Baozun Stock

Baozun Inc. (Baozun) operates as a leader and a pioneer in the brand e-commerce service industry and a digital commerce enabler in China.

The company empowers a broad and diverse range of brands to grow and succeed by leveraging the company’s end-to-end e-commerce service capabilities, omni-channel coverage and technology-driven solutions. The company helps brands execute their e-commerce strategies in China. The company serves global leaders in their respective verticals, such as Philips, Nike and Microsoft.

The company is devoted to innovation in order to maintain and strengthen its market leading position, both in the company’s business model and technology stack. The company’s comprehensive end-to-end service capabilities, along with the company’s in-depth industry knowledge and integrated technology platforms and solutions, enable different brands to plan and execute e-commerce strategies efficiently. With the strong compatibility of the company’s IT systems, the company is able to provide omni-channel solutions across official brand stores, online marketplaces, such as Tmall, JD.com and Pinduoduo; and social media channels, such as WeChat Mini Programs and RED (Xiaohongshu), as well as emerging live streaming and short video platforms, such as Douyin and Kuaishou. The company also helps its brand partners operate on other global marketplaces, such as LAZADA, SHOPEE, HKTVMALL and Yahoo Super Mall.

Leveraging the company’s technology capabilities, the company has continuously expanded and enhanced the company’s service offerings to brand partners throughout the company’s history. The company’s technology stack can support all categories of products and is consisted of three layers:

Front-end systems, including various cloud-based omni-channel technology solutions, customized SaaS (software as a service) tools and efficiency-oriented applications.

Middle-end systems, including business middle platform and data middle platform.

Back-end infrastructure, including proprietary Baozun Hybrid Cloud with strong computing, storage and network capabilities.

Based on the different needs of the company’s brand partners, the company operates under three business models: distribution model, service fee model and consignment model. The distribution model primarily generates product sales revenue and the other two models generate services revenue.

Business Models and Solutions

Through the company’s integrated brand e-commerce capabilities, the company provides end-to-end brand e-commerce solutions that are tailored to meet the company’s brand partners’ unique needs. The company leverages its brand partners’ resources and seamlessly integrate with their back-end systems to enable data analytics for the entire transaction value chain, making the company’s services a valuable part of the company’s brand partners’ e-commerce functions.

The company is a Tmall ‘six-star’ e-commerce service partner, and has been recognized as the highest ranking Tmall e-commerce service partner since Tmall introduced the grading system, based on a suite of performance measures, including operational capabilities, brand development capabilities and service ratings. In addition, the company had another 13 certificates awarded by Alibaba platform. In 2022, the company was also awarded as ‘excellent online service provider’ and ‘independent service provider’ of Tencent Cloud Mall Excellent Partner in Tencent Intelligence Retail Qianyu Program, and a 2022 Brand Service Provider by Douyin Platform.

The company’s e-commerce capabilities encompass every aspect of the e-commerce value chain, including IT solutions; online store operation; digital marketing; customer service; and/or warehousing and fulfillment.

Depending on each brand partner’s specific needs and characteristics of its product category, the company’s brand partners utilize one or a combination of the company’s solutions under one or a combination of the company’s business models: distribution model; service fee model; and consignment model.

The company derives revenues under its business models as follows:

Product Sales Revenues: The company derives product sales revenues primarily through selling the products that the company purchases from the company’s brand partners and/or their authorized distributors to consumers under the distribution model.

Services Revenues: The company derives services revenues primarily through charging brand partners and other customers fees under the service fee model and consignment model.

Business Models

The company’s brand partners value the company for its integrated e-commerce capabilities, dependable services, deep category expertise, market insight and ability to innovate and adapt to the fast-changing e-commerce market. Depending on each brand partner’s specific needs and characteristics of its product category, the company provides solutions to its brand partners under one or a combination of the company’s business models: distribution model, consignment model and service fee model. There is no brand partner to which the company offers all three business models.

Distribution Model

Under the distribution model, the company selects and purchases goods from its brand partners and/or their authorized distributors and sells goods directly to consumers through official brand stores or official marketplace stores operated by the company. Therefore, the company’s brand partners and/or their authorized distributors are deemed as the company’s suppliers under the distribution model. The company primarily generates product sales revenue under this model. In order to generate product sales, the company utilizes every aspect of its e-commerce capabilities. Specifically, the company utilizes its IT and online store operation capabilities to set up and operate online stores, including brand stores and marketplace stores. The company utilizes its warehousing and fulfillment capabilities to store the goods that the company purchases from brand partners and delivers these goods to the company’s consumers who purchase these goods.

