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Baozun Inc. (NASDAQ:BZUN)
Q3 2019 Earnings Call
Nov 21, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Third Quarter 2019 Earnings Conference Call.

[Operator Instructions]

I will now turn the meeting over to your host for today's call Ms. Wendy Sun, Investor Relations Director of Baozun. Please proceed, Wendy.

Wendy Sun -- Investor Relations, Director

Thank you, operator. Hello, everyone, and thank you for joining us today. Baozun's third quarter 2019 earnings release was distributed earlier today and is available on our IR website at ir.baozun.com as well as on Global Newswire services. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Mr. Junhua Wu, Chief Growth Officer; and Mr. Robin Lu, Chief Financial Officer. Mr. Qiu will review business operations and company highlights, followed by Mr. Lu, who will discuss financial and guidance. They will all be available to answer your questions during the Q&A session that follows.

Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of Securities Exchange Act of 1934 as amended and as defined in the US Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies such as will, expects, anticipates, future, intends, plans, believes, estimates, target, going forward, outlook and similar statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

Further information regarding these and other risks, uncertainties or factors are included in the company's filings with the US Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB.

It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Thank you, Wendy and thanks to everyone for joining our earnings call today. E-commerce in China continues to show tremendous resilience, despite the challenging macroeconomic environment, and it's today more active and innovative than it's ever before, ever be. Chinese consumers' purchasing power and average spending per person increases. According to National Bureau of Statistics, e-commerce remains a major driving force in China's greater economy, with e-commerce sales accounting for over a fifth of the country's retail sales.

We have been capitalizing on all aspects of this growth and we continue to leverage our leading position as an enabler within the e-commerce space to empower brand to achieve healthy, high-quality and a sustainable growth.

During the quarter, GMV growth 43% year-over-year with net revenue of RMB1.5 billion, an increase of 35%. [Phonetic] We are seeing China e-commerce shifting more toward marketing campaigns or event driven sales. Therefore low season like, the third quarter that falls between June '18 in the Singles Day. Consumers tend to wait for the next upcoming events for everything other than necessary day-to-day goods. This creates a period of slow seasonality in between sales periods, which is especially true for the small home appliance categories, which form an integral part of our distribution model. Despite this impact, revenue from product sales still grew a solid 31% during the quarter. We continued to make a significant progress in brand acquisition and ramping up new brand operations.

During the quarter, we added a net of 11 new brands with a continued focus on generating high-quality and a sustainable growth -- GMV growth, which brings the total number of brand partners to 223 compared to 132 a year ago. The newly added brands are mainly in the high premium apparel and FMCG categories. In particular, we signed on board [Technical Issues] in the pharmacology sector, several large international fashion brands and a leading International digital solution company during this quarter. The ramping up in scale of new brands is accelerating as reflected in our strong GMV growth. Our ability to bring more brand on board and drive the incremental contribution to GMV has allowed us to fully offset the impact from seasonality and when electronics brand we'll stop serving during the quarter.

This is even more evident with the Single Day numbers we reported last week, where we broke through the RMB10 billion mark in order value and an increase of 53.6% [Phonetic] year-over-year. This strong performance strengthens our confidence in a solid growth fundamentals of e-commerce. If we exclude the Singles Day 2018 contribution of the electronics brand that we stop serving this quarter. The growth rate this year would have been 76% even stronger evidence of the Chinese consumers fully purchasing power. We remain committed to executing our strategy of generating high-quality and a sustainable growth by combining our carriage IT infrastructure, integrating the marketing capabilities, extensive analysis of big data, sophisticated warehousing and logistic networks, and deep insights into consumers, all of which enable our brand partners to engage with consumers more effectively and drive sales sustainably.

Now, let me quickly go through the progress we have made in enhancing our infrastructure during this third quarter. Technology continues to play a critical role enabling e-commerce. Alibaba's Tmall Flagship Store version 2.0 now deployed and continuous upwards in progress. They bolstered our first-mover vantage and rapidly upgraded nearly 100 of our brand partners flagship stores before Singles Day. This large-scale deployment of our high customizable store took place across a variety of categories, including apparel, electronics, cosmetics, mom and baby and FMCG. We believe these initiatives, we will further enhance our ability to help brand partners actively engage with customers, personalized content and manage the creative marketing strategies.

