Baozun Group (NASDAQ: BZUN), a leading e-commerce service provider in China, reported a 3% year-over-year increase in revenue for the second quarter of 2024, with total net revenues hitting RMB 2.4 billion. The company's e-commerce services under the Baozun E-commerce (BEC) segment showed a strong recovery, marking a 6% growth in total revenue and a 10% increase in service revenue. The brand management segment, Baozun Brand Management (BBM), also made strides in optimizing operations and expanding its offline store presence.
Key Takeaways
- Baozun Group's total net revenues grew to RMB 2.4 billion, a 3% increase from the previous year.
- The BEC segment saw a 6% rise in total revenue and a 10% jump in service revenue.
- BBM segment reduced losses and grew its offline store network to 126 stores.
- The company integrated Location, a leading partner on Douyin, into its live streaming business.
- Baozun expanded its platform presence, signed an exclusive deal with Joseph and Joseph, and deepened its partnership with Gap Inc (NYSE:GAP).
- A share repurchase program continued, with approximately $2 million in ADS bought back.
Company Outlook
- Baozun is committed to strategic transformation, focusing on omnichannel solutions, cost optimization, expanding digital marketing, localizing brand strategies, and improving customer experience.
- The company anticipates a return to growth in e-commerce product sales in H2 2024 and potential top-line growth later in the year.
Bearish Highlights
- The company did not provide specific details on challenges or setbacks faced during the quarter.
Bullish Highlights
- Revenue growth in the BEC segment and service revenue indicates a strong recovery.
- Strategic partnerships and expansion of the offline store network are expected to contribute to future growth.
Misses
- There were no significant misses reported in the earnings call.
Q&A Highlights
- Ase Yu expressed confidence in achieving full-year targets and returning the BEC business to sustainable, profitable growth.
- Ken Huang discussed building a profitable business that appeals to mass-market families in China with localized products.
- Vincent Qiu highlighted long-term growth driven by the growth of BEC and BBM segments, despite macroeconomic challenges.
In their strategic focus, Baozun emphasized their commitment to omnichannel e-commerce solutions and cost optimization through Lean and 6 Sigma projects. The company is also looking to expand its digital marketing and technology capabilities, localize global brand strategies, and improve store operations and customer experience. With these initiatives, Baozun expects to return to growth in e-commerce product sales in the second half of 2024 and continue optimizing the BBM business.
The company's financial health appears robust, with a maintained strong cash position of RMB 2.9 billion. Additionally, Baozun's adjusted income from operations reached RMB 10 million. Key business developments include the successful integration of Location into the live streaming business, expanding presence on emerging platforms like Douyin and Little Red Book, and the opening of new stores.
Executives, including President Ase Yu, CFO Ken Huang, and Chairman and CEO Vincent Qiu, expressed confidence in the company's strategy and its alignment with long-term growth despite macroeconomic challenges. The focus on leveraging global resources, such as those from Gap Inc., and delivering localized products that align with the brand's DNA, were emphasized as part of the strategy for achieving targets and driving growth.
Full transcript - Baozun Inc (NASDAQ:BZUN) Q2 2024:
Conference Operator: Good morning, ladies and gentlemen, and thank you for standing by for Baozun Second Quarter 2024 Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms.
Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy.
Wendy Sun, Senior Director of Corporate Development and Investor Relations, Baozun: Thank you, operator. Hello, everyone, and thank you for joining us today. Our Q2 2024 earnings release was distributed earlier before this call and is available on our IR website atir.baozheng.com as well as on PR Newswire Services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for download. On the call today from Baozun, we have Mr.
Vincent Qiu, Chairman and Chief Executive Officer Ms. Katherine Zhu, Chief Financial Officer Mr. Ase Yu, President of Baozun E Commerce and Mr. Ken Huang, Chief Financial Officer of Baozun Brand Management. Mr.
Qiu will first share with our business strategy and the company highlights, followed by Mr. Zhu, who will discuss our financials and then by Mr. Yu and Mr. Huang to share more about our e commerce and brand management segments respectively. They will all be available to answer your questions during the Q and A session that follows.
Before we begin, I would like to remind you that this conference call contains forward looking statements within the meaning of the U. S. Security Act of 1933 as a mandate, the U. S. Security Exchange Act of 1934 as a mandate and the U.
