Baozun's strategic transformation yields 5% revenue growth and significant profitability improvements, with expectations for sustained growth into 2026.

Good morning ladies and gentlemen and thank you for standing by for Baozun's third quarter 2025 earnings conference call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Wendy Sun, senior Director of Corporate Development and Investor Relations of Baozun. Please proceed. Wendy.

Thank you. Operator hello everyone and thank you for joining us today. Our third quarter 2025 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well on TRNewswire services. They've also posted a PowerPoint presentation that accompanies our comments to to the same IR website where they are available for your download. On the call today from Baozun, we have Mr. Vincent Chu, Chairman and Chief Executive Officer, Ms. Catherine Zhu, our Chief Financial Officer, Mr. And Chief Strategy Officer of Baozhong Group, and Mr. Ken Huang, Chief Financial Officer of Baozhong Brand Management. Ms. Chu will first share our business strategy and company highlights. Ms. Zhu will then discuss our financials and outlook, followed by Mr. Wu and Mr. Huang who will share more about our E Commerce and Brand management segment respectively. They will all be available to answer your questions during the Q and A session that follows. Before we begin, I would like to remind you that this conference call contains forward looking statements within the meaning of the US Security act of 1933 as a mandate, the US Security Exchange act of 1934 as a mandate 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 related events that involve known or unknown risk, 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 statement. Further information regarding these and other risk uncertainties or factors is included in the Company's filings with the United States Securities Exchange Commission and its announcements, notices, or other documents published on the website of Stock Exchange of Hong Kong Ltd. All information provided in this call is as of the date hereof and is based on assumptions that the Company believes to be reasonable as of this date and the Company does not undertake any obligation to update any forward looking statement except as required in the applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this call are in RMB, you may now turn to slide number two for the executive highlights for the quarter. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Chu. Vincent, please go ahead.

Thank you, Wendy. Hello everyone and thank you all for your time. I'm pleased that Baozun is advancing its strategic transformation with steady momentum, delivering a strong quarter marked by 5% total revenue growth and a big improvement in profitability fueled by strong gross margin expansion. Our non-GAAP operating loss narrowed to 11 million from 85 million a year ago. These results show that our transformation is effective and demonstrate the strength of our business model. Both of our two core engines are driving this success. Bec's solid execution and the growing agility continue to deliver strong results this quarter. Building on the 56 percent year over year increase in adjusted operating profit from the second quarter, BEC achieved its most profitable third quarter in recent years with non-GAAP operating profit of 28 million compared with operating loss of 30 million a year ago. This significant improvement in profitability along with 6% services revenue growth and the strong gains in creative content and marketplace connectivity shows that the BEC is now more agile and efficient. Baozun Brand Management (BBM) continued with strong top line growth with revenue up to 20% year over year driven by impactful merchandising and marketing initiatives. This quarter we engaged our first Gap China brand ambassador, a top tier actor with 30 million followers on Weibo and 8 million on Douyin. We also launched a series of marketing campaigns and themed products to deepen emotional connections with local consumers. Hunter continued its brand momentum and opened our new store in Qingdao, bringing Hunter's total offline stores to eight, including five in China and three in Southeast Asia. These efforts contribute to sales growth, stronger gross margin and improved overall profitability for Baozun Brand Management. In summary, we are firmly on track with our strategic transformation. With a resilient E Commerce foundation, accelerating brand management momentum and the technology as our catalyst, we believe 2025 is a highly productive building phase. We anticipate 2026 to mark our inflection point, shifting from transformation investment to sustained profitable growth. Now I will hand the call over to our team for a deeper dive into our financials and the business performances.

