Specialist
Former divisional leader at Hangzhou Youzan Technology Co Ltd
Agenda
- Youzan’s (HKG: 8083) 2020-H1 2021 development review, H1 2021 revenue decline and reasons behind, plus development trends and challenges across business segments
- Youzan’s client profile, merchants’ main demand, paying merchant quantity, average contract value, typical client cooperation provisions, plus renewal rates across product types, highlighting Youzan WeiMall and store SaaS products
- Youzan vs Weimob (HKG: 2013) in product, management, channel and client maintenance, plus sales strategies targeting different types of clients
- Impacts from Tencent (HKG: 0700) sharing ecosystem with Alibaba (HKG: 9988) on e-commerce SaaS and impacts from Kuaishou (HKG: 1024) building its own closed-loop ecosystem on Youzan
Questions
1.
As we know, Youzan developed on the ground that Tencent blocked Taobao links and merchants hoped to build their private traffic pools. With the tightening of antitrust regulations, Alibaba and Tencent have considered opening their ecosystems to each other. It is said that Alibaba may introduce WeChat Pay on Taobao and Tmall, whereas Tencent may allow users to share links redirecting to Alibaba’s e-commerce platforms on WeChat or allow users to use some of Alibaba’s services through WeChat mini programs. How deeply do you think Tencent and Alibaba will cooperate with each other? How will their cooperation affect the development of third-party e-commerce SaaS vendors based on WeChat, including Youzan and Weimob? Has Youzan taken any measures in response?
2.
In order to protect users’ privacy, Alibaba and Douyin may encrypt the phone numbers and other personal information of their users on waybills or in ERP and CRM systems. If merchants cannot get such information, how can they build their private traffic pools?
3.
According to its interim financial report, Youzan had an operating revenue of RMB 803m in H1 2021, a decrease of 2.5% YoY. The revenue Youzan generated from SaaS subscription solutions was RMB 508m, up by 6.8% YoY; the revenue from merchant solutions was RMB 290m, down by 15.2% YoY; the revenue from other business lines was RMB 63.33m, down by 17.3% YoY. Youzan’s net loss increased to RMB 199m in H1 2021 from RMB 120m in H1 2020. SaaS subscription business accounted for around 60% of Youzan’s total operating revenue and was the only business line that registered positive growth. The revenue from SaaS subscription business included subscription fees for SaaS products such as Youzan WeiMall, Youzan Retail, Youzan Chain, Youzan Beauty and Youzan Education as well as a per-transaction cloud service fee for each extra order beyond a pre-specified order number threshold that consumers made to such merchants through SaaS products. Youzan’s SaaS subscription business grew by 89% YoY in 2020, but the growth rate plummeted to 6.8% in H1 2021. Can you tell us the reasons behind the decline? What obstacles did Youzan encounter in the post-pandemic era?
4.
It is said that the contribution of Kuaishou-based merchants to Youzan’s GMV has fallen to 20% and may decrease further to around 10% in the future. Do you think the figure will remain largely unchanged, or will it decrease further?
5.
What can Youzan do to compensate for the loss of Kuaishou-based merchants?
6.
What are the main features and target clients of Youzan’s SaaS products, including Youzan WeiMall, Youzan Retail, Youzan Chain, Youzan Beauty and Youzan Education? How does Youzan upgrade those products?
7.
Youzan WeiMall is a mature product. Have there been any noteworthy upgrades to Youzan Retail over the past few years? What are the shortcomings of Youzan Retail? What is its competitive position in the market?
8.
About SaaS for offline stores, according to Youzan’s financial report, its GMV grew 4% YoY in H1 2021 and dropped 3.5% YoY in Q2 to RMB 24.5bn. The GMV from Kuaishou continued to decline, accounting for 20% of the total, while that from other channels maintained solid growth, up 34% YoY. The financial report also noted that GMV from SaaS solutions in stores doubled YoY in H1 of the year to nearly RMB 12bn accounting for 25%. If Youzan is integrating the online and offline business, why does it divide the business into stores, WeiMall and integrated operations?
9.
If it got RMB 800m in revenue in H1 2021, including RMB 500m from SaaS solutions, how much do you think Youzan WeiMall and its offline store SaaS solutions contributed to its revenue respectively?
10.
For clients who only subscribe to online WeiMall, those who buy only offline solutions and those who purchase both, what is the difference in the charging model? How much value does each client of Youzan bring on average?
11.
Youzan’s transaction fees have been criticised. The portion exceeding the order amount may be charged extra cloud service fees. What do you think of the practice?
12.
In H1 2021, the number of new paying merchants decreased by 41% YoY, and there were 11,093 new paying merchants in Q2, down by 40% YoY. Buyers of offline store SaaS products accounted for 32% of Youzan’s new paying merchants in H1 2021, up from 10% in the same period of 2020. Basically, buyers of offline store SaaS solutions increased in H1, while the paying merchants of other products decreased. Why did paying merchants decrease badly in H1 2021? Does this have anything to do with Kuaishou’s declining contribution?
13.
How much traffic has Youzan obtained from WeChat mini programs?
14.
You said Youzan won’t substitute clients’ existing ERP and POS solutions with its solution but will provide an interface to connect them. In such a case, how does Youzan charge clients? Could you compare the price Youzan charges for the interface and that for its solutions?
15.
Youzan’s average contract value has reached RMB 12,811 under a YoY growth of 8% in 2021 H1 and its ARPC (average revenue per client) this Q2 has reached RMB 2,868. Could you brief us on the standard form of the contracts Youzan signs with its clients? How long is its contracts’ average duration and how much is their average amount? Could you comment on Youzan’s pricing trend and the growth potential of its contract amount?
16.
Could you comment on the strengths and weaknesses of Youzan and Weimob in terms of products, management, sales channels and client maintenance and especially their sales strategies and maintenance capabilities regarding different types of clients, such as the major and minor ones and clients from different industries?
17.
Let’s look at Youzan’s renewal rate. Once we interviewed a leading agent of Youzan in Shenzhen. He said Weimob had a renewal rate of less than 10% while Youzan enjoyed a renewal rate of around 15% at most. However, according to Youzan’s open data, it had a churn rate of over 50% before 2021 and that of 30% in the H1 of 2021. Is the discrepancy due to different statistical analysis methods? How has Youzan’s churn rate been over the past few years?
18.
What is the difference between the renewal rate of key clients and that of small and medium-sized clients? What is the respective percentage of paying clients?
19.
What is the net renewal rate of clients? What is the performance of clients that make additional annual purchases compared with that of previously contracted clients?
20.
Youzan has not turned a profit yet and the cost of sales is very high. Do you think Youzan needs to make changes to turn around this situation? Why has the cost of sales remained so high? What are your opinions on the risks in its development?
21.
Compared with Weimob’s smart retail, smart catering and client expansion, Youzan seems to be a little bit inferior in the area of SaaS. How well does Youzan perform compared with Weimob?
