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our reporter li zhu and liu wang reported from beijing

recently, tianyancha app showed that yuhui tongxing (beijing) technology co., ltd. had undergone industrial and commercial changes, and wang jielin resigned as the chief financial officer and was replaced by ma nan. however, wang jielin still serves as a supervisor in several companies, including dongfang youxuan (beijing) technology co., ltd. and dongfang zhenxuan (zhuhai) tourism culture co., ltd.

does this indicate that yihuixingxing will further sever its relationship with dongfang zhenxuan, and the financial separation will be clearer? the 2024 financial report released by dongfang zhenxuan after the "breakup drama" showed that the gross profit margin of self-operated products and live e-commerce business declined. the company said that this was mainly due to dongfang zhenxuan's promotion of member day activities and the continued sales of more agricultural products with lower profit margins.

regarding whether oriental selection will continue to focus on agricultural products and operate its own brand in the future, a reporter from china business news contacted oriental selection, but no response was received as of press time.

a heroic act

in the industry's view, the withdrawal of the chief financial officer is a further severance of huixing's relationship with oriental selection.

on july 25, dongfang zhenxuan announced that it would sell 100% of the equity of its subsidiary yuhuixingxing to dong yuhui for 76.585 million yuan. after "going solo", the number of fans of dong yuhui's personal douyin account and yuhuixingxing continued to grow. as of september 6, the number of fans was 26.89 million and 23.223 million respectively, with an increase of more than 500,000 and 1.6 million fans in more than 40 days. according to chanmama data, the average daily sales of yuhuixingxing live broadcast room in the past 30 days was 10 million to 25 million yuan, exceeding the 7.5 million to 10 million yuan of dongfang zhenxuan.

in contrast, the number of followers of the main account of oriental selection decreased by about 200,000, but sales were not greatly affected. sales in august reached 230 million yuan, an increase from 186 million yuan in july. however, in august, oriental selection fell out of the top ten of the monthly ranking of influencers.

losing super anchor dong yuhui is a bit like "cutting off one's own arm" for dongfang zhenxuan. shenwan hongyuan research report predicts that due to the major adjustments in dongfang zhenxuan's business, its annual gmv in fiscal year 2025 will decline to 6.94 billion yuan.

on the evening of august 23, oriental selection (01797.hk) released its annual report for fiscal year 2024. as of may 31, 2024, oriental selection achieved total revenue of 7.072 billion yuan, a year-on-year increase of 56.8%; oriental selection's total gmv was 14.3 billion yuan, a year-on-year increase of 43%.

jiang han, a senior researcher at pangu think tank, believes that from the perspective of total gmv, its growth further proves the strong performance of oriental selection in the market, as well as the sustainability and profitability of its business model. from the perspective of the number of orders, the total number of paid orders for oriental selection on douyin reached 180 million in fiscal year 2024, a significant increase from 136 million in fiscal year 2023, reflecting the strong influence of oriental selection on the douyin platform and the continued expansion of its consumer base.

it is worth noting that dongfang zhenxuan is actually in a state of "increasing revenue but not increasing profits". the financial report shows that the adjusted net profit of continuing operations and discontinued operations is 2.2 billion yuan, which includes the 1.3 billion yuan after-tax profit of dongfang zhenxuan from the sale of its education business. the adjusted net profit of its continuing live e-commerce business is 709 million yuan, which is down year-on-year.

the reporter noted that the latest financial report also listed the details of the fees paid by oriental selection for yuhui xingxing, showing that from december 22, 2023 to june 30, 2024, yuhui xingxing's unaudited pre-tax profit was 186 million yuan and net profit was 141 million yuan. among them, 129 million yuan was allocated to dong yuhui, and the remaining difference of about 12 million yuan was retained by yuhui xingxing company.

this also confirms what yu minhong, founder of new oriental, chairman of the board and ceo of oriental selection, revealed at a communication meeting on july 26: "50% of the original profit of 141 million yuan has been paid to dong yuhui."

at that time, this "breakup fee" also set off a heated discussion. in addition to the 141 million yuan disclosed in the financial report, the valuation of yuhui tongxing was 76.58 million yuan at that time. yu minhong said, "i arranged the money for yuhui to buy the company, and the company was given to yuhui." he also explained, "yuhui holds the equity purchase money required by yuhui tongxing, and i also arranged to pay it in accordance with the rules of listed companies and the company's articles of association." based on this calculation, this "breakup fee" reached 358 million yuan.

however, the valuation and delivery process of the "breakup fee" were questioned. at that time, zhao hejuan, the founder of titanium media, published an article titled "are yu minhong and dong yuhui involved in the transfer of listed company interests and insider trading?", believing that this was a typical case of mbo (managements buy-out) by company executives. dongfang selection has not responded to this.

it is understood that mbo, or management buyout, refers to the acquisition activity in which the management of the acquired company obtains capital through financing and uses it to purchase the shares or assets of the company it manages, so that the control or ownership of the company is transferred to the management of the company, and then the company is reorganized and profits are obtained.

