiated our brand management efforts on the multiple purchase, including strategic lines through minority investments and self-incubation. We have assembled a diverse and attractive portfolio of 7 brands for Startways covering 2 major categories of apparel and accesses and health and beauty. We are happy to report that we have empowered these brands to a mass of total GMV of approximately RMB 80 million in the first half of 2022. This translated to a year-over-year growth rate of over 50%, strongly performing the general retail industry. Finally, on ESG and sustainable growth, turn to Slide #6. We issued our second annual ESG report this May and launched an additional set of green initiatives, including the introduction of Carbon Neutrality White Paper in June.

從去年開始，我們就開始了多次收購的品牌管理工作，包括通過少數股權投資和自我孵化的戰略路線。我們為 Startways 組建了一個多元化且有吸引力的產品組合，包括 7 個品牌，涵蓋服裝和配飾以及健康和美容兩大類。我們很高興地報告，我們已在 2022 年上半年為這些品牌賦能，總 GMV 約為人民幣 8,000 萬元。這意味著年增長率超過 50%，表現強勁一般零售行業。最後，關於 ESG 和可持續增長，請看幻燈片 #6。我們在今年 5 月發布了第二份年度 ESG 報告，並推出了一系列額外的綠色舉措，包括在 6 月推出碳中和白皮書。

We are committed to reduce 50% carbon emission by 2030 compared to the 2021 baseline and the carbon neutrality by 2050. This quarter, we kicked off our public welfare initiatives by co-launching used-shoes segment program with one leading national sportswear brand. As a leader in e-commerce services, we will always bear in our mind to operate responsibly, comfortably and sustainably. We look forward to expanding with our brand partners to mutual successes. I will now pass the call over to Arthur to go over our financials. Thank you.

我們承諾，到 2030 年，與 2021 年的基線相比，碳排放量減少 50%，到 2050 年實現碳中和。本季度，我們通過與一個領先的民族運動服飾品牌共同啟動舊鞋分部計劃來啟動我們的公益計劃。作為電子商務服務的領導者，我們將始終牢記以負責任、舒適和可持續的方式運營。我們期待與我們的品牌合作夥伴一起拓展業務，共同取得成功。我現在將把電話轉給亞瑟，讓他檢查我們的財務狀況。謝謝你。

Okay. Thank you, Vincent, and hello, everyone. Now, let me first do a quick review of financial of second quarter in 2022. Please turn to Slide #7. During the quarter, our total GMV increased by 47% to RMB 23 billion. The strong GMV growth was mainly due to outstanding performance by one leading electronics brand and the service model. And excluding this particular brand, the adjusted GMV would have grown by 2.4%. A total revenues declined by 8% to RMB 2.1 billion, of which product sales declined 29%, while service revenue increased by 7% compared with the same period of last year.

好的。謝謝你，文森特，大家好。現在，讓我先快速回顧一下 2022 年第二季度的財務狀況。請轉到幻燈片 #7。本季度，我們的總 GMV 增長 47% 至人民幣 230 億元。強勁的 GMV 增長主要是由於一個領先的電子品牌和服務模式的出色表現。不包括這個特定品牌，調整後的 GMV 將增長 2.4%。總收入下降8%至人民幣21億元，其中產品銷售額下降29%，服務收入同比增長7%。

Now, let's turn to Slide #8 for a breakdown of revenue. During the quarter, revenue from our traditional e-commerce partner business accounted for 50% of total business. Revenue for warehouse and logistics contributed 29%, and digital marketing and IT solutions contributed the remaining 21%. The outbreak of COVID and subsequent strict lockdown in April and May had a general negative impact on our business. However, we are glad to see that our luxury category still achieved double-digit growth. There was also more resiliency in value-added services, where warehouse and fulfillment service revenue increased by 20%, and digital marketing and IT solutions declined only 4%.

現在，讓我們轉到第 8 張幻燈片來了解收入明細。本季度，我們傳統電子商務合作夥伴業務的收入佔總業務的50%。倉庫和物流收入貢獻了 29%，數字營銷和 IT 解決方案貢獻了剩餘的 21%。 COVID 的爆發以及隨後在 4 月和 5 月的嚴格封鎖對我們的業務產生了普遍的負面影響。然而，我們很高興看到我們的奢侈品品類仍然實現了兩位數的增長。增值服務的彈性也更強，倉庫和履行服務收入增長了 20%，而數字營銷和 IT 解決方案僅下降了 4%。

And due to COVID lockdown impact, product sales revenue declined by 29%, reflecting a general weak sentiment in product sales as well as our proactive measures to optimize working capital efficiency. And given the current uncertainty in geopolitical events and macroenvironment, we believe it is critical to continue to focus on high-quality revenue stream to minimize risk in the coming quarters. And as such, we have put more efforts on non-distribution model to grow revenues from value IT services, while the advertising distribution model on product sales.

由於 COVID 鎖定的影響，產品銷售收入下降了 29%，這反映了產品銷售普遍疲軟的情緒以及我們優化營運資金效率的積極措施。鑑於當前地緣政治事件和宏觀環境的不確定性，我們認為繼續關注高質量的收入流以將未來幾個季度的風險降至最低至關重要。因此，我們加大了非分銷模式的力度，以增加價值 IT 服務的收入，而廣告分銷模式則用於產品銷售。

Now, turn to Slide #9. During the quarter, our cost of product decreased by 26% to RMB 602 million, mainly due to a reduction in product sales. Our gross profit margin for product sales was 13.2% for the quarter, mostly due to a change in pricing strategy and adjustments in category mix, and the increase in costs related to default and imperfect products. But if we take into account service revenue, our growth -- our overall gross margin improved 7% to 72%, driven by higher revenue stream contribution that generates a higher margin. Now, let's turn to operating cost and expenses on Slide #10. Fulfillment expenses were RMB 725 million, an increase of 29%, which was largely due to the revenue growth in warehouse and logistics services and some incremental costs related to COVID protection for front-end fulfillment staff.

現在，轉到幻燈片#9。本季度，我們的產品成本下降26%至人民幣6.02億元，主要是由於產品銷售減少。本季度我們的產品銷售毛利率為 13.2%，主要是由於定價策略的變化和品類組合的調整，以及與違約和不完善產品相關的成本增加。但如果我們考慮到服務收入，我們的增長——我們的整體毛利率提高了 7% 至 72%，這是由於更高的收入流貢獻產生了更高的利潤率。現在，讓我們轉向幻燈片 #10 的運營成本和費用。履行費用為人民幣 7.25 億元，增長 29%，這主要是由於倉儲和物流服務的收入增長以及與前端履行人員的 COVID 保護相關的一些增量成本。

We are glad to see our regional sericite ramp-up and the efficiency of customer service has improved to a point that such costs declined by 2% year-over-year. Our sales and marketing expenses were RMB 668 million, an increase of 3%, mainly due to increased business development-related staff costs to drive business growth and offset by efficiency improvement. Technology and content expenses were RMB 112 million, a decrease of 3%. The decrease was mainly driven by the company's cost control initiatives and efficiency improvements, which was partially offset by company's ongoing investments in technology innovation and productization. G&A expenses totaled RMB 92 million, a decrease of 6%.

