“Investors Network” Hou Shuqing

Recently, China Youzan (08083.HK) released its financial report for the first half of 2023. CEO Bai Ra said, “This is the only half-year since Youzan was founded 11 years ago with no surprises or surprises.” Weiman, a comparable company, also released its 2023 semi-annual report on August 15.

In the first half of this year, revenue from the two major businesses praised by China increased and decreased. With the gradual implementation of cost reduction measures, gross margin increased year over year, but revenue declined slightly year over year. Youzan is in a state of loss as a whole. Although losses have narrowed to a large extent, the stock price continues to be at a low level.

If you want to save your own stock prices and get your performance back on the path of total growth, what you need to solve most is the loss of stock paying merchants. In the first half of 2023, a significant portion of the number of popular stock payment merchants was added that year, and the total number declined compared to the same period in 2022.

The first half of the year had no surprises

Judging from China's laudable performance in the first half of 2023, “no surprises” is just one aspect. Some of the company's indicators showed a downward trend.

In the first half of 2023, Youzan achieved revenue of 724 million yuan, a slight decrease from 729 million yuan in the same period in 2022 and a year-on-year decline of 0.68%. By business, the revenue of Youzan subscription solution was 422 million yuan, down 3.9% from the previous year, while the revenue from the merchant solution was 300 million yuan, up 5.7% from the previous year.

In terms of revenue, the performance of the Peer Micro Union is clearly better than that of praise. Weimue's revenue in the first half of the year increased 34.5% year on year to 1.21 billion yuan, of which subscription solution revenue was 706 million yuan, up 21.4% year on year, and merchant solution revenue was 504 million yuan, up 58.3% year on year.

With the gradual implementation of cost reduction measures, Youzan's progress in terms of gross profit is quite encouraging. The company's overall gross margin increased to 69.2% from 60.5% in the same period last year. Among them, the gross margin of merchant solutions increased from 48.1% to 52.1%, and the gross margin of subscription solutions increased from 69.1% to 81.5%.

Youzan still hasn't escaped its loss status, but in the first half of 2023, the company's losses narrowed sharply by 97.6%, with a loss of 11.265 million yuan. In the first half of 2023, the profit pressure on Peer Union was even greater. The adjusted net loss was 254 million yuan, a sharp decrease of 55.2% from the same period last year.

Whether it's Praise or WeChat League, there were no surprises with their performance in the first half of the year. Although both Youzan and Weimue are under pressure to reverse losses, in addition to this, Youzan also needs to solve the problem that the revenue scale has stagnated.

Cutting costs with layoffs

In January 2022, there was news that the Youzhun Plan launched a layoff plan involving more than 1,000 people. “Personnel optimization” appeared in the New Year's performance review. According to information from “World Online Merchants” in March 2022, more than 400 people had left their jobs at the time of Youzan.

In response, praise responded that the company's actual layoffs were 20%, and that the scale was exaggerated.

So, after this layoff, how many employees does Youzan still have left? According to the 2021 financial report, the number of employees with praise as of the end of the period was 4,494. Meanwhile, the 2022 financial report shows that as of December 31 of that year, Youzan had a total of 1,552 employees. The rate of layoffs is over half.

The layoffs on this scale are related to the impressive performance at the time. In 2021, Youzan's revenue was 1.57 billion yuan, down 13.8% from the previous year, and losses increased from around 500 million yuan to 3.29 billion yuan. The cumulative loss over 3 years was already close to 5 billion yuan.

In addition to layoffs, the changes in Youzan's employee structure also reflect the company's growth source. The layoffs mainly involved the middle and back office. Since then, Youzan has focused more on sales rather than R&D.

At the end of 2021, sales and marketing personnel with praise accounted for 42%, and R&D and product personnel accounted for 37%. By the end of 2022, the share of sales and marketing personnel had increased to 54%, and the proportion of R&D and product personnel had dropped to 27%.

At the same time, the effects of the praised cost reduction strategy are also clearly reflected in terms of costs. In the first half of 2023, the company's sales expenses and administrative expenses fell by 30.2% and 64.2%, respectively.

In recent years, Youzan's cost reduction measures have been implemented one after another, but whether they can actually increase efficiency is still a question mark. Whether it is layoffs or fee cuts, it is difficult for Youzan to completely get out of the growth dilemma. The crux of the problem is that likes need to find ways to keep users stable so that they can renew their contracts for a long time.

The key is in stock

If you want to know how to break the game, you must first understand why Youzan has fallen into an income bottleneck.

Whether it's Zane or WeChat, their origin all stemmed from the relative ecological closure of major Internet platforms before 2020, which also made the term “private domain traffic” a buzzword in the e-commerce field at the time. In 2018, Kuaishou entered the e-commerce business. At the time, Kuaishou bloggers contributed more than 40% of that year's GMV to Youzan through the monetization channel built by Youzan.

In 2020, under the impetus of the Ministry of Industry and Information Technology, the Internet industry returned to openness, and the traffic ecosystem between the various platforms that were originally independent of each other changed from being relatively closed to interconnection in the past. This change allows traffic to move more freely between platforms, but it has suffered from SaaS platforms such as Youzan and Weimue.

As soon as the policy came out, the turnover rate of favorable merchants rose to 29.6% from 17.5% in 2019, and the loss rate of the Weimei Union also reached 26.1%. The opening of external links means that merchants are less dependent on marketing and streaming services provided by SaaS platforms.

And as Tencent puts the development of the industrial Internet on the agenda, WeChat also launched a WeChat store in 2020. This is part of a series of SaaS products launched by Tencent for merchants. At the same time, video accounts, corporate WeChat, etc. are also interconnected with WeChat stores.

This change directly affects the seven inches of SaaS companies. As a national-level app, WeChat has hundreds of billions of users. With daily and monthly activities on this scale, the distribution and monetization efficiency is difficult for SaaS platforms to reach, and it has become quite easy to increase user retention.

The SaaS dividend period is over, and maintaining a large number of users has become something that must be taken seriously. However, judging from the performance in 2022, Youzan is facing a lot of pressure from paying merchants to stay.

In 2020-2022, the number of approved stock payment merchants was 97,158, 88,395, and 83,439, respectively. The total number declined year by year.

Meanwhile, in 2022, there were 40,443 newly paid merchants with praise. This means that the turnover rate of paid merchants with likes in 2022 will be around 51.36%. According to the calculation of Interface News, in 2021, the turnover rate of paid merchants with likes was as high as 58.1%. This means that in the two years of 2021 and 2022, Youzan will lose half of last year's stock payment merchants every year.

Currently, the number of popular stock payment merchants continues to shrink. There were 78,389 and 72,621 in the first and second quarters of 2023, respectively, and the number of new additions in the two quarters was 5015 and 5848, respectively.

This is equivalent to the fact that Youzan has to import more than half of its “new blood” every year, but the total amount of blood volume is still declining, and the number of stores that pay for stock is in a “always new” state.

Currently, the stock price of China Youzan has been fluctuating around HK$0.15 for a long time, but at the close of January 3 this year, the company's stock price was still HK$0.21, a drop of about 26.7% during the year.

Profits may be able to recover profits this year through cost reduction measures, but if they want to restore stable long-term profits, the focus should be on increasing the size of stock payment merchants while also increasing the retention rate. (Produced by Thinking Finance) ■