zhang huizheng, senior partner of yingke shanghai equity, pointed out that since acquisitions usually require huge amounts of money, and it is difficult for management personnel to fully meet the acquisition needs with their own funds, most of them need to rely on financing to complete, so mbo is usually regarded as a special form of leveraged buyout. as company management personnel who hold both management rights and ownership, there may be conflicts of interest in mbo. since mbo is mostly leveraged buyout, its source of funds is also a major problem.

the reporter noticed that on september 3 and 4, dongfang zhenxuan issued an announcement to invest in its shares. in this regard, the reporter asked dongfang zhenxuan about its future plans, but no response was given as of press time.

on july 25, oriental selection stated that the company's board of directors plans to repurchase no more than 500 million yuan of company shares through the open market within the next year, based on the general authorization of shareholders at the annual general meeting of shareholders on november 3, 2023, and possible other authorizations. on july 26, the first trading day after dong yuhui's "solo" news was announced, oriental selection's stock price plummeted 23.39%, closing at hk$9.5 per share, with a total market value of hk$9.797 billion, evaporating nearly hk$3 billion in one day. as of september 5, it was reported at hk$12.58 per share, and its market value returned to the level before dong yuhui's "solo" news was announced.

"sam" concept

at the shareholders' meeting of oriental selection, in addition to the explanation of the "cut-off" with dong yuhui, yu minhong also proposed an ambitious new idea for oriental selection: he hopes to explore new business models with the help of new oriental's ground-based teaching points, and to benchmark its own products against sam's club.

yu minhong mentioned, "we hope to explore a model that combines online and offline operations by relying on 800 new oriental ground teaching sites, and cooperate with new oriental nationwide to open ground service stores, membership stores, and flagship stores. this model has relatively low costs. new oriental's various teaching sites also have parent traffic, which is also a service for parents." "we are heading in that direction, but our ideal should be more ambitious than sam's club."

zhuang shuai, a retail industry expert and founder of bailian consulting, pointed out that from the perspective of online brand development, only by combining it with offline channel layout can the scale be expanded and long-term development be achieved.

since the beginning of this year, oriental selection has made great efforts in supply chain and self-operated products, and tried to explore the cultural tourism industry, and has made breakthroughs in all aspects. in the industry's view, 800+ teaching points are both the existing resources of oriental selection and the advantage of offline traffic. they can guide online traffic to offline, provide more direct services and experiences, increase user stickiness and satisfaction, and enhance the market competitiveness of oriental selection.

from the perspective of actual profit performance, the gross profit of oriental selection's continuing operations was 1.7 billion yuan, a year-on-year increase of 14.1%; however, the gross profit margin of oriental selection's continuing operations decreased from 38.2% in fiscal 2023 to 25.9% in fiscal 2024. oriental selection explained in its financial report that this was mainly due to the promotion of member day activities and changes in product mix, that is, oriental selection sold more agricultural products that usually have lower profit margins.

retail expert hu chuncai said that currently china's agriculture is a fragmented market, but vegetables account for 70% of the world's total, fruits account for 1/3 of the world's total, and farmed aquatic products account for 60% of the world's total, so there is a lot of room for imagination in terms of branding, and it is very likely that brands such as "zespri kiwifruit" will appear in china in the future. at present, the development of geographical indications for agricultural products is booming. if dongfang zhenxuan can really do a good job in quality control and achieve dual "endorsement" in combination with geographical indications, it is possible to develop into a self-operated brand enterprise mainly focusing on agricultural products.

zhuang shuai believes that any category can have its own brand. "dongfang zhenxuan has been operating its own business and owning its own brand for some time, and has achieved a scale of several billion, proving that there is definitely market space. however, the current competition among private brands is as fierce as that among retailers and e-commerce platforms, so there are definitely many challenges in doing so, such as brand building, channel construction, operation management, product development, and supply chain management."

however, considering the current situation of "increasing revenue but not profits", oriental selection still needs to consider the return on investment. the financial report shows that the total revenue cost of continuing operations increased by 101.6% from 2.4 billion yuan in fiscal 2023 to 4.8 billion yuan in fiscal 2024, and sales and marketing expenses also increased by more than 500 million yuan.

previously, dongfang zhenxuan and jd.com jointly launched an instant retail business with delivery within 12 hours, with jd.com fulfilling the contract and dongfang zhenxuan distributing and promoting the products through live broadcasts. as for the current turnover of self-operated products and the increase in transportation costs, whether dongfang zhenxuan is considering further investment in the supply chain has not yet been responded to by press time.

unlike yuhui tongxing, which relies on the douyin platform, the reporter noticed that dongfang zhenxuan not only withdrew from taobao live, but was also consciously "de-douyinizing". the financial report shows that dongfang zhenxuan's gmv in fiscal year 2024 increased by 43% to 14.3 billion yuan, of which the gmv from douyin accounted for the majority. the reporter noticed that in 2023, dongfang zhenxuan launched its own app. nearly 90% of its self-operated new products will choose to be launched on the app for the first time, and it pays attention to the operation of private channels. its member group is also very active. the 2024 fiscal year financial report shows that dongfang zhenxuan's own app has also become the core channel for self-operated products.

in addition, oriental selection is also conducting joint live broadcasts with the international cooperation agency, but many industry insiders said they "can't see clearly" how to expand international products through live broadcast channels and what the future path will be.