Baozun, Inc, (BZUN) Q3 2022 Earnings Call Transcript

Baozun, Inc. (NASDAQ: BZUN) Q3 2022 earnings call dated Nov. 29, 2022

Corporate Participants:

Wendy Sun — Senior Director, Corporate Development and Investor Relations

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Arthur Junrui Yu — Chief Financial Officer

Tracy Chunlu Li — Vice President, Strategic Business Development

Analysts:

Alicia Yap — Citi — Analyst

Charlie Chen — China Renaissance — Analyst

Thomas Chong — Jefferies — Analyst

Wang Zhihao — CICC — Analyst

Kesong Yang — Guangfa Securities — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, and thank you for standing by for the Baozun’s the Third Quarter 2022 Earnings Conference Call. [Operator Instructions] 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, Corporate Development and Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us today. Our thrid quarter 2022 earnings release was distributed earlier and is available on our IR website at ir.baozun.com as well as on global newswire services. They 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; Mr. Arthur Yu, Chief Financial Officer; Ms Tracy Li, our Vice President of Strategic Business Development, and [Indecipherable] President of Baozun Brand Management. Mr. Qiu will review the business operations and the company highlights, followed by Mr. Yu, who will discuss financials and key operating metrics. They will all be available to answer your questions during the Q&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 Securities Exchange Act of 1934 and the US Private Security Litigation Reform Act of 1995. These forward-looking 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 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 US SEC and the announcement on the website of Hong Kong Stock Exchange. 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 and comparisons are on year-over-year basis.

It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Thank you, Wendy. Hello, everyone, and thank you all for your time. Despite the ongoing challenging environment, we are encouraged with the resilience of our business as shown on sSide number 2. In addition, we delivered double-digit growth in several categories, including luxury, fashion apparel and FMCG. Moreover, digital marketing and IT solutions revenue increased by 22%. While product sales continued to decline as planned as we keep optimizing distribution model, service revenue growth 4% year-over-year.

Business development during the quarter was on track with a net addition of seven brand partners for store operations. For existing client base, it’s worth to note that nothing that our business development also speaks to higher engagement in omnichannel and more value-added services. Our integrated omnichannel operations help brands to timely identify evolving e-commerce trends, thus enhancing resource allocation efficiency.

During the quarter, over 42% of our brand engaged with us on the omnichannel approach. We continuously develop new features and tools to augment the value-added service. This quarter, we launched a short video clip and tool which automatically converts long video or livestreaming record for short videos. We also co-developed with a marquee place an AI-based outbound calling system to make proactive communications to targeted brand customers. This help us with better purchase frequency and conversion.

We expanded the regional service centers to more cities recently and added a new scope to them, supported by our customer service management systems, or S-ANY, as the backbone. We improved not only service quality, but also efficiency. A new module named S-ANY, which means event anywhere, has been developed and ported onto S-ANY for its centrally managed content equation tool during the quarter. Despite the short-term headwinds from macro environment, we are glad to see that brand partners — you take China as one of the most critical markets with lot of potential.

We continue to see a trend of digital transformation such as the rapid convergence between online and offline or OmO continues. Along with the digital transformation trend and the emphasis, China for China strategy, brands are investing IT solutions for the long-term. As such, technology-related revenue sees notable growth with a sound pipeline for additional growth. In light of the strong demand, we officially launched BOCDOP, the Baozun omnichannel digital operation platform. A package of solution with powerful customization capabilities. BOCDOP is centered on multiple channel order fulfillments and delivers and it delivers powerful omnichannel D2C, data intelligence and the decision support functionalities to our brand partners.

Following many years of nonstop investment in technology, we started expanding upstream in recent years and the target to evolve into a technology-driven omnichannel commerce player. Early this November, we announced our acquisition of GAP Greater China, one of the largest American specialty apparel brands. Along with the acquisition, we launched Baozun Brand Management. The new line of business that we see as a strategic addition that naturally flows from our core e-commerce service and technologyv. The acquisition is a good fit to develop BBM, since we have worked with the brands for many years. We love it, and believe in it. It has only been a few weeks since our announcement and we are still in the process of finalizing the acquisition.

