Ellen Chiu - Investor Relations Vincent Qiu - Chairman and CEO Junhua Wu - Chief Growth Officer Beck Chen - CFO.

Amy Wong - HSBC Joyce Ju - Merrill Lynch Monica Chen - Credit Suisse Alicia Yap - Citigroup Chen Bi - CICC Nicky Ge - China Renaissance Billy Leung - Haitong International Tian Hou - T.H. Capital.

Hello, everyone, and thank you for joining us today. Baozun’s 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 are Mr. Vincent Qiu, Chairman and Chief Executive Officer; Mr. Junhua Wu, Chief Growth Officer; and Mr.

Beck Chen, Chief Financial Officer. Mr. Qiu will review business operations and company highlights, followed by Mr. Chen, who will discuss financials and guidance. They will 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 the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by terminologies such as will, expect, anticipate, future, intends, plans, beliefs, estimates, targets, 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 is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law.

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

Thank you, Ellen, and thanks, everyone, for joining our earnings call today. We delivered another solid quarter with total GMV increasing by 55% year-over-year.

Growth continues to be driven by the existing online stores and the improved efficiency as we invest further in developing new and innovative products, backhand order, and the warehousing systems, and other omnichannel solutions.

We expanded the number of the brand partners we work with to 132 at the end of Q3, an increase from 146 during the same period last year. The newly added brands are mainly in apparel, cosmetics, and FMCG categories, in particular.

We, again, beat our fee of competition to sign contracts with one of the world's largest multinational toy manufacturing company and a leading luxury winter clothing company. Our pipeline remains a strike over with a number of leading global brands expected to come on board in the near future, including ones in apparel, luxury, and FMCG categories.

I'm proud of the experience and the capabilities we have accumulated from participating in the single-day shopping festival over the past decade. This year, total other value sent home through payment gateways are all our e-comms channels reached a new record high of ¥6.5 billion, an increase of 31% compared to last year.

Technology plays an increasingly important role in our strategy, especially when it comes to ensuring the seamless integration of our IT infrastructure, online store management, digital marketing, customer service, warehousing, other fulfillments, and backhand administration.

This expanded area of solutions we have at the ready allows us to step over 18 million others on single-state, an increase of 49% compare with last year. This, again, demonstrates the strength of our strategy, our work executional capabilities, and distributive foresight. To be sure, we are adequately prepared. And all systems are working as intended.

To strengthen our position as the leading brand e-commerce business partner and technology solutions service provider, we are expanding the scope of our service through targeting investments, innovation, product citation, and the hiring of engineers.

Teams from our technology and innovation centers located in Beijing, Shanghai, and Chengdu now consist of over 800 IT engineers. These teams were instrumental in our operations for single state where it significantly improved the efficiency of our other and the warehouse and management systems.

We continue to refine and update our e-host development shopfront products for SMEs, LOS, SOL, and other technologies which we expect would further increase overall efficiency and drive future growth as we gradually become commercialized in the near future.

We strongly believe that you have seen the R&D related product foundation for our long-term sustainable growth. Leverage in our peak experience and in the wake, itself, develop tools.

We expected the omnichannel matrix of solutions we're able to offer brands so that they can rapidly establish on an online presence and benefit from the enormous growth opportunities in China's e-commerce market.

Here in the quarter, we won award of smart corporations at the 2018 Tmall New Retail Owner's Conference in recognition of our cutting-edge solutions. As a industry premiere, these same innovative tools can be applied to domestic brands.

We successfully connected and integrated two leading domestic pair of brands, off-brand stores with their Tmall stores and the brand hubs. We also took over beta operations for the online stores and help to drive targeted online traffic to offline stores.

The value this service has created in a new retail era are increasingly being recognized by domestic ones. And we are confident we will be able to fully extend our market share with them in the future. This quarter, we also launched several new WeChat Mini programs for several apparel brands and a leading code influencing brand.

We will continue to closely monitor changes in the market, anticipate the need of our brand partners, and develop solutions and services across different channels. Our digital market solutions continue to gain popularity among this team of potential brand partners as our work becomes increasingly recognized across the industry.

These capabilities play an important role in acquiring new customers for our brand partners. Last week, we were awarded the bronze award of paper-driven marketing at the 2018 Greater China Effie Awards, the preeminent advertising award in the industry. Finally, before turning the call over to Beck, I'd like to warmly welcome Robin Lu as our new CFO.