In addition, we significantly strengthened our hybrid cloud infrastructure, Belgium cloud and fully integrated our core e-commerce systems by enhancing them with adding the flexibility, the ability to rapidly adjust service within minutes and improve efficiency and reliability. This allowed our platform to rapidly scale its data processing capability from 3 million to 4 million orders for hour in response to sudden surge in orders, as tend to happen on Singles Day and the brand of quick swags [Phonetic] for example. In response to the needs of our brand partners and changing dynamics in the industry. We have developed a wider array of comprehensive digital marketing services.

One important aspect is cooperation with multichannel networks including live streaming, KOL position in Alibaba's ecosystems and other short medium social networks Douyin and Kuaishou. And the co-branded offline events to turn marketing power in to sales power. To prepare for this year's, Singles Day the industry kicks-off preparation very early in September and digital marketing playing a key role in attracting customers early on. Digital marketing not only help brands to acquire customers, but also create demand for impulsive purchases. We also expanded our cooperation with a number of leading domestic brands during the quarter to include data analytics and auto marketing services. We believe these initiatives serve as a good entry point and opportunity to engage with domestic brands and demonstrate the value we can deliver to them.

We expanded our warehouse network to more than 500,000 square meters in capacity during the quarter and made a significant system upgrades for warehouses management systems, WMS, and the logistics management information system, LMIS to further optimize resource allocation and our logistics network. In addition, we expanded our warehouse capacity to address the increase in demand from high premium sector and are continuously upgrading equipment with specific operation features as such as temperature and humidity controls 33 -- 360 degree monitors and the security enhancements. We believe -- the continued innovation and the enhancement of our infrastructure played a critical role in this year's fabulous Singles Day performance. And our outlook for the rest of this year remains positive with China's e-commerce sector showing continuous resilience.

I will now pass the call over to Robin to go over our financials for the quarter. Thank you.

Robin Bin Lu -- Chief Financial Officer

Thanks, Vincent. We are glad to see incremental contribution to GMV from newly acquired brands as they ramp up. And more encouragingly, we are capitalizing a number of emerging opportunities, which give us very optimistic about future growth prospects. We believe this solid results validate our strategic decision to optimize our brand portfolio toward higher quality growth and reinvent our profit to capture select emerging opportunities. This new emerging opportunities not only improved adding brand partners, but more strategically enhance new categories, new channels, and new approach to digital marketing.

In the third quarter, we expanded our warehouse capacities for high premium standards. Set up marketing and the sales forces dedicated category and the integrated IT systems with Alibaba's Luxury Pavilion. These investments are quickly paying off as reflected in addition of a half a dozen brands in the premium and our affordable luxury sector. Furthermore, we are expanding the services we offer WeChat Mini Program ecosystem. As we have discussed before in the last few quarters, we have helped many brands develop mini apps that would ideal for branding, marketing and of course, we are taking deeper engagement with consumers.

Mini Programs are widely build for the brands extended official stores. We are working to enhance our ability to drive traffic acquisition, social networking, scenario based initiatives, and the marketing which extends to O2O or smart retail initiative to support brands with omni-channel intelligent retail. Thus far in the fourth quarter, we will sell some key brands to develop more active mini app business, which we will share more in our next earnings call. We are excited about this emerging opportunities, which we believe require superior technological capability more interactive marketing tools and the innovative traffic acquisition of which Baozun is well-positioned that to provide and which we will become our growth drivers for the next few years.

As China e-commerce industry continues to evolve and become more interactive and engaging, we now expect GMV in the fourth quarter to grew by approximately 45% to 50% year-over-year. Based on our best estimate, as of today, our outlook for 2019 revenue growth is largely unchanged. As it will take a few quarters for the incremental GMV growth to reflect in our revenue and the bottom line growth as our services take hold and scale up

Now let's go over the third quarter 2019 financial results in detail. We believe year-over-year comparison is the best way to review our performance. Our percentage changes I'm going to give -- will be on that basis. Once again, please note all figures mentioned in this financial review section are in RMB. Total GMV during the quarter increased by 43% to RMB9.08 billion. The non -distribution business was again outperformed with a GMV increase of 44% this quarter to RMB8.34 billion.