S. Private Securities Litigation Reform Act of 1995. These forward looking statements are based upon management's current expectations and current market and operating conditions and relates 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 to differ materially from those in the forward looking statements. Further information regarding these and other risks and uncertainties or factors is included in the company's filings with the U. S.
Securities and Exchange Commission and its announcement notice or other documents published on the website of the Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date here and is based on assumptions that the company believes to be reasonable as of this date and the company does not take any obligation to update any forward looking statements except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. In addition, we may elect to use adjusted in place of non general accepted accounting principle or non GAAP in order to reduce overall confusion that may arise from our discussions about financials related to the GAAP brand. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr.
Vincent Chu. Vincent, please go ahead.
Vincent Qiu, Chairman and Chief Executive Officer, Baozun: Thank you, Wendy. Hello, everyone, and thank you all for your time. I'm pleased to share that we continue to achieve success in executing our plans. In the Q2 of 2024, Baozun Group achieved a 3% year over year revenue growth, reflecting our ongoing efforts to strengthen our core operations and adapt to the evolving market landscape. BEC has shown solid momentum with top line returning to growth after 10 consecutive quarters of year over year contraction.
We're encouraged to see a turning point that highlights our effective revitalization efforts in both services and product sales. Notably, we successfully integrated Location, a top Douyin partner into Baozun's live streaming business unit. This is a strategic breakthrough as it strengthens our position within the Douyin ecosystem and further enhances our omnichannel value proposition. BBN is narrowing its losses while accelerating its store expansion and fine tuning the unit economics of new stores. We are seeing better performance from our new stores, which gives us confidence in further expansion in these markets.
This progress was achieved despite the top line pressure EBM is facing from cautious consumer sentiment. Additionally, in light of GAAP's strong global trend, we have deepened our interactions with Gap Inc. And developed plans to better leverage this trend and its global resources. Our aim is to balance these resources with our localization efforts to drive growth. This quarter, Baozun Technology is once again being recognized for excellence, receiving another prestigious Gardner Award in direct to consumer solutions.
Tailored for the Chinese market, our DTC solutions offer a comprehensive commerce platform that is secure, scalable and flexible. This award underscores our ability to build innovative solutions for brands' private domains, empowering their further growth. On the ESG front, we continue to advance our commitment to sustainability. During the quarter, 2 of our logistic parks were certified as carbon neutral and we also partnered with Nike (NYSE:NKE) on an innovative shoe recycling program. Through these efforts, we are not only reducing our carbon footprint, but also setting industry standards and making a positive contribution to environmental protection.
With the improving momentum in e commerce and the continued focus on strengthening BBMs fundamentals, we remain fully committed towards strategic transformation. Looking ahead, we are confident in our ability to drive further growth and deliver long term value for our shareholders. Now, let me pass this to Katherine for financial updates.
Katherine Zhu, Chief Financial Officer, Baozun: Thanks, Vincent, and hello, everyone. Now, let me share with you our Q2 2024 financial results in more detail. Please turn to slide number 3. Baozun Group's total net revenues increased by 3% year over year to RMB2.4 billion. Of this, e commerce revenue contributed RMB2.1 billion, while brand management generated RMB294 1,000,000.
Breaking down the e commerce revenue by business model, services revenue increased by 10% to RMB1.6 billion in the quarter. This growth was primarily driven by double digit year over year increase in revenue from store operations in apparel and accessories category, as well as from digital marketing and IT solutions. DC product sales revenue continued to show progress with the year over year contraction narrowing by 4% to 559,000,000. With the business optimization nearly complete and the ramp up of our newly introduced exclusive distribution business, we are on track to return to growth in our BC product sales in the second half of twenty twenty four. CDM product sales totaled $292,000,000 for the quarter, a year over year decline of 10% compared with the same period of last year.
The contraction was mainly due to weaker consumption sentiment in the fashion apparel industry, and Ken will elaborate more later. Please turn to Slide number 4. From a profitability perspective, our gross margin for e commerce product sales was 11.7% for the quarter. The decrease in gross margin for e commerce product sales was mainly due to a change in category mix and a higher proportion of cash rebates from brand partners compared with more weight on procurement rebates in the same period of last year. Gross margin for BBM totaled 52.3%, while our group's blended gross margin for product sales was 25.3%.
