As we all know, private label products have been a very important margin contributor of those top listed chain stores which have been discussed in their financial reports. But for the majority of our customers, 111 customers, they are small, medium chain stores or even individual stores. And they don’t have the capability to establish their own brand. So Guan Zhao, Huang RongYao has become a very attractive solution for them. And those private labels also help us to build up a very long-term relationship with those customers.
Operator: Your next question comes from Mark Su [ph], a private investor.
Unidentified Analyst: I have 2 questions. The first is that we are seeing the company is narrowing the loss. What’s your future plan to further improve growth margin and to improve profitability? The second is that we understand that the buyer group has terminated the privatization of the company. What does that mean to the company and what will be the company’s future plan on capital market?
Junling Liu: I will take the first question regarding margin. And our strategy towards a healthy business model has been working very well. And we are seeing significant improvement on our capability to generate more and more profits. And firstly, to reduce our procurement costs, we direct source from pharmaceutical companies. This has been highly effective in lowering the cost of products. And we now source from over 500 local and international pharmaceutical companies. And we will continue to deepen our strategic relationship with our existing partners as well as securing new partnerships. And such relationships provide us with a wide range of product selection at a lower cost. The second level which is a key strategy of us, as I mentioned just now, is our JBP model.
In the past quarter, it has been growing very well. It’s about close to 60% of our total inventory. We are going to launch a new generation of this JBP which provides a robust system to enable our partners to better manage their inventory, manage their price, et cetera. And all these value-added services will help our partners to get more sales and more profits. And also, at the same time, it will also bring us those value-added profits for our services. And thirdly, we will continue to optimize our product assortment and structure. Through our AI technology and big data, we are much more effective to balance our portfolio of products. Funding those high-velocity but maybe low-margin products, those which drive traffic, together with some very healthy-margin products.
We have now about 5,000 SKUs with very good margins, including our own private-labeled products. And new products are from those pharmaceutical companies. And we are very confident that we will be able to help those pharmaceutical partners in commercializing their products with high-efficiency and high-gross margin. And the last but not least, as part of the country’s health-care strategy, the revolution of medical treatment and drug-sales separation will bring extra sales to retail markets from hospitals. And, well, I believe it will not only bring sales but also bring more marketing functions to retail markets. Because previously, a lot of education was from inside the hospital. Now, it comes to the retail market. With these marketing functions and with 111’s capability of those big data or digital marketing capabilities, we will be able to provide a very effective service to pharmaceutical companies.
And this will be a good process for 111. As we already have those capabilities, both in our B2C and B2B models on the digital market.
Luke Chen: Yeah, regarding the privatization, as previously announced, the Bayer Group has officially notified the special committee that it will no longer pursue the privatization of the company. And this means that the company will continue to maintain its listing status in NASDAQ. We think it’s good for the company to continue to be a public company and keep the door of the capital market open. As the management, we will conduct more meetings with existing and potential investors to help them to understand our business model and update them on our latest development. The management team will continue to focus on growing the business and delivering profitability to create value for shareholders.
Operator: Thank you. That is all the time we have for questions. In closing, on behalf of the entire 111 management team, we’d like to thank you for your interest and participation in today’s call. If you require any further information or have any interest in visiting 111 in Shanghai, China, please let the company know. Thank you for joining our call today. This concludes the call.
