CFO INTERVIEW: After IPO, Yunji Aims to Expand Supply Chain, Attract Users
The CFO of Yunji, which completed its IPO in New York on Friday, said the company can compete with big retailers because of its unique selection of products and reliance on member feedback.
Yunji, an e-commerce site powered by member participation, celebrated a fruitful debut on the Nasdaq last week as it witnessed its stock soar as high as 65 percent before settling 29 percent above the issue price, at $14.15 per American depositary share.
The Hangzhou-based company rang the MarketSite bell in Times Square Friday, selling 11 million of its shares for $121 million in its initial public offering.
Like other Chinese companies entering the New York stock markets, Yunji Inc. (Nasdaq: YJ) sought to gain trust from its customers and supply partners through its IPO, said the chief financial officer of the company, Chen Chen, in an interview with CapitalWatch.
On its platform, the company sells products in categories of household goods, electronics, childcare, and food and beverage. Subscribers of the app get a personalized shopping experience, as well as discounts for the goods.
In China's highly competitive online retail sphere, where giants Alibaba Group Holding Ltd. (NYSE: BABA), JD.com Ltd. (Nasdaq: JD), and Pinduoduo Inc. (Nasdaq: PDD) take up much of the market share, Yunji aims to stand out by selling products from non-mainstream, domestic suppliers, in addition to well-known brands.
Yunji relies on member feedback for the selection of goods they offer. In addition, according to Chen, a team of approximately 400 people, including specialists in the industry, discover new products, emerging brands, and quality manufacturers for potential partnerships with Yunji.
Recently, Chen said, the company scored a partnership with Shenfeng Fruit Co., which operates more than 10,000 offline fruit shops. "They have a lot of buyers located across China," he added.
While Yunji's networks promote goods from the partnering suppliers and factories on social platforms, it does not charge its partners for advertisement. Sales make up the main income for the company. Chen said that's one of its biggest differentiators from big retailers.
"Suppliers pay huge advertisement fees to sell on Alibaba or JD," he said. "Emerging brands – they can create or produce high-quality products, but they are small, and their resources are very limited. If you want to secure a page on Alibaba, you pay around 10 million yuan – that's a huge amount, but Alibaba will not guarantee any final sales results."
Of Yunji's total gross merchandise volume (GMV), 52 percent comes from well-known, or mainstream, brands, while the rest are smaller producers. Chen said Yunji aims to operate a unique supply chain and "create some certainty," as well as "save resources for the emerging and quality factory brands" it partners with.
Launched in 2015, the company generated revenue of $1.9 billion last year, according to its prospectus filed with the U.S. Securities and Exchange Commission. That was double its revenue of 2017 and was equivalent to the revenue of another four-year-old Chinese retailer, the popular, scandal-ridden discounter Pinduoduo. Yunji reported a net loss of $8.2 million for 2018, however, compared with Pinduoduo's soaring losses of $1.5 billion.
For 2018, Yunji reported 23.2 million users, up from 16.9 million in 2017 and 2.5 million in 2016. As of Dec. 31, it had 7.4 million members. Of all purchasers in 2018, 66 percent were members of the platform.
Chen said 95 percent of Yunji's members are women who are likely to use online social media to discuss their shopping experience and products. "They want to get quality products for a reasonable price," he stated. "If we provide more value for the price, they will stay with Yunji."
He also said, "Our members are not only members that get discounts, but also act as a bridge to help us create content and share it to incentivize others to make purchases. They act as a channel between the brands and the final users."
In its filings, Yunji said it intended to use the proceeds from the IPO to expand its business operations, to improve its technology and facilities, and for general corporate purposes.
"This is just a start for us," Chen said. "Our next steps will be enhancing our supply chain, finding more emerging brands in China and factories that can provide the best quality products with a lower price. We believe, if we can find more valuable suppliers and more products, we can keep our members increasing and keep them active."
The IPO was underwritten by Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, and China International Capital Corporation Hong Kong Securities Ltd. (CICC).
Now that Yunji has become a publicly traded company, Chen said, "We are very excited, but we also feel a lot of responsibility and will aim to ensure our investors get a long-term profit in the future."