(BZUN) 2023 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Fourth Quarter and Fiscal Year 2023 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 for Baozun. Please proceed, Wendy.

女士們、先生們早安，感謝大家出席寶尊第四季及2023財年獲利電話會議。 （操作員說明）提醒一下，今天的電話會議正在錄音。現在我將會議交給今天的主持人，寶尊企業發展和投資者關係高級總監孫雯女士。請繼續，溫迪。

Thank you, operator. Hello, everyone, and thank you for joining us today. Our fourth quarter and fiscal year 2023 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on global newswire services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website, where they are available for download. On the call today from Baozun, we have Mr. Vincent Qui, Chairman and Chief Executive Officer; Mr. Arthur Yu, Chief Financial Officer and the President of Baozun e-commerce; and Ms. Sandrine Zerbib, President of Baozun Brand Management. Mr. Qui will review the business strategy and company highlights, followed by Mr. Yu, who will discuss the business development of Baozun e-commerce and about our financials and outlook, and then by Ms. Zerbib to share more about Baozun Brand Management. They will all be available to answer your questions during the Q&A session that follows.

謝謝你，接線生。大家好，感謝您今天加入我們。我們在本次電話會議之前發布了第四季度和 2023 財年收益報告，可在我們的 IR 網站 ir.baozun.com 以及全球新聞專線服務上取得。我們也在同一個 IR 網站上發布了附有我們評論的 PowerPoint 演示文稿，可供下載。今天，寶尊董事長兼執行長邱文森先生接聽了我們的電話；寶尊電商財務長兼總裁於亞瑟先生；以及寶尊品牌管理總裁Sandrine Zerbib女士。奎先生將回顧業務策略和公司亮點，隨後於先生將討論寶尊電子商務的業務發展以及我們的財務和前景，然後Zerbib女士將分享更多有關寶尊品牌管理的資訊。他們都將在接下來的問答環節回答您的問題。

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 a mandate, the U.S. Securities Exchange Act of 1934 as a mandate 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 manufacture 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. Securities 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 the assumptions that the company believes to be reasonable as of today, and the company does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Secondly, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. In addition, we may elect to use adjusted in place of non-general accounting accepted accounting principles or non-GAAP in order to reduce any confusion that may arise from our discussion about the financials related to the GAAP brand. Here are please turn to Slide #2, and it is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qui. Vincent, please go ahead.

在開始之前，我想提醒您，本次電話會議包含《1933 年美國證券法》、《1934 年美國證券交易法》和《美國私人證券訴訟改革》所界定的前瞻性陳述。1995 年法案。這些前瞻性陳述是基於管理層當前的預期以及當前的市場和營運狀況，並涉及涉及已知或未知風險、不確定性和其他難以預測和超出公司控制範圍的因素的事件，這些事件可能導致公司的實際結果與前瞻性陳述中的結果有重大差異。有關這些及其他風險、不確定性或因素的更多信息，請參閱該公司向美國證券交易委員會提交的文件及其公告通知或在香港聯合交易所有限公司網站上發布的其他文件。本次電話會議中提供的所有資訊均截至本新聞稿發布之日，並基於本公司認為截至今日合理的假設，本公司不承擔更新任何前瞻性陳述的義務，除非適用要求法律。其次，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。此外，我們可能會選擇使用調整後的會計準則來取代非一般會計公認會計準則或非公認會計準則，以減少我們對與公認會計準則品牌相關的財務狀況的討論中可能出現的任何混亂。請轉到幻燈片#2，現在我很高興介紹我們的董事長兼執行長 Vincent Qui 先生。文森特，請繼續。

Thank you, Wendy. Hello, everyone. Thank you all for your time. 2023 kicks off our journey of transformation. Throughout 2023, Baozun Group demonstrated our resilience and adaptability to transformation. BEC reinforces omnichannel capability and improved service quality, consolidating our leadership within the digital commerce ecosystem. EBM contributed additional revenue stream and extends our value creation from supply chain to also supply chain fulfillment. We also further enhanced our cash-generating capabilities with cost optimization resulting from process reengineering and more efficient working capital management. Overall, despite challenging market conditions, our annual operating cash flow and free cash flow, both grew by double digit year-over-year and third to record highs. This has significantly strengthened the financial health of the group. Total revenues of the group grew 5% year-over-year to CNY 8.8 billion, underpinned by incremental contributions from both brand management. BBM executed the strategy of premiumization for Gap China and achieved an impressive gross margin of 54% for the year. This is, in turn, resulted in much lower operating losses, far surprising our initial forecast. This breakthrough in our first year is a result of having established a solid foundation for growth and success in brand management. BBM is a key component of Baozun Group's second growth curve. Baozun international BCI represents a longer-term opportunity for which we continue to lay the business foundation and the infrastructure. As BBM ramps up, expansion following its acquisition of Honda IP, BCI will play a vital role to expand Honda into Southeast Asia, starting with Singapore and Malaysia this year.

謝謝你，溫迪。大家好。感謝大家抽出寶貴的時間。 2023 年，我們開啟了轉型之旅。 2023年，寶尊集團展現了轉型的韌性與適應力。 BEC 增強了全通路能力並提高了服務質量，鞏固了我們在數位商務生態系統中的領導地位。 EBM 貢獻了額外的收入來源，並將我們的價值創造從供應鏈延伸到供應鏈履行。我們也透過流程重組和更有效率的營運資金管理所帶來的成本優化，進一步增強了我們的現金產生能力。整體而言，儘管市場條件充滿挑戰，我們的年度營運現金流和自由現金流均較去年同期成長兩位數，並第三次創下歷史新高。這顯著增強了集團的財務健康狀況。在兩個品牌管理層的增量貢獻的支撐下，集團總收入年增 5% 至 88 億元。 BBM為Gap中國執行了高端化策略，全年毛利率達到了54%的驕人成績。反過來，這導致營業損失大大降低，遠遠超出了我們最初的預測。第一年的這項突破是為品牌管理的成長和成功奠定了堅實基礎的結果。 BBM是寶尊集團第二條成長曲線的關鍵組成部分。寶尊國際BCI代表著一個更長期的機遇，我們將繼續為此奠定業務基礎和基礎設施。隨著 BBM 收購本田 IP 後的擴張，BCI 將在本田進軍東南亞的過程中發揮至關重要的作用，今年將從新加坡和馬來西亞開始。

This is a good example of the synergy and the collaboration between our business units. We believe that our expertise in technology applied to operations and business transformation is at the core of Baozun's identity. We are happy to share that Baozun has been acknowledged as a representative vendor in Ghana's 2024 market guide for distributed order management system. We are proud to be the only Asian vendor selected alongside global retail service giants, such as Oracle, SAP, IBM and Salesforce. This is a recognition of Baozun's outstanding technical capabilities in the industry. Looking forward, we remain cautious about the macro uncertainties, yet, we are confident that our ongoing transformation has strengthened our business fundamentals and our value proposition to brand owners. Our main focus this year is to continue to execute our plans diligently and patiently in a sustainable manner. With a healthy cash flow and the balance sheet, we will be ready to seize new opportunities and provide lasting value to our shareholders. This January, our Board has also approved a new share repurchase program of $20 million over the next 12 months. We will exit this program from time to time, taking into account factors such as trading window and marketing fluctuations. Let me now pass the call over to Arthur for a review of our financials and update on our e-commerce business, BEC (inaudible) for more elaboration on BBM.