It is encouraging that has since the news was on air, many other brands have come to us to discuss about China for China strategy and about our technology-driven approach. It has become obvious that our brand management offering clearly can add more to our value proposition and it differentiates us from traditional service providers. While it will take time and hard work to fully actualize vision, we believe a close loop demand to supply value chain as well as integrated offline and online commerce will make brands unique and much more successful than before.

I shall now hand over the call to Arthur to go over our financials. Thank you.

Arthur Junrui Yu — Chief Financial Officer

Okay. Thank you, Vincent, and hello, everyone. Please turn to Slide 4. During the quarter, our total GMV increased by 16% to RMB18.6 billion, mainly due to outstanding performance of one leading electronics brand. Excluding this brand, the adjusted GMV would have been flat on a year-over-year basis. Total revenues declined by 8% to RMB1.7 billion, of which product sales declined by 29%, while service revenue increased by 4% compared with the same period of last year.

Now let’s turn to Slide number 5 for a breakdown of revenue. Despite a decline in total revenue, several categories including apparel and FMCG achieved double-digit growth. The value-added services has shown more resilience in this quarter, where digital marketing and IT solutions increased by 22%, and warehousing and fulfillment service revenues declined by only 7%. Overall, the contribution from value-added service increased to 23% of total revenue in this quarter.

Please turn to Slide number 6. In this quarter our cost of products decreased by 30% to RMB415 million, mainly due to continued efforts in optimizing product sales business. As a result, despite reduction of 29% in product sales revenue. The gross margin for product sales improved by 175 bps to 16.6%. Moreover, our overall gross margin improved by 800 bps to 76.2%, driven by a combination of a higher service revenue mix and improving gross profit margin.

Now I’ll turn to Slide number 7. Our non-GAAP income from operations was RMB17 million during the quarter, representing a non-GAAP operating profit margin of 1%. Non-GAAP net income was breakeven this quarter, mainly impacted by unfavorable exchange rate movements. Once again, we have prepared waterfall diagrams depicting our analysis of how our top-line and bottom-line evolved year-over-year. As a reminder, this analysis is unaudited and should solely be used as supporting numbers to aid discussions.

First on Slide number 8. This diagram shows our net revenue walk from quarter three 2021 to quarter three 2022. In red, you can see the biggest item impacting our revenue this quarter was product sales as we continued our efforts to optimize low quality distribution revenue. Revenue from DM and IT services, which we view as value-added services, grew by 22% this quarter. Revenue from warehouse and logistics declined by 7%, mainly due to our decision to deinvest a subsidiary in the business, which I will address more later. Excluding such disinvestment, revenue from warehouse and logistics should have been a slight increase year-over-year. On a positive note, this initiative led to better profitability.

Now please turn to Slide number 9 for the indicative walk of non-GAAP operating profits. As mentioned earlier, the combination of higher COVID-related cost and general operating deleverage due to lower revenue resulted in less profit for online store operation businesses, generally across all categories. However, as shown, non-GAAP operating profit from digital marketing and IT improved by RMB30 million year-over-year. In addition, the optimization of low quality distribution business contribute RMB3 million. And the profits from warehouse and logistics business improved slightly by RMB1 million.

We also generated a positive savings of RMB3 million from back office cost optimization. In cost optimization, we continue to gain higher efficiencies by centralizing our operating capability, Russian pricing incentives and consolidating office footprint. Most significantly, this quarter we selected more cities such as Jinan, Chengdu and Enshi to expand the scope and scale of our regional service center. Now, approximately 60% of our customer service staff are located in regional service centers. By placing customer service staff in regional centers, increased service flexibility and agility to better cope against COVID-induced the turbulence. Moreover, we expanded beyond customer service, and added more operating functions at regional service centers and livestream studios.

We also further deepened our cooperation with Cainiao to leverage on its established infrastructure and network. As you may recall, in the second quarter, we began to many Cainiao’s warehouses in the apparel category. Got business referrals in luxury and premium sector and also launched them all for some of our key sportswear brand. Motivated by this — by the synergies and after further careful evaluation, we decided to reduce our shareholding of Baobida, a last mile delivery agency to minimize duplication with Cainiao. As you may recall, last year, prior to our strategic alliance with Cainiao, we invested into Baobida to expand our logistics capabilities. However, now with Cainiao alliance, we decided to wait on our investment to a minority holding in Baobida.

