Dear Shareholders:
As 2016 ended, we had a great deal to celebrate.
It’s been less than two years since our Initial Public Offering of
American Depository Shares (ADSs) on Nasdaq in May 2015, when we
raised US$113.7 million. Since then we also had a successful
follow-on offering raising US$33.1 million in December 2016. The
positive response to both the IPO and the follow-on offering was a
testament to the faith investors have in us, and to the
extraordinary opportunities in the Chinese brand e-commerce space.
We plan to use the funds raised to create more shareholder value as
we look to benefit from the opportunities created by the dramatic
changes taking place in the digital retail sector.
We were delighted to finish off the year on a
strong note, with another quarter of solid financial and
operational results. Our strong performance was driven both by
sales growth of our existing online stores, as well as the
expansion of our portfolio of brand partners. 2016 marked our third
straight year of profitability on a non-GAAP basis. I believe this
was a direct result of our improving operational capabilities, the
sustainability and quality of our topline growth and the steady
improvement in our margins due to both increasing economies of
scale and enhanced execution. Looking ahead, we plan to continue to
strengthen our leading position in the market by continuously
providing best in class e-commerce solutions to our brand
partners.
As China’s leading brand e-commerce player, we
are not only riding the digital commerce wave but also shaping it.
As the digital retail market transitions from the “first-round”
transactional phase of e-commerce to a more holistic model,
involving omni-channel sales, digital marketing, Customer
Relationship Management (CRM), data warehousing and analytics, we
are leading the market by integrating all these services and
providing holistic solutions to our brand partners.
As such, we believe that we are well-positioned
as a leader in one of the largest e-commerce market in the world.
China’s total online shopping market represents 14.8% of China’s
retail sales of consumer goods and grew by 30.7% from 2015 to RMB 5
trillion in 2016, according to iResearch. This market is expected
to grow to RMB 7.5 trillion, according to iResearch, by 2018.
Within the overall Chinese e-commerce space, brand e-commerce,
which connects brands and consumers through official online stores
and authorized marketplace stores, is among the most exciting
sectors and we are the clear market leader with a market share of
22% by transaction value in 2015, according to iResearch.
2016 Highlights
Let me share with you some of the key highlights
from 2016, which was also our 10th anniversary since we started
operation.
Performance
This year, we generated RMB11.3 billion (US$1.62
billion)1 in Gross Merchandise Value (GMV), representing
year-over-year growth of 67%, which marks out first year with GMV
generated more than RMB 10 billion. Our non-GAAP net income
attributable to ordinary shareholders of Baozun Inc. was RMB 121
million (US$17.4 million), representing a year-over-year increase
of 437%. We expect GMV during fiscal year 2017 to grow by over 50%
compared with fiscal year 2016.
Over the course of 2016, Baozun’s portfolio of
e-commerce brand partners grew to 133, up from 113 as of December
31, 2015. These brand partners are also diverse, covering product
categories ranging from apparel, appliances, electronics, home and
furnishings, food and health products, cosmetics, fast moving
consumer goods, insurance and automobiles. Beyond mainland China,
we provide end-to-end e-commerce solutions to brand partners in
Hong Kong and, from April 2016, we began to provide e-commerce
solutions to our brand partners in Taiwan.
Baozun was the only brand e-commerce player
consecutively named a 6-star Tmall service partner in both 2015 and
2016. Underlining our strong performance on Tmall, on the November
11 “Single’s Day” in 2016, our total order value was RMB 2.5
billion (US$367.7 million)2 over twice the amount achieved in
2015. Single’s Day is the world’s biggest online shopping day, and
we were very pleased with our performance.
Professional Services
- Logistics: We set up a wholly-owned warehouse
and logistics subsidiary, Baotong E-logistics, to expand the scale
of our diversified range of logistics services. As a partner of
Cainiao, a leading logistics data platform operator associated with
Alibaba Group, Baotong has strengthened and expanded the scale of
our warehousing and fulfillment services and improved our ability
to serve a larger number of brand partners and other merchants.
- Information Technology (IT): On top of our
core brand e-commerce system, we expanded our e-store system,
comprising Nebula+, Business Intelligence (BI), and Omni-Channel.
- Digital Marketing: We upgraded the digital
marketing team to a business group in 2016, and have made major
improvements through hiring more skilled team members in Customer
Relationship Management (CRM) and Customer Experience Management
(CEM), as well as winning a number of marketing project awards
along the way.
- Restructuring for Greater Focus: We expanded
the number of business groups from four to six, supporting greater
mission focus on the part of each business group as well as greater
professionalism in management and operations.
1 Exchange rate of RMB1:US$0.144 as of
12/30/2016.2 Exchange rate of RMB1:US$0.147 as of November 10,
2016.
Expansion in Greater China
We started offering our brand partners
end-to-end solutions in Hong Kong in 2013 and, since then, have
added several more stores. In October 2015, we received approval
from the Investment Commission of Taiwan’s Ministry of Economic
Affairs and started to provide our brand partners with end-to-end
e-commerce solutions in Taiwan in April 2016. We can now offer
end-to-end e-commerce solutions to our brand partners in mainland
China, Hong Kong and Taiwan, and plan to follow demand from our
partners to other countries and regional markets.