Total net revenues increased by 35% to RMB1.5 billion, which was partially impacted by the low season impact, as Vincent addressed earlier. To break it down product sales revenue increased by 31% to RMB662 million, a small home appliances sector is one category that has been more impacted by the seasonality. Services revenue increased by 39% to RMB841 million during the quarter. The increase was primarily attributable to the rapid growth of our service model, incremental contribution from new brands and in particular brands more engaging in digital marketing services

Total costs and operating expenses were RMB1.45 billion compared with RMB1.07 billion in the same quarter last year. In particular, cost of products increased RMB529 million from RMB401 million last year, primarily due to higher costs associated with an increase in product sales revenue. Gross margin for product sales remained roughly unchanged at 20%. Blended gross margin expanded to 64.8% a increase of 90 bps, which is mainly attributable to our increase in the proportion of services revenue contribution.

Fulfillment expenses increased to RMB333 million from RMB262 million last year, mainly due to an increase in GMV from our distribution and the consignment model and warehouse rental expenses, which were partially offset by improvements in efficiency. While, we increased our investments in our high premium warehouse, we maintained disciplined cost control initiatives and enhanced average through efficiency improvement and optimization of delivery resources. As a percentage of GMV, our fulfillment expenses ratio improved to 3.7% from 4.1% a year ago, which marked the third consecutive quarters that we will achieve leverage improvement in fulfillment costs.

Sales and the marketing expenses increased to RMB443 million from RMB301 million last year. And as a percentage of GMV, our sales and the marketing expense ratio grew to 4.9% from 4.7% a year ago. The increase of sales and the marketing expenses as a percentage of GMV was mainly due to more marketing activities and the early launch of marketing campaigns for Singles Day. Expanded staffing for new brands, and those for high premium brands as well as our growing digital marketing business.

Technology and the content expenses increased to RMB94 million from RMB70 million a year ago and a decrease RMB8 million sequentially from RMB102 million last quarter. The sequential decrease in technology and the content expenses was mainly attributable to increased savings in setting up IT infrastructure for new brands as the efficiency and optimization improved and our initialization of labor optimization between our Chengdu and the Shanghai R&D Centers. We continue to invest in innovation and the productization, very disciplined focus in a streamlined manner.

During the third quarter of 2019, our investment in innovation and the productization totaled RMB21 million largely unchanged from RMB20 million last year. G&A expenses increased to RMB52 million from RMB41 million last year, primarily due to increase in administrative corporate strategy and a business planning staff of the business skills. All in all, income from operations increased to RMB56 million based on operating margin of 3.7% an expansion of 20 bps form 3.5% in the same quarter of last year. For the first-nine months of 2019, operating margin expanded 30 bps to 4.2% from 3.9% of last year.

Offsetting interest income, net interest expense totaled RMB2.4 million compared with a net interest income of RMB470,000 last year and a net interest expense of RMB3.4 million last quarter. Income tax expenses totaled RMB14 million on effective tax rate of 18.9% compared with 13.6% of last year on non-GAAP basis. The increase in income tax was mainly due to higher net income base for this quarter and the lower effective rate as some tax incentive policies applied to the same period of last year. In the third quarter, net income attributable to ordinary shareholders of Baozun increased by 32% to RMB39 million. Basic and the diluted net income attributable to ordinary shareholders of Baozun per ADS were RMB0.68 and RMB0.66 respectively, compared with RMB0.52 and RMB0.50 respectively during the same period of last year.

On a non-GAAP basis, income from operations was RMB76 million, an increase of 24% from RMB61 million last year. Non-GAAP operating margin was 5.1% compared with 5.5% in the same quarter of last year. Non-GAAP net income attributable to ordinary shareholders of Baozun increased by 15% to RMB59 million. Basic and the diluted non-GAAP net income attributable to ordinary shareholders of Baozun per ADS were RMB1.01 and RMB0.99 respectively, compared with RMB0.90 and RMB0.86 respectively for the same period of last year.

As of September 30, 2019. We had RMB2.15 billion in cash and the cash equivalent and short-term investments, compared with RMB514 million as of December 31, 2018. The significant improvement in cash position was mainly attributable to strong operating cash inflow in the first-nine months of 2019, which more than tripled from the same period of last year from working capital optimization, as well as our safety finance impact in April.

Turning to guidance. Based on current macroeconomic and operating conditions, for the first quarter of 2019, we expect total net revenues to be between RMB2.70 billion and RMB2.75 billion, which represents a year-over-year growth rate of approximately 23% to 25% in which service revenue should increase in line with a growth rate of total net revenue on a year-over-year basis.