The company utilizes its customer service capability to facilitate sales and ensure the company’s consumers are satisfied. In order to increase the company’s product sales, the company utilizes its digital marketing capabilities to boost site traffic and transaction volume. When the company operates stores under the distribution model, the sites will typically indicate that Baozun is the seller of the products and, when the company delivers goods to its consumers, the invoices and tax receipts will typically bear the company’s name instead of those of the company’s brand partners. As the company assumes inventory ownership under the distribution model, other than quality issues, the company generally is not allowed to return unsold inventories to the brand partners and/or their authorized distributors.

The company adopts the distribution model primarily to cater to specific needs of brand partners for certain product categories, such as appliances and beauty and cosmetics. The company implements strict screening procedures utilizing the company’s strong data analytics capabilities in analyzing product category data and historic SKU data of brand partners and impose high thresholds on the brand partners selected for the distribution model. Based on the screening and evaluation, the company carefully selects competitive, reputable and reliable brands with low inventory risk and long-term potential for the distribution model. The company chooses to adopt the distribution model when the benefits of such model outweigh the potential risks in inventory management.

Service Fee Model

Under the service fee model, the company provides one or more of the following services in exchange for service fees:

IT solutions, including consultations with brand partners, IT infrastructure setup and integration, and online store setup and design;

Online store operation , including merchandising, site content management and store event management;

Digital marketing , including marketing campaign planning and media services, social marketing, creative contents and big data support; and/or

Customer service, including pre-sale and post-sale customer services.

The company’s brand partners are deemed as its customers under the service fee model. The company primarily generates services revenue under this model.

Consignment Model

Under the consignment model, in addition to the above services the company may offer under the service fee model, the company also provides warehousing and fulfillment services, whereby the company’s brand partners stock their goods in the company’s warehouses for their own future sales and the company is responsible for managing storage and delivering goods to consumers. In contrast with the distribution model, however, the company does not take title to the products, does not have any latitude in establishing prices and selecting merchandise, has no discretion in selecting suppliers and generally is not involved in determining product specifications. The company may also facilitate its brand partners’ online sales of goods as an agent and charge the company’s brand partners commission fees based on a pre-determined formula.

The company’s brand partners are deemed as the company’s customers under the consignment model. The company primarily generates services revenue under this model.

End-to-End Brand E-Commerce Capabilities

The company’s integrated brand e-commerce capabilities enable the company to provide end-to-end solutions that encompass every aspect of the e-commerce value chain, including IT infrastructure setup and integration, online store design and setup, online store operations, visual merchandising and marketing campaigns, customer services, warehousing and order fulfillment. The company utilizes its capabilities and tailor the company’s solutions to fulfill the specific needs of each brand partner. For each brand partner, the company first hold consultations to determine its e-commerce needs and development plans. Each brand partner may then elect to use the company’s full e-commerce capabilities or select specific elements of the company’s capabilities that best fit their needs. Over the course of the collaboration, many brand partners appreciate the value the company bring to them and gradually expand their engagement with the company to a broader set of solutions.

IT Solutions

With the company’s expertise in technology infrastructure and systems, interactive page design and the company’s deep understanding of Chinese consumers’ online shopping habits, the company provides consultations to its brand partners, helps its brand partners set up e-commerce sites that enhance their brands and cater specifically to local consumers. The company provides proprietary e-commerce technology, which can be customized to and integrated with the company’s brand partners’ existing operational back-end systems in a convenient and cost-effective manner.

Where necessary, the company also helps its brand partners set up or improve the suitability of their own IT infrastructure for e-commerce operations. The company has made significant investments and intends to continue to invest in developing the company’s proprietary technology platform to deliver solutions that aim to address comprehensive e-commerce needs across different sales channels for the company’s brand partners. The company’s technology systems and applications facilitate the company’s brand partners’ digital transformation throughout their e- commerce value chain: from storefront sales to backend fulfillment, from user acquisition to customer lifecycle management, from achieving operational efficiency to gaining industry insights. The company’s IT services enable the company’s brand partners to quickly adapt to the local e-commerce market and effectively service online shoppers in China without the costs associated with establishing and maintaining local infrastructure and capabilities on their own.

In addition to establishing the infrastructure for system integration, the company’s designers help its brand partners design online stores that enhance their brand image and online presence. The company’s web developers also incorporate features and functions familiar to Chinese consumers to facilitate conversion of site visitors into paying consumers. The company’s Cloud-based System, a proprietary operations system on the company’s cloud-based platform, enables efficient setup of official brand stores and official brand WeChat Mini Programs for the company’s brand partners. It allows the company to efficiently build up comprehensive functions necessary for an online store, such as real-time data exchange, digital marketing, order management, product recommendations, membership management, payment management, as well as O2O functions.

