Baozun - Earnings Call - Q2 2025
August 28, 2025
Transcript
Speaker 8
Good morning, ladies and gentlemen, and thank you for standing by for Baozun's second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy.
Speaker 0
Thank you, Operator. Hello everyone, and thank you for joining us today. Our second quarter 2025 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com, as well as on PR Newswire Services. They have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for your download. On the call today from Baozun, we have Mr. Vincent Wenbin Qiu, Chairman and Chief Executive Officer, Ms. Catherine Yanjie Zhu, our Chief Financial Officer, Mr. Junhua Wu, Director and Chief Strategy Officer, and Mr. Ken Huang, Chief Financial Officer of Baozun Brand Management. Mr. Qiu will first share our business strategy and company highlights. Ms. Zhu will then discuss our financials, followed by Mr. Wu and Mr. Huang, who will share more regarding our e-commerce and the brand management segment, respectively.
They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements relating to the meaning of the U.S. Securities Act of 1933 as amended, the U.S. Securities Exchange Act of 1934 as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties, and othe
Speaker 8
Thank you, Wendy. Hello everyone, and thank you all for your time. I'm pleased to share that Baozun delivered another solid quarter, with both DEC and DBM making commendable progress. Overall, our total revenue grew by 7%. Excluding one-off expenses, our adjusted operating income expanded to RMB 59 million, a significant improvement from RMB 10 million in the same period of last year. We believe these results demonstrate the resilience of our underlying business model, highlighting meaningful profitability expansion alongside top-line growth. DEC's disciplined execution is starting to yield tangible results. DEC revenue grew by 3%, while adjusted operating profits rose 56% year over year to RMB 94 million, the highest second quarter level in four years since the pandemic. Amid ever-changing market dynamics, DEC has shown agility in adapting to the evolving needs of our brand partners.
This profitability improvement underscores our progress in reshaping DEC into a stronger and more profitable business. With our scale and premium client base, we are confident that these efficiency gains can translate into meaningful earnings upside. DBM continues to build and accelerate top-line momentum. Revenue grew 35% year over year, up from 23% in the previous quarter. We remain on track with our merchandising, channel expansion, and marketing initiatives for Gap, driving healthy top-line momentum while improving profitability. Hunter also reached a remarkable milestone in unit economics from its first three offline stores, opened in May, and is making steady progress in category expansion. Together, we believe these achievements validate our transformation vision, with DBM now established as a growth-driving core division that demonstrates our ability to execute with precision. Beyond our financial results, we continue to make significant strides in technology empowerment.
We remain committed to leveraging technology and data-driven solutions to bridge demand and supply chain in retail. In the first half of this year, our focus on refining the retail operating platform has enabled deeper insights into market and consumer demand trends for DBM. This enhanced intelligence allows us to optimize decision-making and improve target setting and tracking. These initiatives are driving the success of product development while enhancing inventory efficiency and productivity. The combined strengths of DEC's resilience, DBM's accelerating growth, and our technological leadership position us well to deliver sustainable long-term value creation. Now I'll hand the call over to our team for a deep dive into our financials and business performance.
Speaker 6
Thanks, Vincent, and hello everyone. Before we dive into the financial details, I'd like to quickly address the one-off write-offs. Back in September 2021, we initiated arbitration against a distributor in the healthcare and cosmetics industry, Siemens Depots. Taking a conservative and prudent approach, we had previously made a provision of RMB 93 million in 2021. This quarter, based on the latest progress in arbitration, we assessed the likelihood of recovery as remote. Therefore, we wrote off the remaining RMB 53 million in this specific accounts receivable. This was recorded as a one-off, one-time general and administrative expense in DEC's second quarter P&L. Now, let me provide a more detailed overview of financial results for the second quarter of 2025. Please turn to slide number three. Baozun Group's total net revenues for the second quarter of 2025 increased by 6.8% year over year to RMB 2.6 billion.