Thanks, Vincent and hello everyone. Now let me provide a more detailed overview of financial results for the third quarter of 2025. Please turn to slide number three. Baozun Group's total net revenues for the third quarter of 2025 increased by 5% year over year to 2.2 billion. Of this total E commerce revenue grew by 2.4% to 1.8 billion while brand management revenue rose by 20% to 396 million. Breaking down E Commerce revenue by business model services revenue increased 6.3% year over year to 1.4 billion. This increase was driven by revenue growth in online store operations and digital marketing and IT solutions. BEC product sales revenue decreased 8.9% year over year to 413.4 million mainly due to decline in appliance and health and nutrition categories. BDM product sales totaled 395.2 million representing a 20% year over year growth. This growth was mainly driven by the strong performance of the GAAP brand. Please turn to slide number four. From a profitability perspective, our blended gross margin for product sales at a Group level was 34.3%, an expansion of 620 basis points year over year. Gross profits increased by 26.1% year over year to $277.4 million for the quarter. Breaking this down by our key business lines, gross margin for E Commerce product sales expanded to 30.1% reflecting a 300 basis point improvement compared to 10.2% a year ago. This margin expansion was primarily driven by product mix diversification consistent with our progress throughout the year. Gross margin for BVM was 56.5% compared with 52.8% a year ago reflecting the success of merchandising and marketing initiatives of BVM. Now please turn to slide number five for a walkthrough of our OPEX sales and marketing expenses increased by 10.7% to $886.6 million. This included an increase of $67.5 million for BEC which was mainly due to higher spending on creative content on Dowin and Retnode and more revenues contribution from digital marketing will busy during the quarter. BBM sales and marketing expenses increased by 18.8 million due to higher front end expenses from expanded offline network and more marketing initiatives for BBM during quarter Fulfillment cost for the quarter was reduced by 4.5% to 495.9 million reflecting our ongoing efforts in cost optimization. Technology and content expenses decreased by 18.2% to 115.2 million as we continue to enhance tech monetization efficiency General and administrative (G&A) expenses decreased by 4.4% to 1.68.9 million primarily attributable to our ongoing efforts in efficiency enhancement and cost optimization. Turning to bottom line items, please refer to slide number 6. During the quarter our non GAAP loss from operations was 10.8 million, a sharp improvement from 85.2 million in the same period of last year, BEC's adjusted non GAAP income from operations was 28.1 million, while non GAT loss from operations was 29.8 million. A year ago, BDM reported a non GAAP operating loss of 38.7 million, an improvement of 30% compared to the same period of last year. As of September 30, 2025, our cash and cash equivalents, restricted cash and short term investment totaled 2.7 billion. Lastly, I'd like to quickly address an accounting update on the balance sheet to reflect expiration of options related to the Taiyang minority investment in Baotong, our warehouse and logistics business. According to the agreement with Taiyang, if certain triggering events occur, Taiyang had the right to exercise a put option requiring Baotung to redeem Bao Tong's shares within 12 months starting from August 2024. As a result, this investment was originally recorded as redeemable non controlling interest, which is a complex financial instrument classified between liabilities and equity. With these options expiring during the third quarter, the investment has now been reclassified as non controlling interest and equity item. Following this accounting adjustment, our total Equity increased to 5.5 billion compared with 4 billion in the previous quarter. Importantly, this adjustment has no impact on our warehouse and logistics operations. Let me now pass the call over to Junhua to update you on bec, our E Commerce business.