Now turning to Slide number 10 about our cash flow. As of September 30, 2022, our cash-and-cash equivalent totaled RMB2.9 billion. In light of macro uncertainty, we continue to improve working capital efficiency. During the quarter, we launched new initiatives to further advance our back-end process to improve inventory management, billing and collection activities. Historically, in order to prepare for the Double 11 festival, the third quarter typically require peak operating cash flow. This third quarter, undertaking from the progress in our inventory procurement planning, we were able to narrow the operating cash outflow for only RMB113 million compared with RMB740 million a year ago.

During the quarter, we repurchased approximately 700,000 ADS for approximately $6.1 million. To date, with our share buyback efforts, we repurchased accumulative total of $68 million in the last nine months. Lastly, the voluntary conversion into a primary leasing status on the main board of the Stock Exchange of Hong Kong Limited became effective on the 1st of November. Baozun is now a dual primary leasing company on both Hong Kong Stock Exchange and the NASDAQ Global Select Market. This marks a significant milestone in our capital market journey.

Overall, our effectiveness in maintaining operations and supporting our partners success during this period of macro uncertainty and as well as the durability and strength of our business model. Throughout this year, we prioritized the cost transformation and wasn’t capital efficiency. And our efforts are bearing fruit in terms of higher gross margin, lower operating expense and better cash flows. The establishment of Baozun Brand Management, along with the acquisition of GAP Greater China will provide us with good opportunity for future growth. This is my financial review section, and that concludes our prepared remarks. Thank you.

Operator, we are now ready to begin the Q&A session.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Alicia Yap from Citi. Please go ahead, your line is open.

Alicia Yap — Citi — Analyst

Hi, thank you. Good evening, management. Thanks for taking my questions. I have two questions. First, if management can share with us any preliminary color that you are seeing in terms of the consumption sentiment and across order channels post a single stage. So in relation to that, how should we think about the overall GMV and revenue growth for the fourth quarter? And if management also have any preliminary view on the 2023 outlook?

Second question is, your digital marketing and IT solution is actually doing pretty well. If you can elaborate a little bit what — what type of the brand customer and the operation metrics, like the take rate that you can share with us related to this service, and will this revenue continue to deliver decent growth in the coming quarters? So how should we think about that? Thank you. Okay. Thank you, Alicia. So maybe Tracy can comment the Double 11 performance and the consumption sentiment and I can answer about view, so Q4 and next year. If that’s okay, Tracy.

Tracy Chunlu Li — Vice President, Strategic Business Development

No problem. Thanks for the question. I think right now the China consumers still verylargely impact impact from the COVID-19 and also you can see in recent two months, actually from the logistic part of view, there still a lot of lockdown and impact on that. But I assume Double 11s number we can see. The overall member is still under pressure, which means there is no big increase, but the [Indecipherable] is a very important window. We see the trends — different categories. So on that part, actually I can summarize some of the observation from our point of view, from our BI system and also from the public system, we see from the consumption trend the upward days consumption, home improvement, self scale, and sports lifestyle are the four heated schemes. Take the sports lifestyle scheme, for example, the sales of the category outdoor sports equipment, huger also the sports footwear were listed by range from 28% to 9% year-on year increase represented, and also you can see the fitness, mountain climbing, skinny, urban sports, camping and running and basketball contributes most of the category. And also we can see that luxury and also bags and luggage has been the several — I mean few of the category are still reach steady growth in the past four quarters. So I think among this full area we still can see the opportunity for next year, but also there are also downtrends category like the fashion accessories and also men’s and women’s footwear, and this has been reflect over two or two or three quarters decline in most of the daily sales and become promotion. So for all of this part, we still need steady growth, the way to sticking out.

And besides the category shift, I think we also see the platform pay more attention on the user retention and the acceleration of private domain [Indecipherable] new business incrementals, like [Indecipherable] newly added store member enrollment benefits, the membership coupon and membership gifts. And all of this has kept our potential to collaborate brands and the platform togethers on the digital marketing and also interactive technology-related. So I think on that part we can back to others part to talk about our next years plan, yeah.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Okay. Thank you, Tracy. Regarding to the Q4 outlook, our current view is from the GMV perspective we see some good momentum in the electronics and FMCG. But we also see some strong headwinds in terms of the apparels and the sportswear. So overall, we believe our Q4 GMV will be in line with the market, which is likely to be flat year-over-year.

