On November 22, Beijing time, Baozun E-commerce (NASDAQ: BZUN, HK: 9991) released its financial report for the third quarter of 2023 as of September 30, 2023. Financial data shows that Baozun E-commerce's net revenue in the third quarter of 2023 was 1.8 billion yuan, a year-on-year increase of 5%, with a year-on-year increase of 26% in operating revenue from sports apparel; The operating cash flow continued to improve, achieving the first positive conversion in the same period in history.
Despite factors such as a weak economic environment and seasonal sales fluctuations, the transformation of Baozun's business is still steadily progressing. Especially under the Baozun brand management business, during the Gap China facelift, new products and stores were fully unveiled in the third quarter, significantly enhancing brand strength. Gap China is not only regarded by Baozun as the center of its brand management sector, but also lays a solid foundation for further unleashing Baozun's capabilities and resource advantages, and finding new growth curves.
Gap firmly transforms and reshapes brand power
Gap China is comprehensively improving its operational capabilities, firmly adhering to the path of transformation, reshaping its brand power, and achieving a "new and revitalized". Just like the founder of Baozun E-commerce Mr. Qiu Wenbin, Chairman and CEO of Baozun Group, stated: The brand management business has been highly effective, and Gap's all-round transformation is steadily advancing, achieving multiple important results in new products, new stores, market promotion, and brand awareness enhancement. These 'brand power upgrades' have gradually transformed Gap from a discount driven brand in the past to a consumer driven brand. This quarter, we have successfully created an omnichannel retail operation platform (ROP) This has laid a solid foundation for the continuous digital transformation of Gap business
At the end of last year, Baozun acquired the Greater China business of the clothing brand Gap. Baozun once pointed out that 2023 is the first year of transformation and preparation for Gap China's business, and the primary task is to ensure a smooth transition after the acquisition. Since taking over Gap China, the Baozun brand management team has been continuously committed to transforming Gap from a discount driven brand to a brand that wins with brand power, and establishing consumer love for the brand and products. In the third quarter, good progress was made in the launch of new products, opening of new stores, new marketing strategies, and upgrading of new systems.
Specifically, at the new product level, a new localized design has been launched to tailor three product series for Chinese consumers: "American retro style, urban functional style, and minimalist texture style", covering diverse urban life scenarios such as daily life, leisure, and commuting; At the new store level, five new stores including Guangzhou Zhengjia Plaza, Beijing Wukesong Wanda Plaza, and Shenzhen Zhonghang City Junshang will be opened in September, emphasizing a younger and more interactive product layout. It is expected to open a total of 10 new stores in the second half of the year; At the new marketing level, we will create social topics such as "I AM GAP" and "If you want a Gap, just Gap", and announce Ouyang Nana as the brand's new manager and idol, the new force Qinglian, as a friend of the Gap brand. At the same time, we will effectively enhance the brand's influence by sponsoring the trendy cultural event Hypefest Music Festival, launching a co branded series with local designer brand ATTEMPT and trendy buyer store brand DOE.
At the same time, the Baozun Technology Innovation Center is conducting a comprehensive evaluation of Gap China's core system and embarking on a journey of digital transformation and upgrading of omnichannel retail. Within just 6 months of project launch, the Gap China Omni Channel Retail Operations Platform (ROP) was successfully launched by designing and simplifying the system architecture, integrating over 70 historical operational systems. This platform adopts a new architecture, replacing traditional ERP with a centralized central platform, to achieve real-time sales management. Adopting an online and offline inventory management model to improve sales efficiency and inventory turnover, laying a solid foundation for Gap's digital transformation. In the future, Baozun E-commerce plans to create an integrated intelligent end-to-end value chain management system, further improving the efficiency of brand inventory planning and deepening private domain capabilities.
On the supply chain side, Gap has been continuously improving since the beginning of this year. It is reported that the new Gap has built a localized and rapid response supply chain system, with a dedicated product production team responsible for upstream and downstream docking, which is faster and more efficient, achieving a transformation from a very limited local supply chain to full category coverage.
Effective brand management business
With the transformation and upgrading of Baozun, the three major business sectors of Baozun E-commerce, Baozun Brand Management, and Baozun International have formed a pattern. Among them, the brand management business that continues to focus on the orderly transition of Gap China's business is seen as a new growth pole and is particularly noteworthy.
From financial data, the brand management business contributed approximately 300 million yuan in revenue in the third quarter, with losses significantly narrowing compared to the same period last year. The gross profit margin increased by over 10% to 56% year-on-year. At the same time, the inventory turnover days have improved from 220 days a year ago to 177 days, and the product has achieved the fastest update speed within 4 weeks from research and development to listing. Up to now, Gap China's localized production capacity has almost fully covered local procurement needs, accounting for nearly 100%.
At the same time, key indicators such as customer flow, conversion rate, average unit price, and floor area efficiency have also been steadily optimized, achieving more same store sales and confirming the excellent effect of Gap in brand power upgrading. At present, the total number of Gap members exceeds 28 million, with approximately 2.5 million active members. It is reported that during the Tiktok super brand date at the end of September, Gap continued to be the top of Tiktok flagship store and men's clothing hot list. GMV increased 7 times year-on-year, reaching 56 million, setting a new record of one-day self broadcasting.
The outstanding performance of brand management business confirms that Baozun's previous efforts in Gap China have been quite effective, and its brand management business has undoubtedly achieved phased success. Baozun once revealed at its analyst conference that its expectation for Gap China is to turn losses into profits in 2025 and double revenue in 2027. In fact, in addition to acquiring Gap's Greater China business, Baozun's brand management business line is constantly moving - in August this year, it established a strategic partnership with American brand management company Authentic Brands Group to operate the Hunter brand's Greater China business under ABG Group. At the same time, it will also establish a joint venture with ABG Group to acquire 51% of Hunter's intellectual property rights in Greater China and Southeast Asia from ABG Group. If we look back further, in 2021, Baozun successively acquired Full Jet, a consulting management company specializing in brand strategy and operations, and Yishang, a fashion brand e-commerce service provider. They also invested in the skiing brand NOBADAY and the healthy meat product brand Benwei Fresh.
It is understood that mergers and acquisitions or investments in overseas brands by enterprises have become an important industry trend to increase brand breadth horizontally and enhance profitability. As a leader, pioneer and digital business enabler in China's brand e-commerce service industry, Baozun has helped Gap China to open up a new Xintiandi by relying on years of experience accumulated in the brand e-commerce field and the scientific and technological strength honed. It will also attract more overseas major brands to establish in-depth cooperation. With the vigorous development of brand management business, its future performance is worthy of market expectations.