Of this total, e-commerce revenue grew by 3.4% to RMB 2.2 billion, while brand management revenue rose by 35.4% to RMB 398 million. Breaking down e-commerce revenue by Bin's model, services revenue increased 3.5% year over year to RMB 1.6 billion. This increase was driven by revenue growth in digital marketing and IT, and analyze operations. BEC product sales revenue increased 3.3% year over year to RMB 599 million, supported by strong performance in beauty and cosmetics and alcohol categories. BBM product sales totaled RMB 396 million, representing a 35.5% year-over-year growth. This growth was mainly driven by the strong performance of the Gap brand. Please turn to slide number four. From a profitability perspective, our blended gross margin for product sales at the group level was 28.4%, an expansion of 310 basis points year over year.
Gross profits increased by 28.1% year over year to RMB 283 million for the quarter. Breaking this down by our key business lines, gross margin for e-commerce product sales expanded to 12.8%, reflecting a 110 basis point improvement compared to 11.7% a year ago. This margin expansion was primarily driven by product mix diversification. Gross margin for BBM was 52%, relatively flat compared with 52.3% a year ago. Now, please turn to slide number five for a walkthrough of our OpEx. Fulfillment cost for the quarter was reduced by 3.3% to RMB 606 million, reflecting our ongoing efforts in cost optimization. Sales and market expenses increased by 11% to RMB 938 million, mainly due to higher spending on creative content and performance-driven digital marketing during the 6/18 e-commerce campaign, as well as increased front-end expenses from expanding BBM's offline network.
Technology and content expenses decreased by 11.7% to RMB 115 million as we continue to enhance tech monetization efficiency. G&A expenses rose 30.7% to RMB 224 million, primarily due to the one-time write-off of RMB 53 million in account receivables. Excluding this write-off, G&A remained flat compared with the same period of last year. Turning to bottom line items, please refer to slide number six. During the quarter, our non-GAAP income from operations was RMB 6.1 million. Excluding the above-mentioned RMB 53 million non-recurring provision, our adjusted non-GAAP income from operations was RMB 59 million, a sharp improvement from RMB 10 million in the same period of last year. DEC's adjusted non-GAAP income from operations was RMB 94 million, representing a year-over-year improvement of 56.4%, or RMB 34 million higher than a year ago.
BBM reported a non-GAAP operating loss of RMB 35 million, an improvement of 30% compared to the same period of last year. As of June 30, 2025, our cash and cash equivalents, restricted cash, and short-term investments totaled RMB 2.7 billion. Let me now pass the call over to Junhua to update you on BEC, our e-commerce business.
Speaker 3
Thanks, Catherine, and hello everyone. In the second quarter, BEC stayed focused on profitability and sustainable growth. Following our phased approach, we aligned in Q1, stabilized in Q2, and accelerated in the second half. This quarter, we delivered operating profit growth by 56.4% year over year, while sustaining top-line growth of 3.4%. These results were driven by our ongoing efforts to strengthen business fundamentals, enhance the quality of our distribution model, and drive continuous development in our service model. In our distribution business, quality has always been our top priority, setting us apart from the broader market. We believe in an integrated approach. Linking channel management, pricing and inventory control, and marketing are crucial for building sustainable distribution partnerships in today's dynamic environment. Our goal is to elevate our role from a distribution partner to a comprehensive trade partner.
To support this, we have conducted a thorough review of our partnership scope and terms. This review aligns us with our partners' evolving needs and helps identify opportunities for innovation and mature growth. Please turn to slide number seven. During the quarter, BEC product sales grew 3.3%, driven by strong performance in beauty and cosmetics. We also achieved consistent breakthroughs in alcohol and apparel categories. While these appliance categories experienced a revenue contraction, the unit's bottom line improved significantly. This delightful trade-off highlights our focus on quality growth over volume. Gross profit margin for BEC product sales expanded 110 basis points year over year to 12.8% for the quarter, demonstrating how our category mix optimization and ongoing initiatives are translating into stronger profitability.