我們很高興看到我們的地區絹雲母產量增加，客戶服務效率提高到此類成本同比下降 2% 的程度。銷售及營銷費用為人民幣 6.68 億元，增長 3%，主要是為推動業務增長而增加與業務發展相關的人員成本，並被效率提升所抵消。技術和內容費用為1.12億元，下降3%。下降的主要原因是公司的成本控制舉措和效率提高，部分被公司在技術創新和產品化方面的持續投資所抵消。 G&A 費用合計人民幣 9,200 萬元，下降 6%。

The decrease was primarily attributable to the company's cost control initiatives and efficiency improvements at a higher base from the running period for the company's new headquarters in the same period of last year. Now, turning to Slide #11. Based on the above-mentioned items, our non-GAAP income from operations was RMB 47 million during the quarter, and non-GAAP operating profit margin was 2.2%. Once again, we have prepared waterfall diagrams depicting our analysis of how our top line and bottom line evolved year-over-year. As a reminder, this analysis is unaudited and should solely be used as supporting numbers to add discussion.

減少的主要原因是公司新總部在去年同期的運營期基礎上進行了成本控制和效率提升。現在，轉到幻燈片 #11。基於上述項目，本季度我們的非公認會計準則營業收入為人民幣4700萬元，非公認會計準則營業利潤率為2.2%。我們再次準備了瀑布圖，描述了我們對頂線和底線如何逐年演變的分析。提醒一下，此分析未經審計，僅應用作支持數字以增加討論。

First, on Slide #12. This waterfall diagram shows our net revenue work from Q1 2021 to Q2 2022. In red, you can see that the biggest item impacting our revenue this quarter was product sales. As mentioned earlier, the 2 major factors contributing to this drop were our continuous effort in brand optimization and weak product sales due to COVID lockdown, mainly from one key brand in personal care product categories. Revenue from digital marketing and IT services, which we view as value-added services declined slightly this quarter by 4%. This slight decline in digital marketing and IT revenue can also be attributable to the COVID lockdown that negatively impacts several new project launch from brand partners. On a positive note, this initiative in value-added service led to better profitability.

首先，在幻燈片 #12 上。此瀑布圖顯示了我們從 2021 年第一季度到 2022 年第二季度的淨收入工作。用紅色表示，您可以看到本季度影響我們收入的最大項目是產品銷售。如前所述，導致這一下降的兩個主要因素是我們在品牌優化方面的持續努力以及由於 COVID 鎖定導致的產品銷售疲軟，主要來自個人護理產品類別中的一個關鍵品牌。來自數字營銷和 IT 服務（我們認為是增值服務）的收入本季度略有下降 4%。數字營銷和 IT 收入的小幅下降也可歸因於 COVID 鎖定，這對品牌合作夥伴推出的幾個新項目產生了負面影響。積極的一面是，增值服務的這一舉措帶來了更好的盈利能力。

And please follow me to Slide #13 for the indicative work of non-GAAP operating profit and cost stream. As strong, non-GAAP operating profit from digital marketing and IT improved by 19%. We also generated a positive saving of RMB 15 million from cost optimization, while at the same time, we kept investing in new opportunities. We spent RMB 40 million on brand management, overseas expansion and COVID protection and welfare for employees during the lockdown. For our traditional store operation business and warehouse and fulfillment business, the challenging external environment dropped down the overall top line will also trigger higher operating expenses during COVID lockdown. Please turn to Slide #14. To counter these headwinds caused by COVID lockdown, we continued our cost transformation and optimization efforts, mainly focused on 4 areas.

請跟我來幻燈片#13，了解非公認會計原則營業利潤和成本流的指示性工作。來自數字營銷和 IT 的非 GAAP 營業利潤強勁增長了 19%。我們還通過成本優化節省了 1500 萬元人民幣，同時我們不斷投資於新的機會。封城期間，我們在品牌管理、海外擴張以及新冠肺炎保護和員工福利方面投入了 4000 萬元人民幣。對於我們傳統的商店運營業務和倉儲和履行業務，具有挑戰性的外部環境使整體收入下降，也將在 COVID 鎖定期間引發更高的運營費用。請轉到幻燈片 #14。為了應對 COVID 鎖定造成的這些不利因素，我們繼續進行成本轉型和優化工作，主要集中在 4 個領域。

Firstly, we proactively minimize the risk by diversifying regional service center functions, including store operations, design, digital marketing, and technology capabilities. Following our success with regional service center in Nantong and Hefei, we have selected more cities for the next phase of expansion, including China, Hangzhou and [Juxi]. Secondly, we continue to reengineer our business processes by centralizing our operating capabilities where we use one team to serve multi-brand with similar tasks. We also introduced a couple of new automation and intelligent tools to increase productivity and reduce labor costs.

首先，我們通過多元化的區域服務中心功能，包括門店運營、設計、數字營銷和技術能力，主動將風險降至最低。繼南通和合肥區域服務中心取得成功後，我們選擇了更多城市進行下一階段的擴張，包括中國、杭州和【巨溪】。其次，我們通過集中我們的運營能力繼續重新設計我們的業務流程，我們使用一個團隊為具有類似任務的多品牌服務。我們還引入了一些新的自動化和智能工具，以提高生產力並降低勞動力成本。

Thirdly, we rationalized our compensation incentive for our front-line employees by introducing the Baozun Business Owner, i.e., BBO contract which was designed to motivate our employees to take ownership of their roles and offer more entrepreneurial incentives to reward performance. And finally, after moving into the new headquarter building, we were able to consolidate the office footprint across all departments into one place and further streamline supporting functions such as finance, administration, and procurement to reduce cost.