In terms of the revenue, at this moment we still see the optimization of the low quality product sales will continue unless the market sentiments pick up. So from a revenue perspective, we think there will be a low-teen decline year-over-year. The main contributor is the product sales, which we continue to optimize.

In terms of the next year, I think it’s a little bit too early to comment because there are still some very big factor which is in the overall micro Kind of condition and also the COVID policy. But our view for next year from a current perspective is conservative and we to plan on a conservative basis for the next year as well, i.e., to focus on the quality instead of focus on the growth.

On your second question, Alicia, regarding the digital marketing and IT solution, i.e., our view on the value-added service. I think that’s one of the area we see that quite a strong momentum from our client base. So basically at this moment our brand partners start to focus on the medium and long-term investment of their business in China. So therefore we have seen a strong kind of the pipeline from the value-added service, like the IT solutions, like the digital marketing, and the market are related to handle the proposals from our offerings. So we think that will continue and given the investment into the technology in the last few years, I think Baozun is well-positioned to take on those opportunity at the current market situation. Okay?

Alicia Yap — Citi — Analyst

Yeah. Thank you, Arthur. Thank you, Tracy.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Okay. Thank you, Alicia.

Operator

Thank you. We will take our next question — our next question comes from the line of Charlie Chen from China Renaissance. Please go ahead, your line is open.

Charlie Chen — China Renaissance — Analyst

Thanks management for taking my questions. I got two questions here. The first one is regarding the GMV combination. So I can see in this quarter the GMV contribution from non-Tmall channel seems to be a little bit lower than last year4Q 2021. So can you explain what’s the rationale and background behind this? And what’s the long-term goal of this GMV growth between Tmall and non-Tmall channel? That’s the first question.

And the second question is regarding the GAP transition as well as the whole restructuring. So can you give us more color about the progress after you acquired — announced the acquisition of GAP? And also I can see Baozun seems to be transforming from a pure marketing agency to a more comprehensive service company. So how do you expect the levels of this transition period? When do you see the synergies or integration should be completed and we can see some results or impact going forward. Thank you.

Wendy Sun — Senior Director, Corporate Development and Investor Relations

Hello. Hey, operator, can you hear me?

Operator

Yes, I can hear you lound and clear.

Wendy Sun — Senior Director, Corporate Development and Investor Relations

Okay. [Technical Issues]

Operator

Please continue to standby, your conference will resume shortly.

Wendy Sun — Senior Director, Corporate Development and Investor Relations

Hey, operator?

Operator

Hi there, I can hear you.

Wendy Sun — Senior Director, Corporate Development and Investor Relations

Okay, you can only hear us from this time, does it make the way.

Operator

Yes, but you welcome, and pretty loud and clear.

Wendy Sun — Senior Director, Corporate Development and Investor Relations

Actually how about Charlie, do you have to ask about the brand-management for the second question. Maybe, Sandrine, can you take this one while we try to get to system ready.

Unidentified Speaker —

Yes, sure, sure. Hello, Charlie. This is Sandrine [Phonetic] Thank you for your question. So it’s about three weeks to have singned with GAP. We have not yet [Technical Issues] and since January if everything goes smoothly on the approval procedure. So we are very mobilized in the corporation, which now focuses on really taking a deep dive with a different GAAP function to enable a deeper understanding of the operation today and [Technical Issues] And then based on this we will be able to pretty much more detail. But still I understand you want to have it bit of color. So for the time being, what we are learning from the feedback confirming what we were seeing in the [Technical Issues] That on the one-hand there will be some quick wins in terms of — a bit of a restructuring and cost cutting, mainly coming from the fact that we are now managing from China a Chinese company. And then going forward, we mentioned earlier, we see some real opportunities around product that can be [Technical Issues] and as you may remember, we have a full freedon on the the supply chain. So supply chain is ours. So we can really improve the speed to market, reactivity to trends and also bring some elements that are more locally relevant in the product design and development. That’s one aspect.

The other aspect is ready to work and actually the first one, we’re also trending to work on the gross margin and reduce the discount levels, which are in our view too high today, and we believe that by differentiating products or channels, which is not done today, we can really improve the discount situation. The third aspect, which would be is for us to revamp the current portfolio of stores. So it’s not going to be about opening many more stores, it’s going to be really to make the current stores, both in terms of look and feel and in terms of operations much better than what we have today. So this is pretty as much color I can give today.