Online Store Operations

The company staffs dedicated operations teams with relevant industry expertise and brand- specific knowledge for stores the company operates and maintains proprietary technology infrastructure and systems for online store operations. The company’s operations teams closely monitor and are responsible for all activities and the daily upkeep of online stores. The functions of the operations teams and systems broadly fall into three categories: merchandising, site content management and store event management.

Merchandising: Each operations team has merchandising staff in charge of maintaining an appropriate level of inventory for online stores by procuring products to be sold on the company’s brand partners’ online stores and forecasting quantities to purchase based on expected demand. The company’s operations teams also assist the company’s brand partners in launching products, managing product listing, and processing sales orders in online stores. The company manage sales orders through the company’s proprietary OMS that integrates with the company’s other technology platforms to ensure smooth online transactions. The company’s merchandising staff monitors store sales through periodic sales reports.

Site Content Management: In addition to providing design services during the initial store setup, the company periodically updates the content in stores the company operates in order to maintain the appeal of the online stores. The company has a design services team that helps ensure that brands’ online stores are artfully presented, and refreshed in keeping up-to-date with the company’s brand partners’ latest advertising campaigns. The company’s design services team regularly works with the company’s brand partners in producing the most updated digital content, including product photography, site banners and other promotional content.

Store Event Management: The company’s store event management system monitors and identifies events and activities on e-commerce marketplaces or other channels, and systematically manages application and registration procedures in batch processing, including event consolidation, goods identification and data unification, and visual content organization and upload, to improve efficiency and minimize errors. With this robust system, the company was able to effectively manage the number of employees engaged in the company’s store event management functions.

Digital Marketing

The company’s omni-channel brand e-commerce operation capabilities enable the company to effectively leverage diverse data to conduct results-driven marketing planning and execution. The company has developed multi-faceted digital marketing capabilities and are able to effectively design and execute marketing plans across various online platforms, including official marketplace stores, brand stores, as well as other major and emerging online media and channels. The company’s digital marketing service can also be provided independently from the company’s brand e-commerce service and is available to the company’s non-brand partners, which serves as an additional brand partner acquisition channel.

As a solid partner to different platforms, the company also received agency certifications from reputable marketplaces and platforms. For Alibaba Group, the company has been the 6 star service provider for Alimama solution, data ISV provider, innovative engaging ISV provider, as well as the leading pioneer service provider with Lingyang. Being able to be recognized as the key marketing partner on various different marketing categories, the company will enhance its in-depth understanding of consumer behavior, increase effectiveness of the company’s digital marketing service, as well as further strengthen the company’s advantage in e-commerce operations. For JD, the company is also the official media partner as well as data ISV partner. The company has been working closely with JD to provide a holistic engaging CRM mini-program solution which are well received by various clients. For Douyin, the company became their certified ISV and was awarded as the Industry Pioneer. Finally, the company is the only Tencent partner who received both excellency on eCommerce operation and technical ISV.

The company’s digital marketing capabilities include marketing campaign planning and media services; social marketing; creative content; and big data support & CRM.

Marketing Campaign Planning and Media Services: The company provides both marketing campaign planning and media services to the company’s customers. The company’s unique offering on integrated commerce marketing campaign is the company’s data insight to its target audience, as well as the company’s in-depth knowledge of their behavior. Based on that determination, the company create a tailored customer journey and communications engagement campaigns to have the most impact on the targeted audience. The company’s media planning capability is based on achievable ROI as well as brand building potential.

The company’s diversified media services on major digital platforms include but not limit to search engine optimization, brand ads, programmatic ads and feeds. For example, based on the company’s understanding of the methodologies and mechanisms adopted by different platforms, the company customizes the content of the stores the company operates to achieve high rankings. Where appropriate, the company also helps its brand partners to negotiate arrangements with platforms to use new products that can achieve higher ROI. To optimize the company’s efficiency and effectiveness of the company’s media solution, the company developed a media tool call Yunbian. Yunbian can help to create media plans, as well as reports that can significantly help the company’s media professionals to do media placement. Yunbian is now connected to Ali, Tencent and Jingdong.

Social Marketing: Based on the company’s experience, purchase decisions of Chinese e-commerce consumers are heavily influenced by recommendations from family, friends, key opinion leaders, key opinion consumers and colleagues who are considered to be trusted information sources. The company is able to provide tremendous value to the company’s brand partners by helping them formulate social marketing strategies and campaigns that encourage consumers’ engagement with their brands and drive consumers’ desire to purchase their products.