Robin will take over later in the month for Beck, who is leaving us to pursue other opportunities. I would also like to thank Beck for his years of service. We are grateful for his contributions and wish him the best of luck in his future endeavors. Robin joins us with extensive leadership experience in financial management and capital markets.

We look forward to working with him to further grow our business and fortify our leading position in the industry. With that, I will turn the call over to Beck to go over our financials. Thank you..

Thank you, Vincent. Before I go into my remarks, I would like to take this moment to thank Vincent, Junhua, and the entire team at Baozun. I'm very grateful to have had the opportunity to work with you all here for the past six years and will cherish every moment of it.

I will stay until end of this month and work closely with Robin to ensure a smooth transition. Robin will be a fantastic addition to the team where his tremendous experience will help to lead the company into its next stage of growth. Let's now go over the third quarter financial results.

We delivered another solid quarter with GA increasing by 55% year-over-year. In a non-disputation, GMV, in particular, increasing by 62% year-over-year. We believe year-over-year comparison is the best way to review our performance. All percentage of changes I'm going to give will be on that basis.

Firstly, the total net revenues increased by 25% to ¥1.1 billion, product of revenue increase by 7% to ¥505 million.

The increase was primarily attributable to the increase in product sales revenue resulting from the increase of popularity of our brand partners' products and the Belgian's effective marketing and the promotional campaign which was partially offset by the transitioning off leading electronics brand partners doing this wrong distribution model to the consignment model in September 2017.

This is high versus last quarter with this transition effect. Services to revenue increased by 45% to ¥606 million during the quarter. The increase was primarily attributable to effective growth in sales from existing brand partners and addition of new brand partners under the company's consignment model and the service fee model.

The total operating expenses were ¥1.1 billion compared to ¥862 million in the same quarter last year.

In particular, cost of product decreased to ¥401 million from ¥408 million last year, primarily due to the transitioning off of leading electronics brand partners from distribution model to the consignment model in September of 2017 and improved margin of product sales to 20.5% from 13.8% for the same quarter of last year.

Procurement expenses rose to ¥262 million from ¥173 million last year, mainly due to an increase in GMV from the company's consignment model venues in combination with increase the warehouse vendor expenses.

Sales in the marketing spend is close to ¥301 million from ¥222 million last year, primarily due to the addition of online store operations and an increase in promotional and the marketing expenses associated with online stores operated by us. Technology and the content expenses rose to ¥70 million from ¥36 million last year.

The increase was primarily due to increased investments in innovation and the productization and the recruitment of additional technology-focused staff. G&A expenses rose to ¥41 million. The increase was primarily due to an increase in administrative, corporate strategy and the biggest planning staff.

Income from operations increased to ¥39 million while operating margin improved to 3.5% compared with 3.1% in the same quarter of last year.

Non-GAAP income from operations was ¥61 million, an increase from ¥41 million in the same quarter of last year while non-GAAP operating margin improved to 5.5% compared with 4.6% in the same quarter of last year.

Investments in technology, innovation, and the productization were ¥20.1 million which we believe will enable us to expand our adjustable market and to strengthen our long-term competitiveness. Excluding these investments, non-GAAP income from operations increased by 93% year-over-year.

In Q3, net income attributable to ordinary shareholders Baozun rose to ¥30 million, an increase of 36% from the same quarter of last year. Basic and diluted net income attributable to ordinary shareholders of Baozun per ADS were ¥0.52 and ¥0.50, respectively, compared to ¥0.40 and ¥0.37 respectively during the same period of last year.

Non-GAAP net income attributable to ordinary shareholders of Baozun rose to ¥51 million, an increase of 47% compared with the same quarter last year. Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun per ADS were ¥0.90 and ¥0.86, respectively, compared with basic and diluted non-GAAP.

Net income attributable to ordinary shareholders of Baozun per ADS of ¥0.64 and ¥0.59, respectively, for the same period of last year. That completes the profit and loss statement for the quarter.

As of September 30, 2018, the company had ¥445 million in cash, cash equivalents, and the short-term investments, a decrease from ¥557 million as of December 31st, 2017, primarily due to the mentioned procurements in preparation for single state 2018.