With all this, financially we think that it can translate into a very significant reduction of the loss in ’23. We consider that loss can be reduced from half of what it used to be in ’22, then we will see a further reduction of loss in ’24 in order to reach breakeven point in ’25 and profit in ’26. So that is for GAP. And I would leave it to Wendy to allocate the other questions to some other people.

Arthur Junrui Yu — Chief Financial Officer

Okay. Charlie, let me maybe answer your question on the Tmall. So the trend you have seen is actually impacted by a major electronics brands outperforming in quarter three. So if we are excluding the increase of this one single brand, our Tmall percentage has actually dropped, a non-Tmall has increased by a single-digit. So that’s the true reflection of what’s going on in the non-Tmall channel. And in addition, our omnichannel strategy is actually not with a purpose to push the people from the Tmall to a non-Tmall channel. It’s actually to encourage people to go forward with omnichannel, which has increased the stickiness and to drive more value-added service from Baozun to the client. So by this quarter we have 42% of our total brand partners choose Baozun omichannel for them. So this is our current situation. Thank you.

Charlie Chen — China Renaissance — Analyst

Thank you.

Operator

Thank you. We will take our next question — please standby. Our next question comes from the line of Thomas Chong from Jefferies. Please go ahead, your line is open.

Thomas Chong — Jefferies — Analyst

Thanks, management, for taking my questions. So I have two questions. My first question is, can management share some color about change of domestic versus international brands?. And my second question is, could management share some updates about the cooperation with Cainiao and [Indecipherable] about expansion into Southeast Asian market? Thanks.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Okay. So Tracy, maybe you can take the first one, then I will take the second one.

Tracy Chunlu Li — Vice President, Strategic Business Development

Sure. No problem. Hello. Thanks for the question. I think in terms of the — to win in the consumer side I think they are facing the same pressure, no matter is following all local brands, how to solve the short-term problem and how to invest in longer problem so we invest around. But for the online business we can see actually most of the players are still emphasizing the importance of the online part because of the relatively poor store performance in recent quarters. So right now actually we’re working with our brand partners to come out with a the three years plan to talk about how to connect with their consumer directly and then how to allocate their budgets smartly, I mean, cross-channel, and also to reach the direct communication with the consumer. And also from the — for the local brands part, we arevery likely to share. We have some break during the past few months to seek the collaboration opportunity in professional ways, areas like IT surveys, counter marketing, interactive marketing technology and the consumer customer service. I think in the longer run, the professional in specific areas still will be the win in the service market. Thank you.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Okay. Thank you, Tracy. Regarding to the Cainiao, we have continued our good progress in terms of guiding the synergy. So as we mentioned in the past, we see the synergy coming from three areas. So the first one is joint BD. So with Cainiao and Alibaba ecosystem, we would be able to — I mean we’re seeing some additional BD opportunity coming in from the ecosystem, so which is helping both Baozun logistics and also Baozun as a whole to conduct new business.

The second one we see is actually to utilizing the scale and even structural Cainiao. So basically in terms of the warehousing and in terms of the last mile delivery, Cainiao style has provided very good kind of support for us to get more results. And finally we see is that technology enhancement. So basically, previously is actually Baozun makes the investment into the techonology on the logistics part, and now we can utilize the Cainiao Network on the technology enhancements like the RFID technology which is giving us more efficiency, while we operate in the warehouse. So overall we think we’re in good trend with our alliance with Cainiao.

In terms of the Southeast Asia expansion, we are continuing to focus on building on our own capability in that region and also our approach is trying to replicate some best practice and take the learnings we had from operating the e-commerce in China. But also our approach in the Southeast Asia works closely with the plan to grow the e-commerce offering in that region. So when we have made more progress, we will come to report back to the market. Okay?

Thomas Chong — Jefferies — Analyst

Thank you.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Thank you.

Operator

Thank you. We will take our next question — our next question comes from the line of Wang Zhihao from CICC. Please go ahead, your line is open.

Wang Zhihao — CICC — Analyst

Hi. Good evening, management. Thank you for taking my questions. We noticed that the number of brand partners for store operations increased. As the macro-environment is weak, could you please share something about customer acquisition strategy you are seeing in this quarter? And could you please share some details about the new brand partners such as their industry, scale, and the main channels we help them to operate. Thank you.