The company identifies preferred social media platforms for its brand partners then open and operate accounts on these platforms for the company’s brand partners. The company creates and publishes contents on its brand partners’ accounts, and the company engages in dialogue with consumers who post on the company’s brand partners’ accounts. The company tracks visitors’ activities and analyze the impact of its social marketing outreach, and the company also facilitates interactive marketing through livestreams and short-form videos.

In 2019, the company was certified by Alibaba Group as an MCN partner. Starting 2020, the company became an authorized marketing partner of Douyin. The company has been closely following industry trends and remain on track to further expand the company’s services to include a wider array of comprehensive digital marketing solutions. These solutions include new initiatives such as live streaming, key opinion leader and key opinion consumer positioning to convert marketing power into sales results.

In addition, the company monitors and responds to comments about the company’s brand partners on internet forums and product review websites. The company helps identify key opinion leaders on these platforms and work with them in responding to comments about the company’s brand partners.

Creative Contents: The company provides its brand partners with the infrastructure and expertise for producing digital content to be used in their online stores. The company operates an in-house, professional photography studio in Shanghai to create digital product images for product features, promotions and advertising campaigns. The company’s production services range from pre-production work such as casting, art direction and styling to post-production editing and retouching.

The company has developed and utilized Yunzhuan, an AI-based automated content generator that identifies specifications of merchandise based on pictures of such merchandises using image recognition technology and automatically generates batches of promotional articles on such merchandises, which helps to reduce manual inputs and improve marketing efficiency. Yunzhuan can also do AI video editing that fits the fast-moving livestreaming environment to create product specific short video that can become social content to drive traffic.

The company provides live streaming services for brands on various platforms. The company’s services cover the planning and production of live and short video content. The company has a large and stable KOL resource to help brands screen high-quality influencers. Through data analysis, the company provides brands with merchandise strategies of live streaming. The mastery of the platform's algorithm logic enables the company to provide brands with refined live media placement services.

Big Data Support: The company works with platform to provide insightful analysis that can help brands to perform better on e-commerce. By apply these insights to create impactful marketing campaigns for the company’s brand partners which can refine their digital marketing strategies under a results-driven approach. The company has developed its own business intelligence software, which enables real-time analysis of transaction data across personal computers and mobile channels to make more targeted and insightful marketing recommendations to the company’s brand partners.

The company provides a one-stop CRM service from strategy to execution. The company’s CDP helps brands integrate member data from different platforms, form visual dashboards, and automatically generate intelligent analysis reports. The company provides customized member mini program planning, design and development for brands. The company tailors activities, content and mechanisms for brands that cover the entire consumer lifecycle.

Customer Service

Providing satisfactory pre-sale and post-sale customer services is one of the company’s top priorities. Consumers can contact the company through online chat, phone calls or emails. Pre-sale questions relating to product details comprise most of the questions the company receives from consumers, and an effective pre-sale customer service experience can encourage consumer purchases. The company also provides post-sale services to address questions like return and exchange. Consumers can access the company’s online representatives and service hotlines from 9 a.m. to 10 p.m. daily (except three days per year during the Chinese New Year holiday).

The company assigns its brand partners with dedicated brand customer service teams for pre-sale and post-sale customer services, who have undergone customer service training, initial and periodic examinations and targeted coaching sessions. In 2021, the company launched a proprietary intelligent customer service management system called ‘Service Anywhere’, or S-ANY, to unify workflow dispatching, training and resource management, and to improve consumer journey and ultimately to promote transactions. In 2022, the company further utilized S-ANY across the company’s multi-location regional service centers to increase efficiency.

Warehousing and Fulfillment

The company offers warehousing and fulfillment services under the consignment model. The company has established along the e-commerce value chain a robust logistics network and warehousing capacity to help ensure a smooth and positive shopping experience for consumers. The company’s WMS is customized to accommodate different needs in product specifications and can handle requirements specific to each of the eight product categories the company serves. In addition to fulfilling brand partners’ e-commerce orders, the company has launched additional value-added services to enrich the company’s warehouse and logistics service offerings, such as anti-counterfeit code protection, tailor-made packaging, B2B offline store fulfillment, and O2O integrated inventory management.

The company adopts a flexible outsourcing logistics model with several third-party logistic partners supported by the company’s robust and advanced WMS. The company partners with leading nationwide and quality logistics service providers to ensure reliable and timely delivery to over 500 cities across China through their network. The company is able to achieve next-day delivery in over 200 cities across China.

