Executive Summary / Key Takeaways

• Yunji Inc. is strategically transforming from a traditional social e-commerce platform into a "service experience ecosystem" focused on organic health and wellness, aligning with China's "Healthy China 2030" initiative and the "silver economy" opportunity.
• Despite a decline in total revenue in the first half of 2025 to RMB 158.3 million, primarily due to softer consumer confidence, the company maintained a solid gross margin of 47.3%, driven by customer loyalty to high-margin private label products.
• Yunji is leveraging advanced AI tools to enhance operational efficiency, improve customer service, and innovate marketing through short video content creation, aiming to lower costs and generate traffic.
• New initiatives like the Jianxin Tea Therapy program and offline wellness stores are demonstrating strong customer loyalty and cross-selling potential, expanding Yunji's reach to high-net-worth individuals and older demographics.
• The company is intensely focused on achieving breakeven by continuously improving gross margins and optimizing its cost structure, while prudently allocating capital to sustainable growth categories.

Yunji's Strategic Evolution: Cultivating Wellness in China's Digital Landscape

Yunji Inc. (NASDAQ:YJ), founded in 2015, has evolved from a pioneering membership-based social e-commerce platform in China into a burgeoning "service experience ecosystem" deeply rooted in organic health and wellness. This strategic pivot is a direct response to dynamic market conditions and a proactive alignment with the "Healthy China 2030" national agenda, which sets long-term goals for public health improvement. Yunji's core business, traditionally centered on a wide array of consumer goods, now emphasizes high-margin, high-repurchase rate organic health foods and advanced skincare products, leveraging its community-driven model to foster deep user engagement and loyalty.

The company's approach to the competitive Chinese e-commerce landscape is distinct. While giants like Alibaba (BABA) and JD.com (JD) dominate with vast ecosystems and logistics networks, and Pinduoduo (PDD) excels in mass-market group buying, Yunji differentiates itself through a focused strategy on curated, high-quality products and a personalized, community-centric shopping experience. Yunji's platform integrates with popular social networks like WeChat, QQ, and Weibo, enabling users to share product recommendations and participate in interactive campaigns, thereby fostering a loyal customer base. This emphasis on social networking and user engagement sets Yunji apart, particularly against Pinduoduo, by prioritizing deeper user relationships over sheer scale.

Technological Edge: AI-Powered Efficiency and Engagement

A cornerstone of Yunji's strategy and a key differentiator is its investment in advanced technology, particularly in artificial intelligence and big data analytics. The company is actively developing an innovative digital platform powered by AI tools to support the integration and sharing of public resources on trading platforms. These AI applications are designed to improve customer service, generate compelling content, facilitate material sharing, and deliver educational training, all of which contribute to lowering operational costs and enhancing efficiency and service reliability.

Yunji is also combining AI development with short video content creation, recognizing that generic content is ineffective in the current digital landscape. This initiative aims to nurture talent by teaching users how to create original content, providing AI support and marketing skills. The tangible benefits of this technological focus include improved conversion rates, faster innovation cycles, and a stronger competitive moat by enabling more personalized product matching and driving traffic through unique, engaging content. For investors, this technological roadmap signifies a commitment to operational excellence and a strategic lever for sustainable growth and improved profitability by optimizing marketing spend and deepening customer engagement.

Strategic Initiatives: Building a Wellness Ecosystem

Yunji's strategic initiatives are deeply intertwined with its organic health focus and its ambition to become a service-experience platform. The company has made significant strides in expanding its private label offerings and diversifying its sales channels.

The private label beauty brand, SUYE, which celebrated its 14th anniversary in 2024, is a prime example of this strategy. SUYE focuses on premium yet accessible anti-aging solutions, with its PRO-XLANE FIRMING Series generating sales exceeding RMB 10 million in the first half of 2025. The SUYE PRO-XLANE FIRMING ESSENCE LOTION alone generated over RMB 4 million at launch, with more than 32% of buyers being returning dormant users. This success underscores the brand's ability to resonate with consumer preferences for high-value skincare.

In the organic health food segment, Yunji has positioned Youjiang Organic Milk as its flagship product, achieving RMB 5 million in sales at launch in the first half of 2025. Other health products, such as slimming coffee, probiotic bolus, and freeze-dried sea buckthorn powder, have also performed strongly, generating over RMB 10 million, nearly RMB 7 million, and more than RMB 5 million in sales, respectively. These product successes are directly attributed to Yunji's organic health strategy and scientific weight management product selection, which aligns with the national health agenda.

Beyond product sales, Yunji is expanding into experiential services. The Jianxin Tea Therapy program, currently in its incubation phase, offers a unique wellness experience combining tea tasting, traditional Chinese studies, meditation, and stress lessons. This program has demonstrated strong customer loyalty, with a 91% retention rate among its initial 150 participants during its trial phase in 2024. In the first half of 2025, Yunji successfully built a 100% tea therapy team, and frequent users maintained a solid 50% participation rate. Notably, participants have expanded to include high-net-worth individuals, accounting for nearly 15% of all participants, and over 90% of tea therapy users purchased Yunji's main products, effectively supporting sales of other health products.