Thanks Katherine and hello everyone. I'm pleased to share our progress and achievements for the third quarter. Building on the momentum established in the first half of the year, we continued advancing our strategic priorities with a clear focus on sustainable profitability and growth. As previously outlined, our 2025 roadmap follows a clear progression, Q1 for adjustment, Q2 for stabilization and the second half for acceleration. I'm pleased to report that Q3 delivered meaningful progress across key business segments. BEC posted solid performance with a stabilizing revenue based a significantly improved revenue mix and quality, leading to a notable improvement in profitability. On a non GAAP basis, operating profit reached 28 million, making the most profitable third quarter in the recent years for BEC. Please turn to slide number seven. BEC product sales declined by 9% this quarter reflecting our transition strategy toward a quality driven portfolio, optimizing selected clients in the health and nutrition category and shifting certain clients in beauty and cosmetics category from a distribution center (DC) mode to a service mode in the appliance category. Top Line Softness Persistent as we prioritize profitability over volume. These adjustments followed a thorough review of each segment's market dynamics and have led to stronger profitability under a distribution model. As a result, bec delivered a 300 basis point improvement in gross profit margin to 13.1% for product sales. Just as importantly, enhancements in procurement discipline and turnaround management drove nearly a 20% improvement in inventory turnover days enabling us to maintain a healthy and efficient inventory levels. In addition, we remain focused on building a more sustainable and quality driven distribution portfolio. During the quarter we achieved healthy growth in beauty and cosmetics, alcohol and apparel categories. Notably, we are expanding our pipeline into non standard categories including apparel within distribution mode. By leveraging our brand management expertise in our core category, we are increasingly able to apply deeper expertise and a more brand owner oriented mindset. Looking ahead, we expect BEC product sales to return to top line growth in 2026. Turning to slide number eight, our services revenue grew by 6% in third quarter primarily driven by strong performance from online store operations which saw 16% growth and a 6% growth in DM and IT solutions. Within online store operations, the core apparel and accessory category was a key driver with all key segments generating encouraging top line growth. The strong performance of our services mode reflects how we have advanced brand empowerment by utilizing our data driven insights and expertise and capturing opportunities from ever changing industry dynamics. We remain committed to leading innovation in creative content as these are critical for consumer engagement and traffic attraction. On RedNote, we plant content seeds to drive interest and brand awareness which enhances emotional connection and refines the consumer shopping experience. Furthermore, by leveraging enhanced connectivity between marketplaces such as the tmall, RedCat and the JD and RedGene collaborations, we help brands to generate better marketing conversion and sales performance. This quarter we were accredited as a Premium Service Partner, further validating our leadership position on this viral live platform and building on our earlier designation as one of the first batch of REP partners in February on Douyin, we continue to pioneer live stream content and formats including scenario based showcases and celebrity collaborations to drive quality business contribution to our brands. In mid September, we successfully partnered with a leading international electronics brand to launch its flagship stores to further enhance the brand's cultural engagements and product promotion. This initiative was immediately effective. Within a month we helped the brand gain 3 million consumer followers and achieved the number one GNV ranking in its category. We are proud to continue setting new industries benchmarks for Douyin brand e commerce. Overall, this quarter is another solid quarter for BEC marked by a return to profitability in a lower seasonality quarter which demonstrates the effectiveness of of our strategic focus on sustainable and high quality growth. We are actively driving the bottom line through efficiency enhancing measures including the ongoing application of artificial intelligence and automation tools as well as our lean cost control initiatives. We are confident that the foundation built throughout 2025 will continue to accelerate our momentum and deliver long term value. Now I'll pass to Ken for an.