In 2021, the company further expanded its logistics network through its acquisitions of BolTone and BaoBest. The acquisition of BolTone has enlarged the company’s premium warehouse capacities and extended the company’s vertical coverage, such as fast moving consumer goods category and beauty and cosmetics category. This acquisition has also brought the company more customs declaration business and B2B business opportunities. The acquisition of BaoBest provides the company with integrated logistics and delivery resources in Suzhou region, helping the company to achieve regional cost advantage and increase customer stickiness. Once fully integrated, BolTone and BaoBest will help the company generate business synergies going forward.

As of December 31, 2022, the company directly operated 40 warehouses with an aggregate gross floor area of over 1,030,000 square meters in nine cities, including Shanghai, Beijing, Suzhou, Shenzhen, Guangzhou, Langfang, Chengdu, Wuxi and Jiaxing The company’s directly-operated warehouses fulfilled approximately 56.8 million outbound orders to consumers in 2022. The company’s warehouses cater to different product categories. In addition, the company collaborates with four third-party warehousing service providers and store goods in warehouses operated by them as of December 31, 2022, to better utilize warehouse resources and better serve brand partners’ needs.

With the company’s proprietary WMS, the company is able to closely monitor each step of the fulfillment process from the time a purchase order from a consumer is confirmed and the product stocked in the company’s warehouses, up to when the product is packaged and picked up by a logistics service provider for delivery to the consumer. Shipments from suppliers first arrive at the company’s warehouses. At each warehouse, inventory is bar-coded and tracked through the company’s WMS, allowing real-time monitoring of inventory levels across the company’s network. The company’s WMS is specifically designed to support a large volume of inventory turnover. The company closely monitors the speed and service quality of the company’s logistics service providers through consumer surveys and feedbacks from consumers to ensure their satisfaction.

Brand Partners & Brand Partner Development and Services

Brand Partners

As of December 31, 2022, the company provided e-commerce solutions to more than 400 brand partners primarily under service contracts with a term typically ranging from 12 months to 36 months. The company’s brand partners cover diverse product categories, including apparel and accessories; appliances; electronics; home and furnishings; food and health products; beauty and cosmetics; fast moving consumer goods and mother and baby products; and automobiles. Some of the company’s existing brand partners have had years of cooperation with the company and the company generated a significant portion of the company’s net revenue through the sale of products in the stores of these brands the company operates under the distribution model and provision of the company’s services to these brand partners primarily under the consignment model and service fee model. The company’s brand partners and/or their authorized distributors are deemed as the company’s suppliers under the distribution model and the company’s customers under the service fee model and consignment model.

Brand Partner Development and Services

Brand Partner Screening and Acquisition

The company has implemented a strict and methodical brand selection process. Based on the company’s screening guidelines, the company carefully selects prospective brand partners, choosing to work with those that conduct business in profitable or promising industries and product categories and with long-term potential. In addition, the company screens potential brand partners based on criteria, such as projected annual GMV and service fees, projected profitability, projected growth outlook and proposed duration of cooperation. The company also conducts due diligence reviews on the company’s prospective brand partners’ qualifications, including whether they hold the proper business operation licenses and safety, sanitary and quality certifications, and trademark registration certificates and license agreements in relation to the branded products.

The company strategically focuses on brand partners in product categories that will help optimize the company’s revenue mix and improve its profitability. The company intends to grow its business by adding new brand partners into the company’s brand partner portfolio and cross sell the company’s services.

The company periodically conducts reviews on its brand partners based on category mix, profitability, growth outlook and other criteria. The company has dropped a minority of brand partners to optimize the company’s brand partner portfolio from time to time.

Brand Partner Services Team

The company typically assigns each brand partner a dedicated brand partner service team to offer individually tailored services and solutions. All stores across a brand partner’s different channels share the same service team to ensure seamless services to the company’s brand partners.

Starting from 2020, the company constantly reorganized the structure of the company’s service team at the store level to consolidate certain functions so that the company can consolidate and streamline the company’s operations and expand the company’s capacity to serve more brand partners.

Omni- Channels

The company provides brand e-commerce services under three business models on major marketplaces, such as Tmall, JD.com and Pinduoduo; and social media channels, such as WeChat Mini Programs and RED (Xiaohongshu), as well as emerging live streaming and short video platforms, such as Douyin and Kuaishou. The company also operates official brand stores and provides O2O solutions to the company’s brand partners. Enabled by the company’s advanced technological capabilities, the company can seamlessly integrate the brand partners’ operations across various channels with unified product details and consumer profiles, strategic cross-channel marketing and synchronized inventory management, which provide the brand partners with a single view of their business across different channels and platforms. The company leverages all of these platforms to deliver omni-channel solutions that combine the strengths of diverse platforms to achieve optimal branding effect and sales results responsive to the e-commerce objectives of each brand partner.

