New Stock Outlook | Suju Zhilian is at a crossroads: Core business is weak, overseas expansion has become a "double-edged sword"

After failing to impact the A-share market for three years, Shuju Zhilian, which withdrew its A-share listing application on July 9, 2024, has recently seen a new trend in its capitalization process. It is understood that on March 13, Shuju Zhilian submitted an application for listing on the main board of the Hong Kong Stock Exchange, with Huaxing Capital as the exclusive sponsor. According to the prospectus, Shuju Zhilian is a technology-driven full-chain brand operator that can provide brand customers with full-chain e-commerce solution services. According to a Frost & Sullivan report, based on the GMV generated by comprehensive e-commerce platforms, Shuju Zhilian ranked seventh among China's top ten brand e-commerce solution companies in the mainland of China in 2024. Moreover, in specific areas, Shuju Zhilian also performed outstandingly: whether in the GMV generated on JD channels in 2024, or in the GMV of consumer electronics categories in the same year, Shuju Zhilian was ranked first in the industry. This indicates that Shuju Zhilian has established a leading advantage in specific channels and sub-fields, becoming a leading enterprise in the industry. However, in terms of performance, Shuju Zhilian's performance is not optimistic. From 2023 to 2025, Shuju Zhilian's revenue was approximately 1.593 billion, 1.379 billion, and 1.608 billion RMB respectively; while the net profits for the same period were 80.485 million, 9.168 million, and 43.399 million RMB, respectively. Both revenue and profit have not shown continuous growth, but rather significant fluctuations. The fluctuation in Shuju Zhilian's performance actually reflects the common challenges faced by the domestic e-commerce solution industry, even though it has become a leader in the industry. Shuju Zhilian's development is still constrained by industry-specific growth bottlenecks and profit pressures. As the old models show signs of fatigue, how will Shuju Zhilian break through? Can entering the capital market help the company create new opportunities? The answers to these questions will have a significant impact on the company's valuation. Core business continues to weaken under the pressure of three challenges Due to the continuous increase in online channel penetration and brands accelerating their digital transformation, the volume of e-commerce transactions in China has achieved rapid growth in recent years, driving the continuous expansion of the brand e-commerce solution market. According to Frost & Sullivan data, from 2019 to 2024, the market size of the mainland Chinese brand e-commerce solution industry (calculated by GMV) increased from 442.4 billion to 1.27 trillion RMB, with a compound annual growth rate of 23.6%. It is expected that by 2029, the market size will further expand to 2.2 trillion RMB, with a compound annual growth rate of approximately 11.7% from 2025 to 2029. Although the industry is experiencing rapid growth, the challenges faced by brand e-commerce solution companies are increasingly intensifying, leading to a "survival crisis" under the pressure of threefold challenges. First is the reduction in traffic dividends, cost increases, and efficiency declines. The growth of traffic on traditional shelf e-commerce platforms such as Tmall and JD has reached a bottleneck. According to industry analysis, the bidding for keywords on mainstream platforms has increased by more than 200% in three years, but the click conversion rate has decreased by 50% in some categories. This means that the profit space for service providers buying traffic for brand clients has been severely squeezed, and the traditional "casting the net wide" strategy has become ineffective. Second, intensified competition within the industry has put pressure on profit models. In the era of stock competition, service providers have entered price wars to compete for customers, leading to a decline in the overall gross profit margin from around 45% in 2020 to about 32% in 2023, with some top companies even experiencing losses and severe performance differentiation. Furthermore, being squeezed by both platforms and brands, the value chain of service providers is being restructured. With the rise of content e-commerce platforms such as Douyin and Xiaohongshu, the fragmentation of the traffic landscape and the operational logic of these new platforms (content-driven, algorithmic recommendations) are fundamentally different from traditional shelf e-commerce. This poses a significant challenge to service providers lacking comprehensive operational capabilities. At the same time, platforms themselves are launching official operational services, further compressing the survival space of "middlemen". As brands accumulate enough experience, they tend to reclaim operational rights to build their own teams, thereby directly controlling user data and increasing profit margins. This poses a risk of the digital assets nurtured by service providers being "harvested". In the face of the continued weak performance of the domestic brand e-commerce business, Shuju Zhilian stated in the prospectus that this is due to reduced marketing budgets of some brand partners and the company actively optimizing its domestic brand portfolio, terminating cooperation with some low-margin brand lines. While the core business revenue continues to decline, Shuju Zhilian's profit has fluctuated significantly. The data shows that Shuju Zhilian's net profit from 2023 to 2025 was 80.485 million, 9.168 million, and 43.399 million RMB respectively, with net profit margins of 5.1%, 0.7%, and 2.7% for the respective years. This indicates that the company's profit foundation is relatively weak, especially in 2024 when it was hovering on the edge of profit and loss. Specifically, the significant decline in net profit margin in 2024 was mainly due to the increased contribution of low-margin sales channels in the domestic brand e-commerce business, as well as the increase in employee costs for one-time resignation compensation, leading to a nearly 2 percentage point decline in gross margin. At the same time, the rapid growth in sales and marketing expenses, as well as general administrative expenses, eroded profits, resulting in a significant decrease in profitability during that period. In 2025, due to the advancement of a high-quality development strategy, Shuju Zhilian saw an increase in high-margin projects in its domestic brand e-commerce business, combined with the high-margin business of overseas brand e-commerce operations, which raised the