Yunji Inc. (YJ) on Q1 2021 Results - Earnings Call Transcript
Operator: Good morning and good evening ladies and gentlemen. Thank you and welcome to Yunji's First Quarter 2021 Earnings Conference Call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; Chengqi Zhang, Vice President of Finance; and Ms. Kaye Liu, Investor Relations Director of the company. Now, I would like to hand the conference over to your first speaker today Ms. Kaye Liu, IRD of Yunji. Please go ahead ma'am.
Kaye Liu: Hello everyone. Welcome to our first quarter 2021 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions and relate to events that involve known or unknown risks uncertainties and other factors of Yunji and its industry.
Shanglue Xiao: Hello everyone and welcome to Yunji's first quarter 2021 earnings call. We celebrated our sixth corporate anniversary on May 16th, 2021. During this year's celebration featuring the theme Prime to Perform and turn over a new lease through enhanced strategies introduced our newly elevated business strategy to our employees and service managers. In today's fiercely competitive e-commerce industry in China, the top players have already established certain advantages through economies of scale with values focusing on more faster better and more cost effective. As a leading membership-based e-commerce platform, we continue to strengthen our focus on product selection and refinement to better implement our supply chain differentiation strategy and provide customers with a more convenient e-commerce experience. We don't pursue a disciplined short-term sales growth. In fact, we focus on cultivating a megahit product flow by introducing quality products with greater appeal and better product market fit for our members. To execute this new component of our strategy, we established a special working group for our megahit product supply chain led by our Executive President, Wei Ye. This working group was formed to leverage the team's exceptional capabilities in business development, content creation, and product presentation to curate popular products optimally present them to consumers and produce -- and distribute associated content to customers for a comprehensive targeted sales approach. By the end of 2021, we aim to develop a portfolio of megahit products covering a variety of categories featuring economical premium quality products. In terms of our differentiated supply chain, we believe the potential for our primary vertical markets in health, cosmetics and food products present the greatest opportunities. These three categories strongly aligned with the demand from our user base and provide them with additional membership value.
Chengqi Zhang: Thank you, Shanglue. Hello, everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in Renminbi terms. And for the first quarter of 2021, while all comparisons and the percentage changes are on a year-over-year basis unless otherwise noted. Starting in 2021, we committed to enhancing our supply chain differentiation strategy to include our new megahit products to through this strategy and further development of our private label products. We are focusing on the lifetime value of our customers and no longer emphasize GMV. We also remain committed to effective cost control and we further refined our membership management system and enhanced our employee structure. While our decision to forgo short-term sales gains in favor of more sustainable growth caused fluctuations in our quarterly sales. We believe these efforts will further drive our progress towards healthy profitability in the long run. Now, let's take a closer look at our financials for this quarter. In the first quarter of 2021, our total revenue was RMB 675 million compared to RMB 1.649 billion, a year ago. Revenues from sales merchandise were RMB 572 million and the revenue from marketplace business were RMB 95 million. As previously mentioned, the decline in total revenue was mainly due to our decision to improve our product curation strategy by implementing our megahit product pool initiative. The initiative focused on introducing products with stronger repurchase potential and great customer appeal. Gross margin in the first quarter of 2021 was 35% compared to 30% a year ago. The improvement in gross margin was due to our supply chain differentiation strategy. Turning to our operating expense. Fulfillment expense in the first quarter of 2021 was RMB 65 million compared to RMB 178 million a year ago. The decrease was mainly attributed to reduced warehouse and logistics expenses, which resulted from our improved logistics efficiency, lower merchandise sales and reduced personnel costs from staffing structure refinements. Sales and marketing expense in the first quarter of 2021 were RMB 96 million, compared to RMB 251 million a year ago.
Operator: Your first question comes from the line of Ethan Yu of First Trust Group Incorporated. Please ask your question.
Unidentified Analyst: Hi good evening. Thanks for taking my question. . I will translate -- quickly translate for myself. I have two questions. The first question is about our private label business. In connection with the rapid growth of our marketplace business, what's the distinct market strategy for our private label products? In addition, could you please give us some comments on the differentiation between us and other private label e-commerce brands like; NetEase, Jingdong et cetera?
Shanglue Xiao: Thank you for your questions. I'm Mr. Xiao Shanglue, the CEO of Yunji, and I will take your questions. For your first question for our private labels, we will be more focused on these two categories that is, health products and cosmetics, because these two categories of products need more sharing and recommendation of our users. If people want to buy some health products, if there are new -- if there are no shopping curators, perhaps they don't know what to buy. And for cosmetics, most of the cosmetics are offline and people go buy these cosmetic products at department stores. And all these products have shopping curators even if it is a very luxury brand. So we can see that shopping curators are very necessary. So in this sense, we'd like to leverage our advantage of service managers of our community. This is very different from Yanxuan or Jingdong. What they sale the most are daily necessities. And their net profit is very low. And in this area, the competition is more fierce. So, we hope that we can further leverage our advantage in community. And we can combine our advantage and further enhance the professional knowledge of our service managers. In the future, we also hope to make further use of our strength in our own platform. And we also want to be settled in some major e-commerce platforms such as Tmall and other video e-commerce platforms. And so, after we have more traffic on our own platform, we will make further moves to other major e-commerce platforms.
Shanglue Xiao: And thank you for your second question. It is a very good question. We believe that, we still have much room to explore to further enhance the value of our members. After our evaluation we found that, -- we decided to lower the benchmark of becoming a member of our -- of Yunji. Because we want to attract more target users. And based on that, we will devote more time and energy, to ensure that, our users can get the recommendation of the best products, and so that they can repeat purchase. Compared to enhance the quality of members, we believe that, to further enhance the value of our members is more important.
Kaye Liu: Okay.
Operator: As there are no further questions at this time, I'd like to hand the conference back to the management, for the closing remarks.
Kaye Liu: Thank you for joining us today. Please do not hesitate to contact us, if you have any further questions. And we look forward to talking with you next quarter. Bye.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