Turning to the guidance for the fourth quarter of 2018, we expect total net revenue to be between ¥2.2 billion and ¥2.25 billion. Our data sales momentum during the fourth quarter of 2018 continues to remain strong and outpace the growth on single state this year.

As such, we expect our GMV for the fourth quarter of 2018 to grow 40% to 45% on a year-over-year basis while our services revenue during the fourth quarter of 2018 will grow faster than the GMV growth. This updated expectation reflects the impact of softening retail sales growth from a slowing macroeconomic environment.

While the impact on single state was greater than expected, this was a one-off event. We remain confident and encouraged as growth in most of categories outside of single state continues to be strong and higher than the industry average.

And we believe our improved efficiency, investment in innovative technology, and the development of a variety of new omnichannel solutions will continue to attract new brand partners and the customers. This concludes our prepared remarks. Operator, we are now ready to begin the Q&A session. Thanks..

Thank you. [Operator Instructions] The first question is Amy Wong at HSBC..

Two questions. Hi, management. Thank you for taking my questions. Sorry. Can you hear me well? Hello..

Yes, Amy..

Sorry. So, my first question is -- I actually have two questions here.

One is that actually, on the macro side and also on the trade wall, how do we see that in terms of the overseas brand in terms of their strategies, adjusting into China in terms of laws? And then my second question is that if we look at the overall margin, it's actually slightly down a little bit this quarter.

But I guess longer-term, we probably will see more upside in terms of the margin as we go in terms of the scales and also, our business model going into hopefully more like a SM-like model with our software infrastructure business. So, how should we think about for the margin trend on that front? And then the last question is more housekeeping.

In terms of the same-store sales growth, how should we see that? So, if you can, help us address some of these questions would be very helpful. Thank you, management..

So, Amy, I will answer the second and third question first. And I will leave your first question to Vincent. So, for the second question about the margin -- so, basically, our margin -- if you look at the margin gap such as revenue, it's growing on a year-over-year basis. But still, we put more investments into technology, just like we said.

So, if we exclude the innovations investment, our non-GAAP operating income could increase over 90% on a year-over-year basis.

And in the coming years, the investment will be gradually paid back, either help us take more expensive to increase the leverages and the efficiencies of the OpEx items, or we can just generate more revenues, and especially services of product revenues from outside. So, I think this is generally the general guidance.

And as pricing about the same-store sales, for the third quarter, for the single quarter, our same-store sales growth is 45% for the same store..

Okay. Amy, I think your first question is about the high call and macro.

Right?.

Yes. That's right. And also, in terms of the -- overall, with the macro situations, I think people will worry about consumption. How do we see in terms of the -- how is the macro weakening conditions impact Baozun or maybe our brands' strategy in trying to oversee spends expansion? Because a majority of our brands are overseas.

So, how should we think about that? And also, as you said, high call business..

Okay. We have some business for the quarter-across-quarter business. So, that is different from any overseas purchase service, this kind of thing. So, we have seen strong growth in that sector. Although, in the actual amount, it's a very huge number because we will see a strong demand from a Chinese customer for the premium national brands.

And I think the government policy right now is turning more-strict to the [indiscernible]. And we think this could impact our business. In this case, the Chinese consumers need the brands and also the brand ones who are entering the China market. And because they going to high place now, I've limited.

So, we will be better when it falls up, like their business in China. So, this give us more tailwind to grow our business and working with more potential US and international brands..

Okay. Thank you. And may I just have a quick follow-up on the margin side, in terms of your investment priorities? Because, of course, after the Double 11, you see that there are efficiencies in terms of the number of orders that can dump food on the China logistic as the improved date.

I think, they said that the first [indiscernible] parcels were there, but it means you're seeing like, 2.68, right? So, how is our logistic business infrastructure? We are closely working with Alibaba China on this part.

So, how should we look at that down the road in terms of our strategy, our role here? So, if we think of brands because we are also investing a lot in our logistic capabilities. So, how does our role of vouchers fit into the corporation with tie-in now? That's one question.

And I guess second question is that I think opening remarks Vincent mentioned that we’ll be investing more in terms of our R&D.

So, given that we have investment into R&D, technologies, and also into our logistic infrastructures and also, probably, into other some more new, innovative ideas, strategies, areas that management mentioned, how should we prioritize? In management's eyes, how will we prioritize all these investments? Thank you..

