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|Baozun Releases 2017 Chairman Letter|
We have just had another great year! Before I go into details, let me offer my thanks and appreciation to all of my colleagues at
2017 marked the start of Baozun’s second decade in business. It also marked a tipping point for online retail in
The Market Opportunities
China’s Internet industry had a hyper-active year in 2017. Among the top 10 Internet companies globally, five come from
Sustained rapid growth of e-commerce
Online retail grew by 28% to
One of the biggest tail winds is the long-term high-speed growth of the overall market. In the short term, it strengthens our ability to generate revenue and profit growth, and creates a supportive environment for us to improve the efficiency and quality of our management and technology deployment. In the longer term, with this growth, we expect we will have more resources to dedicate to new business models and technology, while creating a sustainable and solid base for future development.
Observations on the market dynamics
If we take a closer look, there are fascinating changes and dynamics taking place behind the scenes in this rapidly developing market.
The entire e-commerce market in
Average Internet usage by consumers in
For smaller brands and merchants, mature infrastructure makes it much easier for them to do business online. Opening an online store is no longer very difficult. Most of them have the ability to operate online stores and provide value to their customers. They are both cost-sensitive and flexible, and they are keen for traffic. They can move quickly to fulfill consumer needs and will contribute to the rapid growth of the market in the future.
We firmly believe that big data and advanced technologies and systems are the future of the offline retail industry. We continue to invest in developing cutting-edge technologies so that our brand partners will always be able to rapidly benefit from their roll out. Big data and customer relationships are playing increasingly important roles in e-commerce, and their combination with artificial intelligence (AI) can help reduce much of the cumbersome work needed to maintain the back end of e-commerce platforms, and help brands create value for their customers and increase competitiveness.
Double 11 Shopping Day
China’s e-commerce has become a huge marketing and promotional platform which heavily influences market trends. For us, despite the many challenges, this era brings an opportunity to quickly organize and deploy resources to benefit from the growing volume of transactions.
Among China’s promotional sales periods, the biggest of all is Double 11, which has taken place every
In just eight minutes, total order value exceeded the Double 11 number for 2015, which was over
Our edge and value come from our revolutionary end-to-end solutions
Leading brands today expect much more from their e-commerce partners than what Business Process Outsourcing (BPO) providers and pure e-retailers can offer. They expect their partners to provide omni-channel solutions that include the establishment of independent brand online stores; fulfillment services; Online to Offline (O2O) services; connected marketing and retail strategies; supply chain restructuring, optimization, and operations; new generation digital operation platforms; online sales forecasts and replenishment; and technologies such as data analytics and AI. These needs require solution providers to step up their game. In this rapidly developing and fast-changing market, we need to always be conscious of the future and take preemptive action, both for ourselves and for our clients. The brands that work with us expect world-class retail technologies and capabilities.
Since day one, we have dedicated ourselves to the needs of our brand partners. We work closely with them to ensure our direction and thought processes are tightly aligned with their needs, and we continuously invest in supply chain technologies, IT systems, and innovation. In recent years, our investments have focused on in-store IT systems for next generation brands; O2O strategies; inventory integration and digital marketing. These services have proven to be visionary and effective. Our efforts not only ensure the success of our brand partners, but also provide benefits and showcase brand e-commerce to our industry peers.
We have always adopted a brand-oriented philosophy and approach as we work to continuously improve and innovate our capabilities both vertically and horizontally. Among the top 1,000 brands,
Clear leadership in logistics and supply chain management
Baotong, our wholly-owned warehousing and logistics solutions subsidiary, provides market-leading delivery services and has become one of the foremost brands in the industry. In 2017,
Innovation and technology development in Software as a Service (SaaS)
The Baozun Innovation Center was established in mid-2017. The Innovation Center is leveraging our research and development capabilities to develop new technologies, including computer vision, machine learning and data analytics, which meet the needs of our engineering teams and brand partners. As the foundation of our future technological development, the Innovation Center is creating new dimensions to e-commerce. We are also leveraging the Baozun Innovation Center as a bridge between us and universities and research institutions.
Improvements in digital marketing
We made substantial progress in enhancing our digital marketing capabilities in 2017. Our digital marketing team is stronger than ever, as a result of recruitment and restructuring. We saw improved service revenue, enhanced capabilities, and new solutions in customer relationship management (CRM) and customer experience management (CEM). A number of our successful business cases in which our digital marketing capabilities were applied attracted significant attention from the industry and helped us win a number of awards, including the
Key Strategies for 2018
Invest more in technology to serve clients better
We will invest more in technology, including upgrading our core e-commerce system, internal management systems, next generation business service systems for brands and merchants, and innovative value-added systems based on data analytics and artificial intelligence (AI).
Strengthen the ability to serve large and medium sized customers
We intend to provide more software services to our large and medium-sized brand partners, in addition to retail operations, logistics, IT and digital marketing. These new services will leverage our deep industry experience and knowledge in technological innovation. We believe our services will help brand partners to strengthen their leading market positions and support the evolving transformation of their businesses.
Serve more clients
With our more than 10 years of brand e-commerce experience, we have been able to transform our experience and knowledge into valuable software products, platforms, services and solutions, providing them to not only large, medium, and small-scale brands, but also merchants. A larger base of clients will help to reduce the costs of technology, and increase scale and profitability.
Strengthen technology innovation and commercialization
We will continue to invest in technology and innovation, which can be seen in the number of patent applications for which we apply. We released several new software products and modules and will continue to do so in the future. In 2018, we are especially focused on commercialization and promotion of these products and services to a larger group of clients.
We remain firmly committed to being one of the best employers. We are working hard to build a better overall office environment, improve our administration system, make our compensation packages more equitable, and provide greater career advancement by giving employees access to new training opportunities. In addition, our management team is constantly striving to become more active and responsible.
Through our persistence and hard work, we hope to increasingly benefit from the investments we have made and the tremendous opportunities that are being created by the market we are in.
Thank you again for your support of
Safe Harbor Statements
This letter 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
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