這是我們業務部門之間協同和協作的一個很好的例子。我們相信，將科技應用於營運和業務轉型的專業知識是寶尊身分的核心。我們很高興地告訴大家，寶尊已被認可為加納2024年分散式訂單管理系統市場指南的代表供應商。我們很榮幸成為唯一與 Oracle、SAP、IBM 和 Salesforce 等全球零售服務巨頭一起入選的亞洲供應商。這是業界對寶尊卓越技術能力的認可。展望未來，我們對宏觀不確定性保持謹慎態度，但我們相信，我們正在進行的轉型已經加強了我們的業務基礎和對品牌所有者的價值主張。我們今年的主要重點是繼續以可持續的方式勤勉、耐心地執行我們的計劃。憑藉健康的現金流和資產負債表，我們將準備好抓住新的機遇，為股東提供持久的價值。今年 1 月，我們的董事會也批准了未來 12 個月內 2,000 萬美元的新股票回購計畫。考慮到交易窗口和行銷波動等因素，我們會不時退出該計劃。現在讓我將電話轉給 Arthur，讓他審查我們的財務狀況並更新我們的電子商務業務 BEC（聽不清楚），以進一步詳細說明 BBM。

Okay. Thank you, Vincent, and hello, everyone. Let me do a quick review of the financials for the fourth quarter and full year of 2023. After which, I will discuss our BEC business in more details. Please turn to Slide #3. Baozun Group's total revenues for the fourth quarter of 2023 expanded nearly 9% to CNY 2.8 billion compared to the same quarter last year, driven by incremental BBM revenue of CNY 458 million. Due to a weaker economic environment, our e-commerce revenue declined to CNY 2.4 billion. Further pursuing a high-quality business model, we scaled back on low-margin product sales and trained low value-added service revenues. Consequently, product sales revenue of e-commerce decreased 23% year-over-year, notably in the appliance, electronics and fast-moving consumer goods categories. This was partially offset by increased sales from health care and beauty categories. Baozun Brand Management generated total revenue of CNY 458 million, a sequential improvement of 53%. Our total product sales revenue grew by 36% to CNY 1 billion, and the gross profit for product sales more than doubled to CNY 350 million. Product sales gross margin for Baozun Group totaled 30%, significantly improved from 17% a year ago. The growth of our gross profit and gross margin was mainly attributable to incremental contribution from BBM. Group income from operations was CNY 6.4 million during the quarter, of which e-commerce operating income was CNY 50.1 million. BBM continued to show good momentum in reducing its operating loss to CNY 43.7 million. At premiumization strategy with discount control, new China for China product launch and new store openings have all met our expectations. These initiatives will provide a foundation for better profitability in the coming quarters. Sandrine will cover the details later.

好的。謝謝你，文森特，大家好。讓我快速回顧一下 2023 年第四季和全年的財務狀況。之後，我將更詳細地討論我們的 BEC 業務。請翻到投影片 #3。寶尊集團2023年第四季總營收較去年同期成長近9%，達到28億元人民幣，主要受惠於BBM營收增量4.58億元人民幣。由於經濟環境疲軟，我們的電子商務收入下降至 24 億元。進一步追求高品質商業模式，壓縮低毛利產品銷售，培育低附加價值服務收入。電商產品銷售收入較去年同期下降23%，尤其是家電、電子和快速消費品類。這被醫療保健和美容品類銷售額的成長部分抵消。寶尊品牌管理總收入達人民幣4.58億元，較上季成長53%。產品總銷售收入成長36%，達10億元人民幣，產品銷售毛利成長一倍多，達到3.5億元。寶尊集團產品銷售毛利率達30%，較去年同期的17%大幅提升。毛利和毛利率的成長主要得益於BBM的增量貢獻。本季集團營運收入為人民幣640萬元，其中電子商務營運收入為人民幣5,010萬元。 BBM持續展現良好勢頭，將營業虧損減少至4,370萬元人民幣。在高端化策略和折扣控制下，新中國為中國的產品推出和新店開幕都達到了我們的預期。這些舉措將為未來幾季更好的獲利能力奠定基礎。桑德琳稍後將介紹詳細資訊。

On the group level, our net loss significantly narrowed to CNY 2 million during the quarter from CNY 256.5 million a year ago as we incurred a significant onetime fair value loss during the same period of last year. Excluding the impact of ESOP, amortization and other nonrecurring business factors, our adjusted income from operations was CNY 75.7 million during the quarter, of which e-commerce adjusted operating income was CNY 118.2 million, and the BBM operating loss narrowed to CNY 42.5 million. Our adjusted net income was CNY 76.8 million during the quarter. Let us turn to a quick full year summary. We ended 2023 with group total revenue of CNY 8.8 billion, an increase of 5% year-over-year. Gross profit totaled CNY 6.4 billion, an increase of 4% year-over-year. Our adjusted operating loss totaled CNY 23.7 million. Please turn to Slide #4. Turning to our cash and cash flow status. As of December 31, 2020, our cash, cash equivalents, restricted cash and short-term investments totaled CNY 3.1 billion. We continue to improve working capital efficiency through back-end process reengineering on inventory, billing and cash collection management. Annual operating cash flow and free cash flow were CNY 454.5 million and CNY 259.5 million, an increase of 19% and 46% reflectively year-over-year.

在集團層面，由​​於去年同期發生了重大的一次性公允價值損失，我們本季的淨虧損從去年同期的 2.565 億元大幅收窄至 200 萬元。剔除員工持股計畫、攤銷和其他非經常性業務因素的影響，本季我們調整後的營運收入為人民幣7570萬元，其中電子商務調整後的營運收入為人民幣1.182億元，BBM營運虧損收窄至人民幣4250萬元。本季調整後淨利為 7,680 萬元。讓我們快速進行全年總結。截至 2023 年，集團總營收為 88 億元人民幣，年增 5%。毛利總額為人民幣64億元，較去年同期成長4%。調整後的經營虧損總計 2,370 萬元。請翻到投影片 #4。轉向我們的現金和現金流狀況。截至2020年12月31日，我們的現金、現金等價物、限制性現金及短期投資總計31億元。我們透過庫存、計費和現金回籠管理等後端流程再造，持續提高營運資金效率。全年經營現金流和自由現金流分別為人民幣4.545億元和人民幣2.595億元，較去年同期分別成長19%和46%。

Now let's dive into our BEC business. 2023 is a year of transition for our BEC business. At the beginning of the year, we signed a strategic objective of achieving customer-centric, high-quality and sustainable business growth for BEC. (inaudible) principle steered the team's efforts and allocation of resources throughout the year. As a result, we have made progress in the following 3 areas as displayed on Slide #5. Firstly, the customer satisfaction enhancement. We introduced (foreign language) MPS framework in collaboration with Nielsen in 2022. The objective of this initiative is to implement a robust client service quality management framework, defining precise standards for various services and migraine the outcomes. I'm glad to report that our MPS score has improved from 8.07% in 2022 to 8.23 in 2023. This improvement reflects our clients' growing recognition of Baozun's service and directly contribute to our outstanding contract renewal ratio. In 2023, over 97% of our key account plans choose to renew their contracts with Baozun, and I'm pleased that we are well on track to further improve customer satisfaction in 2024. Secondly, we focused on driving business growth through strengthening our omnichannel capabilities and expanding core product category. By participating in high-level discussions with brand partners and key marketplaces. We helped our brand partners formulate effective omnichannel go-to-market strategies for sustainable e-commerce business growth in China. This enabled us to acquire over 50 new brands in 2023, including Tapani, Tumi, and Dyson, just to name a few.