Turning to slide number eight, our service revenue increased by 3.5% in the second quarter, driven by solid growth in online store operations and DM and IT solutions. By integrating advanced technologies and leveraging our data and analytics, we remain committed to evolving with the market and enhancing our service offerings to better serve our partners. Let me use a leading sports brand as a case study to illustrate how we empower our business during the recent 6/18 promotions. By leveraging our data analytics, we gained deep insights into consumer behavior and shopping trends. This allowed us to refine consumer profiles and adjust marketing priorities. We then applied our digital marketing expertise to design highly targeted campaigns across multiple channels, including key marketplaces, social media, and influencer partnerships. This strategy generated significant buzz and drove sustainable traffic into the brand.
The results were remarkable, with the brand achieving exceptional double-digit growth during the 6/18 promotions, far exceeding expectations. We are proud to report that the service revenue in online store operations grew across major categories, with sports up to 10.8%, luxury 5.5%, and other apparel at 17.6% year over year. Our omnichannel initiatives also gained strong momentum in this quarter, with the multi-channel rate reaching a new record high of 48.5% for the second quarter. We saw growth across many key marketplaces, reflecting the effectiveness of our strategies among emerging channels. Douyin and RedNote stood out as top performers. To advance best practices in brand e-commerce, we enhanced our Douyin services to include daily livestreaming, storytelling, livestreaming, and integrated marketing campaigns. This hybrid approach engages consumers across the food consumption circle, driving brand growth, sustainable audience expansion, and omnichannel empowerment.
With a healthy pipeline of new clients, we expect growth momentum to continue. On RedNote, revenue grew triple digits, driven by rising demand across both marketing and store operations. In the first half of 2025, we partnered with 20-plus brands across outdoor, sports, luxury, and footwear. As one of the first six qualified RedNote partners, validated in data, content, and marketing, we've earned benchmark recognition and industry awards. This recognition reinforces our leadership on this emerging platform and serves as a strong testament to our ability to innovate and adapt to new channels. In summary, Q2 demonstrates that BEC is stabilizing on a stronger foundation. Our quality and value-driven, profit-centric framework positions BEC well to accelerate profit generation in the second half of the year. As we navigate market complexities, we remain committed to our vision and strategic goals toward sustainable growth and long-term success.
Now, I'll pass the call to Ken for an update to Baozun Brand Management.
Speaker 4
Thank you, team, and hello everyone. Please turn to slide number nine for BBM's performance in the second quarter of 2025. I'm pleased to report that BBM's positive momentum continued in Q2. With top-line growth accelerating further, revenue grew by 35.4% year over year, driven by positive same-store sales and contributions from new stores, as well as healthy expansion across both online and offline channels. Now, let me share with you our key initiatives for Gap China in the second quarter. Our merchandising strategy remains sharply attuned to market timing, helping drive consistent improvements in store traffic and conversion rates. Through disciplined product planning and sharper segmentation, we are strengthening our ability to capture demand across categories while reinforcing the relevance of Gap's core DNA.
Overall, our BBM gross margin for the quarter was 52.3%, roughly flat year over year, while BBM gross profits grew by 34.5% to RMB 208 million. On the channel front, we expanded our footprint with 11 new openings in the quarter, for a net increase of eight, bringing our total to 156 locations by the end of June. Several of these openings were in new markets, such as Kashgar, broadening Gap's reach into previously untapped regions. We also expanded further into emerging cities, including Ningbo, Foshan, and Nanning, as we view these new tier one and tier two markets as strong opportunities. With encouraging store-level unit economics, we are adjusting our store opening plans to emphasize local partnerships, leveraging an SLI-ed approach to secure premium locations. Our revised plan now targets 40 new stores for full year 2025, with our direct stores primarily focused on tier one cities.