三是合理化對一線員工的薪酬激勵，引入寶尊企業主，即BBO合同，旨在激勵員工對自己的角色負責，並提供更多的創業激勵來獎勵績效。最後，在搬入新總部大樓後，我們能夠將所有部門的辦公空間整合到一個地方，並進一步精簡財務、行政和採購等支持功能，以降低成本。

Now, let's turn to Page 15 about our cash flow. As of June 30TH, 2022, our cash and cash equivalents totaled RMB 3.1 billion. In light of the macro uncertainties, we continue to prioritize working capital efficiency enhancements and launched new initiatives to further advance our back-end process to improve inventory management, billing and collection activities. As a result, we are pleased to sustain a positive operating cash flow of RMB 405 million during the challenging period of COVID lockdown. Meanwhile, we moved forward with our share buyback efforts and purchase of convertible senior notes, which totaled RMB 992 million during the quarter. And lastly, our Board of Directors has approved us to pursue the voluntary conversion to do primary listing on the Hong Kong Stock Exchange. As of today, we are happy to announce that we have received the acknowledgment from Hong Kong Stock Exchange regarding the conversion to dual primary listing.

現在，讓我們轉到第 15 頁，了解我們的現金流。截至2022年6月30日，我們的現金及現金等價物總額為人民幣31億元。鑑於宏觀不確定性，我們繼續優先考慮提高營運資金效率，並推出新舉措以進一步推進我們的後端流程，以改善庫存管理、計費和收款活動。因此，我們很高興在新冠疫情封鎖期間保持 4.05 億元人民幣的正經營現金流。同時，我們繼續推進股票回購和購買可轉換優先票據，本季度總計人民幣 9.92 億元。最後，我們的董事會已批准我們進行自願轉換，在香港聯交所進行第一上市。截至今日，我們很高興地宣布，我們已收到香港聯交所關於轉為雙重主要上市的確認函。

We expect the primary conversion to become effective on November 1st, 2022. After the primary conversion becomes effect, Baozun will become a dual primary listed company on the NASDAQ global selected markets and the main board of Hong Kong Stock Exchange. By becoming primary listed on both exchanges, we anticipate expanding our assets to a wider investor base. Overall, despite some turbulence in macro environment, our ability to conduct business during the lockdown highlights the flexibility and resilience of our business model. We will continue to prioritize resource allocation, drive cost transformation and improve working capital efficiency. We believe our solid balance sheet, our improved momentum in value-added service, and our well-diversified brand partner portfolio will not only prepare us to get through the tough macro environment ahead, but also enable us to emerge as a stronger business with sustainable long-term growth. So this is my financial review section, and that concludes our prepared remarks. Thank you, everyone. Operator, we are now ready to begin the Q&A session.

我們預計主要轉換將於2022年11月1日生效。主要轉換生效後，寶尊將成為納斯達克全球精選市場和香港聯合交易所主板的雙重主要上市公司。通過成為兩個交易所的主要上市公司，我們預計將我們的資產擴大到更廣泛的投資者基礎。總體而言，儘管宏觀環境出現了一些動盪，但我們在封鎖期間開展業務的能力凸顯了我們業務模式的靈活性和彈性。我們將繼續優先配置資源，推動成本轉型，提高營運資金效率。我們相信，我們穩健的資產負債表、增值服務的改善勢頭以及我們多元化的品牌合作夥伴組合不僅將使我們準備好度過未來艱難的宏觀環境，而且使我們能夠成為一家更強大、可持續發展的企業。長期增長。這是我的財務評論部分，我們準備好的評論到此結束。謝謝大家。接線員，我們現在準備開始問答環節。

(Operator Instructions) And your first question today comes from the line of Alicia Yap from Citi.

（操作員說明）您今天的第一個問題來自花旗的 Alicia Yap。

I have 2 questions. The first one is related to the progress and traction for the non-Tmall channels. It seems like this quarter, the contribution declined from last year to 24%. Could management share more color the reasons of this mix and how we should be thinking about the future growth opportunity for all these alternative channels? For this quarter specifically, should we -- is this suggesting the brands remain quite resilient or actually returning more to the Tmall channel? And then the second question is, can you update us on your relationship with iClick? How is the business cooperation with iClick so far? Is the investment and strategic business collaborations are working as planned? Any color that management could provide would be appreciated.

我有 2 個問題。第一個與非天貓渠道的進展和牽引力有關。看起來這個季度，貢獻率從去年下降到了 24%。管理層能否分享更多關於這種組合的原因以及我們應該如何考慮所有這些替代渠道的未來增長機會？具體而言，對於本季度，我們是否應該——這表明品牌仍然相當有彈性，還是實際上更多地回歸天貓渠道？然後第二個問題是，您能告訴我們您與 iClick 的關係嗎？目前與愛點擊的業務合作如何？投資和戰略業務合作是否按計劃進行？管理層可以提供的任何顏色將不勝感激。

Okay, Alicia, I will take your questions. So this is Arthur here. So first of all, on the non-Tmall percentage. So basically, the number you have seen is based on including a very strong performance of one major leading electronic brands during the 618. And if we exclude this one leading electronic brand, actually non-HMO residents 48% of both our GMV this quarter compared with 43% last year, which is an improvement of 5% year-over-year. And this is actually demonstrated our omni-channel strategy has continued to make [IFS]. We also see that more brand is starting to utilizing the non-Tmall channel to grow -- to grow their e-commerce business. And as we have mentioned earlier, we have made good progress in not only Tencent, but also we made good progress in JD and other private omni-channel as well.

好的，艾麗西亞，我會回答你的問題。所以這裡是亞瑟。所以首先，關於非天貓的百分比。所以基本上，你看到的數字是基於包括一個主要領先電子品牌在 618 期間非常強勁的表現。如果我們排除這一領先電子品牌，實際上非 HMO 居民占我們本季度 GMV 的 48%去年為 43%，同比增長 5%。而這其實也證明了我們的全渠道策略一直在做[IFS]。我們還看到，越來越多的品牌開始利用非天貓渠道來發展——發展他們的電子商務業務。正如我們前面提到的，我們不僅在騰訊取得了不錯的進展，在京東和其他私人全渠道方面也取得了不錯的進展。

On your second question regarding the cooperation with iClick. Basically, just a recap the main purpose of us making the investment into iClick is to enjoy the operational synergy by Baozun operating the back end of operations and iClick outlet having a front hand kind of system, which allow us to join [played] and teach more customers. So basically, the integration will fully completed, and we have seen good progress in terms of the joint BD and as a result, you can see, we mentioned earlier, our Tencent ecosystem has made a major progress in this year, where we were voted -- I mean we were awarded 2 good rating one -- I mean in 2 categories, one in the e-commerce operation and another in the ISV.