The company is also expanding its physical footprint with offline wellness stores, the first of which opened in July 2024, focusing on traditional Chinese medicine practices. A second location followed in October 2024. These stores aim to strengthen the connection between online and offline services and broaden the customer base, particularly targeting the 40-55 age group through word-of-mouth referrals. This initiative also addresses the "silver economy" opportunity, providing services for an aging population.

Financial Performance and Liquidity: A Path to Breakeven

Yunji's financial performance in recent periods reflects both market challenges and strategic adjustments. For the first half of 2025, total revenue was RMB 158.3 million, a decline from RMB 233.8 million in the same period of 2024. This reduction was primarily attributed to softer consumer confidence and the company's ongoing strategy to refine product selection and optimize its supply and merchant bases. Revenues from sales of merchandise were RMB 131.7 million, while the marketplace business generated RMB 24.5 million in the first half of 2025. Despite these revenue headwinds, Yunji maintained a solid gross margin of 47.3% in the first half of 2025, a testament to sustained customer loyalty towards its private labels and an effective product curation strategy emphasizing high-margin offerings. The full year 2024 gross margin stood at 49.4%, with Q3 2024 reaching 54.1%.

Operating expenses saw mixed trends. Fulfillment expenses decreased in the first half of 2025 to RMB 20.6 million from RMB 42.6 million a year ago, driven by lower warehousing, logistics, and personnel costs due to reduced merchandise sales and staffing optimization. Conversely, sales and marketing expenses increased to RMB 50.1 million from RMB 47.5 million, primarily due to higher member management fees and increased personnel costs for market expansion, partially offset by lower advertising. Technology and content expenses decreased to RMB 15.3 million from RMB 25.5 million, mainly due to staffing structure optimization. General and administrative expenses rose significantly to RMB 93.4 million from RMB 33.5 million, largely due to a higher allowance for credit losses, though excluding a one-time loss, G&A expenses decreased by 35.6%, indicating underlying expense optimization efforts. The company reported a net loss of RMB 100.7 million in the first half of 2025, compared to a net loss of RMB 8 million a year prior.

In terms of liquidity, as of June 30, 2025, Yunji held RMB 217.1 million in cash and cash equivalents, restricted cash, and short-term investments, compared to RMB 242.8 million at the end of 2024. The company's liquid assets are considered adequate to cover its payable obligations, and it has no long-term bank loans or debt on its balance sheet. Management is committed to efficient working capital management and asset utilization to support operations.

Outlook and Risks: Charting a Course for Sustainable Growth

Yunji's management is focused on achieving breakeven and strengthening its overall financial position. The company aims to continuously improve its gross margin and maintain financial discipline while investing strategically in categories with sustainable growth potential. The restructuring undertaken in 2024 has provided a more streamlined operational foundation, and Yunji plans to be prudent with capital allocation, focusing on high-margin, high-repurchase rate products.

The company's outlook is underpinned by its commitment to the organic health strategy, the expansion of its SUYE beauty brand, the incubation of the tea therapy program, and the growth of its offline wellness stores. These initiatives are expected to enhance profitability and drive long-term value for shareholders.

However, Yunji operates within a challenging market environment. "Market uncertainties still posted challenges to our operations," and "weakened consumer confidence have led to a slight decline in our total revenue," as noted by management. The rapid growth of internet retail also poses new challenges for community retail group leaders, necessitating Yunji's focus on empowering them through private domain e-commerce and organic food placements. While the company's social network effects and user community focus offer strong customer loyalty, its smaller scale compared to industry giants like Alibaba and Pinduoduo could lead to higher operational costs and impact market share in competitive environments. Technological gaps, if not addressed, could also hinder innovation speed and growth rates.

Conclusion

Yunji Inc. is undergoing a profound strategic transformation, pivoting towards an organic health and wellness ecosystem powered by its unique social e-commerce model and advanced AI capabilities. Despite recent revenue declines driven by broader market uncertainties and softer consumer confidence, the company's consistent gross margins and strong user loyalty to its private label brands highlight the resilience of its core strategy. The expansion into experiential services like tea therapy and offline wellness stores, coupled with a disciplined approach to cost optimization and capital allocation, positions Yunji for a potential return to profitability.

The investment thesis for Yunji hinges on its ability to execute this strategic pivot effectively, leveraging its technological differentiators and community-driven approach to capture opportunities in China's growing health and wellness market and the "silver economy." While competitive pressures from larger e-commerce players remain a significant factor, Yunji's focused niche and commitment to a service-experience model, supported by AI-driven efficiencies, offer a distinct path forward. Investors should monitor the company's progress towards its breakeven target, the continued growth and profitability of its new initiatives, and its ability to maintain its competitive edge through technological innovation and deep customer engagement.