Okay. So, yes. Amy, let me try to answer your question. Basically, this is like the investment in logistics and the investments in the R&D; it's outlook. But basically, this day generally, we all need to put some reinvestment -- in any kind of our capabilities.

But for logistics, it's more like you can be-usually, we put the investment in Q1, Q2, even Q3. But we may be fully paid back in Q4 because the GMV is very strong. So, we can leverage everything, every dollar in the warehouse. So, basically, it's like investing during the year, and you are paid back also during the year in Q4.

But for R&D, it's a more-longer term investment process. So, we need to invest -- actually, we started to invest from last year. So, right now, this year, we keep to investing.

We already see a lot of these indicators in some investment and product to be launched and also to be tested, trialed by our own people and even some outsiders outside the customers. But R&D expense is usually -- you need to wait, be more patient, to wait to be paid back because it's more creative things. It's not like logistics.

So, R&D is more creative things..

And what about the investment priorities in terms of if you think about, down the road, in terms of a business that -- maybe, actually, examples of the R&D investments into 2019, the key areas that Vincent mentioned opening them up that if we invest more in that, where are the areas in terms of R&D spending..

So, yes. You may also already know from the financial statements that, for the first three quarters of this year, the R&D expenses increased at around 100% on year-on-rate basis. But we expect that the growth of R&D expenses being -- 2019 will be greatly decreased compared to right now, this triple-digit growth rate.

But in year 2019, we think the growth rate will be much more decelerated compared to this year. So, because we already have established the foundation of the teams, so we don't need a lot of more people.

We need more people, but not a lot of more people which can help us gradually to make the business more mature and also which is a way for the product to be launched to the public as to impart or to generate meaning for revenue in the coming future..

Next question is from Joyce Ju at Merrill Lynch..

My first question is to Vincent regarding the overall competitive landscape. We have seen now more and more new e-commerce channels including PDD to platform or like WeChat which is a social commerce channels emerged.

And we want to know what's the -- and also, we have seen some up-close competitor to Baozun who's also e-commerce solution providers, actually. They fade out recently out of business.

So, want to understand in terms of the overall landscape how did you look at, in terms of competition or future development strategies, any impact or insights into this area? And my second question was a follow-up to Amy's question in terms of the macro condition.

How should we understand Baozun's GMV growth or revenue growth for 2019?.

Right now, we think -- today, believe it's representing about of international brands, compacting their e-commerce business in China. But it's a major revenue stream of ours. And right now, we're fully equipped with jobs. So, we take position. We think the same way as the brands are thinking.

And that's why we're taking omnichannel position to operate their business on different platforms, including the major one, like Tmall, and also some other platforms and your grant official web source and also some emerging platforms like Pinduoduo and also WeChat, these social related commerce platform. So, then it was grappling for them.

And we'll keep doing so in the future. This give us a chance to be a one-stop shop, omnichannel basis solution to the party brands. We feel this is very valuable to their growth in China. And also, in the future, the other important thing we'll do for the brands will be the technology enabling for their business.

So, in this case, we can not only make the current business development of the existing brands and more mostly. And then we can also help them to reduce their cost, bringing more efficiency improvements to them in the same time. So, in this case, that is technology unit link.

We are developing more and more technology tools not only to help existing brands to be more efficient and also giving more a broader customer base can work with Baozun to enjoy all the experience and solutions we gain from the past and help them to be more and more successful..

Okay. So, about the second question about the GA outlook for the coming years, just like we said in the prepared remarks, we believe the capabilities of Baozun could attract more and more brands. So, for us, not only we grow the same-stores. But also, we grow the number of brands.

And also, during the quarter, we grow the number of brands much more than the prior quarters and the prior years. So, we believe as long as we can have more brands, even if those brands are already on those marketplaces like Tmall or JD, or even PDDs -- but to Baozun, they're still new brands to us.

So, we believe our penetration potential is very much bigger than the time being. So, that's why we believe our growth rate of the GMV and also the revenues should be much more than the industry average..

Next question is from Monica Chen at Credit Suisse. Please go ahead..