關於第二個關於與愛點擊合作的問題。基本上，簡單回顧一下，我們投資愛點擊的主要目的是享受寶尊運營運營後端和愛點擊出口擁有前端系統的運營協同效應，讓我們加入[玩]和教更多的客戶。所以基本上整合就完全完成了，我們在聯合BD方面也看到了不錯的進展，所以大家可以看到，我們之前提到的，我們騰訊生態在今年取得了很大的進展，我們被投票-- 我的意思是我們獲得了 2 個良好的評價之一 -- 我的意思是在 2 個類別中，一個在電子商務運營中，另一個在 ISV 中。

Both of them is actually in the top category of the Tencent ecosystem. And that cannot be achieved without the support along with iClick. So after that, we actually become the only one company in China, which enjoys the top region in Tmall, which is the 6 star rated TP and also the top rated in the Tencent system, making us the best service provider for both the public domain and private only. So this is what we have seen the progress and the strategic opportunity we open along with the investment into iClick.

兩者其實都屬於騰訊生態的頂級品類。如果沒有愛點擊的支持，這是無法實現的。所以在那之後，我們實際上成為中國唯一一家享有天貓頂級區域的公司，即6星TP，也是騰訊系統的頂級區域，使我們成為公共領域的最佳服務提供商僅限私人。這就是我們看到的進展和我們在投資愛點擊的同時打開的戰略機會。

This is very helpful. Arthur, congrats on this solid achievement.

這很有幫助。亞瑟，恭喜你取得了這一堅實的成就。

The next question comes from Thomas Chong from Jefferies.

下一個問題來自 Jefferies 的 Thomas Chong。

I have 2 questions. First is about the recent trend. Can management comment about the impact of the macro headwinds and the consumer sentiment to our overall business and also the trends of different categories in June -- in July and August so far? And my second question is about our cooperation with Cainiao. Our management provides an update about the cooperation and also share our thoughts about the expansion into Southeast Asia market?

我有 2 個問題。首先是關於最近的趨勢。管理層能否評論宏觀逆風和消費者情緒對我們整體業務的影響以及 6 月 - 7 月和 8 月到目前為止不同類別的趨勢？我的第二個問題是關於我們與菜鳥的合作。我們的管理層提供了有關合作的最新信息，並分享了我們對擴展到東南亞市場的想法？

Okay. So maybe, Tracy, you answer the first one, then I will take the one about Cainiao.

好的。所以也許，特蕾西，你回答第一個，然後我會拿關於菜鳥的那個。

Yes. Thank you, [Jeffrey]. I'm going to cover the first one. So regarding the digital consumption actually would be monitored closing in this 3 months. After 2 months, the rough time, actually the accumulated consumer demand has had helped us to achieve a very successful 618 as Vincent mentioned. And since these 2 months, we can see the traffic and GMV is up from July to August. So the overall consumption has gradually recovered, although it hasn't been fully recovered to the same level compared with last year, but we think the trend is good. And that it is the very similar situation on the consumer sentiment here, the market is facing the challenge of the free traffic shut-in and the lower read of the conversion and also the higher rates on Cainiao the returns across categories. And I think this is the shared landscape across different categories, 5% up and down across different categories. But we can see the platform are taking many initiatives to upgrade the APP's consumer experience, like they initiated the market delivery address in one other in those 2 weeks.

是的。謝謝你，[杰弗裡]。我將介紹第一個。所以關於數字消費實際上將在這3個月內關閉。 2個月後，艱難的時期，實際上積累的消費者需求已經幫助我們實現了Vincent所說的非常成功的618。而這兩個月以來，我們可以看到從 7 月到 8 月的流量和 GMV 都在上升。所以整體消費逐漸恢復，雖然和去年相比還沒有完全恢復到同一水平，但我們認為趨勢是好的。與這裡的消費者情緒非常相似，市場面臨著免費流量關閉和轉化率較低以及菜鳥跨類別回報率較高的挑戰。我認為這是不同類別之間的共享格局，不同類別之間有 5% 的上升和下降。但我們可以看到平台正在採取許多舉措來升級APP的消費者體驗，就像他們在這兩週內相互啟動市場送貨地址一樣。

So we believe all of those investments will harvest the consumer preference in longer term. And from Baozun side, actually, in the past 1 quarter, we put a lot of attention on the consumer experience, too. We're actually working with our brand partners to launch new features like to digitalize the poster sales, consumer care service we have many of our clients to enable the cleaning and maintenance service for over 1,000 products so that our consumers can enable to enjoy the same premier service online and offline and also our design hub to launch the 3D display monitoring service and also the [Woes Crytpo Cards] and also the Tmall exclusive capsule in the CBD period. So all of these tactics, I think, will help us to communicate with the young generation. And also, I think in the longer term, will build the competence in the consumer sentiments and the consumption.

因此，我們相信所有這些投資將在長期內收穫消費者的偏好。而在寶尊方面，實際上，在過去的一季度，我們也非常關註消費者體驗。我們實際上正在與我們的品牌合作夥伴合作推出新功能，例如海報銷售數字化，消費者關懷服務我們有很多客戶為超過 1,000 種產品提供清潔和維護服務，以便我們的消費者能夠享受同樣的服務線上線下首屈一指的服務，也是我們的設計中心，推出3D顯示監控服務，還有【Woes Crytpo Cards】和CBD時期的天貓專屬膠囊。所以我認為所有這些策略都將有助於我們與年輕一代進行交流。而且，我認為從長遠來看，將在消費者情緒和消費方面建立能力。

Okay. Thank you, Tracy. I will answer the first -- I mean, the second question I think this question actually has 2 parts. On the cooperation with Cainiao, we are making good progress quarter-on-quarter. So basically, we have cooperated mainly in 3 areas. So the first one, we have been joined by BD in several luxury and primary apparel brands with some good results. And we see that as one of the major opportunities for us in cooperating with Cainiao. And secondly, Baozun was able to utilize Cainiao's national-wide capability on logistics and warehouse. So during the 618, we were able to use the Cainiao capability to operate the great management system, which allows the delivery in a faster speed to the customers. So that helped us to achieve a good result in the 618 campaign. And thirdly, both Cainiao and Baozun actually technology, very strong company. So basically, in this quarter, we started operation on the RFID technology, and we adopt that technology on a field international sportswear brands, which helped to improve the efficiency and to improve the customer satisfaction.