At the same time, our e-commerce channels delivered strong momentum, fueled by a tailored segmentation approach. This included product and consumer segmentations, targeted marketing, and optimized operational execution, which led to strong consumer engagement and higher conversion rates. From a marketing perspective, we launched a successful IP collaboration with Melting Sadness, a renowned Chinese art brand. The collection blended Gap's timeless denim comfort with Melting Sadness's playful artistic spirit. At the heart of this collaboration is a message: every day needs a Gap moment, aimed at building stronger emotional connections with consumers. In celebration of Children's Day, we also rolled out our Brendan Bear campaign, featuring a beloved character designed to spark joy and creativity in children. We created a series of kids' activities and Brendan-featured booklets, fostering a strong sense of family orientation and community.
Looking ahead, we are preparing an even stronger lineup of marketing activities for the second half of 2025, with the aim of further enhancing Gap China's brand resonance and driving continued growth. In the second quarter, we also achieved solid improvements in efficiency. Inventory management was a standout, with days of inventory reduced to 126 days, representing a more than 20% year-over-year improvement. This progress reflects disciplined demand planning, tighter alignment between merchandising and the supply chain, and a stronger sell-through on core product lines. We also realized additional operating savings through efficiency enhancements and leaner back-office spending. Together, these actions provided a solid boost to operating performance. On a non-Gap China basis, BBM's operating loss narrowed further to RMB 35 million, a 30% improvement from the same period of last year. Lastly, to share some exciting updates on our brand, Hunter.
This past May, Hunter accelerated its offline expansion with the simultaneous opening of three flagship stores in Shanghai Zhongyuan, Hangzhou Mingxi, and Beijing Sanlichun, each achieving profitability in its first quarter, an impressive start. The brand has gained market attention with stylish products, well-designed store displays, and effective marketing that has led to higher customer traffic and sales. At the same time, Hunter has continued to diversify its product matrix with new lines' introduction. With innovation and customer satisfaction at its core, we are confident that Hunter will continue to thrive. In summary, Q2 marked another strong quarter of progress for BBM, with accelerated top-line growth and solid execution across merchandising channels and marketing. Gap China is strengthening its brand resonance through localization and global collaboration, while Hunter is scaling with a sharper brand identity.
With continued operational discipline and stronger seasonal activations in Q3 and Q4, we remain confident in achieving our full-year targets. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.
Speaker 8
Good morning. Excuse me, we will now begin the question and answer session. To ask a question, you may press *1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press *2. At this time, we will pause momentarily to assemble our roster. The first question comes from Alicia Yap at Citi. Please go ahead.
Speaker 7
Thank you. Good evening, management. Thanks for taking my questions. I have two quick ones. The first one is that if you can share with us the % of the contribution from your various platforms, which are including, you know, coming from the T-Mall and also the non-T-Mall platforms. Related to that is also, how do we see the impact from the recent step-up of the instant retail shopping's competitive landscape by all these e-commerce platforms? Wondering, you know, is Baozun's, you know, business and also the store operations or anything that has affected, you know, the Baozun business at all? If you can share some colors on that. The second question is related to your strong growth of your BBM business. Do you anticipate the strength of that momentum will further continue in the coming quarters? Is there any timeframe for the profitability timeline? Thank you.
Speaker 5
Okay, thank you, Alicia, for the question. I believe the first question is related to the BEC. Let me address that first question. For the past 6/18 promotion, we definitely see a lot of GMV growth on Tmall and on JD.com, especially those two traditional marketplace ecosystems. The Douyin platform and the Tencent Smart Retail Business don't have the very strong 6/18 mindset. Let's focus on Tmall and JD.com. Tmall growth, I don't have a specific number on Tmall proportions over JD.com, but I believe that the GMV growth of Tmall is like two times or three times compared with JD.com. We see that Tmall and JD.com maintain a very strong GMV growth in the 6/18 campaign. Back to the question about the instant retail shopping. We realize that instant retail shopping is being very, you know, popular recently, especially between different big ecosystems.
Baozun, we have a lot of different categories. Our SMCG category is doing a lot of test water stage with this kind of the instant retail shopping, like for fast-moving consumer goods and for those in cosmetic categories and alcohol kind of the categories, and especially in some kind of the home appliance categories. We can share you with more information in the future. Based on the data collected of our business, we will just keep tracking the instant retail shopping in the long run. Thank you.