Now to bottom line items. Please turn to slide number 5. During the quarter, our adjusted income from operations totaled $10,000,000 compared with $1,000,000 a year ago. This included an adjusted operating profit of $60,000,000 from e commerce segment and a reduced operating loss of RMB50 1,000,000 from BBN. As of June 30, 2024, we maintained a steady balance in cash and cash equivalents, restricted cash and short term investments totaling $2,900,000,000 in line with balance in the previous quarter.
Lastly, we continue to execute our share repurchase program. Year to date, we have repurchased approximately $2,000,000 ADS for $4,900,000 through the market, reflecting our confidence in the company's future. As of today, the remaining amount of forward authorization for share repurchase program, which is effective through January 2025, stands at US15 $1,000,000 Let me now pass the call over to Arthur to update you on BEC, our e commerce business.
Ase Yu, President of Baozun E-Commerce, Baozun: Thank you, Vincent and Catherine, and hello, everyone. Now, let's review the BEC business performance for the Q2 of 2024. Please turn to slide number 6. Despite the challenging macroeconomic environment and slowing down of e commerce growth in China, BEC delivered good results in the Q2 this year. Total (EPA:TTEF) revenue growth turned positive for the first time since 2022, increasing by 6% year on year.
This growth was primarily driven by a strong performance in our service business during the 6/18 campaign and stabilization of our product sales business. In the 2nd quarter, BEC's service business grew by 10%, driven by strong performances across key categories of sports and fashion apparel. Notably, during the 6/18 shopping festival, traditional marketplaces such as Tmall resumed growth, with especially strong momentum in all store and sportswear. As a result, BEC achieved double digit GMV growth for all the brands we operate during the campaign, significantly outpacing overall market performance. In terms of the channel performance, Douyin experienced exceptional growth in this quarter following the successful integration of our newly acquired location business, now contributing over 5 percent of our BEC revenue with triple digit year over year growth.
Little Red Book related revenue also achieved a triple digit growth from a low base, showing good potential to become another growth driver for BEC. We believe that these 2 live streaming and content based platforms not only provide brands with a new sales channel, but also allow them to conduct more effective brand marketing to build their brand image. In addition to our offerings on Douyin and Lipo Redbook, we further enhanced our services in digital marketing, IT system, and logistics, underpinned by our recent investments in data and technology. During the quarter, we engaged with a large FMCG client to revamp its order management system. In terms of logistics, we onboarded a world leading outdoor brand to provide a comprehensive B2B logistics and warehousing solution in China.
Our expansion of service capabilities helps us to extend and strengthen our relationship with existing clients and provides us with a competitive edge when acquiring new clients. As a result, our new business development efforts delivered our new business development efforts delivered strong performance with over 30 new wins this quarter. Our existing client renewal rates reached a historical high at 95% in the first half of this year, ensuring our future revenue stability and potential growth. Now let's turn to product sales business. During the quarter, BEC's product sales business has reached the end of our rationalization process, with only a single digit decline year on year.
The revenue was impacted by weak performance of the small appliance and electronics category during the 6/18 campaign, which was offset by strong performances in the beauty and healthcare categories. We also continued to add new brands under the exclusive distribution model, where we enjoyed a higher gross margin with full control over sales and marketing activities. This quarter, we signed an agreement with the UK Kitchenware brand Joseph and Joseph to become the exclusive distributor in China. Overall, our exclusive distribution brands have achieved good momentum in the initial phase and we anticipate further improvement in revenue and profitability following the ramp up period. Lastly, to enhance bottom line performance, we continue to drive cost optimization and efficiency improvements through Lean and 6 Sigma projects.
This quarter we rolled out 6 Sigma trainings to more frontline staff, combined with upgrading our Lean operation system and increasing the adaptation of AIGC tools. We also completed a project to integrate our business processes, systems, and operations among our group companies, including the integration of the newly acquired location business. In 2024, we expect to complete over 100 Lean and 6 Sigma efficiency projects, which are projected to deliver a financial benefit of more than RMB20 1,000,000. In the first half of this year, we continued our strategic plan to turnaround the BEC business and successfully delivered financial performance in line with our expectations. We are confident that this strategy will help us achieve our full year target and transform the BEC business back to growth in a sustainable and profitable manner.