好的。謝謝你，特蕾西。我將回答第一個問題——我的意思是，第二個問題我認為這個問題實際上有兩個部分。在與菜鳥的合作上，我們在環比方面取得了不錯的進展。所以基本上，我們主要在三個方面進行了合作。所以第一個，我們在幾個奢侈品和初級服裝品牌中加入了BD，並取得了一些不錯的成績。我們認為這是我們與菜鳥合作的主要機會之一。其次，寶尊能夠利用菜鳥在全國范圍內的物流和倉儲能力。所以在618的時候，我們可以利用菜鳥的能力來運行強大的管理系統，讓我們能夠以更快的速度交付給客戶。所以這幫助我們在618戰役中取得了不錯的成績。第三，菜鳥和寶尊都是真正的技術，非常強大的公司。所以基本上，在這個季度，我們開始在RFID技術上運行，我們在國際運動服裝品牌領域採用了該技術，這有助於提高效率並提高客戶滿意度。

So we see a great future and continued success in working together with Cainiao. On your second part of the question in terms of expanding overseas market. So basically, since early this year, we have started over to -- started to expand outside of China. So, so far, we have offices in Singapore and also in Paris, in France. And we start to build our footprint in both Asia outside of China and also Europe with additional people and additional network on the ground. So as of this quarter, we actually can see about [CNV] 200 million, which were generating from outside of China, and this amount is actually growing quarter-by-quarter.

因此，我們看到了與菜鳥合作的美好未來和持續成功。關於你關於拓展海外市場的問題的第二部分。所以基本上，自今年年初以來，我們已經開始 - 開始在中國以外的地區擴張。因此，到目前為止，我們在新加坡和法國巴黎都設有辦事處。我們開始在中國以外的亞洲和歐洲建立我們的足跡，並在當地增加了人員和網絡。因此，截至本季度，我們實際上可以看到大約 2 億 [CNV] 來自中國以外的地區，而且這個數字實際上是逐季度增長的。

Our international growth strategy is focused on replicating our China e-commerce success and take the learnings we have in China and adjusted for the local crisis and also to utilize the local now house to make it a second generation of e-commerce in each of the markets we aim to operate. And in our approach to grow internationally, we will consider both the organic growth and also the inorganic growth, as we mentioned in the past as part of our M&A statin. So that is about our overseas expansion.

我們的國際增長戰略專注於復制我們在中國電子商務的成功，吸取我們在中國的經驗並針對當地危機進行調整，並利用當地的現房使其成為每個國家的第二代電子商務我們的目標市場。在我們的國際增長方式中，我們將同時考慮有機增長和無機增長，正如我們過去在併購他汀類藥物中提到的那樣。這就是我們的海外擴張。

Your next question comes from the line of Joyce Ju, Bank of America.

您的下一個問題來自美國銀行的 Joyce Ju。

I have 2 questions. The first one is the big picture one. As we all know, there's actually a lot of change in macroeconomic condition in regulation -- in regulatory requirements in industry dynamics and also the competitive markets. So I want to know from a management perspective, what's the top priority of Baozun right now? Is there any change in the company's strategic direction? And my second question will be regarding the like upcoming Singles Day promotion. I'm wondering how is the preparation from the brand's perspective? Have we made any plans start to -- and how the momentum look like at this time?

我有 2 個問題。第一個是大圖。眾所周知，監管方面的宏觀經濟狀況實際上發生了很大變化——行業動態和競爭市場的監管要求。所以我想從管理的角度知道，寶尊現在的首要任務是什麼？公司的戰略方向是否有變化？我的第二個問題是關於即將到來的光棍節促銷活動。我想知道從品牌的角度來看，準備工作如何？我們是否制定了任何計劃開始 - 以及此時的勢頭如何？

Yes. Okay. Thank you, Joyce. I think maybe, Vincent, you can share some high-level thoughts on the first question. And Tracy you may be able to cover the second one?

是的。好的。謝謝你，喬伊斯。我想，Vincent，你可以就第一個問題分享一些高層次的想法。特蕾西，你也許可以覆蓋第二個？

Sure. Thank you. Thank you, Joyce, for the question. Yes, talking about the priorities of the strategy, I’ll pick 3. I think the first one is, of course, the China e-commerce market, which is our core business. I think despite all the negative impact from different angles, we still think the Chinese e-commerce market will be quite robust, and there's still a lot of potential to grow in the future. So we will still focus a lot in this area, trying not only to have more valuable customers, but also make our operations and technologies more efficient to support the future growth. That is number one. Number 2 is we think technology, as always, we keep investing in this area. And right now, we think we are stronger and stronger in the industry. And we want to touch the existing and the potential new users through this technology arm. And we are seeing really good progress in the first half of this year as well.

當然。謝謝你。謝謝喬伊斯的提問。是的，說到戰略的重點，我會選擇3。我認為第一個當然是中國電子商務市場，這是我們的核心業務。我認為，儘管從不同角度產生了負面影響，但我們仍然認為中國電子商務市場將相當強勁，未來仍有很大的增長潛力。所以我們仍然會在這個領域投入很多精力，不僅要努力擁有更多有價值的客戶，還要讓我們的運營和技術更有效率，以支持未來的增長。那是第一名。第二是我們認為技術，我們一如既往地在這個領域進行投資。而現在，我們認為我們在這個行業中越來越強大。我們希望通過這個技術部門接觸現有和潛在的新用戶。今年上半年我們也看到了非常好的進展。

And I think also the charm between this tool is that when this tool can be connected to each other or leverage to each other, we see a very much, much better result of effect of 1 plus 1, much bigger than 2 effect. It means that when we talk to potential technology clients, our experience in China e-commerce will help a lot. And when we talk to e-commerce customers technology will also play a very important role. So I think the charm between the 2 is very important. So number 3, I think, will be overseas expansion. As you see, we have a lot of progress, too. And we use this business plus investment approach, which other just said, organic and inorganic together. So we are quite confident we can continuously make progress in the second half of this year as well. So I think this 3 is really a quite important priorities for today's work. And it's quite in line with our midterm plan. So that is the first part of our thinking. The second one about the double 11 thing, I think, Tracy, you can answer this.

而且我認為這個工具之間的魅力還在於，當這個工具可以相互連接或相互利用時，我們看到1加1效果非常非常好，比2效果大得多。這意味著當我們與潛在的技術客戶交談時，我們在中國電子商務方面的經驗將有很大幫助。而當我們與電子商務客戶交談時，技術也將發揮非常重要的作用。所以我覺得2人之間的魅力很重要。所以我認為第三個將是海外擴張。如您所見，我們也取得了很大進展。我們使用這種業務加投資的方法，其他剛才說的有機和無機結合在一起。所以我們很有信心在今年下半年也能繼續取得進展。所以我認為這3個對於今天的工作來說確實是一個相當重要的優先事項。並且非常符合我們的中期計劃。所以這是我們思考的第一部分。第二個關於雙11的事情，我想，Tracy，你可以回答這個問題。

Yes. Sure. Thank you, Vincent. So actually talking about 11, I think it's still in the early stage because we have been moving the real estate to talk about the inventory and the investment level. But on the top conversation with their leadership team merging brands, I think their ambitious is still there. They seek for the next second half of the year, I think most of our brands, their new product launch plan and also the marketing investment is still at the same level right now. But from the altitude part, right now, they are sitting on the fence.