Speaker 4
For BBM in Q3 and Q4, I think first continuing to expand our stores offline, both Gap and Hunter. The second, we will continue to improve our products in Q3. For Gap, we're going to introduce Capsule to the market. We will also launch a series of activities both offline and online, with some celebrities and offline pop-up stores to enhance our connection with our consumers through music and dance. These are all the activities we prepared for the next two quarters. We remain still very confident to achieve our full-year operating business objectives. Our break-even point, as we committed before, we will make Gap break even in the last quarter, Q4. Thank you.
Speaker 5
Following Ken's projection about Q3 and Q4, let me add up something about the projection from the BEC perspective. As we all know, we had a strong 6/18, you know, and this raised a lot of confidence for all our brand partners. They've also started to plan a big second half of this year. For sustainable, we will see, compared to last year, an even stronger Double 11 in this Q4, especially where we had a deeper dive with a high quality of the traffic. T-Mall and JD.com are engaging with us, and the more backend tools we can target to a very accurate, more accurate consumer profile. We foresee that this is going to be a very promising second half of this year.
Speaker 7
Thank you.
Speaker 8
The next question comes from Jiawei Yin of CITIC. Please go ahead.
Speaker 2
Good evening, management. Thank you for taking my question. Congratulations on this quarter's strong performance. I have two questions. The first is regarding the e-commerce business. In the past year, major domestic e-commerce platforms have emphasized providing more benefits to the merchants. Has this reduced the operational cost for brands on these platforms? Has Baozun benefited as a brand partner? Some platforms are also prioritizing traffic allocation over absolute low price. Have you observed an increase in traffic for brand products? This is my first question. My second question is about brand management. Does Baozun plan to pursue further brand acquisitions or deepen collaborative partnerships? Could you share the criteria for selecting such brands? How will the operational experience gained from managing Gap and Hunter in recent years be leveraged to support new brands in the future? Thank you.
Speaker 5
Thank you. Let me address your first question related to BEC. Yes, the platform is offering a rebate program in the joint business plan, JBP in short. All our brand partners are signing up the JBP contract with the platform. Consider if you reach a certain level of your GMV, you can have a specific % of your rebate, especially within your platform conditions. From the Baozun perspective, we also signed up different contracts on the JBP with a major platform like T-Mall and JD.com regarding the paid media services. Especially, we combine a lot of our brand partners' GMV-wise to get rebate from achieving the target. You can see that the platforms are encouraging Baozun and the brand to just keep driving the top line and maintain a healthy growth rate in the long run. This is about the rebate program.
The platforms are also prioritizing a traffic allocation over absolute low price. This is very different from different categories. In the traditional category and heavy categories and very crowded categories like sportswear, the pricing strategy is still a competitive element across different brands. In the premium and luxury category, they do maintain a support for a higher quality kind of traffic. We cannot say in general you are providing high traffic over the low price, not the other way. I think by differentiating different kinds of the attributes in different categories, things are very different. One thing for trend is like both T-Mall and JD.com, they are trying to just reallocate a high-quality kind of traffic to the brand to make sure that we are not keeping rat raising on price in the long run. Thank you.
Speaker 4
Thanks for the question. This is Vincent. I will try to answer the first part of your question about the BD criteria for the new brands. Maybe Ken can also add some comments for the collaboration between different brands and how BBM can utilize Gap and Hunter's experience for the future brands. For the first one, yes, we have a strategy of a brand portfolio for BBM. That means we'll have multiple brands. That's why we have the first one Gap, second one Hunter, and also maybe the third and fourth one in the future. I think, luckily, all these two brands, Gap and Hunter, were previously Baozun's e-commerce clients. After many years of e-commerce operations, we then started to work with them in a deeper collaboration manner, which is brand management, including everything.