現在讓我們深入了解我們的 BEC 業務。 2023年是我們BEC業務轉型的一年。年初，我們簽署了BEC實現以客戶為中心、高品質、永續業務成長的策略目標。 （聽不清楚）原則指導團隊全年的努力和資源分配。結果，我們在以下 3 個領域取得了進展，如幻燈片 #5 所示。一是提升客戶滿意度。我們於 2022 年與尼爾森合作推出了（外語）MPS 框架。該計劃的目標是實施強大的客戶服務品質管理框架，為各種服務定義精確的標準並偏向結果。我很高興地向大家報告，我們的MPS 分數從2022 年的8.07% 提高到2023 年的8.23。這一提高反映了客戶對寶尊服務的日益認可，並直接有助於我們出色的續約率。 2023年，超過97%的大客戶計畫選擇與寶尊續約，我很高興我們預計在2024年進一步提高客戶滿意度。其次，我們專注於透過加強全通路來推動業務成長能力並擴大核心產品類別。透過參與與品牌合作夥伴和主要市場的高層討論。我們幫助品牌合作夥伴制定有效的全通路進入市場策略，以實現中國電子商務業務的可持續成長。這使我們能夠在 2023 年收購 50 多個新品牌，包括 Tapani、Tumi 和 Dyson 等。

From the product category standpoint, we consistently achieved growth in Baozun's market share within our primary categories of luxury and the premium apparel on both Tumi and JD platforms. And this has helped us establish a solid foundation from which we will extend our reach into new product categories such as wine and spirits, health and beauty and luxury automotive in 2024. Given the dynamic nature of the e-commerce landscape, we are strategically investing in interest and content-based e-commerce. In early 2003, we launched our creative content to commerce division, which included a Shanghai-based live streaming center. This was followed by the announcement of our acquisition of location, a leading doing partner in November 2023. Leveraging on our established partnerships, we secured several contracts on Baozun channel with industry leaders like Zara, Trucks, Amani and Coca-Cola, just name a few. Thirdly, we continued our efforts in efficiency improvement and cost control. During the year, we established a lead management committee to drive cost control and efficiency improvements. Our middle and back-office functions are becoming leaner and more integrated through process reengineering. We also scaled up regional service centers by transferring approximately 770 new positions into these facilities, generating an annual cost saving of CNY 24 million. We integrated more AIT initiatives through strategic partners with industry leaders such as Microsoft and Open AI, enhancing data operational efficiency of over 3,000 employees. Our efforts in working capital management also yields substantial results, taking new records in both operating cash flow and free cash flow, as mentioned in my financial update.

從品類來看，寶尊在Tumi和京東平台的奢侈品和高端服飾主要品類中的市佔率持續成長。這幫助我們奠定了堅實的基礎，我們將在 2024 年將業務範圍擴展到葡萄酒和烈酒、健康和美容以及豪華汽車等新產品類別。鑑於電子商務格局的動態性，我們正在戰略性投資基於興趣和內容的電子商務。 2003 年初，我們推出了創意內容商務部門，其中包括一個位於上海的直播中心。隨後，我們在 2023 年 11 月宣布收購領先的合作夥伴 Location。憑藉我們已建立的合作夥伴關係，我們在寶尊管道上與 Zara、Trucks、Amani 和可口可樂等行業領導者簽訂了幾份合約。很少。第三是持續抓好效率提升和成本控制。年內，我們成立了領導管理委員會，以推動成本控制和效率提升。透過流程再造，我們的中後台職能變得更加精簡、更加一體化。我們也擴大了區域服務中心的規模，將約 770 個新職位轉移到這些設施中，每年節省成本 2,400 萬元。我們透過與微軟、Open AI等產業領導者的策略夥伴整合更多AIT舉措，提升了3,000多位員工的資料營運效率。正如我在財務更新中提到的，我們在營運資本管理方面的努力也取得了實質成果，在經營現金流和自由現金流方面都創下了新紀錄。

Looking ahead, our primary focus for 2024 remains on executing our business strategy to create high-quality and sustainable business growth. We aim to fortify our market leadership position in the luxury and apparel categories while also expanding into high potential categories such as wine and spirit, health and beauty and luxury and automotive. We believe this will naturally expand our market share and TAM in brand e-commerce. We will continue to enhance our omnichannel capabilities. One of our key focus is so in where we leverage locations expertise in daily live streaming in conjunction with Baozun's creative content and e-commerce operating experiences. Following the completion of location acquisition in March 2024, we are now well positioned to seize more opportunities from our brand partner and to create additional revenue streams for BEC. In addition to Don, we are also working closely with vip.com and Little Red Book, aiming to build an extended ecosystem focused on value for money, content marketing and traffic acquisition for our brand partners. We are also exploring business opportunity in other emerging channels such as Dou and Quezon. We believe these new opportunities will expand our success across major e-commerce platform, positioning us for sustainable growth. Lastly, we aim to further grow our high-quality product sales business in 2024. In the past year and a half, we have been optimizing our product sales business model by emphasizing higher quality. When we refer to high quality, we are aiming for both improved margin and enhanced merchandising and inventory control. As part of this effort, we have elected to terminate certain partnerships where the gross margin level and inventory rates did not meet our standards.

展望未來，我們 2024 年的主要重點仍然是執行我們的業務策略，以創造高品質和永續的業務成長。我們的目標是鞏固我們在奢侈品和服裝類別的市場領導地位，同時擴展到葡萄酒和烈酒、健康和美容以及奢侈品和汽車等高潛力類別。我們相信這自然會擴大我們在品牌電商領域的市場份額和TAM。我們將繼續增強我們的全通路能力。我們的重點之一是利用日常直播領域的專業知識以及寶尊的創意內容和電子商務營運經驗。繼 2024 年 3 月完成地點收購後，我們現在已做好準備，可以從品牌合作夥伴那裡抓住更多機會，並為 BEC 創造額外的收入來源。除了Don之外，我們還與唯品會和小紅書密切合作，旨在為我們的品牌合作夥伴建立一個專注於物有所值、內容行銷和流量獲取的擴展生態系統。我們也在Dou和Quezon等其他新興管道探索商機。我們相信這些新機會將擴大我們在主要電子商務平台上的成功，為我們的永續成長奠定基礎。最後，我們的目標是在2024年進一步發展我們的高品質產品銷售業務。在過去的一年半里，我們一直在強調更高品質，優化我們的產品銷售業務模式。當我們提到高品質時，我們的目標是提高利潤並加強銷售和庫存控制。作為這項努力的一部分，我們選擇終止某些毛利率水準和庫存率不符合我們標準的合作關係。

In 2024, we have introduced a new business model where Baozun serves as the exclusive distribution partner for a government brand in China. This model entails managing all sales channels, both online and offline, utilizing our omnichannel's digital technology. We are confident that by applying Baozun's leading data and system technology, we can seamlessly integrate online and offline channel to deliver a superior performance compared to traditional distributors. Furthermore, with our product sales business, our self-incubated brand, (foreign language) continued to deliver high double-digit growth in beauty and health care category. We are convinced that this new initiative will drive the growth in both revenue and profit margin for our product sales business in 2024. Overall, I believe we have established a solid foundation and implemented the right initiatives for our transition. We have confidence that we are now on track for strengthening EC's top and bottom line, we're continuing to generate healthy cash flow in 2024. Now let's pass on to Sandrine.