This concludes our prepared remarks. Thank you. Operator, we're now ready to begin the Q&A session. Thank you.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Tian Hou of T.H. Capital. Please go ahead.

Tian Hou -- T.H. Capital -- Analyst

Thank you, management for pickup of my questions. The question is related to the micro. So, I look at the guidance and little bit still weaker than the consensus expectation. So, you guys in the front line of business operation. Do you see any weakness of economies impact on China's luxury brands consumption? So that is the first question. The second one is going forward, what is your brand pipelines, how many do we expect to add in Q4 and into next year. That's my two questions. Thank you so much.

Robin Bin Lu -- Chief Financial Officer

Sure. Tian, it's Robin. Let me answer your question. In the public data, you may say, yeah, there is some weakness in China economy, especially in the second half of this year, but we do think the e-commerce is kind of very resilient as Vincent addressed in his prepared remarks. However, I think in some certain category in the e-commerce for example in the best fashion, we do see the sale of the bikinis in Q4, even though, overall, we think across the category, we are pretty balanced, well balanced of the growth, some of certain categories like fast fashion, you will see some weakness is what we can say right now.

But regarding the revenue in Q4. I think the first one, I think is kind of what we expected in back in the early of this year when we issued the guidance you remember is RMB7.2 billion is in line with our early guidance because we have our larger pie of the GMV coming from the new brands and based on our nature of the business, when we grab one brand, we normally, we will only provide operations in the very beginning. And then, we will add up some other services like digital marketing, like logistics, like data analysis, services, like customer services to them, so we can penetrate more of the services in the longer-term. So this one really have some impact in short-term about our revenue generation in Q4. So I think that's my answer for your first question.

Regarding the second question, I think as you remember, we're expecting -- we have 40 new net brands adding up in this year and right now until September 30, we already added 38 and we are expecting more than 45 in this year. And for 2020, we don't have a number yet, but based on our very strong pipeline, we think we can very optimistic about next year's new brands acquisition. Thank you.

Tian Hou -- T.H. Capital -- Analyst

Thank you, Robin.

Operator

Thank you. Our next question is from the line of Alicia Yap of Citigroup. Please go ahead.

Alicia Yap -- Citigroup -- Analyst

Hello, can you hear me? Yeah.

Wendy Sun -- Investor Relations, Director

Yeah. Go ahead.

Alicia Yap -- Citigroup -- Analyst

Yeah. Good evening. Thanks for taking my questions. To follow-up a little bit on the previous questions. So I understand a bit on the GMV growth versus the revenue, the difference. And then should that actually continue into the next quarter, meaning like faster GMV versus the revenue growth. Will that continue into the next few quarters? And then for -- and another quick questions is on the sales and marketing, understanding management gave a few kind of quick reasons, but if you can elaborate a little bit more detail, the reasons behind the higher than expected sales and marketing spend this quarter? And then, how should we think about the sales and marketing for the fourth quarter and into the 2020? Thank you.

Robin Bin Lu -- Chief Financial Officer

Sure. Thank you. It's Robin, again. Yeah, I think let me take the second question first. About the sales and marketing, I think while we break down to the increase of sales market, I think there's three reasons. The first one is basically we have our slow season in third quarter especially in the second part of the third quarter and some of our brands get the start early warm-up for the big, the large sales, which is Singles Day and they invest more in marketing spending. So that's a one reason.

The second reason is, we have lots of new brands, especially we set up the dedicated team for the high premium brands which add-up some related cost in sales and marketing. The third reason is pretty normal as we've talked before, we have a very significant growth in the digital marketing services which has a lower margin for example, we start to do the service for some very famous international brand in Douyin and Kuaishou, which really drive up the revenue, but still have some an active impact on our marketing spending. So your -- so what's your first question, please?

Alicia Yap -- Citigroup -- Analyst

Yeah. The first question is the delta between the GMV growth rate this quarter versus the revenue growth rate, you did mention a little bit on the reasons why GMV growth is faster. So I'm just wondering into the next few quarters, will this kind of this delta continue?

Robin Bin Lu -- Chief Financial Officer

Yeah. I think we -- it will getting [Phonetic] better as you remember to know, we've started to adjust our GMV to pursue the high growth profile and I think we're in the right path to do that, we are expecting, we can get, to since better and better in the later few quarter especially for the next year.