I think this helps us reduce the risk when we start a new business with these kinds of brands, save a lot of time and cost and learning curve. This is a very good methodology. In the future, if possible, we're still doing the same thing. In BEC, we have a quite large client base, including hundreds of fashion apparel, accessories brands. We can also do this again, cultivate some more brands from a kind of generic e-commerce collaboration into a brand management collaboration. That gives us a huge potential in the future. Of course, we're open to other brands as well from the outer world.
For talking about the criteria, I think firstly, these kinds of brands need to be energetic, have a big potential no matter online or offline in China, and also can benefit from the experience we gained from Gap and Hunter, and also serve for the foreign market. Basically, we need these kinds of brands to give us growth and in the meantime, profitability. For the second part of the second question, I think first, Gap and Hunter help BBM to build a very strong foundation infrastructure, including the system and process, the talent in the full value chain of apparel retail business. Second, I think for Gap, it helps to provide a foundation for the future brands to easily onboard, including merchandising channels and marketing. For example, the merchandise part, the product part, just how, because Gap covers all categories of products of apparel.
If we have any new brand in the future, it will help easily onboarding their local supply chain. For the channels, if we have any new brands, we can also expand faster than any other brand. For Hunter, I think it will also help us to establish a successful case to have the controlling IP rights, and we can run it from online to both online and offline, and expand its business at a very quick pace. I think that's all for Gap and Hunter's empowerment to other brands in the future.
Speaker 2
Thank you. Very clear.
Speaker 8
Again, if you have a question, please press *1. The next question comes from Frank Tao at CMBI. Please go ahead.
Speaker 2
Thank you. Thank you for taking my question. Good evening, management team. My question is on the growth outlook of BEC business. I think you shared on previous calls that we will be focusing on driving operating efficiency improvement this year. We have noticed some cheerful results in the first half. Just wondering, where are we in the progress now? We have seen some big acceleration in top-line growth. How should we expect the trend in the second half? A related question is that you've been selected as one of the first batch of service providers in the cooperation between RedNote and Tmall. Just wondering if you could share with us some insights on how are we benefiting from this program currently, as well as your business growth expectations in the second half. Thank you.
Speaker 5
Okay, Frank. Let me address your two questions. The first question is related to the operational efficiency improvement. From the beginning of this year, we lately emphasized internally, based on our bottom line, optimizing our bottom line and optimizing our cost, and drive a lot of efficiency, building a healthier organization and operation flow. That doesn't take our full time. It's more like the company policy and implementation job. Right now, just as we shared an example in the previous kind of the script, in the past 6/18, in the leading Germany sports brand, we focused a lot on driving the top-line growth, especially focused on the merchandising pairing and the quality of the traffic, and all those kinds of the traffic structure, and how do we drive a better ROI. Basically, this is our day-to-day job, driving the top line in this year.
In the second half of this year, just like I just said, foreseeing the coming Q3 and Q4, we drove a lot of confidence along with our brand partners in the past 6/18. With the higher growth, we are planning with a better merchandising support, a relatively higher support on the paid media, and et cetera. The second half, especially in the coming Double 11, is going to be very promising. That's my first question addressable. The second one is, let me clarify the second one. You want to know how are we benefiting from the fact we were awarded as a Red partner, or you want to know how are we benefiting from RedNote itself?
Speaker 2
From the RedNote partner.
Speaker 5
Okay.
Speaker 2
As we've been selected as the first batch of service partners.
Speaker 5
Yes, that's right. We were the first one of the six Red partners, especially the only one in the fashion sports category. That happened in the first month of the past 6/18. This gave us a lot of credentials across different categories. The day before yesterday, RedNote just announced to release, to open the gate to all those categories, which means that a lot of different categories can be opened to RedNote and Red Cat initiatives, selecting great partners. Baozun and our team are always listed on the top of the selection, just like our six-star TP partner in Taobao, a diamond in Douyin, and also the first-plus service partner on JD.com. We will be very exposable to all those potential clients, which means that we are selectable for a lot of high-quality clients.