Update Update on BBM thank you Tim and hello everyone. Please turn to slide number nine for BBM's performance in the third quarter of 2025. I'm pleased to share that BBM maintained strong growth momentum this quarter with total revenue growing 20% year over year to $396 million. The strong growth was driven by improvements across key operating metrics including same store sales, traffic, average transaction value and network expansion. Overall, Gap's same store sales growth was 7% for the quarter. Gross profit for BBM totaled 223 million, an increase of 28% year over year with gross profit margin expanding to 56.5%, up 370 basis points from 52.8% a year ago. This margin expansion, along with strong top line growth highlights the effectiveness of our merchandising and marketing initiatives. The higher gross profits combined with improved operating efficiency further enhanced our overall profitability. As a result, BBM's non gap operating loss for the quarter improved by 30% to 39 million from 55 million in the same period of last year. Now let me expand on our key initiatives for Gap China in the third quarter. First Marketing as we made a major leap forward in brand storytelling and the culture engagement this quarter. On September 15th we announced the appointment of Cheng Yi, one of China's most acclaimed actors, as the inaugural Brand Ambassador for Gap China. In accordance, we launched Mind the Gap Bridge the Gap campaign using music as a bridge to engage younger audiences and reintroduce Gap as a comfort confident, modern lifestyle brand. We also introduced the Gap Club Capsule Collection and upgraded the brand image in our offline stores to reflect stronger creative energy and local relevance. To provide immersive experiences, we hosted two pop up experience stores, one in Shanghai's Amphi Road and one on Shenzhen Coke park, both featuring live performance, vinyl shops and art collaborations, successfully merging lifestyles and fashion in this campaign, we also introduced innovative interactions with social PGC and UGC contents. These efforts helped us attract more customers, strengthen brand renaissance and deliver meaningful business results. In total, the campaign had more than 1.2 billion impressions, 9 million interactions and 176,000 new followers. These efforts also drove a 25% increase in young customers and strengthened Gap's position as an authentic and aspirational brand for China's younger generation. Meanwhile, we continue to work closely with Gap Inc. To capitalize on its global marketing assets and upward momentum. This August, Gap Inc. Partnered with KSAI on the Bed teen denim campaign. Blending Gap's iconic timeless denim with KSAI's contemporary and edgy fashion sensibilities and China is one of the few countries that offer KSI's exclusive products to the market also achieved a very satisfying result. Second, merchandising, which remains the core engine of our growth, we continuously sharpened product offerings and introduced a higher mix of online, exclusive and segmented products across different marketplaces over the summer and fall. We also deepened the collaboration with major platforms through exclusive assortments and joint marketing programs such as Timor Fashion show and Douyin Super Brand Day. This tailored ecommerce strategy coupled with our participation in platform promotional events accelerated traffic and conversion growth. At the same time, our improved supply chain ensured fast and localized fulfillment. We believe that our agility and the flexibility in shifting between online and offline channels has become an important competitive advantage. From a channel perspective, we continue to expand our physical presence for Gap. We opened 11 new stores in Tier 1 and Tier 2 cities including Guangzhou and Yincheng while closing four low productivity stores. We also started to remodel existing stores in Wuhan and Wuxi this quarter to upgrade our store image, visual merchandising and the customer's experience. This brought the total number of Gap stores to 163 by the end of this third quarter. Together with Hunter's network expansion, our Baozun brand management offline portfolio now stands at 171stores. In addition, we hosted a national partner conference in September convening a dozen top tier business partners, all important provinces. Notably, half of these partners were new with strong brand portfolio and operating expertise in their regions. Cooperations with these new partners also aligned with our expansion plan by enhancing our business in the key cities in North, Southwest and South China. This event allowed our partners to directly experience our ascending brand influence and our marketing, product and channel strategy in the coming year. Their positive feedback reaffirmed the strong partners confidence in our brand direction. In summary, BBM delivered another quarter of healthy growth and brand revitalization. Furthermore, our integrity marketing campaigns have laid a solid foundation for the Gap brand to further unlock market potential potential. This was evident in the big improvements in brand rankings across all key divisions, men's, women and kids during the most recent Double 11 campaign. This success places us on track to achieve Gap's first breakeven quarter quarter in the upcoming fourth quarter with both Gap and Hunter building stronger emotional relevance and culture momentum, we are confident in sustaining our growth through year end and beyond. That concludes our prepared remarks. Thank you operator. We are now ready to begin the Q and A session.

We will now begin the question and answer session. To ask a question you may press Star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Start. And then two. Our first question comes from Alicia Yap with Citigroup. Please go ahead.

Hi. Thank you. Good evening management. Thanks for taking my questions. Congrats on the solid result. Two questions. First, can you provide some of the observations on the latest consumer sentiment? So have you seen any shift of the consumer spending behavior recently, especially with the recent Singles' Day promotions? Any change of the consumer preference in terms of the purchase willingness and then categories that you have seen doing better than you previously expected and also categories that performing worse than you anticipated and then also what are the brands, how are the brands willingness to spend on the marketing budget during this year Singles' Day? How should we be thinking about the impact from the Singles' Day to the fourth quarter outlook? And then second question please. You know I know it's a little bit early but then any comment on the 2026 outlook in terms of your different business segments and also what are your top strategic priorities? For example, is there any target for margin expansions or any of these brands extensions? And also how AI will play in a role on helping you to achieve some of your 2026 priorities. Thank you.