是的。當然。謝謝你，文森特。所以實際上說11，我覺得還處於早期階段，因為我們一直在搬房地產來談庫存和投資水平。但在與他們的領導團隊合併品牌的頂級對話中，我認為他們的雄心壯志仍然存在。他們尋求下半年，我想我們大部分的品牌，他們的新品發布計劃和營銷投入目前都在同一水平。但從高處看，現在，他們正坐在柵欄上。

For some of the brands, I think they have the healthy economy situation based on their omni-channel landscape and also their product bonus part their marketing investment stock level is a little bit higher. I mean, prepared for the double 11, but we still put close monitoring on online and cost structures. But at the current stage, I think when we see the double 11 in the next maybe 3 months later, I think the most important thing is we need -- I think in the recovery, we are still in the recovering period actually from Baozun’s operation plan point of view, we think we need to take at least a 6-month plan to focus on 2 things.

對於一些品牌，我認為他們的全渠道格局和他們的產品紅利部分，他們的營銷投資存量水平略高一些。我的意思是，為雙11做好了準備，但我們仍然密切關注在線和成本結構。但在現階段，我想當我們看到未來可能3個月後的雙11時，我認為最重要的是我們需要——我認為在復蘇中，我們實際上還處於恢復期，從寶尊的運營來看。計劃來看，我們認為我們至少需要採取6個月的計劃來專注於2件事。

First is to move the focus of daily sales to margin part and new product part, not that discount concentrate. And the second is on the -- I mean, the resource contribution and the stock level and the bargepart to put efforts on the big promotion. And the third party is to mitigate actually the -- I mean, the impact of the missing of the top KOL host and to build a metric for new live stream ecosystem. So that is the top 3, including the daily sales and the big promotion and also the live stream part, we will build into our 6-month plan to work with our brand partners to mitigate the impact of COVID-19. I hope this will help to solve the problem, and we keep close communicate with brands and share more information later.

首先是將日常銷售的重點轉移到利潤部分和新產品部分，而不是折扣集中。第二個是關於 - 我的意思是資源貢獻和庫存水平以及努力進行大促銷的bargepart。第三方實際上是為了減輕 - 我的意思是，頂級 KOL 主持人失踪的影響，並為新的直播生態系統建立一個指標。所以這是前 3 名，包括每日銷售和大促銷以及直播部分，我們將納入我們的 6 個月計劃，與我們的品牌合作夥伴一起減輕 COVID-19 的影響。我希望這將有助於解決問題，我們將與品牌保持密切溝通，並在以後分享更多信息。

And your next question comes from the line of Charlie Chen from China Renaissance.

你的下一個問題來自華興資本的陳查理。

I got 2 questions here. The first one is about the performance of some international brand partners from some of the international apparel brands, financial reports, you can see their performance in China has been rather disappointing as Baozun has been an existing long-term partner with some of the key international apparel brands. What is the management strategy to basically turn around this trend or is there any other brands that can compensate the revenue shortfall from the international apparel brands? So that's the first question. And the second question is a follow-up question. So Baozun has been the partner of Internet marketing for a lot of brands for a long time.

我在這裡有 2 個問題。第一個是關於一些國際品牌合作夥伴的表現，從一些國際服裝品牌，財報，你可以看到他們在中國的表現相當令人失望，因為寶尊已經與一些關鍵的國際品牌建立了長期合作夥伴關係。服裝品牌。基本扭轉這一趨勢的經營策略是什麼，或者有沒有其他品牌可以彌補國際服裝品牌的收入缺口？所以這是第一個問題。第二個問題是後續問題。所以寶尊長期以來一直是很多品牌的網絡營銷合作夥伴。

So going forward, I want to get some color on how to -- how about Baozun sustain the growth or even create the second growth curve? In particular, is there any further penetration that we can do with international brands in China? Or we should bring some international brands into Chinese market? Or on the other side, is there strong enough demand from domestic brands in Internet marketing? Or do we have any plan to bring those domestic brands outside of China to the overseas market. So I wanted to get some color on that.

所以展望未來，我想了解一下如何——寶尊保持增長，甚至創造第二條增長曲線？特別是國際品牌在中國有沒有進一步的滲透？或者我們應該把一些國際品牌帶入中國市場？或者另一方面，國內品牌對網絡營銷的需求是否足夠強勁？或者我們是否有任何計劃將這些國內品牌帶到中國以外的海外市場。所以我想給它一些顏色。

Okay. So on the first one, maybe I'll just share some brief thoughts on this, and Tracy, you can add color on that. So given the current challenge, we're actually looking at 2 ways of counter [challenge] at the moment. Number one is you can see we put more emphasis on the value-added service, the things like our digital marketing, our IT solutions, and also our logistics and warehouse services. These are value-added services on top of the e-commerce operations, which, on one hand, is going to generate new revenue streams and also place a path to helping us to get into a more penetration into the new customer base. So that's one. Secondly, we have made a lot of efforts and have seen good progress in terms of the BD since last year. We now have established a central business development team across all the different categories. And at this moment, we have created a long lease of potential BD, and which we have seen good opportunity to go further in terms of getting more brands onboard with our capability on offer. So maybe Tracy wants to add more.

好的。所以在第一個問題上，也許我會分享一些簡短的想法，Tracy，你可以在上面添加顏色。所以考慮到當前的挑戰，我們目前實際上正在研究兩種反擊[挑戰]的方式。第一是你可以看到我們更加重視增值服務，比如我們的數字營銷、我們的 IT 解決方案，以及我們的物流和倉儲服務。這些是電子商務運營之上的增值服務，一方面將產生新的收入來源，同時也為幫助我們更深入地滲透到新客戶群奠定了基礎。所以這是一個。其次，從去年開始，我們在BD方面做了很多努力，取得了不錯的進展。我們現在已經建立了一個涵蓋所有不同類別的中央業務開發團隊。此刻，我們已經創造了一個長期的潛在 BD 租約，我們看到了很好的機會，可以利用我們提供的能力讓更多品牌參與進來。所以也許特蕾西想要添加更多。

Sure. Thanks. I think I can add more elements on the second point because actually, I think BD has been proving one of the keeping driving factor for our business right now. We have 3 highlights in the first half of the year. I think the first one is we have very solid programs on the Jingdong and the brand side, [meaning HKEX] channel, with -- actually, we're going to have, I think, at least 20 significant store opens by this year, and its cross-category in luxury, in beauty and in sports category.