Especially when everybody is being very confident about the new initiatives and the new consumer experience from RedNote to T-Mall, especially driving transactions and seeding, heating, and for new arrivals and for those great content designing. We believe that with this early bird kind of initiative and award, we can have a higher revenue coming from the RedNote stream. Meanwhile, we can link to our business directly from the Red Cat initiative. Hope that makes sense to you, Frank.
Speaker 2
Got it. Super helpful. A quick follow-up, if I may. We saw some recent rumors regarding a yoga brand onboarding. Just wondering, can you elaborate more on the collaboration approach between you and this brand? Thank you.
Speaker 4
Okay, thanks for the question. Vincent again. Yes, we also noticed that we have already reached some of the agreement with the brand, and we are quite excited. Although the brand right now is not so big, just as what I just said, this brand is also operated the e-commerce business first by our team, and then we convert this into a brand management, you know, brand. It is not a stranger to us. It is a long-time friend already. We know a lot of this brand already, ups and downs in China. I think it is a very good timing because right now we have operated the two brands, the two brothers and sisters in the past years. This new brand can benefit from a lot of good things.
For example, the designing power and also the supply chain capability, which we built alongside with the two brands, can benefit this new baby. We have all the systems in place, so they don't need any efforts in system building. They can use all the things immediately. They can also learn from Hunter how we build, how we strengthen, field and strengthen, establish a clear core category and products, how we market this through RedNote, Douyin, and other channels, and how we expand the category into others. We are quite excited to see the potential because yoga and other sports apparel industry is huge in China. The potential is so big, and we are just a baby. That means huge potential ahead of us. Yeah, it's true. Thank you.
Speaker 2
Yep, got it. Very clear. Thank you, Vincent.
Speaker 8
Your next question comes from Chris Chow and Huatai Securities. Please go ahead.
Speaker 1
Hi, thank you, management, for taking my question. I have two questions. The first question is about the AI application. How do we think about the progress we made in AI this quarter? Is it mainly about increasing our revenue or reducing our cost and increasing efficiency? Are there any further directions we can assume for the AI use in the development in the future? With some new models emerging recently, have you noticed any better effect when applying this kind of AI new technology and models in the business operation? My second question is about the Double 11 promotion. We can see that we experienced strong momentum in the 6/18 festival. Do we currently have any early indication or plan for this year's Double 11 promotion? Thank you.
Speaker 5
Okay, Chris, let me address your two questions. The first one is related to AI. You know, Baozun, we are eccentric, you know, focused on our technology. We have over 800 in-house software engineers. We spend a lot of resources in increasing the efficiency, especially leveraging AI to save our bottom line. Now we are developing more internal tools focused on the digital assets kind of the management, like how can we quickly use AI to just make sure we can drive content like pictures, like scripts, like videos, something like that. Basically, our focus on AI is more from the internal driving efficiency, making, creating content, especially for the consumer-facing part, and the PDP and the short video clips, et cetera.
We are now spending a lot of resources on leveraging AI to drive revenue because we believe that AI, and not to mention the big scale, large scale mode and the AI agent, it's not quite mature enough to, you know, replace the human kind of the expertise, especially different categories like merchandising, like marketing campaign, like competitor analysis, something like that. AI for now for BEC is more focused on driving efficiency in our back office. That's question number one. The second question is related to the forecast of Double 11. We do not have a very clear focus on Double 11 because we haven't received any information or clues about how we will start the Double 11 campaign and how that's going to end. The past 6/18 was the longest 6/18 for the history. We have no idea about the mechanism of the coming Double 11.
The things we can share is a lot of our brand partners and us are being confident, leveraging a lot of expertise and experience we learned from the past 6/18 to the Double 11. More and more brands are planning on putting more inventory for the Double 11 and allocating a higher, relatively higher paid marketing services budget to Double 11. We can share more information later on, maybe in the next quarter. Thank you.
Speaker 2
Thank you.
Speaker 8
This concludes our question and answer session. I would like to turn the conference back over to Wendy Sun for any closing remarks.
Speaker 0
Thank you, Operator. On behalf of the Baozun management team, we would like to thank you again for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us today. This concludes the call.
Speaker 8
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.