gross profit margin to 23.1% during the period, an increase of 3.6 percentage points year-on-year. However, due to the rapid growth of sales and marketing expenses, this increase in the net profit margin in 2025 was only 2 percentage points. It is evident that while the company has adopted a defensive development strategy in response to the multiple challenges faced by its core business, leading to a significant fluctuation in performance, the overall financial risk has increased. The overseas brand e-commerce operations may become a new growth curve As a leading company in domestic brand e-commerce operations, Shuju Zhilian has been keenly aware of the increasing operational pressure in the industry. Therefore, the company is actively adjusting its core business model and promoting high-quality development, while also actively exploring new growth curves in order to achieve successful breakthroughs in the new stage of industry development. Acting as the agent and authorized brand operator, overseas brand e-commerce operations are the new direction in which Shuju Zhilian continues to exert effort. Unlike the light-asset e-commerce brand operation, acting as the agent and authorized brand operator means that Shuju Zhilian obtains exclusive general agency or deep authorization from brand owners in the Chinese market, directly buys product ownership, and takes full responsibility for the brand's online pricing, sales, marketing, and channel management. This transformation from a "service provider" to a "brand operator" extends the business chain, enhancing the company's control over products and profit potential. In this model, Shuju Zhilian can earn the full price difference of product sales instead of just service commissions. From a strategic perspective, the domestic brand e-commerce business reflects the company's foundation as a "service provider", while acting as the agent and authorized brand operator represents a crucial step in its transformation to a "brand operator". The former is deeply tied to platforms and brands, with growth being greatly influenced by external factors; the latter tests the company's brand selection, market insight, and independent operating capabilities, aiming to build a more stable and autonomous source of profit. However, to date, the proportion of revenue from the agency and authorized brand operations of Shuju Zhilian is still relatively small. From 2023 to 2025, the revenue from this business accounted for 1.3%, 1.3%, and 2.7% of the company's total revenue respectively, without significant effects. This is related to the business's "heavy asset, slow turnover" characteristics, as the company needs to rigorously screen brands and control risks, making it difficult to scale up quickly. Therefore, it remains uncertain whether the agency and authorized brand operations can become a new growth curve for Shuju Zhilian. In comparison, the growth rate of overseas brand e-commerce operations is more significant. According to the prospectus, Shuju Zhilian began accelerating its efforts in overseas brand e-commerce operations in 2024, and by 2025, this business recorded a revenue of 351 million RMB, accounting for 21.8% of the company's total revenue. The rapid success of this business can be attributed to Shuju Zhilian's keen grasp of the "Chinese brands going global" trend and its reliance on its long-term technological capabilities and full-chain operation experience to provide systematic cross-border solutions for brand owners. This allowed the company to accurately enter and seize this structural market opportunity. At the same time, the company has elevated the importance of the overseas business to a strategic core position and continues to invest resources to promote its development, further accelerating its growth momentum. However, the rapid expansion of overseas brand e-commerce operations has also brought significant financial pressure to Shuju Zhilian. As this business mainly adopts the "product sales model", the company needs to pay for the purchase of goods in advance, leading to an increase in the volume of purchases as the business grows. The data shows that the inventory and contract fulfillment costs of Shuju Zhilian were approximately 205 million, 280 million, and 351 million RMB from 2023 to 2025 respectively, which further soared to 427 million RMB by the end of January 2026, intensifying the pressure on capital utilization. At the same time, with the continuous increase in the volume of purchases, Shuju Zhilian's cash flow has also been "dragged down", with the net cash flow from operating activities changing from a net inflow of 129 million RMB in 2023 to a decrease to 58.8 million RMB in 2024, and turning into a net outflow of 141 million RMB in 2025. This has also led to a continuous decrease in the company's cash and cash equivalents at the end of each year, which stood at only 96.461 million RMB by the end of 2025. It is clear that while the overseas brand e-commerce operations have achieved results, the unique business model has brought certain challenges to Shuju Zhilian, causing significant pressure on operational cash flow. Behind this pressure, it also highlights that overseas brand e-commerce operations face multiple constraints at the industry level. Firstly, there is a high dependence on international platforms like Amazon, and policy adjustments, rising traffic costs, and changes in cooperation relationships can directly impact operations. Additionally, the inherent regulatory differences, tax compliance, supply chain stability, and intellectual property risks in cross-border e-commerce continue to increase the uncertainty of business development. These significant external challenges collectively exacerbate the difficulties in capital turnover and profitability, posing more stringent requirements on the company's fund management, risk control, and international operational capabilities. Overall, Shuju Zhilian is at a crucial stage of transformation: on one hand, under the pressure of multiple challenges in the industry, the revenue of the core business continues to decline, and profit fluctuations are significant; on the other hand, although overseas brand e-commerce operations, as an emerging growth point, have shown initial success, they have also brought significant financial pressure and external challenges. In the future, if the core business can stabilize and the overseas e-commerce operations demonstrate sustainable growth momentum, the company's fundamentals will receive strong support; conversely, if both aspects perform below expectations, the company's valuation level is likely to face significant pressure.