So, I have two questions here. So, No. 1 is regarding our 4Q GMV guidance. We do notice that we have lowered our GMV guidance to 40% to 45%. Previously, we were talking about something over 60%. And also, we delivered 31% in the Double 11 sales. So, I want to understand what is the key reason for this revision down of our GMV.

Is it because some particular brands, or is it a broader slowdown or cross ramp of a certain headwinds? So, that's question No. 1. And then my second question will be -- so, management talked about the potential launch of some of the new and innovative products and potential commercialization plan.

And given we have been investing in this new product for quite a while, so when do we expect a launch of the new product? Maybe some around next year.

And what kind of monetization are we talking about? We're going to charge a base fee? Or is more like a percentage of that GMV? And how fast do we expect the ramp-up of the new revenue relying on the contribution to the total revenue?.

I'll answer the first question, Monica. So, in terms of the 4Q GMV expectations, we already accompanied all the factors, especially the Double 11 results. And also, we looked through all the data sales. And we think the data sales remain strong and outpace the growth on single state.

But for the single state, it's just like some one-off event, one-off promotion events. It comps like 42%, 50% of the quarter's GMV. But still, it's not the quarter. It's just a one-off date, one-off of 90 days.

Just before the Double 11 day, it has impacted partially many by a leading -- the global smartphone brands which is naturally impacted by some unhealthy price competition from the different marketplaces. But basically, we think it's just -- it's under our control. So, we think it may impact the GMV. But it may not impact a lot for the other line items.

So, after considering all of those other -- the data sales, right now, we gave the guidance 45% growth on prudent basis..

Okay. About the second one, talking about new products and solutions developed and its commercialization plan. Right now, we are in the progress in developing different kind of softwares. First category will be the internal yield core system. That is very important for us to end all the daily orders and fulfillment. So, that one is epic.

And then we have some of the productive tools for the internal use. So, in this case, we can greatly reduce a cost and have a better manageability for the current business, given management and also the clients' better visibility of the data visits. So, that is just huge financial for us to deliver in this kind of software.

For the other soft-based or other SME related solutions, I think we're quite on the right track. And recently, we have already have a number of different testing users already found on the soft platform. And we think this result is quite encouraging. Right now, we are quite focused on the users, equity users, and also the functionality improvements.

And we are expecting to make the revenue and profits in the near future. Right now, we think things including the internal solutions and also the solutions for all freight user quite on track..

Can I have a quick follow-up on the guidance for Q2 guidance? Can management maybe provide some color on if we look by distributions and their non-distribution GMV? What's the growth outlook for fourth quarter?.

Okay. So, still we believe non-discrete GMV will grow faster in the overall GMV contribution..

Next question is from Alicia Yap at Citigroup. Please go ahead..

Hi. Good evening, management. Thanks for taking my questions, and Beck, thank you. And best wishes for your new endeavors. Robin, welcome to your new role. Two questions here.

First is that -- wanted to get a better sense, if management can share, what is driving the better GMV outside of the single state? So, given if we back out the GMV on single state and your guidance for 4Q, it is actually suggesting non-single state GMV is actually growing at 50% to 60%.

So, what are the categories that drive the strong traction from user outside of single state? And then second questions is related to the recommended features change on Taobao app. So, just wondering whether the change of the user traffic dynamics on Taobao will have any impact to how the brands on Baozun platform conduct or operate their business.

And as a service partner, does Baozun experience any difference on sales, use of demand, or the outline?.

Okay. Thank you, Alicia, and thank you for your question. So, I'll answer the first question. And I'll leave the second question to Junhua.

So, for the first question about a GMV for the non-single state GMV, so, like we said in the prepared remarks, we have seen for most of the categories out of single state continues to be stronger than the single state. So, basically, I would say excluding the smartphone category, all the other categories is going very healthy.

This is a general outlook..

Hi, Alicia. This is Junhua from Baozun. So, let me address your second question. First, I want to let you know that I'm not the good person to address all those details from the Taobao revenue changing.

But I can share with you currents from our at the service partner with Tmall and then let you know what kind of the changes we're getting from the change of the Taobao app. So, there are two dimensions from Tmall that are changed. One is they're consolidating their databank which provides more accurately traffic gathering to our particular stores.

And they are consolidating all those commodity investment footprints across all the Alibaba investment, like the Ali music, Alitrip, et cetera. So, all those footprints happen to have a click or mention or a particular brand content will be consolidated into the databank.