2024年，我們推出了新的業務模式，寶尊作為政府品牌在中國的獨家經銷合作夥伴。這種模式需要利用我們的全通路數位技術來管理所有線上和離線銷售管道。我們有信心，透過應用寶尊領先的數據和系統技術，我們可以無縫整合線上和線下通路，從而提供比傳統經銷商更優越的業績。此外，憑藉我們的產品銷售業務，我們的自孵化品牌（外語）繼續在美容保健品類中實現兩位數的高成長。我們堅信，這項新舉措將在 2024 年推動我們產品銷售業務的營收和利潤率成長。總體而言，我相信我們已經為轉型奠定了堅實的基礎並實施了正確的舉措。我們有信心，我們現在正在加強 EC 的營收和利潤，我們將在 2024 年繼續產生健康的現金流。現在讓我們把注意力轉向 Sandrine。

Thank you, Vincent, and Arthur, and thank you all for joining us today. It is my great pleasure to speak with you. Please turn to Slide #6. As you recall, in February 2023, recognizing a golden opportunity to reinvigorate an iconic brand, BBM acquired the operations of Gap Greater China, with a clear vision to transform Gap into a lifestyle brand tailored to the modern Chinese consumer, BBM embarked on a journey, fueled by innovation and strategic foresight. Our vision was to reinterpret American style for the modern Chinese consumers by localizing key elements of the core GAAP brand DNA. We pursued a mission to make GAAP products and messaging culturally relevant again in Greater China. The goal was not only to revitalize GAP products, but also to reignite consumer love and loyalty moving away from a discount-driven model to one that resonates deeply with the aspirations of the modern Chinese consumer. We took over a business which had just closed 86 stores and was plagued by abnormally high levels of discounts all year round. And in just 11 months, BBM's multicultural talents and diverse teams, coupled with impeccable execution and technology-driven solutions achieved remarkable results. The transformation of Gap China from a discount-driven brand to consumer-centric power health is evident in the following, as indicated on Slide #7.

謝謝文森和阿瑟，也謝謝大家今天加入我們。我很高興與您交談。請翻到幻燈片#6。記得，2023年2月，BBM看到了重振標誌性品牌的黃金機遇，收購了Gap大中華區的業務，懷著將Gap打造成適合現代中國消費者的生活方式品牌的清晰願景，BBM踏上了一段征程。 ，由創新和戰略遠見推動。我們的願景是透過本土化核心 GAAP 品牌 DNA 的關鍵元素，為現代中國消費者重新詮釋美式風格。我們的使命是讓 GAAP 產品和資訊再次與大中華區的文化相關。其目標不僅是重振 GAP 產品，而且是重新點燃消費者的喜愛和忠誠度，從折扣驅動的模式轉變為與現代中國消費者的願望產生深刻共鳴的模式。我們接手的一家企業剛剛關閉了 86 家門市，並且常年受到異常高折扣的困擾。而在短短11個月內，BBM的多元文化人才和多元化團隊，加上無可挑剔的執行力和技術驅動的解決方案取得了令人矚目的成果。如幻燈片#7 所示，Gap 中國從折扣驅動型品牌轉向以消費者為中心的力量健康品牌的轉變顯而易見。

First, team systems and processes. We focus on assembling the right team and implementing robust systems and processes to execute our turnaround strategy effectively. This included restructuring, hiring key personnel and optimizing operational workflows as well as putting in place a whole new set of systems to support our business. Then premiumization of the brand. We embarked on a comprehensive strategy to elevate the brand by focusing on product design, product segmentation, supply chain enhancements and improving store image. Our goal was to break through from the cycle of perpetual discounts and focus instead on appealing to consumers, thanks to our products and brand image. We introduced a new locally designed China-for-China product aiming to deliver the right product for the right people at the right time. We launched the new products with an integrated go-to-market approach, combining celebrity endorsements, new store openings and social media campaigns. We imposed discount control as the key factor driving the increase in gross margin percentage, which has reached about 1,100 basis points, excluding royalty. We also opened our new store concept, which is more boutique as opposed to the previous big box type of concept. We're enhancing the brand DNA, transforming our stores into more than just commercial channels and creating immersive brand experiences. Our stores are now smaller in size, but higher in square meter efficiency, optimizing space for a better customer experience.

第一，團隊制度和流程。我們專注於組建合適的團隊並實施強大的系統和流程，以有效地執行我們的扭虧為盈策略。這包括重組、僱用關鍵人員和優化營運工作流程，以及建立一套全新的系統來支援我們的業務。然後是品牌的高端化。我們採取了全面的策略來提升品牌，並專注於產品設計、產品細分、供應鏈增強和改善商店形象。我們的目標是突破永久折扣的循環，轉而專注於透過我們的產品和品牌形象吸引消費者。我們推出了一款新的本土設計、專為中國設計的產品，旨在在正確的時間為正確的人提供正確的產品。我們以全面的市場推廣方式推出了新產品，結合了名人代言、新店開幕和社群媒體活動。我們實施折扣控制是推動毛利率上升的關鍵因素，毛利率已達到約1,100個基點（不包括特許權使用費）。我們還開設了新的概念店，與之前的大盒子概念店相比，它更加精品化。我們正在增強品牌 DNA，將我們的商店轉變為不僅僅是商業管道，並創造身臨其境的品牌體驗。現在，我們的商店面積更小，但平方米效率更高，優化空間以提供更好的客戶體驗。

We've implemented scenario-based and serialized co-location of merchandise, creating relevant festive atmospheres that resonate with customers. In-store pop-ups and campaigns are generating social buzz and further enriching the store experience for consumers. Leveraging WeChat and Omni CRM, regaining insights into each customer and offering seamless engagements beyond the physical store. We successfully opened 10 new stores in 2023, including a flagship destination store in Guangzhou as well as new stores in Chengdu, Shenzhen and Beijing. We've enhanced the retail experience, achieving a 50% increase in square meter efficiency for newly opened stores versus the existing portfolio on a full year basis. Additionally, our existing stores have seen a notable 19% rise in same-store comparable sales. Our new stores have been warmly welcomed not only by our customers, but have also gained brand recognition within the retail industry. We are proud to report that we achieved our objectives in these areas within the time frame. In fact, in some aspects such as gross margin, we not only met but exceeded our 2023 targets. This demonstrates the effectiveness of our strategies and the dedication of our team in turning around the business. In 2024, based on our strengthened foundation, we will continue to build on the momentum to solidify the brand fundamentals and revitalize growth for the Gap brand in China. While we pursue 2024 top line growth, safe guarding our gross profit remains paramount. We will achieve this through stringent discount controls and increased special production tailored for our online business. We expect that these efforts, combined with continued control of expenses, will lead us to achieve Gap China turnaround in 2025 as planned.