Official Marketplace Stores

The company maintains close working relationships with the major online marketplaces in China, such as Tmall, JD.com and Pinduoduo. The company’s brand e-commerce solutions benefit third-party marketplaces by helping them attract new brand retailers. As such, marketplaces are often motivated to work closely with the company to facilitate its ability to connect its brand partners to their systems.

The company enters into annual platform service agreements with online marketplaces to set up and maintain online stores on these channels.

Official Brand Stores and Social Media Channels

The company also offers to work with its brand partners in setting up and operating their standalone official brand stores. Based on the company’s experience, consumers expect a total brand immersion experience at an official brand store, which may involve a different presentation of a store compared to official marketplace stores that blend the brand’s image with the particular marketplace’s interface. The company utilizes its in-house design team in crafting online and mobile sites for official brand stores and mobile sites that deliver an impactful online presence for the company’s brand partners.

The company works with its brand partners to enhance awareness of their brands on social media e-commerce channels. For example, the company helps its brand partners set up accounts and design their homepage on WeChat official store, and/or WeChat Mini-programs, help to regularly update their accounts with stories relating to their products, activities and brands, and sustain user engagement through community groups. The company provides advertising services with Wechat Mini-programs, including ROI-driven advertisement landing, traffic operation and comprehensive and integrated marketing campaign. The company also monitors comments on its brand partner’s accounts and work with the company’s brand partners in responding to these comments. In addition, the company helps brand partners directly integrate their WeChat public accounts with their back-end systems across all marketplace platforms to enable flash sale or routine sale of branded products on social media platforms.

The company’s brand partners increasingly merge their view of their official brand stores and WeChat Mini-Programs into a single private domain, and as such, the company has consolidated the company’s official brand stores and WeChat Mini-Programs into a single metric. As of December 31, 2022, the company operated 101 official brand stores and Wechat Mini-program stores.

Other Emerging Channels

As live streaming and short-form videos have gained increasing popularity in China in recent years, the company has expanded its e-commerce solutions to cover these emerging channels. For instance, the company offers digital marketing solutions that help the brand partners promote their products and increase their sales on live streaming and short video platforms, such as Douyin and Kuaishou.

O2O/New Retail Solutions

The company helps its brand partners devise and execute O2O and new retail strategies by integrating and utilizing their online/offline retail space and customer data to optimize sales opportunities and encourage a more connected consumer experience. The company’s omni-channel capabilities help the company’s brand partners achieve optimal branding effect and sales results that are responsive to the company’s brand partners’ e-commerce objectives. The company also offers its omni-channel matrix of solutions to the company’s brand partners to help them rapidly establish an online presence. Examples of the company’s O2O capabilities include allowing consumers to place purchase orders and make payments online, and pick up or return and exchange goods offline; aligning consumers’ online and offline loyalty programs; syncing online and offline QR codes; providing brand partners with an effective channel to interact with offline consumers and providing offline consumers with a convenient and reliable channel to online shopping via interactive screens in offline retail stores; devising and executing O2O strategies for traditional brands lacking IT and system integration capabilities but that have strong offline presence; connecting and integrating brand partners’ offline stores with their official brand stores, marketplaces stores and other brand hubs ; and utilizing CPS (cost-per-sale), a WeChat Mini Program-based tool, to help brand partners formulate key SKU promotion strategies, design promotional events and articles, track sales performance of the sales agents by tracing the products and sales events they share and calculate commissions accordingly. CPS provides the brands with a way to stimulate the digitization of the offline sales process and facilitates traffic conversion.

Payment Service Providers

Third-party marketplaces and the company’s brand partners’ official brand stores provide consumers with the flexibility to choose from a number of payment options. These payment options include online payments with credit cards and debit cards issued by major banks in China, and payment through third-party online payment platforms, such as Alipay and WeChat Pay.

In addition, official brand stores typically offer a ‘payment on delivery’ payment option. The company’s logistics partners deliver products to consumers’ designated addresses and collect payment on site. In addition to accepting cash, delivery personnel carry mobile POS machines for processing debit cards and credit cards.

Logistics Partners

The company delivers orders placed on stores operated by the company in China through reputable third-party couriers with nationwide coverage, such as SF Express, STO Express, YTO Express, EMS and ZTO Express, as well as other quality logistics service providers.

The company’s large-scale operations and reputation enable the company to obtain favorable contractual terms from third-party couriers. The company typically negotiates and enters into annual logistics agreements with the company’s logistics partners, under which the company agrees to pay delivery fees based on the amount and the weight of the goods to be delivered, as well as the destination of the delivery.

