Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yunji's Second Quarter 2023 Earnings Conference Call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; Mr. Peng Zhang, Vice President of Finance; and Ms. Kaye Liu, Investor Relations Director of the company. As a reminder, this conference call is being recorded. Now I would like to hand the conference over to our first speaker today, Ms. Kaye Liu, Investor Relations Director of Yunji. Please go ahead, ma'am.

Hello, everyone. Welcome to our second quarter 2023 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions and related events that involve unknown risks, uncertainties, and other factors of Yunji and its industry. These forward-looking statements can be identified by terminologies such as will, expect, anticipate, continue, or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest document filed with U.S. SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and are expressly qualified entirely by cautionary statements, risk factors, and details of the company's filings with the SEC. Yunji do not undertake any obligation to update this statement except as required on applicable law. With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.

Hello, everyone. Welcome to Yunji's second quarter 2023 earnings call. During the first half of this year with consumption gradually and steadily recovering, a number of notable trends emerged. First, in terms of consumption habits, the post-pandemic surge and consumer mobility triggered by a transition away from stockpiling of the group towards a preference for seasonal purchases. To capitalize on this, we will further enhance our supply chain so that we are better equipped to address seasonal consumer demand. And in time, we will optimize our marketing campaigns to sharpen their focus on holidays seasonal transitions, and social trends. In addition to the leadership, we have also observed the resurgence of local community services in the consumption landscape and the substantial support these services have drawn from national policies. The convergence of these two trends presents exciting opportunities for our gourmet food strategy. Over the course of the second quarter, we steadily rolled out our gourmet food products in local neighborhood groups and online and offline community in certain second-tier and third-tier cities. Our private-label meat products proved especially popular, gradually generating notable levels of repeat purchases. During the second quarter, we have noted a trend where an increasing number of companies have adopted a price war strategy. As we often stimulate consumption, it is crucial to highlight that Yunji adheres to a substantial healthy and value-oriented strategy rather than merely burning money by resorting to subsidies or adopting a low-price strategy. Our prudent approach is centered around refining our operations, saving our funds for subsidies, and leveraging our highly creative product range and economies of scale to offer users parallel value. The resounding success of our private label range underpins our confidence that we can offer users cost-effective products without resorting to price wars. Lately, SUYE, our private label…

Thank you, Shanglue. Hello, everyone. Before I go through our financial results, please note that all numbers stated in the following remarks are in RMB terms and all comparisons and percentage changes are on a year-over-year basis unless otherwise noted. The macro-environment continues to present challenges that demand our careful attention and adaptability. Consumer sentiment and purchasing power still need additional momentum before they completely recover. Meanwhile, consumer preference is evolving swiftly. Based on our existing marketing data, our strategic effort towards healthcare and nutritional products has yield promising results. This shift has not only aligned us changing consumer preference but also bolstered our financial performance. We are dedicated to expanding our product selection and nurturing our private label offerings, ensuring that we stay at the forefront of marketing trends and maintain a competitive edge. We remain committed to optimizing our cost structure and enhancing operational efficiency. By doing so, we will fortify our resilience against the economic fluctuations, reinforce our capacity to weather uncertainties and prosper regardless of the economic cycle. Now let's take a closer look at our financials. Total revenues were RMB167 million compared to RMB284 million a year ago. Revenues from sales of merchandise were RMB131 million and revenues from our marketplace business was RMB34 million. The main driver behind the change were our consistent improvements to our product range across all categories, coupled with the optimization of supplier and merchant network, which led to a short-term impact on sales. Despite these challenges, we improved our gross margin to 51.6% compared to 40.6% a year ago. This was a result of sustained customer loyalty to our private labels and our effective product duration strategy. Now let's take a look at our operating expenses. Fulfillment expenses were RMB30 million compared to RMB43 million a year ago. This…

[Operator Instructions] And our first question comes from Ethan Yu of First Trust. Please go ahead.

Thanks, for taking my question. The Chinese government has repeatedly given some policies to stimulate offline transactions. I'm wondering what's the management's perspective on this issue. And does it have any impact on our business? Thank you.

Thank you for your question. We are delighted to see consumers gradually regaining their vitality and pursuing a better life. We certainly support national policies and hope to contribute to the recovery of offline consumption. Currently, we have made adjustments in line with consumer trends such as increasing the bio, seasonal new products, in housing sales, tailored to the specific scenarios and improving our ability to fulfill services. Furthermore, we have hosted various offline events, including origin tracing equity and loan gathering, allowing our service managers to gain a deeper understanding of the products. This in turn makes our product descriptions more authentic, persuasive and enhances the consumer experience. Yunji is more than just an online sales platform. We have many private labels which provide us with greater flexibility. Our sales rate depends beyond the online market as we manage our network of over 100,000 service managers across cities nationwide, which corresponds to a robust local sales team. We look forward to exploring new facilities in offline well in the future. Thank you.

This concludes our question-and-answer session. I'd like to hand the conference back to management for closing remarks.

Thank you for joining us today. Please do not hesitate to contact us if you have any further questions, and we look forward to talking with you next quarter. Bye.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.