Production | Tiger Sniffing Research
Author | Ding Ping
On March 25, Yunji disclosed its fourth quarter and full-year results for 2019. In 2019, GMV achieved a GMV of 35.2 billion yuan, a year-on-year increase of 55.07%; total revenue was 11.672 billion yuan, a 10.32% year-on-year decrease. In the fourth quarter of 2019, Yunji achieved revenues of 2.494 billion yuan, a year-on-year decrease of 45.15%; the net loss attributable to the company narrowed to 4.497 million yuan.
As the “China’s first e-commerce member to go to the US”, Yunji’s performance in 2019 is not optimistic. The high light moment has ended, and the revenue has fallen, and the loss has become the normal dilemma. Let us understand the truth of Yunji’s troubled situation through four questions.
Yunji is a complex complex that includes multiple business models: S2b2c model, membership model, and social e-commerce.
At the beginning of its establishment, Yunji adopted a multi-level distribution model. Users paid a membership fee of 365 yuan to become Yunji’s shop owners, and obtained the qualification to sell goods on the platform and develop offline. Each time a shop owner invites a new user, he can get Corresponding commissions can be upgraded to “mentors” when over 160 people are invited (30 directly and 130 indirectly), and 1,000 partners can be upgraded to “partners”.
But there are risks to the membership model.
In 2017, the Binjiang Market Supervision and Administration Bureau issued the “Administrative Penalty Decision” and stated that through the investigation of Yunji in 2016, after inspection, it was found that there were “entry fees” and “pulling people’s heads” in the operation activities of Yunji Micro Store platform. , “Team pay”, etc., suspected of violating Article 7 of the “Prohibition of MLM Regulations” and was fined 9.58 million yuan.
Subsequently, Yunji adjusted its modeBecome a manager, supervisor, and shopkeeper at three levels to avoid MLM risks. However, Zhao Jie, a special researcher at the Intellectual Property Research Center of China University of Political Science and Law, said, “The manager still pays from the offline and that is the charge from the supervisor and the owner.
The risks of the cloud-based membership model have not been eliminated, and we are looking for a new path to transformation.
I. What is the source of income for Yunji?
Yunji began to change from self-employed to “self-supported + platform” mode.
At present, Yunji’s revenue is mainly composed of merchandise sales, membership fees and market services revenue. Product sales income refers to direct income from the sale of self-operated products; membership fees are based on membership fees paid by paying members or income from purchasing goods.
Because Yunji is essentially a self-operated e-commerce platform, the sales revenue of goods is the core revenue of Yunji, accounting for up to 90% of its revenue.
The proportion of membership fees has continued to decrease, accounting for only 5.93% in 2019Q4, mainly due to the fact that after the business model has been adjusted to avoid MLM risks, the repurchase rate of members has decreased, and membership fees have decreased. However, because the members of Yunji Group are not only consumers, but also the link of product information and users, the decline in membership fees will also affect the revenue of product sales to a certain extent.
Product sales revenue and membership fee growth have been sluggish, and the embarrassing performance has forced the launch of new business models. Yunji launched the mall business in early 2019, that is, market service revenue, which was included in the statistics for the first time in the second quarter.
Data source: company announcement
Finance report data shows that Yunji’s new market service revenue was 530 in the second, second and third quarters, respectively.The income contribution ratio has gradually increased, and it surpassed the membership fee in the fourth quarter of 2019, becoming the second largest source of revenue.
But compared to integrated e-commerce platforms, both in terms of category and price, Yunji has no advantages and lacks free traffic. This also limits the development of the market service business, so it is expected that the market space for cloud market service revenue will be limited .
Second, what is the user acquisition ability of Yunji?
The growth of Yunji’s trading members has shown a slowdown.
Benefiting from the fission and new base and the low previous period, the number of trading members (that is, members who purchase goods or pay membership fees) has increased sharply. 7.4 million, with year-on-year growth rates of 222% and 155% in 2017 and 2018, respectively.
Yunji launched the “0 Yuan Store Owner” Experience Membership Program in October 2018, which resulted in a 76.19% increase in the number of transaction members in 2018Q4. Instead of paying membership fees, these new members become members by purchasing goods. However, after entering 2019, there has been a sharp decline, and even a negative quarter-on-quarter growth in 2019Q1.
Data source: company announcement
As the e-commerce dividend subsides and integrated e-commerce is added, the market competition is intensifying, and the growth rate of the number of members in the cloud trading will continue to decline.
As a member e-commerce, Yunji is the core of platform participation and growth, and is one of the important components of the entire business model. Therefore, the slowdown in the number of trading members will inevitably affect the growth of Yunji’s performance.
3. What is the growth ability of Yunji?
Although Yunji’s trading members are growing, its revenue has entered a decline. It means that the repurchase rate of Yunji members is decreasing, and its transformation is facing difficulties.
Market service revenue has grown rapidly, driving GMV up, but it has not resulted in positive overall revenue growth.