Arthur Junrui Yu — Chief Financial Officer

Okay, thank you, Tracy, would you like to take on and then I’ll can — maybe add on more color after you.

Tracy Chunlu Li — Vice President, Strategic Business Development

Sure. Thanks for the question. For the last quarter, actually most of our new wins are focusing on our new revenue source, which is the IT client and also digital marketing clients. And you can see actually, they are combined with our emerging category, like the — our CC category and also the luxury category. So which indicates actually our strategy on the One-stop solution, which means we come — actually we start from the operation, but we extended our service to other parts, strategy works. And you can see actually in this market wWe can see some of — our clients actually invest a lot in the long-term strategy, including the interactive marketing and also their data and also infrastructure stead up, yeah. Arthur, do you have any other supplementary answer for this?

Arthur Junrui Yu — Chief Financial Officer

No. I think another thing I would like to add is, in terms of the value-added service, we are utilizing the omnichannel and also to utilizing the foundation we have built over the time, what impact will be — means also the new business coming in the next few quarters. That’s it.

Wang Zhihao — CICC — Analyst

Thank you.

Arthur Junrui Yu — Chief Financial Officer

Thank you.

Tracy Chunlu Li — Vice President, Strategic Business Development

Thank you.

Operator

[Operator Instructions] And we will take our next question — the next question comes from the line of Kesong Yang [Phonetic] from Guangfa Securities. Please go ahead, your line is open.

Kesong Yang — Guangfa Securities — Analyst

Hello, management team.So I have two questions. The first one is about the luxury revenue has reaached the best growth during this past quarter. So could you please elaborate on the future strategies for expanding luxury category? Also, do you have a certain benchmark percentage of luxury categories contributing to the revenue?.

My second question is on behalf the investment strategy for 2023. Thank you.

Arthur Junrui Yu — Chief Financial Officer

Okay, let me answer your second question first. And then, Tracy can cover the luxury questions. Yeah. In terms of the investment strategy. As you have seen, we recently made the announcement of acquiring GAP China’s business. So in the short-term, our focus will be building the GAP China business on building the Baozun Brand Management as a new business unit. So we will focus our effort on integration and also transition to make sure it is a success. And in terms of the investments, our focus will in the short-term the the brand related investments will be our focus. So I mentioned in the last few quarters, Baozun has made investment either the minority investment or the controlling investment into six brands. And we have made some good progress in terms of those brand, which in Double 11, the GMV from those six brands together has grown over 200% year-over-year, which shows the enhancement of how Baozun us adding value to those brands.

And also forecast the Double 11 performance has also been good. The GMV has grow 22% year-over-year for the GAP during Double 11, which outperformed the market. All these shows with Baozun enhancement, we will be able to add more value to those brands growth kind of story. At the same time, when we’re looking at the investments, we also proactively optimizing our investment portfolio. As mentioned earlier, the Baobida, which is the last mile delivery investment we made. We actually proactively introduced another strategic investor to take the controlling stake and make Baozun become a minority stake. This is because this investments is a little bit duplicate to our strategic alliance with Cainiao. So with that in mind, we actually optimize our investment portfolio to turn ourself from a majority shareholder into a minority shareholder.

Looking at the medium to longer-term, I think our investment priority, our focus on the international expansion and also building technology capability on to of the brand management. And with the current market conditions, we actually keep an open eye on the good value asset as we did for the GAP China acquisition. Okay, so that’s on the investment strategy. So, Tracy, maybe you had something on the luxury business, yeah.

Tracy, can you hear me.

Tracy Chunlu Li — Vice President, Strategic Business Development

Unmute just now. Yes, come back to the luxury story. I think we need to look at the — to the industry from different angles. In short-term, actually, definitely, the market is facing pressures on the slowing down growth, take this Double 11, for example, many brands have ramped up in variety and intensively of any base to enhance the sales such as deeper discount, interest-free installments and also GMV — GWP based. But on the other hand, we see many of our brand partners are investing for the longer — middle to longer strategy. Some of them take this two years as opportunity to adjust their pricing strategy. They are more focusing on the product innovation itself and also the brands group, the emphasis on the consumer-centric and increase their budgets on content marketing and the data infrastructure. We see a lot of innovations initiate happening in this Double 11. The leap to [Indecipherable] and also you see a lot of limited addition SKUs and online fashion shoes has moving to the live stream topics to continue to drive the sales and also to attract new members. So I think that is the true size of the factor base currently in the industry.