Technology Infrastructure and Business Application Portfolio

The company has made significant investments in developing the company’s proprietary technology platform. The company will continue to invest in the company’s platform to support IT commercialization and deliver solutions that address comprehensive e-commerce needs across different sales channels for the company’s brand partners and to enhance efficiency and scalability. The company’s technology systems and applications facilitate brand partners’ digital transformation throughout the e-commerce value chain--from storefront sales to backend fulfillment; from consumer acquisition to customer lifecycle management; from achieving operational efficiency to gaining industry insights. The company has copyrights to 238 software programs developed by the company relating to various aspects of the company’s operations as of March 31, 2023.

The company’s technologies span across all areas of digital commerce areas--from business applications to data intelligence, and from technology platforms to enterprise integration. Business applications include Direct-to-Consumer touchpoints, Omni-channel business operations, and Big data business intelligence. Technical stacks encompass IaaS, PaaS, and SaaS layers.

Business Applications: Direct-to-Consumer Touchpoints

Transaction Service Application: UNEX, Baozun’s private domain transaction platform, supports rich interactive marketing scenarios, adopts the SaaS tenant model, and enriches private domain services of multiple brands and multiple sites. UNEX is seamlessly integrated with the company’s e-commerce support systems, such as order management system, or OMS, and warehouse management system, or WMS, to ensure synchronization across omni-channel solutions.

Cloud-based System is a system established on the company’s cloud infrastructure with a high level of safety and stability that enables efficient setup of official brand stores and official brand WeChat Mini Programs. It allows the company to efficiently build up comprehensive functions for an online store, such as real-time data exchange, digital marketing, order management, product recommendations, membership management, payment management, as well as O2O functions. The system contains various prototypes to ensure greater efficiency in setting up online stores, while also supporting comprehensive customization to best fulfill brand partners’ specific needs.

Customer Service Application: Customer Relationship Management (CRM) system, or Shopcat, which is based on Baozun’s big data platform, enables the company’s brand partners to go through the whole range of members and precipitates consumer data assets. Supported by business oriented product design based on the company’s big data platform, Shopcat assists operational decisions. Shopcat also integrates online and offline membership programs to facilitate the company’s O2O initiatives. Collectively, Shopcat and business intelligence systems enable the company to effectively gather, analyze and make use of internally generated customer behavior and proprietary transaction data to generate actionable insights for the company’s brand partners.

O2O Solutions allow brand partners to seamlessly integrate their inventories across offline and online channels to share and optimally utilize resources of products and inventories across different channels. These solutions provide seamless data integration that cover order routing, customer management, products and inventory intelligence, and delivery optimization.

Business Applications: Omni-channel Business Operations

Construction and integration of omni-channel user-interfaces facilitate brand partners to stay engaged with consumers wherever they are. The company’s solutions cover brand partners’ official brand stores and major online marketplaces in China, such as Tmall, JD.com and Pinduoduo, and social media channels, such as WeChat Mini Programs and RED (Xiaohongshu), as well as emerging live streaming and short video platforms, such as Douyin and Kuaishou, and offline stores.

Merchandise Service Application: Product Information Management (PIM) system provides a one-stop digital asset management platform for brands, helping the brands quickly expand their businesses through all channels, and ensuring the consistency of product experience through all channels.

Fulfillment Service Application: Order Management System (OMS) controls the processing of sales orders by online stores, including order data fetching and transfer, and fulfillment. This core system connects both internal and external warehousing systems and is capable of tracking order statuses. It also manages all post-sales services such as order canceling, product returns and payment refunds. OMS supports all channels including marketplaces and official brand stores.

Inventory and Order Service Platform ( IOSP): IOSP is designed for the company’s omni-channel e-commerce and O2O initiatives, which instantly and precisely interlinks and synchronizes with inventories at each of the company’s brand partners’ omni-channels. It allows brands to consolidate digital inventories and to dispatch across different scenarios at each of their retail omni-channels. IOSP is comprised of two key modules: Inventory Management, which enables real-time smart inventory monitoring and management to ensure sufficient inventories across channels; and Order Routing, which assigns orders based on optimal inventory level, inventory location and fulfillment cost. IOSP helps brands reduce inventory cost, minimize overselling risk and maximize the management efficiency of inventories.

Warehouse Management System (WMS) assists the company and the company’s brand partners in inventory management, cross-docking, pick-and-pack, packaging, labeling and sorting functions to efficiently manage warehouse workflow and enhance labor productivity. The company’s WMS covers brand partners’ logistics needs in both B2C and B2B businesses.