Alicia Yap -- Citigroup -- Analyst

Okay. All right. Thank you.

Robin Bin Lu -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from the line of Natalie Wu of CICC. Please go ahead.

Natalie Wu -- CICC -- Analyst

Hi. Good evening, Vincent and Robin. Thanks for taking my question. Actually, I have two questions. First one is for the Mini app initiative. I noticed that you started that some kind of the trial regarding the Mini app, we're saying the WeChat ecosystem for your existing app brands or new partners. So just wondering for the Mini app related initiatives compared with some peers specializing in this business for many years. What kind of the competitive advantage a person has that can differentiate yourself from them? And that's my first question.

Second one is that do you plan that termination of the contract with the popular domestic cellphone brand. So I'm just wondering, can we have some colors on the GMV topline and the margin outlook moving into next year. And should we expect the high base effect into the early 2020 and then followed by an acceleration in the second half? Thank you.

Robin Bin Lu -- Chief Financial Officer

Sure. Yeah. Let me take the second question first. Yeah. Actually now we are just constructing our forecast on our marketing for the next year and we are very, very optimistic about our GMV growth even though take the electric brand, we stopped service into the consideration. Maybe that's a right pattern in a number, our growth rate will be naturally affected a little bit in the first half of the year and we'll get it normal for the second half of the year, of next year, but just now I said based on our the new brands we acquired this year and based on our strong pipeline, we think, we are very optimistic about our GMV growth for the next year. We will give you more color for the next earnings call.

And about the Mini program, the first question, I would like to spend a couple of minutes to give you more color about that, we strategically, we think Mini program is one of our future growth driver. The reason for that -- there is two reasons. The first one, we think Mini program is kind of like a very revolutionary e-commerce ecosystem, comparable so-called traditional e-commerce in the existing platforms. For example, we can do more our larger scope of particular services in this ecosystem. We can do with the membership management, very easy to convert to the auto business and also we can do the IT solutions to end-to-end service based on the flat system we developed in the past two years. And also we can do the CRM system and the traffic acquisition, marketing spending, something like that. So we do spend some energy in resources in these new initiatives.

And the second one is, we have very competitive advantage compared with the existing peers because we are kind of like the brand service professionals and we have a very good combination between the technology and operations capabilities. And for example, most recently we acquired leading retailer, the international retailer that we compete with the existing strong competitor already stayed in this e-commerce system for long years, but we win. So we think, we are very confident for this future.

Natalie Wu -- CICC -- Analyst

Got it.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Hi, Natalie. Let me just add some more color on this -- on this one.

Natalie Wu -- CICC -- Analyst

Sure.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

The first question about Mini app, I think Baozun, we are quite strong traditionally in the brand official stores, so no matter the data system and also back-end logistics are very strong, so Mini app is just a front-end, new front-end of the official web store actually. So we can very much leverage on the strengths of our branded store capability and then to compete with others. So we're quite confident on that, and we are closely monitor the new functionalities from the intention side. We work very closely with them. For example, the auto industry thereabouts to released. Our team is very actively working with them. So in this case, for the big brands and also Empress users, we are much stronger than the other players in the market. Thank you.

Natalie Wu -- CICC -- Analyst

Got it. Thank you, Vincent and Robin.

Operator

Thank you.

Robin Bin Lu -- Chief Financial Officer

Thank you.

Operator

Our next question is from the line of John Choi of Daiwa. Please go ahead.

John Choi -- Daiwa -- Analyst

Thank you for taking my question. I have two questions here. Now, if you look into the fourth quarter guidance, I think you guys already touched based on the discrepancy between GMV and revenue growth here, but if I could a little -- go a little bit deep further here. Do we -- should we be expecting for the existing brands to see a similar take rate and as Robin you mentioned the new brands, it will take some time. And over the course of quarters, the take rate should eventually recover on a sequential manner, I just wanted to double confirm that. That's my first question.

Second question is could management share some the roadmap for your cloud offering particularly, I know that you guys have been investing quite a lot on the cloud infrastructure and also on the software side, so what is the adoption rate and what's the brands response so far and how do you think you will further develop it from here? Thank you.

Robin Bin Lu -- Chief Financial Officer

Sure. Yeah. I confirm, yes. I mean -- when you look back over our history, when we acquire brands. The larger the brand is the slower the ramp-up of the revenue, that's correct. And the second question, can you just say again, about your second question, please?