And databank is providing a lot of different dimensions based on different segmentation of data into AIPL. For example, like a where do you trust it, search it, and lodge it, which allow us to bring more accurate traffic to our store by providing the right content to the right products.

So, as far as we know that this kind of data banking and the business model changing is really helping us throughout the higher enrich rates.

The second part is from the Tmall ATV changes related to the -- within Chinese, we call it our [Foreign Language] which allows us -- that technology allows us to create just a part of the consumer painting scene for steam to provide different content for product listing for different kind of attributes of the consumers like trendsetter, reported [indiscernible] pragmatic consumers, and pride sets of consumers.

You can provide different content to those different group of consumers which also allow us to be more accurate running our operation and also in planning. So, as far as we know, from our perspective, we can say that Tmall's ATV changing is giving them a constant support for our operations..

Next question is from Chen Bi at CICC. Please go ahead..

Hi. Good evening, management. Thank you very much for taking the question. I have two questions here. The first question is regarding our cosmetics brands. I think management mentioned in previous calls that cosmetic grow become the fourth largest category for next year.

So, because management share with us the progress so far in seeking new brands in cosmetics category and some new brands in pipeline. And what do management think about losing unique advantages over other existing comparers of service providers in this category? That's my first question.

And my second question, actually, to follow-up on Monica's question regarding our guidance in 4Q. So, if I'm doing the math right, our 4Q revenue guidance actually implies that over 40% year-on-year growth, and our GMV guidance is also around 40% to 45% in 4Q. But, if we look at the previous patterns, our GMV growth usually outpace revenue.

So, could management share with us the rationale behind this guidance? Does this imply a large, faster growth of our distribution GMV in 4Q? And if so, what's the driver behind this acceleration? Or is there's any other reasons we should be aware of? Thank you very much..

Hi, Chen. This is Junhua. Let me just address your first question and leave the second question to Beck. So, regarding to our current district results in quarter two now, so, the business development for the consumer was not due to categories, was very encouraging, as we were expecting.

So, we not just only signed the largest leading cosmetic group with all their independent brand or platforms by providing and replacing their global solutions to be more localization pending a lot of local extra piece for helping us to do more consumer engagement.

We also signed a contract with the second large global cosmetic Gucci Group with the full operations of their independent brands or business. And starting from that point where go-to had a very aggressive stance with the omnichannel perspective.

And we also started the largest in-care brands of the world helping that are taking over all their chemo operations. And so far, after we've taken over all their brands, worldwide growth compared to last year is definitely just going to be up to 100%. So, so far, our current business development is quite encouraging.

And we have a very strong and solid pipeline waiting for us to close the deal. And you were asking about what kind of the advantaging we're taking. I'll say it's all about technology. If you mention about the cosmetic and beauty category, all those brands in those categories, they care their consumers a lot.

Consuming and caring is everything they want, especially those of heritage and lots of great category enthusiasm and category sell sales. Our technology can really help them to do that. For example, we have our innovation center.

We are creating some kind of the voice of consumer products, helping to using their crowding, getting all those comments from the internet. And many don't know that. How do consumers online really think about your brand, about your particular SKU or products? It's very helpful and very different from their offline experience.

And also, our CRN systems, our omnichannel systems are helping them to expand their vision we just brought offline. There used to be a counter score or a shopping mall score to be more omnithinking and consolidating their online and offline penetration in the long-run. But this is one addressing for discussion..

So, for the second question about more color of the 4Q GMV and the revenues, so just like we also said in the prepared remarks, historically, we are in a very big transition process, so transitioning more distribution, GMV to now just leading GMV. So, especially, we transfer the biggest distributional partner in September of 2017.

So, right now, we think that transitioning process is already close which means that generally, our GMV growth will be much more in line with the revenue growth in the coming quarter and also in the coming years which is a major reason..

Next question is from Nicky Ge at China Renaissance..

Hi, Vincent, Beck, Ellen. Thank you for taking the questions. My first question is for our guidance. As management has explained, the Double 11 GMV growth is largely impacted by the press competition for a certain category. I'm just wondering whether this will carry on to the next year.

And how should we think about the GMV growth for 2019? And then my second question is about the takeaway outlook for now distribution model for the fourth quarter this year..