Now I will pass to Ken for an update on BBM.
Ken Huang, Chief Financial Officer of Baozun Brand Management, Baozun: Thank you, Tim, and thank you all. It's my great pleasure to speak with you. Please turn to Slide 7 for additional updates on BBM. During the Q2, weak consumption segment led to a double digit decline in retail traffic, particularly in fashion apparel segment. Despite the headwinds, we advanced our localization strategy by fine tuning the customer experience, improving commercial rates, and expanding our offline network.
We also implemented a cost optimization initiatives to further reduce expenses. As a result of these efforts, we were able to narrow BBMs total revenue to a 9% year over year decline and achieved a 70% year over year improvement in our adjusted operating loss for the quarter. In the 18 months since taking over Give China operations, we have embarked on our strategy to move away from perpetual discounts by enhancing product design, segmentation and the supply chain efficiency. This quarter we reached our core categories such as T shirt by introducing functional features such as quick dry, cooling and the sweater absorption. Overall, despite the weak consumption environment, we maintained a healthy gross margin of 52.3% for the quarter.
We also accelerated the pace of our offline network expansion by opening 9 new stores, resulting in net increase of 2 stores and bringing our total to 126 stores. In addition to opening new locations in Tier 1 cities such as Shanghai and Guangzhou, we also entered several new Tier 1 and Tier 2 cities, including Changsha, Xi'an, Shenyang and Guiyang. Leveraging insights gained from traffic and the consumer feedback, we have continued to refine our store experience and the site location tactics. We focused on quality neighborhood locations and high traffic areas, with an average new store size of 500 to 600 square meters and a higher store inventory capacity to increase sales efficiency. Additionally, we introduced an expansion strategy in collaboration with local partners in 2nd tier cities, allowing us to leverage local resources and enhance investment efficiency for further expansion.
The new store openings have exceeded our expectations. It's encouraging that the new stores in Guiyang Dolphin Plaza and the Shenyang Zhui City are generating unit sales and profits higher than average. The early success of these stores also boosts our confidence in market potential of these emerging locations. We aim to continue strengthening our presence, tapping into new markets and capitalizing on emerging growth opportunities. Overall, we are on track with our target to open more than 50 stores for full year 2024.
After accounting for our proactive optimization and the natural retirement of some existing leases, this expansion will increase our offline network by more than 5% in space footage compared to the end of last year. Recently, we have also deepened our interaction with Gap Inc. And developed plans to better leverage the brand's upward trend and the global resources across product development, supply chain, merchandising and marketing. Both sides see positive long term opportunities for casual style in China and we aim to closely collaborate to balance our localization efforts with Gap's global themes. Our store displays now emphasize categories and the stylish outfits to create a leisure themes, highlighting Gap's 3 key categories, denim, khakis and sweatshirts.
I'm happy to report that despite the current macro challenges, our fine tuning initiatives have led to positive sales growth in August With the improved customer experience and the growing contribution from new stores, we expect our top line will return to growth in the second half of twenty twenty four. In summary, as we enter the next phase of our BBM journey, our focus has expanded to include the top line growth while safeguarding margins. Although we have observed a slower recovery in consumer sentiment, we remain committed to executing our strategic plans. Our goal is to build a profitable business that appears to mass market families in China by delivering localized products that align with GAAP DNA of casual and quality. We invite you to follow our progress.
That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q and A session.
Conference Operator: Thank you. We will now begin the question and answer session. The first question comes from Thomas Chong with Jefferies. Please go ahead.
Analyst: Thanks for taking my question. My question is about the recent consumer sentiment and expectations for the Tmall and the non Tmall. So and how do we see the competition of e commerce segment in the second half of the year? And any thoughts on the upcoming W11? Thanks.
Ase Yu, President of Baozun E-Commerce, Baozun: Okay. Thank you for the question. And I think first of all, from the first half of the year, we have seen a recovery in terms of the Tmall growth compared with last year. Although Douyin is the growth rate is slowing down, but it still have a double digit growth. And we think this trend will continue through to the second half of the year.