John Choi -- Daiwa -- Analyst

I was asking on the cloud development. So, what are the progress this year? And can you share, I mean, well, like how much among your brands, what's the adoption rate and what's the further development plan? Thank you.

Robin Bin Lu -- Chief Financial Officer

Yeah. You're talking about -- Okay. Vincent...

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Okay. So for this question, yes, we are -- we are actually on two tracks. First track is that we are developing a bunch of software and tools for the future use. And in the meanwhile, some of the matured tools already adopted in the daily operation of other stores. I can say that I think early next year, most of the stores, around 300 stores, we will all adopt. The recent development, let's say, ROSS tools, which is the store operation automation tools, which can help greatly uplift the efficiency of the stores. This is just an example.

The other is, and in the meanwhile, the tools and software itself, we will be continuously upgrading from time-to-time. So, that is the other track. So, we continue to invest in the software, infrastructures, and tools. And in the meanwhile, we are quite positive about the rollout and deployment of all these tools. And most importantly, the measurements of the value return from this kind of investment is already setup in the technology department. And we're seeing more and more positive feedbacks from the front end.

Robin Bin Lu -- Chief Financial Officer

Yeah. Just now we talked about the mini program, the -- for the brands, where is there for the existing brands and newly acquired brands. We utilized our SaaS-based system we developed in 2018 and the projects that, the end-to-end e-commerce service solutions for these brands in the Mini programs. So, it's pretty successful now.

John Choi -- Daiwa -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question is from the line of Joyce Ju of Bank of America. Please go ahead.

Joyce Ju -- Bank of America -- Analyst

Good evening Vincent, Robin, and Wendy. Thanks for taking my question. I actually got a question related to the Luxury Pavilion and also the category expansion in terms of luxury or premium brands. Just want to get an update with the progress of, like, may.com and other quarter? And also, like, for the specific categories, you earlier mentioned in the press release -- sorry, in your opening remarks that like, you actually signed half a dozen of premium brands. Could you actually elaborate a bit more, like, what business model we are adopting and what's the potential GMV revenue potential? And also, what's the take rate business model and the profit outlook for these brands? Thanks a lot.

Junhua Wu -- Director and Chief Operating Officer

Okay, Joyce. This is Junhua. Okay. So, let me address your question. So, before I getting deeper, so let me explain you about the three business model of our Luxury Pavilion. So, the first model is a single brand flagship store, just like we're helping a lot of independent brand open their flagship store on Luxury Pavilion, that's a category. The second business model is a multi-brand collection store, just like you just mentioned about the next -- the YOOX NET-A-PORTER. The third business model is a, like a Tmall of self-operated platform, just like you mentioned that may.com could be one example. So, in this quarter, we've been developing a strong pipeline and we fulfilled a lot of new clients. Among our 11 new brands, over 50% of our pipeline came from a luxury premium brands, and they contributed a significant GMV in Q3. So, in that part, we can see a very upcoming and very promising trend in this category.

And, of course, in this Luxury Pavilion operations, there are a lot of benefits for helping our flagship -- single brand flagship stores to be more harmonized with Luxury Pavilion resources. And it's also very important for us to really help Tmall to run their self-operated platform, like, may.com, something like that. So, this is a very unique business model and we can take a lot of advantages if we can imagine to expand to more categories, helping, running their business on Tmall. And for a multi-brand collections store, it also provides a way to connect with our existing single brand flagship store, to help to just make sure we can put all the product lifecycle status, for example, like a new arrival in light off season and clearance across different platforms, not even -- not only just provide sales in a single brand flagship store, but also can connect the traffic and engage different kind of tiers consumers in their multi-brand collection store. So, we have foreseen in the next quarter, in the next year, this pipeline and this category will be continued very strong. And overall take rate in this category is naturally higher than the other category; like, Fast Fashion or women's or men's, something like that.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Yeah. And also, so, we believe that in the coming two, three years, the luxury industry, luxury category will be the hottest category on the Tmall platform. So, we are -- we put a lot of resources on this category. And also, today, where you are clear leading position in this category, so I think we will benefit a lot from the development of this industry in the coming years.

Junhua Wu -- Director and Chief Operating Officer

Exactly.

