E-commerce never sleeps. Technology, consumer trends, supply chains, any one of these factors can cause dramatic changes in the business landscape. Some seemingly ordinary events that fall on a brand often bring about huge changes that change the fate. Just like in February this year, Baozun officially announced that it has completed the acquisition of Gap Greater China. Up to now, Gap has started to rejuvenate under the shaping of Baozun.
On May 25, Beijing time, Baozun E-commerce (NASDAQ: BZUN, HK: 9991) announced its financial report for the first quarter ending March 31, 2023. Among them, Baozun’s overall performance has been steadily improving, while Gap, which was consolidated in early February, has narrowed its losses significantly, and has achieved a “makeover” of the entire value chain in a short period of time. What supports its transformation is Baozun's comprehensive one-stop service capabilities accumulated in the process of deepening digital business.
This is a microcosm. From clarifying the development of the three major business lines to becoming a good "global brand digital business partner", Baozun has entered a new stage of digital business.
Gap's performance disclosed for the first time, strategic "model" reflects Baozun's basic skills
In the first quarter of 2023, under the background of an optimized business environment, Baozun maintained a stable overall performance.
The financial report shows that during the reporting period, Baozun recorded a net income of 1.9 billion yuan, and its operating cash flow improved by 340 million yuan compared with the same period last year. As of the end of the reporting period, it had 2.9 billion yuan in cash and equivalents.
The real bright spot lies in the growth prospects. In this financial report, Baozun disclosed the progress of the brand management business segment for the first time. The core is Gap China, which was consolidated in early February. This quarter contributed about 190 million yuan in revenue, with a gross profit margin of 55%, a substantial increase year-on-year, and losses narrowed by more than half compared with the same period last year before the acquisition. On the whole, Baozun's empowerment of Gap has brought about a substantial optimization of brand performance.
Sandrine Zerbib, president of Baozun brand management, previously said: "Baozun brand management will continue to optimize the supply chain, product strength, and marketing strategy, and establish a Gap full value chain ecosystem." However, it has already started in-depth reform and has become a "strategic model" for Baozun brand management and even Baozun Group as a whole. Through this model, Baozun has clearly demonstrated its accumulated full value chain capabilities, thereby releasing confidence in future growth.
Specifically, Baozun has carried out a comprehensive renovation tailored for Gap, thus releasing the value of brand management.
Schematic diagram of Gap's brand renewal path. Source: Baozun
At the most fundamental level of product power in apparel retailing, improving product power has been identified as the first driver of Gap's revenue growth. Xiao Yong, head of Baozun brand management and operations and the new CEO of Gap Greater China, pointed out in an interview with China Business News that Gap has "formed a local product design team for the first time in history" in the Chinese market. The major product lines are equipped with independent design directors and corresponding layout and pattern experts, so as to realize tailor-made exclusive products for Chinese customers.
Correspondingly, at the level of supply chain management, adhering to the strategy of "rooting in China and serving China", Baozun has carried out the localization upgrade of the supply chain, targeting localized production needs through nearly 30 local manufacturers, and the ability to quickly respond to market demand .
At the front end of the market that touches consumers, Gap's stores have also been reshaped. Xiao Yong pointed out: "The in-store area should be able to have a 'dialogue' directly with consumers, and both the store and the products must be able to tell stories by themselves."
Baozun is good at consumer portraits, and is even more good at forming effective communication with consumers with quality, fun and brand affinity through basic links such as store display and product development. On the store side, Gap's display has changed from hypermarket style to multi-scenario overall collocation, integrating clothing into the business scene, making the store transparent and convenient, and key indicators such as store sales and average customer unit (UPT) have been significantly improved.
To a certain extent, these are also the results of Baozun’s own insight into the consumer market, that is, how to build stronger supply chain capabilities around the consumer market and polish a more attractive sales language, so as to implement the ecology of organic symbiosis and mutual promotion of “people and goods yards” idea.
From a macro perspective, at the system level, Baozun brand management plans to complete the design framework for Gap China's overall system transformation by the fourth quarter of 2023. Sandrine Zerbib, President of Baozun Brand Management, said that Gap must first consider leveraging Baozun’s digital operation capabilities to create in-depth synergy between offline entities and online businesses.
This also means that in the next period of time, we will further see Baozun upgrade the whole process of product planning, circulation management, promotion and customer management, and see how the value of Baozun brand management can be realized in more links.
Therefore, Baozun has established a brand-new professional team for Gap that is more in line with the needs of the Chinese market, but in fact, the core and the most leading direction of change still comes from the underlying capabilities of long-term operation. Including Baozun itself, it is also continuously improving its operating efficiency and optimizing its results.