And another trend we have seen is the emergence of the true omni channel operation for e commerce. So for example, some potential channels like the Little Red Book or Kuaishou, they all attract more attention from the brand. And a big proportion of our brand is operating on a full channel basis online instead of 1 single channel. For 11, what we anticipate is the 11 will start earlier than last year and the duration will be longer based on our experience in the 618. And also the planning is becoming more complex which creates a value added opportunity for Baozun to help our brand partner to be successful.
So, internally, we have already started the planning process for Double 11 and we think with our help, we can replicate the good performance we have delivered in 618.
Vincent Qiu, Chairman and Chief Executive Officer, Baozun: Thank
Conference Operator: you. The next question comes from just one moment. Jarvis Ying from Citigroup (NYSE:C). Please go ahead.
Jarvis Ying, Analyst, Citigroup: Good evening, management. Thanks for taking my question. Congrats on the solid quarter. And I have two questions. The first is that recently we have seen some e commerce platforms shifted from price competition to GMV growth.
Does this trend influence the advertising strategy of the brands operated by Baozun? And my second question is that we have seen a good performance of Gap Global this year. So can management share some details about the future trend of Gap Fashion Design and will Baozun consider introducing more global style? Thank you.
Ase Yu, President of Baozun E-Commerce, Baozun: Okay. So for the first one, in terms of the returning to the GMV focus, I think that's a good opportunity for Baozun because for the large scale brands we operate, that's a good news for us as all the platform, especially Tmall now give more attention to the big brands, the big international brands we operate. So we think that's a positive sign for us. Now, about the gap, can I pass on to Ken?
Ken Huang, Chief Financial Officer of Baozun Brand Management, Baozun: Yes, it's true. We also see Gap Global's performance is quite well and we also see Gap is investing a lot on their new design products and the marketing. So we do plan to increase our global adoption of Gap Global products, but we will do it season by season based on the market feedback. So to make sure our strategy change will have a positive impact to our financials. So I think it includes 3 parts, Onewa.
First is we will adopt GAAP's global product which is successfully launched in the global market and which is also has a very good cost. And the second is we will adopt their designs, but we use localized fabrics, fittings and the details such as color trend in order to meet Chinese customers' needs. And the third one is we will continue to expand our self development on some special categories and also in local IP collaborations in able to maximize our self design product sales potential. Thank you.
Jarvis Ying, Analyst, Citigroup: Thank you.
Conference Operator: The next question comes from Wang Jiao with CICC. Please go ahead.
Analyst: Hi. Thank you for taking my questions. I have two questions. The first one is, we have observed that you have been engaged in share repurchase in the recent quarters. Could you please share your outlook on the future share repurchase and long term plans for shareholder return?
My second question is could you please share some new changes in the services provided to friends partners such as the progress of creative content to commerce? Thank you.
Vincent Qiu, Chairman and Chief Executive Officer, Baozun: Thank you for your question. This is Vincent. I'll take the first one and then Asar will answer the second question. Yes, we are continuing doing the share repurchase And in the visible future, we will maintain this pace and trying to secure and give the a good chance for the investors for their benefits. And in the future, of course, the shareholders benefit is also very important for us.
So, not only the share repurchase, but the other things like we will strive for better performance of the performance of each category of our business and try to turn around the whole business to positive this year and also the BBM holistically next year. So, all this we think are very essential parts of shareholder returns. And also we will develop the synergy between the business units like BBM and also DEC are trying to innovatively deliver some new services and solutions for existing 1.5, 400 clients to create new value for them in the future. So, that is basically our thoughts in delivering good return for shareholders. And then, Oscar for the second one.
Ase Yu, President of Baozun E-Commerce, Baozun: Okay. For the second one, as you have seen, we delivered a 10% year over year growth on the service revenue. And that was underpinned mainly by improving the service quality and also expanding the service scope we're providing to our clients. So, as you mentioned, the client is moving to an omnichannel kind of model at the moment. And both in way power data and technology, we can provide a true omnichannel solution, including all the different channels and how to operate on those channels.