Joyce Ju -- Bank of America -- Analyst

May I have a quick follow-up in terms of, like, Vincent, you mentioned, actually, you invest a lot resources in these categories. Could you actually elaborate a bit what percentage of, like, expenses or what kind of preparations you have made and invest for this category? And when we should expect we starting to see positive returns on those investments? Thanks.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

So all investment in this category. Okay, go ahead. Robbie, you first.

Robin Bin Lu -- Chief Financial Officer

Let me answer -- I think that's a financial question anyway. I think the first one -- I mean, yeah, when we talk about Luxury, I think, for us, that's not very accurate concept. I think the way I talk about high premium, for example, I have some light luxury brands also included in this category, internally. The second one about the investment, it's a different area. The first one, and usually we upgrade our warehousing equipment as we mentioned in our remarks. And also, we have a plan to have some capex spending time-by-time, so that we can strengthen our competition in these certain categories, which make some certain amount of money to do.

Of course, probably in the fulfillment, you'll see margin traction in Q3. The reason for that is, we started to do some investment. Some of the investment has been capitalized and then some of it has been expensed in the fulfillment. And on the other way, we have a very disciplined cost control program in our fulfillment. So, in the end, in the numbers, you'll see the average for that. Maybe in the Q4, you can see some investments for our fulfillment. That's the first part.

The second part is the sales and marketing. We have some -- couple of million dollars -- sorry, million RMB for the dedicated team to set up, specially for these categories. And in the technology for each program, and for the connection with Alibaba system, we invest some extra money, so that we can have a good capacity perhaps to ramp up these categories.

Joyce Ju -- Bank of America -- Analyst

Got it. Thanks.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Thomas Chong of Jefferies. Please go ahead.

Thomas Chong -- Jefferies -- Analyst

Hi. Good evening. Thanks, management for taking my questions. Given the fact that we have newly set up our Chengdu R&D center, and we have optimized our technology expenses and we are also seeing our investment in fulfillments, in marketing, etc. So, I just want to get a sense about our trends in terms of the headcount, as well our other expenses line, each going into 2020, some qualitative or direction would be great. Thank you.

Robin Bin Lu -- Chief Financial Officer

Okay. It's Robin. Thank you. When we look at our Q3 numbers, we see some labor reduction or even year resources reduction in both logistics side and technology side. And we have some add up, as I specified about the new brands and the dedicated team for the high premium category in the marketing side. So, that's kind of like a hybrid in between and we see moderate high comps increase for 2020 as we expected.

Thomas Chong -- Jefferies -- Analyst

Thank you.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] Next question is from the line of Sally Chan of CLSA. Please go ahead

Sally Chan -- CLSA -- Analyst

Yes. Hi. Good evening, management. Thank you for taking my question. I have two questions on our Singles Day performance. We report a very strong 54% GMV growth for this year, Singles day. Could you mind sharing more color on how our key categories have performed? For example, our electronics, sportswear and apparel brands, etc.? And how should we expect a solid GMV growth to translate into revenue growth for the quarter, taking into consideration that these categories have quite different take rate?

And my second question is, on the many new initiatives that Tmall this year during the Singles Day, for example, like, live streaming, like Tmall 2.0 etc. Could you share with us how have our brand partners adopted these new initiatives and how have these initiatives driven their sales during the event? Thank you.

Robin Bin Lu -- Chief Financial Officer

Yeah. Let me -- it's Robin. Let me take the first question. Even though that we want to give you more color about Double 11 in the next earnings call. I can give you some highlights for that. Number one, I think our categories are well-balanced in our Double 11 sales. For example, in the sportswear, electronics and some other high premium brands is pretty good. And, for example, just now we've talked about high premium brands. Our same-store sales growth is over 100%. That's it. And also, I have to mention, in some certain specific category like fast fashion. I've mentioned just now, we do see some slowdown in Double 11 sales.

And about the revenue conversion, I think I've answered question about the new brands acquisition, take some time to convert to the revenue. For example, the share of the new brands, the contribution of the new brands to GMV has been tripled versus last year. And it's a big pie. And we need some time to get more revenue from the new brands. So that's kind of reason why you see, there is a kind of like different growth rate for the revenue in Q4.