當然。謝謝。我認為我可以在第二點上添加更多元素，因為實際上，我認為 BD 已經證明是我們目前業務的保持驅動因素之一。上半年我們有3個亮點。我認為第一個是我們在京東和品牌方面有非常紮實的計劃，[意思是 HKEX] 渠道，實際上，我認為，到今年我們將有至少 20 家重要的商店開業，以及它在奢侈品、美容和運動類別中的跨類別。

And also in this -- and we can see from the Jingdong channel action they show relatively higher growth, especially in the 618 and their potential on sales haven't been fully unleashed, considering most of the stores are in early stage of the operation. So it should contribute more in our business landscape for next year. And secondly, I think for the category part, besides the apparel and accessory, we also have very good progress in lifestyle-related category to work with the higher quality brands actually is including foreign local brands in food and house-leading things related, we are able to balance the category mix and seek sustainable growth.

而在這方面——我們從京東渠道的動作中可以看出，它們的增長相對較高，尤其是在618中，考慮到大多數門店處於運營初期，它們的銷售潛力還沒有完全釋放出來。因此，它應該在我們明年的業務環境中做出更多貢獻。其次，我認為在品類部分，除了服裝和配飾，我們在生活方式相關的品類上也有很好的進展，與更高品質的品牌合作實際上是在食品和家居相關的東西方麵包括外國本土品牌，我們能夠平衡品類組合併尋求可持續增長。

Thank you. Thank you, Tracy. And also, I think for the second question on the -- on the second curve in terms of the business, I think it's a very good question. So before we talk about the second curve. Actually, the main priority for us is to make sure our existing e-commerce business is grown in a very solid way. So basically, as I mentioned earlier, we will prioritize quality over above the pace of the growth. We will protect our margin and protect our cash flow. And we hope that e-commerce, which, as Vincent mentioned earlier, which is strong -- which still presents quite a significant opportunity in the Chinese market. We will tackle this market to protect our existing business and profitability. And on top of that, so we will focus on a few areas, which in line with what Vincent just said, our strategic priority. The first one is technology and digital enhanced value-added service. So this is the core capability of Baozun, which we have been building over the last 15 years.

謝謝你。謝謝你，特蕾西。而且，我認為第二個問題是關於業務的第二條曲線，我認為這是一個非常好的問題。所以在我們談論第二條曲線之前。實際上，我們的首要任務是確保我們現有的電子商務業務以非常穩固的方式發展。所以基本上，正如我之前提到的，我們將質量優先於增長速度。我們將保護我們的利潤並保護我們的現金流。我們希望電子商務，正如文森特之前提到的，它很強大——它仍然在中國市場提供了相當大的機會。我們將應對這個市場，以保護我們現有的業務和盈利能力。最重要的是，我們將專注於幾個領域，這與文森特剛才所說的一致，即我們的戰略重點。第一個是技術和數字增強增值服務。所以這是寶尊的核心能力，我們在過去 15 年裡一直在建設。

We have made a big investment and our capability is very unique and highly valued by the enterprise clients, which they need our OMS and our backhand system to integrate for their e-commerce operations. So given today, many of our enterprise customers pushing into the B2C initiative and also driving this potential [transformation], we have seen in the market a growing demand for those in technology solutions, which Baozun is very good position to offer. So that's on the technology. On top of the technology, if we combine the technology, the transformation capability we have, and also the e-commerce operation capability we have, we actually will be able to enter into the brand management space by utilizing our digital capability to transform our brand and plans.

我們進行了大量投資，我們的能力非常獨特，受到企業客戶的高度評價，他們需要我們的OMS和我們的反手系統來整合他們的電子商務運營。因此，鑑於今天，我們的許多企業客戶都在推動 B2C 計劃並推動這種潛在的 [轉型]，我們已經看到市場對技術解決方案的需求不斷增長，寶尊可以很好地提供這些解決方案。這就是技術。在技術之上，如果我們結合技術，我們擁有的轉型能力，以及我們擁有的電子商務運營能力，我們實際上可以利用我們的數字化能力進入品牌管理空間，對我們的品牌進行改造。和計劃。

In the slides, we have shown earlier, the brands we invested and we deeply managed end-to-end has showed an over 50% growth year-over-year, which is quite a good result. At the same time, from the learning of managing our brand and plans, we will be able to build more experience and more learnings, which we can come back to feedback to our existing APP customers to benefit. So that's where we see the second part of our growth. And then finally, as I mentioned earlier, is the overseas expansion. So basically, technology, brand management, and oversea expansion will play a big part in our second curve of growth.

在幻燈片中，我們之前已經展示過，我們投資的品牌和我們端到端深度管理的品牌同比增長超過 50%，這是一個相當不錯的結果。同時，從管理我們的品牌和計劃的學習中，我們將能夠建立更多的經驗和更多的學習，我們可以回饋給我們現有的APP客戶受益。這就是我們看到增長的第二部分的地方。最後，正如我之前提到的，是海外擴張。所以基本上，技術、品牌管理和海外擴張將在我們的第二條增長曲線中發揮重要作用。

(Operator Instructions) Your next question comes from the line of Yang You from CLSA.

（操作員說明）您的下一個問題來自里昂證券的楊友一行。

Congratulations on the solid results. So I have a question on the margin outlook of the second half. So would we expect further margin improvement compared to what we have last year? Will we see any further benefits arising from our continuing cost transformation efforts? And also a small question on the use of cash. So how should we think about the capital expenditure in the second half?

祝賀你取得了堅實的成果。所以我對下半年的利潤率前景有疑問。那麼，與去年相比，我們是否會期望利潤率進一步提高？我們會從持續的成本轉型努力中看到任何進一步的好處嗎？還有一個關於現金使用的小問題。那麼我們應該如何看待下半年的資本支出呢？

Thank you for the question. I think for the first half -- I mean, for the first question on the margin, we will keep driving the cost of transformation, and also we will prioritize our cash flow for the improvement in the second half of the year. But in terms of the overall market dynamics, there are still a lot of uncertainty, which caused by the potential COVID lockdown and also the slowdown of the overall economy, which has enough some impact into the product sales margin and also the overall growth. So which I would just only to say we will try to protect and improve our margins with the initiatives we have on the ground. But in terms of the end result, we have to wait and see, but we will keep the market updated when we have a little bit more coming in towards the later part of this quarter. On the second one, in terms of the cash, so at this moment, we actually prioritize the cash above the growth. So basically, during the period of uncertainty, [hedge] the team.