The financial report shows that during the reporting period, Baozun recorded a net income of 1.9 billion yuan, and its operating cash flow improved compared with the same period last year, with a year-on-year increase of 340 million yuan. As of the end of the reporting period, it had 2.9 billion yuan in cash and equivalents. Financially, Baozun has established a clear margin of safety.
This is the "projection" of the customer-centric concept in specific operations. From this small area, the precision of Internet traffic makes the marketing environment and consumer characteristics of different channels very different, and Baozun has the ability to create the most suitable for the brand . Channel capabilities provide operational motivation. In the first quarter, the non-GAAP operating profit of Baozun’s e-commerce business segment achieved triple-digit growth compared with the same period last year, reflecting the results of high-quality operations.
Focusing on the general environment of digital business, the post-epidemic era will undoubtedly force many business types to go on an "expedition" again to find new business boundaries and operating methods. For Baozun, this has instead become a period of opportunity to demonstrate its underlying capabilities.
With insight into the trend of digital business, Baozun responds to the changing situation with high-quality measures
Digital business is undergoing profound changes, which are essentially changes in a series of physical brands and changes in the social business environment.
Since the beginning of this year, news about the splitting and optimization of the Taotian platform system organized by Ali, the splitting of JD.com, and changes in platform strategies have frequently surfaced news on large e-commerce platforms. Although this does not directly affect how the brand operates, it reflects that the platform is thinking about new Countermeasures to deal with market changes, it is not easy for a single brand to find its own way in this ever-changing environment. Coupled with the consumer side, the consumption trend in the post-epidemic era has changed. On the brand side, brands have begun to re-examine specific and real issues such as input-output ratio and consumer stickiness.
How to take the road of digital commerce more definitely, how to carry out trend-oriented innovation attempts, it is difficult for brands to cover everything. "Global brand digital business partner", just in time.
In the Q4 financial report last year, Baozun upgraded its three major business lines - "Baozun E-Commerce", "Baozun Brand Management" and "Baozun International" - although it is mainly the division of its own sector, it can also be regarded as the division of The internal system of Baozun Group has been restructured.
The capacity release of the first growth curve, the value chain reshaping experiment of the second growth curve, and the precipitation and growth of the future growth curve. In this way, Baozun will be able to make accurate, controllable and efficient investment according to the maturity of the business, and realize the value of "global brand digital business partner".
Back to the actual business level, the most valuable thing about Baozun is still its basic capabilities that keep pace with the times and last forever.
For example, the background capabilities, the BOCDOP Baoduo end-to-end digital business integration solution launched by Baozun in 2022, is almost a "nanny-style" service. Baozun's digital intelligence marketing solution, with a team of more than 300 people, provides integrated marketing capabilities of the entire marketing chain for customers in need, and takes over the more difficult links such as private domains and media to build their own brands. In addition, including store operation, warehousing and distribution, etc., the system provided by Baozun allows brands to grasp the life status of brands only by performing simple tasks such as visual management.
Baozun BOCDOP solution. Source: Baozun
Another example is the content capability that is being continuously strengthened. In the first quarter, Baozun E-Commerce upgraded the division of the digital marketing business department to the creative content business department, focusing on the layout of creative marketing, visual content and live broadcast. Baozun has seen the trend of content e-commerce, and has accelerated the pace of linkage between products and content, and this is the most urgent need of the brand—whether it is KOL resources, the brand’s own content construction, or content forms such as live broadcasts. For the brand marketing matrix, only a partner like Baozun who understands both e-commerce and content can achieve comprehensive high-quality.
At present, Baozun is building a large-scale live broadcast room with an area of about 4,500 square meters at its Shanghai headquarters, which is expected to be officially put into use in June this year. In the long run, this may be another "blessed place" for brand growth.
Schematic diagram of Baozun Creative Live Center. Source: Baozun
In summary, the development of Baozun is just like what Qiu Wenbin, the founder of Baozun E-commerce and the chairman and CEO of Baozun Group, said: "The three major business segments - Baozun E-commerce, Baozun brand management and Baozun International mutual promotion and mutual integration have jointly built a spiral ecological closed loop."
It is easy to do business, but it is difficult to do ecology, and it is even more difficult to make the ecology develop benignly. But each of Baozun's business locations is practical and effective enough, which is especially valuable in the current pragmatic business environment. Therefore, the clearer the market demand and the smoother the flow, the more certain Baozun's future will be.
Source of this article: Hong Kong Stock Research Institute