Okay, this is Junhua, so let me address your first question and maybe Vincent can address the second one. So in terms of the latest consumer sentiment from our perspective, you know, according to the just finished Double 11, so we realized that the consumer sentiment is getting better. So you can see a lot of consumers they are paying for value. So they are not just they are being very targeted. They know what they want and they wait until all those kind of the values and profitability from the brand and all those coupons are addressed. So especially with the recent promotion, we can definitely expect a very strong finish for the Double 11 this year and from the preference. So as far as our observation, so it's still towards on the sports category and apparel category and FMCG category as follows. So if you're talking about some kind of the categories performing worse than we anticipated, I would say after the pullback of the subsidiaries of the home appliance category. So consumers rather to wait for another kind of benefits from the platform and from another support when their subsidiaries are supported. But the willingness of the consuming power is still getting stronger and the willingness of the brand in spending marketing budget and allocate our new inventory is getting stronger. So after 6:18 this year and after the bow 11 we are seeing that we definitely can expect a stronger support in terms of the marketing fee from the brand perspective and the inventory allocation for the new year. A lot of brands during this past 11, they are focused on their P&L rather than the GMV growth. So a lot of our brand partners, they have increased their their P&L to several point percent and which maybe lead a better result from their global strategy. So that's my answer for the first question.

Okay, thank you for the question. This is Vincent and I think your second question upon our strategies is a very important question. You know, basically we have two business divisions or units, BEC and BBM. You know, one by one for bec, I think next year the most important job for them to do is to expand the margin and in the meanwhile to optimize the cost efficiency. I think these two are very important. So for the margin expansion part, you know, we are doing more and more, you know, distribution model. We are taking more ownership of the, you know, in the process of sales trying to get better margin. That is one side. The other side is that we are initiating a lot of these kind of lean operations initiatives to help us look at a better, you know, cost. So it is do more with less strategy. For bec. On the other hand, we have the BBM, you know, business which the priorities are quite different. So firstly for the existing brands like Gap, Hunter and others, you know, we are trying to make every brand to be a successful, you know, business operation. That is very important not only for the quarter to quarter business performance but also for the future potential of how many and how well we can work with other brands. So the first priority for the BBM is doing well for each brand. The second thing is that we are trying to develop the synergy between BBM and bec. Trying to convey in more and more knowledge, experiences and the mechanisms to BEC to enable them to have more ownership in the distribution business. More ownership always means more margin and more potential on profitability. So that is very important because in the past three years we spend a lot of time and energy in BBM and we gain as a group a lot of solid experiences how to do higher ownership business. So this kind of Knowledge, experience and mechanisms can transfer to BEC to make them a better potential to do this kind of high quality distribution business, especially in the softer goods sections categories. So in the past more than one year we have some of the extreme experiments, you know, we have several projects which is quite more apparel, fashion products, you know, distribution model. They are very successful. So next year we're trying to expand this model into more brands. So we are expecting a huge potential of growth for this, you know, soft goods distribution model. So this gives us a huge potential space to grow the business, not only the top line but more importantly on the margin expansion, you know, side. So that is, you know, basically our plan for 2026 and the years ahead. So for the, of course we are actively looking, you know, for brands, you know, for the BBM portfolio. But I think we'll be very careful in bringing new brands in to make sure we have a good chance to be successful. Each brand, as I mentioned, for the first priority and also, you know, we are investing in data warehouse, AI, all these kind of technology factors and we're seeing yields from these efforts and investments. We are going to do this in the future as well. So all these kind of technology, AI capability and data warehouse can contribute in the future. So synergy between BBM and the BEC is very important. Just add like what Ken just said, mind the gap, bridge the gap. Yeah. So BEC and BBM are getting more and more synergies.

Thanks.

And the next question comes from Yinjia Wei with citic. Please go ahead.

Good evening management. Thanks for taking my questions. Congratulations on this quarter's strong performance. I have two questions regarding becoming. The first question is that as we have seen recently, premium consumption has shown signs of stabilizing and recovery. Has the company's relevant categories benefited from this trend? And my second question is in recent years the growth gap between content E commerce and the traditional E commerce has narrowed. Meanwhile, China's online traffic and sales channels have become more diversified with emerging platforms like RedNote and BDBD. How does the company view the strategic shifts brands should make? And how is Baozong adapting to this change? Thank you.

