2023 will be a devastating test for many businesses.

The stock market's performance is weak, the investment and financing environment is difficult, and the moderate recovery of the general environment is still under pressure. These factors all cast a shadow over enterprise development. In such a market environment, profitability and hematopoietic capacity have become key factors in the survival and development of enterprises. For the SaaS industry in particular, this is an extreme stress test — currently most SaaS companies are still in the early stages of development, large losses are the norm, and external “blood transfusions” are required.

Under such external circumstances, China favored it but bucked the trend, successfully achieved profits, and reached a milestone.

Increased profitability and cash flow

In 2023, Yousan's business goal is “to pursue the accumulation of a better business foundation and organizational capacity as much as possible on the premise of maintaining healthy profits and reasonable human efficiency; to be the first batch of profitable medium-sized enterprise service companies in China, and the first tier of enterprise service companies capable of welcoming the recovery of the general environment.” Youzan CEO Zhu Ning said in a letter to all internal employees, “We did it.”

In the past year, the company not only became one of the first profitable medium-sized enterprise service companies, but also greatly improved its operational quality and hematopoietic capacity. According to financial reports, the company achieved revenue of 1,448 billion yuan in 2023 (unit: RMB, same below), which is basically the same as last year. The company's operating efficiency and profitability improved markedly. Without active staff reduction, overall labor efficiency was greatly improved, reaching 800,000; the company's gross margin increased 4.9 percentage points year on year, gross profit increased 4.2% year on year, and adjusted net profit was 42.289 million yuan, reversing the loss year on year. In addition, the company's hematopoietic capacity improved markedly. The net operating cash inflow increased sharply by more than 70 million over the same period last year, and the cash balance at the end of the period was 926 million yuan.

All of this is not easy. Leaving aside the macro situation, e-commerce traffic will enter a major reshuffle phase in 2023. You praised not only preempted the stabilization of the entire industry, but also achieved significant increases in profits and cash flow over the past year, showing the ability to manage the cycle.

Explore the reasons behind this success, thanks on the one hand, to Youzan's full embrace of AGI and continue to explore innovation on the AI+SaaS path. In the AI 2.0 wave, Youzan, as a leader in the SaaS industry, is putting SaaS on the wings of AI with its deep understanding and forward-looking layout of the retail industry and AI:

First, on the internal side, Youzan used AI technology to comprehensively improve sales efficiency and internal operation efficiency. Through AI intelligent analysis and optimization, the company's internal processes are more efficient, and the sales team can more accurately locate customer needs, improving work efficiency and sales performance.

Second, on the external side, Youzan has accelerated the innovation of solutions.

Youzan promotes the development of “AI+SaaS”, which is not limited to providing better products and services, but also focuses more on helping enterprises achieve business model transformation and innovation. It is recommended to use AI assistants (Copilot) to help merchants more easily use products to do online and offline operations, use automation (Agent) to complete work more efficiently, use business advisors (Insight) to generate more targeted and effective business strategy suggestions, and use AIGC to generate better marketing ideas. In 2023, the company further released the first artificial intelligence product “Add Me Intelligence”, which enables four major scenarios of graphic promotion, event planning, business analysis, and automated tasks. Through AI's data analysis and forecasting capabilities, Youzan can more accurately understand market trends and user needs, explore potential needs in existing user groups, provide customers with personalized and customized solutions, and accelerate the development and transformation process of enterprises.

On the other hand, it has benefited from the company's strategic upgrade, which has achieved remarkable results.

Changes in brand value positioning

In 2023, Youzan actively promoted a major upgrade in brand value positioning, and the pace of the company's strategic upgrade was very clear.

Zhu Ning mentioned in a letter from all internal employees that Youzan's new value position starts with helping merchants do a good job in public domain content marketing, and then providing a private domain operation and distribution group buying system to provide a more intelligent solution for final sales transformation. The new brand positioning is not only more conducive to leveraging the technical strength and innovation capabilities of being praised as a SaaS service provider, but also enables the company to further dig deeper into the industry value chain and seek new growth points. As a result, the company officially changed from single-wheel drive to two-wheel drive with “private e-commerce and store digital service” + “intelligent consumer operation system”. Among them, the intelligent consumer operation system includes products such as Youzan CRM, Youzan Smart Shopping Guide, and Youzan Enterprise WeChat Assistant, which provides customers with smarter and more efficient marketing and operation solutions.

On this basis, Youzan provided a comprehensive solution for merchants, increasing the average sales volume of a single merchant by 33% to 1.61 million yuan in 2023. It is worth mentioning that medium and large businesses have performed particularly well in terms of growth. In 2023, the company gained more medium and large merchants, and the delivery process helped these merchants to actively use it — according to financial reports, the share of medium to large merchants increased to 53%, and total store merchant transactions increased 19% year over year. At the same time, the average renewal amount for the core customer base with likes also increased by 21%, especially in the new retail business, where renewal increased by as much as 25%.

Note that the above data is a posteriori indicator. In fact, forward-looking metrics, that is, leading renewal indicators, also performed well. According to financial reports, the company's e-commerce new customer activity rate, CRM new customer activity rate, and shopping guide activity rate have all increased. It's easy to judge. Thanks to the upgraded value positioning and the birth of new core drivers, the trend of improving profit levels and cash flow is expected to continue steadily in 2024.

From a company perspective, the future development prospects are quite clear: the company has achieved profit in 2023, and the outlook indicators for 2024 are good.

From the perspective of the macro environment:

In the short term, the wave of tiny customers closing their stores has bottomed out, and the scariest moment seems to be over. According to data recently released by the National Bureau of Statistics, the total retail sales of social consumer goods in January-February was 813.7 billion yuan, up 5.5% year on year, slightly higher than Wind's consensus forecast of 5.4%. The growth rate was 2.0 pct higher than the same period in '23. It can be seen that the national economy is rising steadily into 2024.

From a long-term perspective, you are in line with the long-term trends of the future development of countries and times. As far as industrial policy is concerned, the science and technology industry policy and investment represented by “new quality productivity” will be significantly stronger than last year, and is the most important change in this year's two conferences. Youzan relies on technological strength to empower new industries, catalyze new models, and provide new momentum. The company can help enterprise customers break away from traditional growth paths, and is a new quality of productivity that meets the requirements of high-quality development.

In addition, the company also welcomed the benefits of the capital market. In 2024, the Stock Exchange introduced a new “simplified transfer mechanism” and officially implemented that GEM issuers can transfer to the main board for listing. Successful completion of the transition can help increase liquidity, unlock potential, and achieve return in value.

Looking forward to the future, after Youzan crosses the trough, the times will help it achieve greater value.