Data show that in 2019, the GMV of Yunji will reach 35.2 billion yuan, a year-on-year increase of 55.07%; the revenue will be 11.672 billion yuan, a year-on-year decrease of 10.32%. GMV is in the growth rate of more than 50%, but revenue has entered a downward trend. It’s self-explanatory how much water GMV has.
Data source: company announcement
The core revenue has shrunk significantly, and the revenue momentum is insufficient, and it has entered a downward trend.
Based on quarterly data, Yunji’s revenue has shown a negative year-on-year increase since 2019Q2. Yunji’s explanation for this is due to the change in business model: the company began its own operation in the first quarter of 2019 and transferred to the third-party sales mall business, which led to a decline in merchandise sales revenue. But this does not explain the company’s three-quarter revenue decline year-on-year.
2019Q4, Yunji realized operating revenue of 2.449 billion yuan, a year-on-year decrease of 45.15%, and the decline further expanded. As an e-commerce platform, Yunji’s revenue in the fourth quarter of 2019 declined month-on-month, and it did not enjoy the e-commerce dividends brought by “Double 11” and “Double 12”. It can be seen that Yunji’s revenue is in a dilemma of contraction.
Data source: company announcement
Yunji’s operating income in 2019Q3 and 2019Q4 continued to decline, mainly due to a significant decline in merchandise sales revenue.
Entering 2019, the growth rate of Yunji’s merchandise sales revenue continued to decline, falling 14.04% and 39.6% year-on-year in 2019Q3 and 2019Q4, respectively. Commodity sales revenue is the core revenue gathered, and its downward trend is driving the overall revenue into a downward trend.
Data source: company announcement
Yunji’s membership fee has increased significantly in 2018Q4. It is predicted that a part of the product sales expenses for the current period will be included in the membership fee. In the fourth quarter of 2018, Yunji launched the “0 yuan shop owner” experience membership program, which resulted in the number of transaction members increased to 7.4 million. These new members do not need to pay membership fees and can become members by purchasing goods.
In the fourth quarter of 2019, Yunji’s membership fees also fell sharply, down 84.3% year-on-year and down 29.47% month-on-month.
The development of Yunji’s core income has been hindered, causing the overall revenue to continue to fall. Due to the lack of its own traffic, Yunji has limited market service income. So, finding a new growth engine is already a top priority for Yunji.
How is the profitability of Yunji?
Deeply plagued by continuous losses, Yunji began to tilt towards the platform, intending to change the state of continuous losses.
The data shows that Yunji has been in a loss. The net profit attributable to mothers from 2016 to 2019 was -24.67 million yuan, -10.57 million yuan, -59.69 million yuan, and -126 million yuan. The loss gap in 2019 expanded. .
Quarterly data shows that Yunji achieved a net profit of 14.75 million yuan attributable to mothers in 2019Q1, turning losses into profits. However, the second quarter of 2019 turned losses again, and the amount of losses has relatively expanded.
In 2019, Yunji continued to lose money for three consecutive quarters. The reasons are: One is that revenue has fallen into the downward channel; the other is that in order to avoid the risk of pyramid schemes, Yunji has hired third parties to provide member management services, which has increased member management fees , Reducing the profit margin.
Data source: company announcement
But the loss ratios in the third and fourth quarters of 2019 both narrowed, benefiting from the increase in non-recurring gains and losses and the change in business models.
First, non-recurring gains and losses increase . The other gains of 2019Q3 and 2019Q4 were 22.77 million yuan and 10.78 million yuan, respectively, an increase of 22.6 million yuan and 10.25 million yuan year-on-year respectively.The increase in non-recurring gains and losses is one of the reasons for the narrowing of the current net loss, but the non-recurring gains and losses are not related to the main business and are not sustainable.
Second, the transformation of business models . Yunji has shifted to the platform model since the first quarter of 2019. The proportion of self-operated revenue has decreased and the proportion of platform-based revenue has increased. Although Yunji’s revenue has declined, it has improved the company’s gross profit margin. Gross profit margin increased by 0.96 percentage points and 6.2 percentage points year-on-year respectively.
Can Yunji turn a profit?
Yunji’s revenue is in a downward trend. The key to whether it can turn a profit into a profit depends on the degree of cost reduction.
The largest proportion of expenses during the gathering period is sales expenses, and the main component of sales expenses is membership management fees. Member management fees are expenses incurred by Yunji in order to avoid MLM risks by hiring third parties to provide member management services. It is difficult for the platform to release the profit space by reducing the membership management fee, and it is difficult to turn the loss into profit.
Facing the slowdown in the growth of trading members, the continued decline in revenue, and the status quo of losses becoming normal, Yunji said in this financial report that it would expand its membership base.
Yunji adjusted the membership registration system in January 2020, allowing any user to become a member by registering an account on the Yunji APP and enjoying membership benefits for one year for free. If the user meets a certain cumulative spending amount or other requirements during the first year, he can extend his membership for another year.
This strategy may help drive the growth of Yunji’s trading membership, but it is difficult to increase the repurchase rate of trading members and it is difficult to break through the current dilemma. Therefore, Yunji’s future development is really worrying.
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