Okay, let me address your two questions. The first one is a very positive answer. So yes, so premium luxury category is still taking the lead off the result, especially after Double 11. So I can make one example about a leading American premium brands which maintains a 60% year-over-year and the pattern keeps going for the past three years. So in this category, if you want to drive a higher margin, a higher gmv, it's not relied on listing more products online. It relies on the content driven how do you want to just set up the emotion linkage before making transactions? So I cannot reveal a lot of details but if you have the chance to go to our livestream studio for that brand, you can see that they are scenario based. They are building a lot of different scene for a selling total look instead of a single article for top or for bottom. So the luxury and premium category they can provide a very big value for consumers to purchase and they can provide a lot of history, the brand storytelling, a lot of things. So this is very much promising in the future. And we realized that the consumer shopping is paper value. So they rather wait until the good momentum, a good window to shopping all those premium and luxury brands. And the second question is related to content e-commerce and traditional E commerce. So I mean for the past two, three years there's no such a thing to separate a content with the traditional E commerce. They are merging together, they are interweaved with each other. You need to just build up the content before making transactions, not just getting the traffic to your store and let them convert. So the red node before they had the redcat initiative they were the UGC platform that was the pure content. And in the past 618 their initialized all those redcat initiatives link all those content to the transaction which makes that the brand are shifting their strategy putting a lot of marketing fee and marketing spending into an ROI driven kind of the initiatives. So more and more brands they realize that investing in content and getting more investment into the content creation set up the emotion linkage is the key because we can trace all those content how much ROI can driven from those content to the transaction. So we are providing the platforms are also providing a lot of tools and mechanism to validate all those kind of investment from the marketing to e-commerce operations. So you know, if in the future we believe that in that marketing and e-commerce operation they are going to be rebudgeting for the future growth from the brand perspective. You need to just harmonize the marketing spending and your e-commerce operation. Not just the insight performance, marketing driving traffic, but also invest in the content to drive from the content to transactions. Yes, that's my answer for two questions.

Thank you.

And the next question comes from Jonah Ma with cmbi. Please go ahead.

Thanks Management for taking my question. Congratulations on strong quarters. So I have two questions. First is regarding. Welcome Management. Share with us regarding your revenue and profitability outlook in last quarter and also for the full year 26. While my second question is can Management, share with us your development plan for BBM business in the full year 26 both regarding non-GAAP Hunter and other new initiatives. Thank you so much.

Okay, this is Vincent. Let me answer these questions for the first one. You know right now we are already in late November so you can see that from day to day business management and updates. We are quite confident for both BEC and BBM results in the coming quarter. We are trying to deliver another solid quarter in the near future. So so far I think it is quite on track and we are quite confident for the results for the coming year 2026. You know, we are hoping that both business with its performance and also with the synergy in between to be developed. We are expecting a big improvement in profitability for the whole business. You know, separately becs we are expecting, you know, big improvements and also bbm. And because we're developing the synergy so you know, in general we are expecting, you know, big improvements for profitability. Yeah, for the. BBM business. As I just mentioned, the priority is that, you know, we just make each of single brand to achieve the expectations and plan we made for this year and next and in the coming three years. And also we are developing a synergy between BEC and the BBM. Certainly we'll be actively looking for new opportunities but we'll be very careful in bringing in new brands. So that is about the BBM strategy. Yeah.

Thank you.

Again. If you have a question, please press star and then one. Our next question comes from Kao Choming with Haiti Securities. Please go ahead.

