Yunji Inc. (YJ) Earnings Call Transcript & Summary

I'm pleased to announce our next presentation will be from Yunji from China. Before I introduce our speaker, a few points to note. Please submit your questions in the question box below the slides, which will be forwarded to the company, and they will answer via e-mail in due course. On a final note, all of today's presentations will be recorded and can be accessed by the Deutsche Bank website, adr.db.com. At this point, I'm very pleased to welcome Chengqi Zhang, VP of Finance of Yunji Inc., which is on NASDAQ under the symbol YJ. Welcome Chengqi.

Hi, everyone. I'm [ Luke ] Zhang, Yunji Vice President. Thank you for the time allowing me to introduce Yunji. Yunji is very different from mainstream e-commerce platforms, such as Tmall, JD and PDD. Our business model consists of 3 parts: differentiation, supply chain, trend service managers and customers. To provide better goods for our members, we carefully created our supply chain with broad varieties, limited SPU, guaranteed quality and be more differentiated. Our trend service managers can invite new members, share shopping experience and tips and promote product to get commissions, sales incentives and the training rewards from Yunji. Also, our members have also obtained cost effective products. We believe it's a win-win system for all the players in our business model. First of all, let me introduce our supply chain. Our products are mainly divide into 3 categories: high-quality and high-margin products, high-frequency products and mainstream brand products. For each category, we follow our created selective model that limits the number of brands and SKUs to help members saving, selecting time and increase brand exposure. Our strategy is focusing on high-quality and high-margin products. Other 2 categories are helping us to increase member user loyalty and the customer satisfaction. High-quality and high-margin products include private labels, invested brands, emerging brands and high-quality manufacturers. Private label and invested brands products are more unique and most of the sales on the whole network are concentrated on our platform. Emerging brands and advanced manufacturing have high quality, but they are not widely recognized by the public or online market. Under our creation selection model, through the user education from our service managers, they can be more effectively expand brand awareness with a lower marketing expense. In order to develop better products, we maintained ongoing investment into these private label and joint venture brands during past quarters. Today, we have established a deep partnership with over 3 top players in different industries. These players have top product with annual sales in excess of CNY 100 million are our top product companies. Let me introduce some of our star projects. Beauty, food and health supplements are key categories of high-quality and high-margin products. We developed one health supplement product in June 2020. The sales of this SKU in 11 months is around RMB 9 million. In January 2021, we developed a new exclusive skincare product, which break a new record of 100,000 sales within 3 days. These unique products bring us high gross margin and making a differentiated platform from the mainstream e-commerce platforms. Secondly, we leverage social networks as effective and efficient tool for user acquisition and engagement. We also provide the tools to make it easier for members and the service managers to promote our products, including refining product promotional material as well as other tools and training to facilitate product sales. Service manager on our platform is a profitable part-time job for people who love to share. Regional sellers, regional KOLs and the live streamers, salespeople from direct sales companies and insurance companies are our potential service managers. They facilitate members with product sales, monitoring and collecting member feedback on a real-time basis, training and customer education for our unique products, some of them designed to implement marketing strategies themselves. We hire senior lecturers specialized marketing and training to facility service managers with sales potential to become experts in the field, while also enable these service managers to become trusted resources of information in the eye of users, so our service managers have developed this ability to reach their target users more effectively as well as maintain high-touch relationship with these target users at the same time. This continues to demonstrate the strength of both our product quality and professional merchandise capability which have helped to significantly improve the income of our service managers with sales potential. We hope that the company can grow through service managers and continue to generate additional income from them. Certainly, most of our customers or members are women between the age of 25 to 39, who have 1 or 2 children and manage household spending. They are highly active on social networks and they enjoy sharing their lives and shopping experience. They prefer high-quality products at attractive price with good service. That is to say they are consumption of grade class. Besides the business on Yunji App, we also continue to make meaningful progress in both the establishment of innovation marketing channels and the utilization of diverse content formats, such as short-form videos and live streaming, which have enabled us to better present and promote those products sourced from our quality supply chain. Going forward, we plan to further leverage our supply chain's competitive advantages in cost control and operational efficiency, establish partnership with top and mid-tier streamers to introduce more products to our e-commerce community, and provide support and the resources to more of those joint venture brands and the emerging brands with high growth potential. Our financial strategy is to focus on our gross profit, to improve operational efficiency. The take rate of our platform model has steadily increased and stabilized since the transition. Our gross margin has also increased. Our long-run strategy is to support private label and joint venture brands on the supply side, utilization of our resources to empower service managers on the service side and refining our platform experience and user value. We developed this strategy after carefully analyzing multiple players around the industry value chain, and it has helped us to achieve cost-effective business expansion without compromising our margins. Thank you for your time. That's all.