我們實現了場景化、系列化的商品同置，營造了與顧客產生共鳴的節慶氛圍。店內快閃店和活動正在引起社會關注，並進一步豐富消費者的商店體驗。利用微信和 Omni CRM，重新了解每位客戶，並提供實體店以外的無縫互動。 2023年，我們成功開設了10家新店，包括廣州的旗艦店以及成都、深圳和北京的新店。我們增強了零售體驗，全年新開店的平方公尺效率比現有商店提高了 50%。此外，我們現有門市的同店可比銷售額顯著成長了 19%。我們的新店不僅受到顧客的熱烈歡迎，也獲得了零售業的品牌認可。我們很自豪地報告，我們在規定的時間內實現了這些領域的目標。事實上，在毛利率等某些方面，我們不僅達到而且超過了2023年的目標。這證明了我們策略的有效性以及我們團隊在扭轉業務方面的奉獻精神。 2024年，我們將在夯實基礎的基礎上，繼續乘勢而上，夯實品牌根基，重振Gap品牌在中國的成長。在我們追求 2024 年營收成長的同時，保護我們的毛利仍然至關重要。我們將透過嚴格的折扣控制和增加為我們的線上業務量身定制的特殊生產來實現這一目標。我們預計，這些努力加上持續控制費用，將使我們能夠按計劃在 2025 年實現 Gap 中國的扭虧為盈。

Lastly, we have completed the acquisition of Hunter's Intellectual Property and established a joint venture with Authentic Brands Group. We now co-own Hunter's IP in Greater China and Southeast Asia. And BBM has become the licensee for operations in Greater China and parts of Southeast Asia. Currently, we are in the preparation phase, focusing on tasks like store transfers and product planning. The coming second quarter will be the official kickoff of our endeavors with Hunter. We have ambitious plans for Hunter's growth, including expanding into new categories and diversifying our distribution channels to unlock the brand's full potential in China as well as in Singapore and Malaysia in Southeast Asia. Leveraging our Baozun international BCI business units, we aim to further support and accelerate Hunter's business expansion in this region. This concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.

最後，我們完成了對 Hunter 智慧財產權的收購，並與 Authentic Brands Group 成立了合資公司。我們現在共同擁有 Hunter 在大中華區和東南亞的智慧財產權。 BBM已成為大中華區及東南亞部分地區的營運授權商。目前，我們正處於準備階段，重點是做好店鋪調動、產品規劃等工作。即將到來的第二季將是我們與亨特合作的正式開始。我們為 Hunter 的發展制定了雄心勃勃的計劃，包括擴展到新的類別和多元化我們的分銷管道，以釋放該品牌在中國以及東南亞新加坡和馬來西亞的全部潛力。借助寶尊國際BCI業務部門，我們旨在進一步支持並加速亨特在該地區的業務擴張。我們準備好的演講到此結束。謝謝。接線員，我們現在準備開始問答環節。

We will now begin the question-and-answer session. (Operator Instructions) The first question today comes from Alicia Yap with Citigroup.

我們現在開始問答環節。 （操作員說明）今天的第一個問題來自花旗集團的 Alicia Yap。

I have two questions. One is what is the latest consumption shopping sentiment that you have observed over the past 2 months in 2024. What is management's expectation of the macro overall and the consumption outlook for this year. While we think it's still early, so I'm not sure, have you started to plan for this year's 618 promotional festival? What do you expect that could be different this year versus previous year for the June 18 promotion period? And then second question is for the BBM business. Just wondering, have you noticed any meaningful difference in terms of the user spending habit, for example, the average purchasing value at the offline store versus what you have been operating, which is the online store, the behavior for the user that you can make some comparisons. And then if there is opportunity for you to acquire or add a few more brands to your BBM business, could you share with us your decision-making criteria? And what kind of brands that you most see go to add to your portfolio of management?

我有兩個問題。一是您觀察到的2024年過去兩個月的最新消費購物情緒是什麼。管理階層對宏觀整體的預期以及今年的消費前景是什麼。雖然現在覺得還太早，所以不知道大家已經開始籌劃今年的618促銷節了嗎？您認為今年 6 月 18 日的促銷期與去年相比會有什麼不同？第二個問題是關於 BBM 業務的。只是想知道，您是否注意到用戶消費習慣方面存在任何有意義的差異，例如，線下商店的平均購買價值與您一直在經營的在線商店的平均購買價值，您可以為用戶做出的行為一些比較。如果您有機會收購或在您的 BBM 業務中添加更多品牌，您能否與我們分享您的決策標準？您最常將哪些品牌加入您的管理組合中？

Okay. I will take the first one, Alicia, for your questions, and then I will pass on to Sandrine and Vincent to talk about the second one, yes. Regarding the consumption sentiment, I have to say the sentiment has still not recovered very quickly. And the consumer confidence, as we can see, the figure is still very low. But within that, there are some highlights point where we can see some category has performed actually better. For example, all store, healthy food and nutrition. So those are the spotlights which we have seen a good recovery on the consumption. Regarding 618, we haven't formally kicked off the plan for 618. That will start in May. However, we have already focused on to improve the daily sales for example, doing a good operation and doing a good customer service and try to engage with the customer, which is trying to build a customer base and getting ready for the big promotion 618. And the different I have seen for this year is the daily sales becoming more and more important, which means the ongoing operation from a capability perspective is becoming more and more important. So that's for my first question. Sandrine?

好的。我將回答第一個問題，艾莉西亞，然後我將轉給桑德琳和文森特討論第二個問題，是的。關於消費情緒，我必須說，情緒還沒有很快恢復。正如我們所看到的，消費者信心仍然很低。但其中有一些亮點，我們可以看到某些類別的表現實際上更好。例如，所有商店，健康食品和營養品。這些都是我們看到消費復甦良好的亮點。關於618，我們還沒有正式啟動618的計畫。那是從5月開始的。不過，我們已經把重點放在提高日常銷售上，例如做好營運、做好客服，努力與客戶互動，努力建立客戶群，為618大促做好準備。今年我看到的不同之處在於，日銷售變得越來越重要，這意味著從能力角度來看持續營運變得越來越重要。這是我的第一個問題。桑德琳？

Yes. Thank you, Vincent. So thank you, Alicia, for your questions. So the first part of your question is about online versus offline consumer behavior. I mean it's pretty clear that the premiumization progress that I talked about is going faster off-line than online. Nevertheless, online, we have also been able to achieve much better gross margin than previously. So it's a question of cycle and time. It takes longer. Then regarding your second question, we are actually looking at multiple opportunities, but we are being extremely selective with in mind, I would say, this criteria, the four criteria I'm going to say, which are really the key criteria. The first one is, obviously, the segment and the category in which these brands belong to. We're looking for brands that are operating in very dynamic segments, and there are still pockets of growth, which are very interesting in China. The second key criteria is that these brands need to have some true potential to develop in the Greater China and potentially Southeast Asian markets. The third one is the synergies with our current portfolio, particularly with regards to supply chain, but not only. It's really a synergetic brands we are looking at. And the fourth one is brands that will enable us through the right transaction to act on what has been really key so far to the successful progression of GAAP, which is China for China, meaning that we need to be able to work on the product. And the second one, we need to be able to really make a digital difference with our technology leadership. These are really the four key criteria for us.