Junhua Wu -- Director and Chief Operating Officer

All right. This is Junhua. Let me address your second question. So we made a significant growth in the Double 11, just past in the several weeks. And we exceeded about over RMB10 billion in one single day, that's definitely a historical moment and milestone, and nobody has ever done that. So, I'd like to let you know that we achieved that, all because we -- just like Vincent mentioned earlier, we prepared all those Double 11 campaign, way earlier ago. Actually, that was in July and beginning of the August. So all our operation team, merchandising team and assortment planning team and our marketing team has been spending a lot of resources and time, mediation with all our brand partners to prepare all those assortment planning and traffic acquisition plan, and how do we adjust segmenting all those consumer profile and how do we drive a significant higher conversion rate than ever before?

And then doing the three stages, a pre-order and a warm-up and a big date, during that three stages, we've been definitely engaged a lot of new initiatives, just like you mentioned, the live streaming and Tmall 2.0. So, for live streaming, we engage a lot of brands, helping to do with a lot of KOLs to helping the brands to launch their new arrivals and also to just give a very significant growth on their new events, especially for a seasonal product and for a high quality and high discount price during that moment.

So live streaming becomes a very significant way to drive the sales and the membership sense of the store. And about Tmall 2.0, it's basically like a fundamental support. They provide a lot of tools regarding the consumer management, membership management, CRM and inventory across different channels and management. So, we provide a lot of implementations based on those foundations. And, Tmall, they, selected over 100 top brands to highly run all those Tmall 2.0 in a cascade model. So the fortunate part is all our portfolio is on a top of the pyramid. So, most of our brands were selected to be part of a Tmall 2.0 pilot run. That's why we took a lot of advantages in that kind of implementation, which also drives more traffic and higher conversion rate during that day. Okay.

Sally Chan -- CLSA -- Analyst

Thank you. That's very clear.

Operator

Thank you. Our next question is from the line of Tina Long of Credit Suisse. Please go ahead.

Tina Long -- Credit Suisse -- Analyst

Hi. Thank you, management for taking my questions. I have two questions. The first one is on the Mini program, because, as you mentioned that you start to do some trial on setting up Mini program side, so I want to know the first stage and also probably future pipeline. Will it be within our existing brand portfolio or you actually acquire new brands to do Mini programs? And in the meantime, I'm curious to know the take rate level for Mini program compared to the Tmall sites.

And my second question is on the warehouse related to the high premium fashion brands. So, I understand previously there was a chance that we may consider building up one of our own warehouse. So, I want to know if that decision has been made. And if so, like, how long will be the construction cycle and how much we earmarked the capex? Thank you.

Robin Bin Lu -- Chief Financial Officer

Sure. About -- It's Robin. Hi, Tina. About the Mini Program, we both provide-we provide service to both existing brand and the way independently acquire the brands only for the Mini program. I mean, the Mini program is emerging ecosystem. I think almost all the brands would like to explore these opportunities. And further, I mean, I think the whole ecosystem is still not mature. It's emerging. So about the charge model, about the service we provide, it's still in the test, trials right now. And it's not mature yet. But I think it has a very bright future for the Mini program ecosystem.

And also, at this moment, we see some leading retailer and some leading comprehensive brand has a very big GMV generation already in the Mini program. And the take rate even though now the take rate is not higher enough for the -- to complete with the other platform. It's still a very good opportunity for us to ramp up. Regarding the third question, the warehouse, what we -- the management can do is, we will do the very smart investment. And there is not a very definite time for us to do that. We do have a plan about this. But where we'll see -- when is the proper time for us to do this -- start to do this construction for the specific category we can use. Thank you.

Tina Long -- Credit Suisse -- Analyst

All right. Thank you. Thank you, Robin.

Operator

Thank you. We don't have any more questions. I'd now like to hand the conference back to Ms. Wendy. Please go ahead.

Wendy Sun -- Investor Relations, Director

Thank you, operator. In closing, on behalf of Baozun Management team, we would like to thank you for your participation into this call. If you require any further information or keen to visit us in China, please let us know. Thank you for joining us today, this concludes the call.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Wendy Sun -- Investor Relations, Director

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Robin Bin Lu -- Chief Financial Officer

Junhua Wu -- Director and Chief Operating Officer

Tian Hou -- T.H. Capital -- Analyst

Alicia Yap -- Citigroup -- Analyst

Natalie Wu -- CICC -- Analyst

John Choi -- Daiwa -- Analyst

Joyce Ju -- Bank of America -- Analyst

Thomas Chong -- Jefferies -- Analyst

Sally Chan -- CLSA -- Analyst

Tina Long -- Credit Suisse -- Analyst

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