Corporate Governance
Improvements
2016 was the first year we were audited based on
Sarbanes-Oxley Act requirements. We obtained an “Unqualified
Opinion Report” with respect to our disclosure controls and
procedures and internal controls over financial reporting, which
was reflected in our annual report filed with the U.S. Securities
and Exchange Commission. We plan to continue to adhere to best
practices as we conduct future audits and prepare reports.
Industry Recognition
Last May, Baozun hosted the first Global Brand
E-Commerce Summit (BECS). We had more than 400 participants,
including our brand partners, Alibaba and McKinsey. The conference
theme was the “rise of omni-channel e-commerce” and what it means
for brands and brand e-commerce partners. Omni-channel e-commerce
will offer a major opportunity in the domestic retail market over
the next decade, and Baozun intends to be a key player in providing
added value to brands and consumers by offering robust omni-channel
e-commerce solutions.
Team Building
We believe that an essential part of building
our brand is to foster a creative, collaborative, and enthusiastic
corporate culture. Working in teams is one of our strengths, and we
try to give our employees the opportunity to develop themselves as
well as work with each other. The benchmarks we use for our
Employee Net Promoter System, eNPS, increased by 206% this year.
This system tracks the introduction of friends and family members
to Baozun by existing employees. Over the past year, our employee
satisfaction surveys have shown remarkable gains. We think these
measures show that we are making headway towards becoming one of
the most respected Chinese internet companies as well as one of the
most coveted places to work in China.
Business Strategies
We endeavor to create a seamless workflow and
experience for our brand e-commerce partners. We are cognizant of
the need to anticipate the requirements of potential clients as
well as support our existing clients for services ranging from
“transactional” to “integrated”, from single channel to
omni-channel, and from China to global. Key areas of focus are:
- Existing brand partners: Our objectives are to
improve brand satisfaction, realize GMV growth, reduce operational
costs, and provide value-added services including digital marketing
tools and solutions, BI, CRM, CEM and Artificial Intelligence (AI).
We believe our professional management and customized brand
e-commerce strategies will help us to achieve these
goals.
- Potential clients: We rely on our best-of-kind
premium service capability to attract new brand partners. As we
strengthen our capabilities and expand the array of our services,
we expect to see our brand customer base grow.
- Asset-light business model: We are
transitioning towards an asset-light model to further decrease
inventory risk and increase margin profile.
- Omni-channel solutions: In addition to the
continuous investment into software development, we are
increasingly investing in omni-channel solutions by allocating more
resources as we provide services to more brands.
The Next Three Years
Over the next three years we plan to underpin
our growth in four key ways, which are:
Vertical Deepening
For our existing e-commerce brand partners, we
plan to extend our value proposition both upstream and downstream.
On the upstream side, we will use longer-term contracts, strategic
alliances, joint ventures and investments to develop a closer
relationship with our brand partners. On the downstream side, we
will work more closely with e-commerce platforms and develop
solutions based on our insight into consumer markets, to build a
new generation of brand e-commerce value chains and ecosystems.
Global Expansion
As the China brand e-commerce universe expands,
we are facing new demands to take our brand partners beyond China.
We plan to develop our capacity to meet the needs of our brand
partners so that they can succeed not only in China, but also
internationally.
Human Resources
As our business grows, we expect to become ever
more dependent on our ability to recruit and train talent for our
business development and operations. We plan to continually
strengthen our talent pool by using incentive programs, programs
for professional development and management trainee programs. We
are also constantly looking for ways to recruit talent from the
off-line retail market and train them in e-commerce.
Building a Creative and Entrepreneurial
Culture
Our core values are based on integrity,
ownership, collaboration, initiative, and innovation, and
maintaining a creative, entrepreneurial, and innovative spirit is
critically important to us. Every year, we hold a Creativity and
Innovation Competition, which has attracted more and more attention
as well as new recruits.
2017 marks the beginning of our second decade of
operation. The first ten years laid the foundation. Over the next
decade, we will harvest our hard work in an ever more exciting and
fast-paced future. As we look back and look ahead, let me extend a
heartfelt thanks to Baozun’s investors, brand partners, management
and employees. With your continued and most welcomed support,
our future is assured.
Sincere regards,
Vincent Wenbin QiuChairman and Chief Executive
OfficerBaozun Inc.
Safe Harbor Statements
This news release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates," "target,"
"going forward," "outlook" and similar statements. Such 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, all of which are
difficult to predict and many of which are beyond the Company's
control, which may cause the Company's actual results, performance
or achievements 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 and Exchange Commission. The
Company does not undertake any obligation to update any
forward-looking statement as a result of new information, future
events or otherwise, except as required under law.
For more information, please visit http://ir.baozun.com
CONTACT: For investor and media inquiries, please contact:
Baozun Inc.
Ms. Caroline Dong
ir@baozun.com
Christensen
In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com
In US
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@ChristensenIR.com
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