Hi Management. Thank you so much for taking my question. I have two questions. The first question is about Quick Commerce driven by the traffic from Taobao's Quick Commerce on the main app. Taobao's DAU recorded a noticeable year on year increase in third quarter with further momentum continuing into fourth quarter. Have we observed any positive impact from the increase in taobomb main site traffic on our third quarter performance? And in which aspect is this mainly reflected? And looking ahead to fourth quarter, should we expect any sustained positive inference or some potential action on the QR commerce? And my second question is about the recent new regulation on advertising spend and tax. Some of our brands under our portfolio are in the beauty category. The new tax policy introduce updated requirements on advertising spending. Have we seen any impact on our advertising operations so far? How should we assess the potential magnitude and extent of this policy's impact on on revenue and profitability going forward? Thank you.

Okay, thank you for the question. This is Junhua. Let me address Your two questions. The first one is related to the instant shopping, quick commerce. So when you're talking about the instance shopping, you need to talk about the categories. The category really just have that business nature like fmcg, food, wine, some kind of category. They are more related to the instance shopping. So this is not our majority battlefield. In the Belgian BEC business growth we are in the fashion business, in the luxury business, electronic devices. Some of our FMCG and wine brands, they are pilot run and they are devote themselves into the quick commerce. But it's very hard for us to imagine a premium luxury brand, you know, listed their products next to for example like a birth control products. So that scenario is not our majority part of the battlefield. And this is the second one. The second one is the traffic pool from the instance shopping to the TMALL and Taobao are very different. So they are personalized to a very targeted traffic into different brands. So we are not targeting all those instant shopping traffic rather than we just targeted the OAPIPL. So we need to just spend our money wisely in the big pool. So we are focused on more the top tier, I mean the 300 million among the 800 million traffic among all the tmall for example. So this is our target traffic, not the instant shopping traffic. That's the first one. The second one you mentioned about the especially the cosmetics category because we realized that in that category the marketing spending is mostly bigger than the other category. But after the pandemic all the brands are spending their money wisely. So even in the cosmetics brand, the brand doesn't really just spend that much like years ago. So within the regulation and policy we do not, we have not realized any kind of the impact about the regulation, you know, to us. So the brand in that category also the other category also still maintain a decent and you know, very logical investment proportion among the rgnd. Thank you.

And the last question comes from Yinjia Hui with citic. Please go ahead.

Hi management, thanks for taking my question again. I have one question regarding bbm. In September, Gap has signed a top tier brand ambassador and the brand management business also delivered a strong growth this quarter. So what impact has this collaboration had on Gap's brand awareness and user profile? And has there been any synergetic sales growth in other business lines like children's wear? And what is the company's long term view on Gap's profit potential and the development vision? Thank you.

Thank you for the question. This is Ken, I will answer your question. I think for the first as I mentioned before in this campaign we attracted more young customers from the younger generations. 25% increase. It's not only increasing the young generation but in the whole customer base we see a big increase in all the AIPL customer base customer base. And more importantly we see a lot of new UGC contents in the social media. The brand, our brand and our products are discussed within the young generations and our consumers. And this campaign also helped us to promote our key category products especially denim and sweatshirts. Our ambassador wear different color, different feet Silo logo sweatshirt during the campaign it further help us further strengthen the brand awareness and the key product awareness to the market. And second for the kids and baby business we do see the synergy because kids and baby is strong restaurant division of gear brand. And it's also our advantage because nearly all our stores sell both adult and the kids and baby products. So this can be proved from our increase of our units per transaction. So we see more family customers also shop both adult and the kids products at the same time. And for your last question about Gap's future profit potential, I think by capitalizing this marketing asset of these four campaign, we will continue using this, our winning formula to continue expand our customer base, brand and sales in the coming quarter and the coming year. So we expect to continue our double digit growth in Q4 around 20% increase. And for next year we also expect a continuous double digit increase in our sales in Q4. We will also introduce our new store image. So with this new store image we expect bigger store sales productivity in our new store format in next year. So we will further accelerate our store expansion, keep the momentum of sales growth in both scale and unit stores which in total I think will help us to improve the profit. Thank you.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Ms. Wendy sun for any closing remarks.

Thank you, operator. On behalf of the Baozun management team, we would like to thank you again for your participation in today's call. If you require any further information, please feel free to reach out to us. Thank you for joining us today. This concludes the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.