And for Baozun, we still treat luxury as our strategic part of our overall business. Because of the luxury market is still growing, they still have lower penetration, and we see a lot of duties in new pipelines right now. And we in the longer run, I think it’s not just to rely on one or two cases. We rooted in, I think over 10 years practice in fashion and then we developed our luxury industry solutions in more forward-looking strategy, which is more omnichannel with leading IT solutions and more consumer driven with a strong in-house sales team and more reliable and value-added service related to logistics solutions. And with all of this, we have the strong belief to grow with the market in the next one year or two years. Thank you.

Operator

Thank you. We will take our next question — our next question comes from the line of Charlie Chen from China Renaissance. Please go ahead, your line is open.

Charlie Chen — China Renaissance — Analyst

Thanks management for taking my questions again. So I have one question regarding the launch of BOC, DOC. So I heard and Vincent mentioned that. So can you share more color about this topic. And how do you think about the cost and the top-line contribution for 2023? Thank you.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Thank you for the question. This is Vincent. I will talk about the concept of this is in BOC, DOP, what we call is BOCDOP. In Chinese, we gave it the Chinese name called the Bow. So this product line or solution. And then Arthur, maybe you can talk more about the revenue or local expectations.

Arthur Junrui Yu — Chief Financial Officer

Yes.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

Actually, in the past several years, Baozun’s core system, we call this a middle-end system, including all the order fulfillment, other management and processing system and also other fulfillment system. We call this middle end. This middle end or DOP, Digital Operating Platform plays a very important role to support an omnichannel retail and D2C-based business. Because all these traditional ERPs, they don’t have these kind of offerings. I mean China, because of the omnichannel and the online/offline integration is much faster and advanced than the other countries in the market. So, there is a strong demand in the local market for this kind of system. With this system, all the brands can operate their retail and D2C business. They can open stores on Tmall and JD and WeChat everywhere in the same time. And they can process all the orders from different channels and make sure they can deliver all these orders to their customers. So that is the system.

So, previously, it’s just about the highly customized system for each of the clients Baozun did as the other players. Recently, we put a lot of investment in the packaging and the product types of this solution. But right now I think the productization level is much higher than before. So we package this as a solution. It’s more ready to market. So we are trying to market the solution to Baozun client base and also other new clients and also some medium and small size of the clients trying to help us with them with the omnichannel solution strategy. So that is the concept of the products. We are seeing very good progress and we are trying to make it better in future, the near future. And Arthur about the revenue, what’s your view on that? Yeah.

Arthur Junrui Yu — Chief Financial Officer

Yeah, sure. So, Charlie, thanks for the question. From a financial point of view, I think we made continued investments into technology, which is to build the competitive advantage of Baozun over our competitors. And from the introduction of the BOCDOP, which is actually helping us to commercialize those technology in a more advanced way. So looking forward, we will be able to see the investment side, we continue to make a similar amount of investments into technology year-over-year. So the cost would not increase. However, we foresee the revenue from the technology will increase year-over-year because our better structured productization and also commercialization of our IT offerings. So, in return that will help us to drive our profit margin from the type offering into the market.

Vincent Wenbin Qiu — Chairman of the Board of Directors and Chief Executive Officer

One more thing. Thank you, Arthur. One more thing is not only support all the clients with omnichannel order processing and fulfilling capabilities, but also with all the data collected from different channels, we can also deliver a much better business intelligence capability and decision support capability to all the clients. Yeah. Thank you.

Arthur Junrui Yu — Chief Financial Officer

Yeah. And also in addition to that, I think investments into technology not only benefit the traditional e-commerce business, it will also benefit the Baozun business management business as well. So, with the GAP China, we will be able to use our technology to drive the transformation of the brand we acquired as well. So, that will help to create more value.

Charlie Chen — China Renaissance — Analyst

Thank you very much.

Operator

Thank you. There are no further questions, so I would like to hand back to management for closing remarks.

Wendy Sun — Senior Director, Corporate Development and Investor Relations

Thank you, operator. In closing, on behalf of the Baozun’s 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 the IR team. Thank you for joining us today. This concludes the call.

Operator

[Operator Closing Remarks]