Financial Service Application: Recon-Ease provides full-domain e-commerce financial accounting solutions. Based on the best practices of financial accounting scenarios on mainstream e-commerce platforms, Recon-Ease realizes automatic financial reconciliation and efficient financial operation of online businesses.

Business Applications: Big Data Business Intelligence

BI Applications: The data scope of BI covers the whole business data, and it has multi-level business data collection and analysis capabilities. It is a highly flexible visual analysis platform.

Artificial Intelligence Application: Selling Machine (SEMA) brings continuous growth to the brand through data drive. This system has a variety of built-in data models, which are combined with AI algorithm to carry out intelligent recommendation strategy and digital marketing.

Technology Infrastructure

BaaS (Business applications as a service) includes transaction, commodity, promotion, inventory, payment, order, price, membership and other modules content.

DaaS (Data applications as a service) collects and organizes data relating to product information, transaction information, consumers’ geographic location and purchase history throughout all stages of business transactions.

PaaS (Platform applications as a service) comprises Technology Platform and Data Exchange Platform. Technology Platform includes tenant management, development and operation of basic services, technical monitoring and alarm, secondary development and operation of open- source middleware, etc. Data Exchange Platform manages all data integration requirements from external parties. It supports flexible synchronization of information with any system and also acts as a buffer to help avoid overloading the company’s core systems, such as OMS and WMS.

Baozun Hybrid Cloud is a hybrid cloud infrastructure, upon which the company’s proprietary technology is built. Baozun Hybrid Cloud provides secure and elastic computing power, storage, and network infrastructure that facilitates brand partners’ business 24/7. It can be readily expanded internally or through public clouds (such as AliCloud, AWS cloud) to accommodate business and customer needs. Baozun Hybrid Cloud and its underlying data centers achieve multiple levels of system and network redundancies and resiliencies, and enhance the company’s storing and computing capabilities with added flexibility to improve efficiency and reliability.

In late 2022, the company began to focus the company’s R&D efforts on the Platform layer, aiming to fundamentally enhance the company’s technology’s core competency and market competitiveness, including expediting time-to-market, optimizing cost-structure, and expanding addressable market. Specifically, the efforts involved (1) multi-cloud development lifecycle, (2) light-mode deployments, (3) internationalization, and (4) Enterprise Application Integration (EAI) standardization.

IT Commercialization

It is worth highlighting that in 2022, Baozun officially launched a new technology business brand named Baozun Omini-Channel Digital Operating Platform (‘BOCDOP’), aimed at supporting the digital transformation of the retail industry. BOCDOP seamlessly integrates Baozun’s comprehensive technological capabilities, focusing not only on differentiated business layouts between different channels and the integration of online and offline channels, but also on the integration of various business forms (shelf e-commerce, social e-commerce, offline self-operation, etc.) and the hierarchical authorization of multi-organizational operation modes (group organization, brand self-operation, TP agency operation, etc.). BOCDOP also focuses on comprehensive and integrated management of back-end product operation, order fulfillment, inventory management and other aspects for multiple channels, and is committed to empowering the digital transformation of a wider global retail market by providing an end-to-end digital business solution covering brand.

Intellectual Property

As of March 31, 2023, the company owned 203 registered trademarks, 6 patents, copyrights to 238 software programs developed by the company relating to various aspects of the company’s operations, and 97 registered domain names.

Customers

The company’s brand partners and/or their authorized distributors are deemed as the company’s suppliers under the distribution model and the company’s customers under the service fee model and consignment model.

Regulations

To comply with such foreign ownership restrictions, the company holds a VAT license for domestic call center services and internet information services through the company’s VIE, Shanghai Zunyi. The company also hold a VAT license for online data processing and transaction processing business (operational e-commerce) through the company’s PRC subsidiary, Shanghai Baozun.

The company’s PRC subsidiaries and the company’s VIE, which are online business operators and service providers, are subject to the Administration Measures for the Supervision of Online Transactions.

Seasonality

The company’s results of operations are subject to seasonal fluctuations. For example, the company’s revenues are relatively lower during the holidays in China, particularly during the Chinese New Year period, which occurs in the first quarter of the year (year ended December 2022), when consumers tend to do less shopping, both online and offline. Furthermore, sales in the retail industry are typically significantly higher in the fourth quarter of the year than in the preceding three quarters, particularly in November when Singles Day campaign occurs and consumers tend to do more shopping.

History

The company was founded in 2007. It was incorporated under the laws of the Cayman Islands in 2013. The company was formerly known as Baozun Cayman Inc. and changed its name to Baozun Inc. in 2015.