I'll take the first one. Talking about this year's Double 11 event, yes. We have some unexpected events happen during that day which influenced a lot for category three category. I think this one gets the one-time thing. And in the coming next year maybe, I'll be -- so, each year, the rules of Double 11 event will be changed little bit.

So, I think we need to monitor and follow more closely with all this kind of change and adjust our strategy to eliminate any potential category and potential influence to some category. And we also plan to grow more in the new customers, as I said, and more new channels to be developed.

This also can help us balance between different brands, different categories, and different platforms to give us some more predictable forecast of the business..

So, for the second question, Nicky, about the outlook of 4Q takeaway product margin, so general, we think the 4Q will be stable compared with 3Q. So, it's more stable. So, next year, we think the takeaway will be slightly increased because we sell more value-added services to those brands.

And also, we have more good brands on board and with better commercial trends. And also, interest for the product sales margin, we have witnessed a significant growth for the product of margin in the past several quarters.

And while we introduce some new distribution partners and the FMCG in the cosmetics category, their gross margin is usually higher than our current appliances in the 3C category's growth margin which means that's gradually in the mix. Growth margin results. It could be improved as well..

Next question is from Billy Leung at Haitong International. Please go ahead..

Thank you, management, for taking my question. And Beck, I wish you all the best. Just a few questions. The first one is management mentioned that we have been helping brands for services on platforms such as WeChat Mini apps.

The question is are we seeing clients more and more requiring services on platforms outside of Tmall's ecosystem? And if that's the case, do we see a trend where we are doing more services outside of Tmall's platform? And will that affect our cost in the longer-term? And my second question is just a smaller question.

On our balance sheet, it seems that we've picked up a new long-term borrowing. So, I was just wondering what the nature of that is and what the reason for that is..

I'll take the first one. Vincent, again. Brands today, they're doing business in a much more comprehensive way than before. Not only they need to take care of offline and online channels, and they also need to look into different online channels, including the existing gig platforms like Tmall.

So, a lot of brands also rely on platforms like JD to produce generous GMV. And also, every brand now is considering to engage more, especially with younger generation of consumers. So, that makes them to pay more attention on the social commerce platform like Pinduoduo, WeChat, our own show, or these kind of platforms.

So, to date, they are comprehensive. So, they need to engage consumers in a not only transactional basis but also non-transactional basis, CRN system, these kind of different activities. And it's not the first day working with multiple omnichannels.

And we think in the future, maybe we'll try to take more of an advantage of the omnichannel landscape of Chinese e-commerce market..

So, Billy, thank you. So, for the second question, it's on the long-term borrowings on the balance sheet. So, we had a chance to lock in a lower rate for long-term borrowing. But it's not so long. It's just beyond one year. It's within two years. But companywide, we need to -- the quarter is at long-term borrowing.

But next year, it will be transferred to the shop and borrowing. So, because we can lock in a lower rate, so we think economically, we should do this..

Last question for today is from Tian Hou at T.H. Capital. Please go ahead..

So, the question is related to the brand partners. So, I saw in Q3, you added 10 brand partners and GMV partners. So, I wonder, Q4, how many do you expect to add it on your platform? And also, in 2019, can you give us some color? How many brand partners do you expect to have on your platform? That's my question..

So, basically, in the past two years, every year for the full year, from January to December, we add around 20 number of brands into our portfolio. But for this year, just for the first three quarters, we already added in the 20 new brands. So, we believe for the year-end, we may add more, like around maybe five to six.

But not too much because it's already close to the year-end. And usually, those new brands will miss the Double 11 campaign. So, they will wait until the next quarter. And also, for the next year, especially 2019, we will be still very aggressive, again, prior to acquiring new brands.

So, just like we said before and also Junhua mentioned before, we already have a very good pipeline, including SMG brands, cosmetic brands, apparel brands, luxury brands, all those brands, and even some domestic brands in the pipeline. So, we think next year, it could be even stronger..

Thank you. This concludes our Q&A session. And now, I'll hand it over back to Ms. Ellen Chiu for closing remarks..

Thank you, operator. In closing, on behalf of our whole management team, we would like to thank you for your participation in today's call. If you require any further information or have any interest in visiting us in China, please let us know. Thank you for joining us today. This concludes the call..

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