感謝你的提問。我認為上半年 - 我的意思是，對於邊緣的第一個問題，我們將繼續推動轉型成本，並且我們將優先考慮我們的現金流，以改善下半年的情況。但就整體市場動態而言，仍存在很大的不確定性，這是由潛在的新冠疫情封鎖以及整體經濟放緩造成的，這對產品銷售利潤率和整體增長有足夠的影響。因此，我只想說，我們將通過我們在實地採取的舉措來保護和提高我們的利潤。但就最終結果而言，我們必須拭目以待，但當我們在本季度後期有更多消息時，我們將保持市場更新。在第二個方面，就現金而言，所以此時我們實際上將現金放在了增長之上。所以基本上，在不確定的時期，[對沖]團隊。

So on one hand, we are improving our working capital to reduce the inventory level at the same time to increase the speed of collection, trying to improve our operating cash flow. At the same time, in terms of the investment activities, we put a higher quality for our investments in this year. And also given the uncertainty into the Chinese market, we actually put some of activity, especially the consolidation of the similar TP on hold in China. But outside of China, we do look at opportunity to further grow as we mentioned, in terms of investment into the brand management, the investments into the overseas expansion are the 2 directions that we will keep making the investment. And finally, as we have always seen [opportunities] to the technology companies and the investment into the technology will be one of our priorities and we think that will help us to build a sustainable business into the future.

因此，一方面，我們正在提高我們的營運資金以降低庫存水平，同時提高收款速度，試圖改善我們的運營現金流。同時，在投資活動方面，我們今年的投資質量也有所提高。並且考慮到中國市場的不確定性，我們實際上進行了一些活動，特別是在中國暫停了類似目標價的整合。但在中國以外，我們確實看到了進一步發展的機會，正如我們所提到的，在品牌管理方面的投資方面，海外擴張的投資是我們將繼續投資的兩個方向。最後，正如我們一直認為技術公司的[機會]，對技術的投資將是我們的優先事項之一，我們認為這將有助於我們在未來建立可持續的業務。

And your next question comes from the line of Yang Bai from CICC.

你的下一個問題來自中金公司楊白的話。

My question is also about brand partners. The macro environment is weak. If you lose any big brand partners this quarter due to the truth studio operations by themselves due to foreign brands closing of land stores in China?

我的問題也是關於品牌合作夥伴的。宏觀環境疲軟。如果由於外國品牌在中國關閉陸上門店而導致真相工作室自行運營，本季度失去任何大品牌合作夥伴？

Okay. So maybe I will share a little bit insight on [metric] and more. So basically, what we have seen at this moment is the brand partner starting to put more cautious approach in terms of the e-commerce, how they run the e-commerce. On one hand, given they also focus on the efficiency over the growth and several of the brand partner has put a quality over the growth speed. They're actually looking for a stable partner to work with them to develop a long-term approach. So this is what we have seen the churn has been reduced over the last couple of quarters, where we see uncertainty increase. And secondly, in the China e-commerce market, it's actually -- the evolvement of this market has changed very quickly. New channels coming out every several quarters, new ways of operating the e-commerce has changed over time to time in a very fast pace.

好的。所以也許我會分享一些關於 [metric] 的見解等等。所以基本上，我們現在看到的是品牌合作夥伴開始在電子商務方面採取更加謹慎的態度，他們如何經營電子商務。一方面，考慮到他們也注重效率而不是增長，而一些品牌合作夥伴也將質量置於增長速度之上。他們實際上是在尋找一個穩定的合作夥伴來與他們合作以製定長期的方法。因此，這就是我們在過去幾個季度中看到的客戶流失率有所減少，我們看到不確定性增加了。其次，在中國電子商務市場，實際上——這個市場的演變變化非常快。每隔幾個季度就會出現新的渠道，新的電子商務運營方式會隨著時間以非常快的速度發生變化。

So in order to catch the market, the brand partner actually needs the service provider like Baozun, who has the capability to keep in the front of everything is happening on e-commerce. We will be able to learn from the many different brands and will bring that the knowledge and also experience from the e-commerce and add value to our brand partners. So that gave us a good advantage in terms of keeping and expanding our service into the brand partners. So that's some of the insights I have seen. Tracy, you want to add on more?

所以為了搶占市場，品牌合作夥伴其實需要寶尊這樣的服務商，有能力站在電商前沿。我們將能夠從許多不同的品牌中學習，並將從電子商務中獲得的知識和經驗帶來，並為我們的品牌合作夥伴增加價值。因此，這使我們在保持和擴展我們的服務到品牌合作夥伴方面具有很好的優勢。這就是我所看到的一些見解。特蕾西，你想補充更多嗎？

Yes, I think exactly as a strategic partner, actually, right now, the key is about the long-term direction things as Baozun, we were working with our brand development, I think at least the 18-month operation plan to conclude the impact of COVID-19, like in this 2 or 3 months is a quiet period, how to rationalize the investment and save the effort to test the water. That is the key. But for the next 6 months, it's a recovering period. As I mentioned, how to move the focus of the daily sales and also prepare for the big promotion and to mitigate the top TOL [missing] issues and but turning into the next year in the developing period and how we can work with the brands to use market, how to see values on the channel content and the marketing campaign to rebuild the brand equity and record the consumer group. And that is the key. I think in the longer term, we will -- we work with the brands to surpass the impact of the COVID-19.

是的，我認為作為戰略合作夥伴，其實，現在，關鍵是關於長期方向的事情，作為寶尊，我們正在與我們的品牌發展合作，我認為至少18個月的運營計劃才能結束影響COVID-19，就像在這2、3個月是一個安靜的時期，如何合理化投資，節省試水的精力。那是關鍵。但在接下來的 6 個月裡，這是一個恢復期。正如我所提到的，如何轉移日常銷售的重點，同時為大促銷做準備，緩解 TOL [missing] 的首要問題，但在發展期進入明年，我們如何與品牌合作用市場，如何看待渠道內容和營銷活動的價值，重建品牌資產，記錄消費群體。這就是關鍵。我認為從長遠來看，我們將與品牌合作以超越 COVID-19 的影響。

I will now hand the call back to Wendy for closing remarks.

我現在將電話交還給 Wendy 以作結束髮言。

Okay. Thank you, operator. In closing, on behalf of the management team, I would like to thank you for all your participant today. To reach out to us. Thank you for joining us, and this concludes the call.

好的。謝謝你，接線員。最後，我謹代表管理團隊感謝您今天的所有參與者。聯繫我們。感謝您加入我們，電話到此結束。

This concludes today's conference call. Thanks for participating. You may now disconnect. Speakers, please standby.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。揚聲器，請待機。