是的。謝謝你，文森。謝謝艾莉西亞提出的問題。所以你問題的第一部分是關於線上和線下消費者行為。我的意思是，很明顯，我談到的高端化進程線下比線上更快。儘管如此，在網路上，我們也能夠實現比以前更好的毛利率。所以這是一個週期和時間的問題。需要更長的時間。關於你的第二個問題，我們實際上正在尋找多個機會，但我們非常有選擇性，我想說的是，這個標準，我要說的四個標準，這確實是關鍵標準。第一個顯然是這些品牌所屬的細分市場和類別。我們正在尋找在非常活躍的細分市場中經營的品牌，並且仍然有一定的成長空間，這在中國非常有趣。第二個關鍵標準是這些品牌需要在大中華區和潛在的東南亞市場中具有一定的發展潛力。第三個是與我們目前產品組合的協同效應，特別是在供應鏈方面，但不僅如此。我們正在尋找真正的協同品牌。第四個是品牌，它們將使我們能夠通過正確的交易，對迄今為止對 GAAP 成功進展真正關鍵的問題採取行動，即“中國為中國”，這意味著我們需要能夠致力於產品的開發。第二，我們需要能夠憑藉我們的技術領先地位真正帶來數位變革。這些確實是我們的四個關鍵標準。

The next question comes from Thomas Chong with Jefferies.

下一個問題來自 Jefferies 的 Thomas Chong。

My question first, can you talk about the growth outlook for non-Tmall trends and the contribution to our GMV? And then secondly, as we highlighted in the prepared remarks, we are looking into operating efficiencies, improving profitability. So I just want to get some more color about the trend in our operating expenses and our margin outlook. And then finally is more about our use of cash and our thoughts about our M&A.

我的問題首先，您能談談非天貓趨勢的成長前景以及對我們GMV的貢獻嗎？其次，正如我們在準備好的演講中所強調的那樣，我們正在研究營運效率，提高獲利能力。所以我只是想了解更多關於我們的營運費用趨勢和利潤前景的資訊。最後更多的是關於我們對現金的使用以及我們對併購的想法。

Okay, Thomas. Four questions. Yes, let me take them one by one. The first one, outlook for non-Tmall channel. As I mentioned in my earlier part, omnichannel is a trend and it's a strategy we will follow in 2024. And we have put a lot of emphasis on doing and Hansen channel. We also are looking into the new channels like the vip.com and the rest. We believe given the complexity and the evolving of the China e-commerce landscape, omni-channel is becoming more and more important. From a number of perspectives, our non-Tmall channel has increased. But however, we are not looking at the number by itself, we are looking at capabilities because the capability will allow us to do omnichannel. It doesn't matter where the traffic goes. We will be able to adjust along with the brand very quickly and very easily. So that's the first one. Your second question is about operating efficiency. So from the BEC perspective, we established a lean management committee looking at how to capture the cost saving and efficiency opportunity in a very structured way. And in that program, we have already delivered very significant savings. So for example, as I mentioned, our regional service center program has delivered -- has transferred 770 positions from Shanghai to lower-cost locations, which generate more than CNY 20 million of savings. That's just one of those examples. We have a set of those examples in terms of how to drive the cost savings.

好吧，托馬斯。四個問題。是的，讓我一一列舉。第一個，非天貓頻道展望。正如我在前面的部分提到的，全通路是一種趨勢，也是我們將在 2024 年遵循的策略。我們非常重視漢森通路的建設。我們也在研究唯品會等新管道。我們相信，鑑於中國電子商務格局的複雜性和不斷發展，全通路變得越來越重要。從多個角度來看，我們的非天貓頻道有所增加。但是，我們關注的並不是數位本身，而是能力，因為該能力將使我們能夠進行全通路業務。交通流向哪裡並不重要。我們將能夠非常快速、輕鬆地隨著品牌進行調整。這是第一個。你的第二個問題是關於營運效率。因此，從 BEC 的角度來看，我們建立了一個精益管理委員會，研究如何以非常結構化的方式捕捉成本節約和效率機會。在該計劃中，我們已經實現了非常可觀的節省。例如，正如我所提到的，我們的區域服務中心計劃已經將 770 個職位從上海轉移到成本較低的地點，節省了超過 2000 萬元人民幣。這只是其中之一。我們有一組關於如何節省成本的範例。

In terms of the BBM, we currently focus on two things. One is from the third-party procurement, we actually put a lot of emphasis to deliver over 30% of savings in terms of the third-party procurement. And secondly, is the overhead control. When we take over the business, we have streamlined the overhead to save the money. I will pass on to Sandrine talk about the gross margin improvement in that as well, which is also driving the margin improvement. Sandrine?

就BBM而言，我們目前關注兩件事。一是來自第三方採購，我們其實非常重視第三方採購節省30%以上。其次，是開銷控制。當我們接管業務時，我們精簡了管理費用以節省資金。我也將向桑德琳達轉達毛利率的改善，這也推動了利潤率的改善。桑德琳？

Well, I mean for the gross margin, obviously, the procurement is an important part of it, as Arthur mentioned, but key all year round has been our absolute control over discount so that we really bring the -- we convince consumers to come and see us and buy our products, be it online or off-line, not just because they're discounted, but because they are good products with a good brand. So in order to get these results, we had to exercise extreme discipline on discounts, that's number one, but also to bring the right product at the right time in stores which are more attractive and with the right marketing communication and marketing messaging. This is in order to attract consumers.

嗯，我的意思是，對於毛利率來說，顯然，正如阿瑟所提到的，採購是其中的重要組成部分，但全年的關鍵是我們對折扣的絕對控制，以便我們真正帶來— —我們說服消費者來，無論是在線上還是線下，看到我們併購買我們的產品，不僅是因為它們有折扣，還因為它們是具有良好品牌的好產品。因此，為了獲得這些結果，我們必須對折扣實行嚴格的紀律，這是第一位的，而且還要在正確的時間將正確的產品帶到更具吸引力的商店，並提供正確的營銷傳播和行銷訊息。這樣做是為了吸引消費者。

Yes. Sandrine. And on the use of cash and also M&A strategy. So for the cash, as you've seen, because of our healthy cash flow, we keep a relatively high net position. So we will use our cash to deliver the shareholder value in both short term and long term. In the short term, as Vincent has announced, the Board has approved a repurchase program on our share, and we will start that program once we have opportunities. And in the longer term, when we're looking into using the cash to do M&A, we are very selective under the current market situation. We're looking at a target for both strategic fit and also healthy financial status. So in this way, we will be able to use our cash very effectively to drive the longer-term value for our shareholders. So that's my answer, Thomas.

是的。桑德琳.以及現金的使用和併購策略。因此，就現金而言，正如您所看到的，由於我們健康的現金流，我們保持了相對較高的淨頭寸。因此，我們將利用現金來實現短期和長期的股東價值。在短期內，正如文森特所宣布的那樣，董事會已批准了我們股票的回購計劃，一旦有機會，我們將啟動該計劃。從長遠來看，當我們考慮使用現金進行併購時，我們在當前的市場狀況下會非常有選擇性。我們正在尋找策略契合度和健康財務狀況的目標。因此，透過這種方式，我們將能夠非常有效地利用我們的現金來為股東帶來長期價值。這就是我的回答，湯瑪斯。

(Operator Instructions) The next question comes from Wang Zhihao with CICC.

（操作員指令）下一個問題來自中金公司王志浩。

My first question is that, you mentioned that Baozun will launch the for the brand Honda in the Southeast Asia. Could you please share some details on the strategies of Baozun's International business in the 2024? And my second question is that could you share your investment plan in AIGC and how AIGC will be used in the company's business?