And that is greatly appreciated by our clients, especially at the current moment that increased competition from all the channels and making the e commerce landscape very complex. And our clients need us to help them through the service to drive the sales online. In terms of the creative content part of the business, for this quarter, we have successfully integrated location business which we recently acquired. And the outcome is very good because we combined the creativity and innovation of a small entrepreneurial business like location weighs the very efficient foundation of Baozun Group as a whole to really unleash the potential of the location business. And that half of the business has grown triple digit during this quarter and our outlook is very strong on that part.
Ken Huang, Chief Financial Officer of Baozun Brand Management, Baozun: Thank you. Thank
Conference Operator: you. Thank you. The next question comes from Alicia Yap with Citi. Please go ahead.
Analyst: Hi, thank you. Good evening, management. Thanks for taking my questions. Two questions. First is, can management comment and share if there's any of these reasons intensified competitive landscape among the e commerce player in China might have affected or even benefited Baozun, given our relatively more diversified exposure to both the Tmall and the non Tmall channels?
And then second question is, can management also share your view in terms of some of the latest consumption trend into the second half, especially if wondering if you have seen the improvement in the Gap offline store traffic? And then for your online business, based on your conversation with the brands, just wondering how do you expect your digital marketing solution revenue and the warehousing business might trend in the second half? Thank you.
Ase Yu, President of Baozun E-Commerce, Baozun: Okay. Thank you, Alicia. It's Arthur. I will take the first half of the question and then I pass on to Ken to comment on the gas part. I think it's a good question in terms of the intensified competition landscape impact.
I would say intensification definitely will lead to some issues like higher return rate and more discount being offered. On the other hand, those change and competition has definitely offered an opportunity for Baozun. And I think the impact is more positive than negative for a few reasons. Number 1, I think the omnichannel capability for Baozun is our strength and is supported by our investments into the technology over the last 10 years. And that competitive advantage is very difficult to be replicated by our competitor.
So that we believe under this kind of situation, we will stand out as a good company to offer a good service to our client. And secondly, given the different other easy platforms start to compete with each other and they introduce a lot of new rules and new ways of operating, the advisory role of Baozun is becoming more important to our clients. And we can use this opportunity to work more closely with our clients to define their overall easy strategy instead of just to be an operator for 1 single channel. And thirdly, this also strengthens Baozun's position in the middle of the brand and platform. And in the first half of the year, we have been approached by quite a few of the EC platform who wants to collaborate with Baozun to innovate together for the client.
They would like to know what the client has really need. And given the more than 400 clients we've been dealing with, that's giving us a good position to work closely with the platform to innovate together. So because of this, I think the competition definitely creating a lot of challenges, but I think there's more opportunity for Baozun. Thank you. On that one, I will pass to Ken.
Ken Huang, Chief Financial Officer of Baozun Brand Management, Baozun: Okay. For the traffic question, actually it's improving, especially in August. We are going to have a sales Y o Y increase in August and we also expect for the second half, we will have a Y o Y increase in the GAAP sales. I think talking about this traffic question, I think it's quite different in different cities, different malls and the Ole and the destination neighborhood stores. So, I see the opportunity to get because compared to other competitors, Gap still have a big room and flexibility to optimize our channels.
So, we will continue to take advantage of this opportunity in second half to optimize our store locations, make sure we are opening our new stores in good locations with good traffic and also help our sales growth in the next year. Thank you.
Conference Operator: The next question comes from Jack Ho with Apti Securities. Please go ahead.
Jack Ho, Analyst, Apti Securities: Okay. Thanks management for taking my question. I have a question also regarding the computation. So with intensified competition in e commerce sector, we have seen e commerce platforms are continuously paying efforts on merchant support and efficiency improvement. For example, the launch of marketing tours of Quanjian Tui on almost all e commerce platforms.
So what's management's view on Baozun's core competitiveness and a barrier in the next stage development? Thank you.
Ase Yu, President of Baozun E-Commerce, Baozun: Okay. Thank you for the question. It's Arthur here. I think there are a couple of areas we would like to build our competitive advantage. First one is our focus on our customer, our clients.