我的第一個問題是，你提到寶尊將在東南亞推出本田品牌的產品。請您詳細介紹寶尊國際業務2024年的策略？我的第二個問題是，您能否分享一下您對AIGC的投資計劃以及AIGC將如何用於公司業務？

Wang Zhihao, this is Vincent. The first question is about our international business, we call this BCI. I think after this almost 2 years' efforts, we have established a full team who can deliver e-commerce services to our target brand, number one, that is. And number two, we also established a brand and business team as well. So that means that we cannot only provide the traditional e-commerce services in this region, just like we are doing in China, but also we can help the brands to have the online offline business, omnichannel business in Southeast Asia as well, yes. So this gives us a lot of potential to help brands to expand their business into this region. So right now, we have established several offices in different countries to run the business for e-commerce services and also the brand business. So Honda is a good example for the brand business. We are going to open online stores and off-line stores this year, middle of this year. And we're also conducting marketing for brand marketing in Singapore and Malaysia. So Singapore, Malaysia will be the first two places we're going to run the business in Southeast Asia. And also our experiences data technologies will be all utilized into this omnichannel home business. So that is for your first question.

王志豪，這是文森。第一個問題是關於我們的國際業務，我們稱之為 BCI。我認為經過近兩年的努力，我們已經建立了一個完整的團隊，可以為我們的目標品牌，即第一品牌，提供電子商務服務。第二，我們也建立了品牌和業務團隊。所以這意味著我們不僅可以在這個地區提供傳統的電子商務服務，就像我們在中國所做的那樣，而且我們還可以幫助品牌在東南亞開展線上線下業務、全通路業務，是的。因此，這給了我們很大的潛力來幫助品牌將業務擴展到該地區。所以現在我們在不同的國家設立了多個辦公室來經營電子商務服務業務以及品牌業務。所以本田是品牌業務的一個很好的例子。我們計劃今年年中開設線上商店和線下商店。我們也在新加坡和馬來西亞進行品牌行銷。所以新加坡、馬來西亞將是我們在東南亞首先開展業務的兩個地方。我們的經驗數據技術也將全部運用到這個全通路家庭業務中。這是你的第一個問題。

The second one is about AIGC. I just want to talk this in two levels. First level is that in a whole group, no matter it's BEC or branded business, BBM, these two business units, we all use AIGC in general. Means that when we want to generate no matters text or photos or videos, we utilize the results from opening America soft, these kind of big players. So you can see AIGC capabilities in different -- almost all functions of our business units. So that is, in general, we are adapting this capability from outside players. Secondly, based on that, based on the general capability, we also have some specific directions we want to pour more resources to create some leading edge for the business to help them against their own competitors. So right now, it's still early stage. We are doing -- some of them are proof of concept. Some of them are minimum payable products. But we hope they can make progress this year because compared to the previous years right now, we work much more closely with brands, especially Gap and Hunter. So I think we have much better results than before in this direction. Yes, that is for your second question.

第二個是關於AIGC。我只想分兩個層面來談這個問題。第一個層次是，在整個集團中，無論是BEC或品牌業務、BBM，這兩個業務部門，我們通常都會使用AIGC。這意味著當我們想要產生任何文字、照片或影片時，我們都會利用開放美國軟體這些大公司的結果。因此，您可以在我們業務部門的幾乎所有職能中看到 AIGC 的能力。也就是說，總的來說，我們正在從外部參與者調整這種能力。其次，在此基礎上，在整體能力的基礎上，我們還有一些具體的方向，我們要投入更多的資源，為企業創造一些領先優勢，幫助他們對抗自己的競爭對手。所以現在還處於早期階段。我們正在做——其中一些是概念驗證。其中一些是最低付款產品。但我們希望他們今年能取得進展，因為與前幾年相比，我們與品牌的合作更加緊密，尤其是 Gap 和 Hunter。所以我認為我們在這個方向上取得了比以前更好的成果。是的，這是你的第二個問題。

The next question comes from Colin Yang with Citic Securities.

下一個問題來自中信證券的楊科林。

I'm Colin Yang from Citic Securities. And I have two questions about BBM. The first is that we saw a significant narrow-down of GAAP loss in the past quarters and the offline same store sales achieved double-digit growth in the fourth quarter. And during this process, what progress is better your expectation? And what measures can be further adopted to improve the margin of GAAP in the future? And the second question is that in your experience of running Gap, what's the key know-how of fully running an international brand in China's online and especially offline market directly? And how would that experience be leveraged in your further operations in other brands such as Hunter?

我是中信證券的楊科林。我有兩個關於 BBM 的問題。首先是我們看到過去幾季的 GAAP 虧損大幅收窄，第四季線下同店銷售額實現了兩位數成長。而在這個過程中，哪些進展是你所期望的更好的呢？未來可以進一步採取哪些措施來提高GAAP利潤率？第二個問題是，在您經營Gap的經驗中，直接在中國線上尤其是線下市場全面經營一個國際品牌的關鍵技巧是什麼？您將如何在 Hunter 等其他品牌的進一步營運中利用這些經驗？

Okay. Colin. So on your first question, I think what was a good surprise clearly was the faster improvement of the gross margin than we expected. We had planned for improvement of gross margin. It was actually at the heart of our plan. But honestly, it has been even better and faster than what we had expected. Of course, there is still room to further improve overall the fundamentals of the business. But still, I think it's important to notice that it's actually the most pleasant surprise, I would say. Now what would we have to further improve, it's going to be through, obviously, further working on refining product and product segmentation that's pretty clear, but also by using data. We explained that in the first phase of our work, which was '23, we already did quite some work to change all the legacy systems of Gap China and to bring a new platform of systems, thanks to Baozun technology. Now really, in this second phase, we want to go much further in terms of data, enabling us to be even thinner in our understanding of consumers and also enabling us to have almost instant reaction in terms of messaging and product once we have this very refined information. So that's for the gross margin. But gross margin also overall requires continued discipline. It's a lot about the discipline on discounts. And overall, also regarding our strategy going forward. Now I think, clearly, we want to go back to a growth strategy with more store openings, continued improvement of our store productivity, and a multichannel approach to our online business. So that's for the first part of your question.

好的。科林.關於你的第一個問題，我認為明顯令人驚訝的是毛利率的改善速度比我們預期的要快。我們計劃改善毛利率。這實際上是我們計劃的核心。但老實說，它比我們預期的更好、更快。當然，整體業務基本面仍有進一步改善的空間。但我認為重要的是要注意到這實際上是最令人驚訝的，我想說。現在我們需要進一步改進什麼，顯然，這將透過進一步完善產品和產品細分來進行，這是非常明確的，但也透過使用數據。我們解釋說，在我們工作的第一階段，也就是23年，我們已經做了相當多的工作來改變Gap中國的所有遺留系統，並帶來一個新的系統平台，這要歸功於寶尊的技術。現在，實際上，在第二階段，我們希望在數據方面走得更遠，使我們能夠更加深入地了解消費者，並且一旦我們掌握了這一點，我們就能夠在訊息和產品方面幾乎立即做出反應。精煉資訊。這就是毛利率。但毛利率整體上也需要持續的紀律。這與折扣紀律有許多關係。整體而言，也涉及我們未來的策略。現在我認為，顯然，我們希望回歸成長策略，開設更多商店，持續提高商店生產力，並對線上業務採取多通路方法。這就是你問題的第一部分。

On the second part of the question, I think in terms of synergies, clearly, it's going to be about the product machine, number one, and number two, the systems. But in terms of overall learning and from the experience, it's also about how important the teams and the people are in this business. It's all about people. And I think this is something we really worked hard to put the right team together, and we're quite happy with our team. But it's also about constantly trying to enchant the consumers' experience with interesting stores, interesting stories, interesting products. And this in a time of weaker consumption, this necessary enhancement of consumers is even more important. That's for my answer to your questions, Colin.