So basically, since 20 22, we launched the NPS program, the net promote score program with the aim to offer a good service, a stable service to our clients. And as a result, we have done a good job in terms of improving the renewal rate of our clients. At the same time, we enhanced our service offering to our customers, underpinned by our investments in technology and data. So that, for me, is our core competitiveness under the current kind of the market situation. So that's number 1.
Number 2 is looking internally, we start to launch a lot of lean program aiming at improving our operation efficiency. That will give us a lot of competitive advantage from a cost perspective. On one hand, we offer a good service. On the other hand, that service is being offered in affordable and good value from a financial perspective to our clients. And that gave us an ability to acquire more market share under the current environment.
And finally, the third one is our recent push into the high quality product sales business and the introduction of the exclusive distribution business model. And we believe the exclusive distribution model can give us more scope to operate and to leverage our strength in terms of e commerce and marketing and digital. And we would like to operate as a digital enhanced distributor for the global brand in China. And given the current situation in the market, we believe this will be another driver for our business. Thank you.
Conference Operator: The next question comes from Johanna Ma with CMBI. Please go ahead.
Analyst: Thank you. Hi, management. Thank you for taking my question. Two questions here. The first one is about, can management share some updates on your observation of QTD consumption trend and your outlook for the second half?
Will there be any adjustments on our business strategy related to this? And another question is for our BBM business. How should we think about the loss reduction trajectory amid the current macro backdrop? And regarding the long term growth strategy, can management share with us your investment plan or key priorities on investment to drive for long term growth? Thank you.
Ase Yu, President of Baozun E-Commerce, Baozun: I will answer the first one and I will pass on to Ken to comment on the second one. I think the first one in terms of the trend for the core consumption, I mean the overall trend is still weak due to the cautious kind of the spending by the overall consumers and also that's being impacted by the wider macroeconomic environment. But having said that, I think when we're looking at the 6/18 performance, the brands we supported to carefully planning the campaign and can also steal a good growth momentum. So for example, the brands we operated during the 6/18 has delivered a double digit growth year over year. So even though the market is a little bit soft, but if we do one is a little bit soft, but if we do well, we can still find opportunity to grow.
Ken Huang, Chief Financial Officer of Baozun Brand Management, Baozun: Okay. First, second question, regarding the current macro back job, I think from our point of view, we see actually an opportunity for Gap's business because Gap is targeting mass market. And currently, we see the mass market trend is still okay. And as mentioned before, it's also an opportunity for us to optimize our channels, our stores. So, on one hand, we will continue to keep our cost optimization actions.
And on the other hand, we will still continue to improve our products including adopting more products from Gap Global's successful experiences and invest our brands in new Tier 1 and the 2nd tier cities to boost our sales in our target market and the target audience. So we are optimistic on our progress of Gap's financial targets, 3 years business plan.
Vincent Qiu, Chairman and Chief Executive Officer, Baozun: Yes. For the long term strategy and also the investment thoughts, this is Vincent to share some of our thoughts. Despite the challenge for the macro economy, I think based on solid efforts, our long term growth will be driven by 3 things. First is the BEC's growth and then BBM's growth and then synergy in between. So we are happy to see that although the environment is very challenging, but BEC in the first half already turned back to growth.
So very happy thing to see. And then we see that BBM here is also very confident to be back on track on growth for the second half of the year. So it's a very good thing to see. And for the key priorities for investment, I think there are several keywords. First one will be cautious because we need to make Gap and Hunter just to acquire brands to be very successful.
And then the macro economy is not very optimistic in visible second half of this year. So we need to be cautious. 2nd, cautious doesn't mean do nothing. We're still looking for good opportunities. Yes, but we will do it with caution.
That is the second one. And the third thought will be we need to maintain the very healthy financial positions of Baozun as a group because this is very important in this today's environment. And number 4 is that we need to have a very strong capability because when we want to invest, we need the financial resources, but we also need a very strong team to integrate the Target (NYSE:TGT) business into our core business just like we did successfully for location integration. So, that is the key ideas when we think about the long term growth and also investment strategies. Thank you.
Analyst: Thank you.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Wendy Sun for any closing remarks.
Wendy Sun, Senior Director of Corporate Development and Investor Relations, Baozun: Thank you, operator. On behalf of Baozun management team, we would like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us today. This concludes the call.
Conference Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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