關於問題的第二部分，我認為就協同效應而言，顯然，這將與產品機器（第一）和第二（系統）有關。但就整體學習和經驗而言，也取決於團隊和人員在這個行業中的重要性。這都是關於人的。我認為這是我們真正努力組建合適的團隊的事情，我們對我們的團隊非常滿意。但這也是不斷嘗試用有趣的商店、有趣的故事、有趣的產品來吸引消費者的體驗。而在消費疲軟的時代，消費者的這種必要的提升就顯得更加重要。這就是我對你問題的回答，科林。

Very clear for my question about BBM. And I have a follow-up question about the BEC. Since the beginning of the year, almost all e-commerce platforms are talking about and emphasizing about the price power and from the perspective of --

我關於 BBM 的問題非常清楚。我還有一個關於 BEC 的後續問題。今年以來，幾乎所有電商平台都在談論和強調價格力，並從以下角度——

(technical difficulty)

（技術難度）

And how did you see any consumption characteristics changes in consumers' behavior? And how would Baozun react to this trend?

您如何看待消費者行為中消費特徵的改變？而寶尊又會如何因應這股趨勢呢？

Yes, Colin. And it's a good question. Yes, we have also observed the increased advertise on the price point and also the service level from each of the platforms. We believe it's actually a good trend. If I say, we'll make sure the platform actually delivering a better service to the brand and also to the consumer. From a consumer perspective, quality has always been a theme. So a good quality brand will always have the market. Value for money doesn't mean good quality brands will not be favored by a lot of consumers. So in stand, the latest technology and the transparency of all the e-commerce platform provides a good opportunity for consumers to compare and choose where they buy, and that drives two things. Number one is how to design -- how to define an omnichannel strategy for those brands on the current e-commerce dynamic is very important. So that's where Baozun can use our experience and our technology to help.

是的，科林。這是一個好問題。是的，我們也觀察到每個平台的價格和服務水準的廣告有所增加。我們相信這實際上是一個好的趨勢。如果我說，我們將確保該平台實際上為品牌和消費者提供更好的服務。從消費者的角度來看，品質始終是一個主題。所以品質好的品牌永遠有市場。性價比並不代表好的品質品牌不會受到許多消費者的青睞。因此，事實上，最新的技術和所有電子商務平台的透明度為消費者提供了一個很好的機會來比較和選擇他們購買的地方，這推動了兩件事。第一個是如何設計——如何針對當前的電子商務動態為這些品牌定義全通路策略非常重要。這就是寶尊可以利用我們的經驗和技術提供幫助的地方。

Secondly, the experience. How to improve the online purchasing experience for the brands to help them to increase the conversion. This is also what we can do using the data and technology to enhance. So with that trend, we believe we're well positioned, we are very strong in technology, we are very strong in data. We have a huge experience across different categories will allow us to grow the market share in the current dynamic of e-commerce.

其次，體驗。如何改善品牌的線上購買體驗，幫助他們提高轉換率。這也是我們可以利用數據和技術來增強的。因此，在這種趨勢下，我們相信我們處於有利地位，我們在技術方面非常強大，我們在數據方面非常強大。我們在不同類別方面擁有豐富的經驗，這將使我們能夠在當前的電子商務動態中擴大市場份額。

The next question comes from Charlene with HSBC.

下一個問題來自匯豐銀行的夏琳。

I'm asking on behalf of Charlene. So I have a question regarding the product sales segment. We understand that product sales has been under adjustment and some challenges for 2 years. How should we think about this trend entering into 2024? So is there any chance we can see this segment, the revenue growth or decline can stabilize this year? And what are the key drivers and the challenges here?

我代表夏琳問。所以我有一個關於產品銷售部門的問題。我們了解到，兩年來產品銷售一直處於調整和一些挑戰之中。進入2024年，我們該如何看待這個趨勢？那麼我們是否有機會看到這個細分市場今年的營收成長或下降能夠穩定下來？這裡的關鍵驅動因素和挑戰是什麼？

Yes. Thank you for the question. For the product sales, first of all, it has already started to see the stabilization in quarter 1. And we will see the product sales revenue as plant starts to increase from quarter 1, quarter 3 onwards. For the full year, we expect to see an increased product sales revenue from BEC. From the business management perspective, we put a lot of emphasis on better control of the risk from the product sales. What we emphasize on is two things. Number one is inventory. And number two is the commercial terms. We will make sure we rationalize the inventory level to reduce the risk and enhance our cash flow. At the same time, in the negotiation, we will put a straight requirement on our commercial terms to protect our gross margin. So that's the first one.

是的。感謝你的提問。對於產品銷售，首先，第一季已經開始趨於穩定。從第一季、第三季開始，我們將看到工廠的產品銷售收入開始增加。全年來看，我們預計 BEC 的產品銷售收入將會增加。從業務管理的角度來看，我們非常重視更好地控制產品銷售的風險。我們強調的是兩件事。第一個是庫存。第二是商業條款。我們將確保合理化庫存水平，以降低風險並增強現金流。同時，在談判中，我們將對我們的商業條款提出直接要求，以保護我們的毛利率。這是第一個。

Secondly, as I mentioned earlier, we introduced a new business model on product sales this year, which is focused on acquiring the exclusive distribution ownership for a brand. So in this model, Baozun will have full control of all sales channels, both online and offload. Using our data and system technology, we will be able to enhance the efficiency throughout our system, and we believe we will do better than traditional distributors by using our data and technology. And thirdly, as I mentioned earlier, our own intubated brand, (inaudible) has seen a double-digit growth. And in 2024, we expect to see that part will further increase, and that will also help to drive the product sales revenue. With those initiatives, we believe we can drive both the online and we can drive both the top line and bottom line of our product sales business.

其次，正如我剛才提到的，今年我們在產品銷售方面引入了新的商業模式，重點是獲得品牌的獨家分銷所有權。因此，在這種模式下，寶尊將完全控制所有銷售管道，包括線上和線下。使用我們的數據和系統技術，我們將能夠提高整個系統的效率，我們相信透過使用我們的數據和技術，我們將比傳統經銷商做得更好。第三，正如我之前提到的，我們自己的插管品牌（聽不清楚）實現了兩位數的成長。到2024年，我們預計該部分將進一步增加，這也將有助於推動產品銷售收入。透過這些舉措，我們相信我們可以推動線上業務，也可以推動我們產品銷售業務的營收和利潤。

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

我們的問答環節到此結束。我想將會議轉回溫蒂·孫（Wendy Sun）發表閉幕詞。

Thank you, operator. On behalf of the Baozun management team, we'd like to thank you for all your participation in today's call. If you have any further questions, just feel free to reach out to us. This concludes the call. Thank you.

謝謝你，接線生。我們謹代表寶尊管理團隊感謝大家參加今天的電話會議。如果您還有任何疑問，請隨時與我們聯繫。通話就此結束。謝謝。

Okay. Thank you, everyone.

好的。謝謝大家。

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

會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。