Xing Jin: In the third quarter, we saw repeated COVID-19 outbreaks in certain parts of China. Despite this market uncertainty, we delivered a solid financial performance during the quarter, and the situation is gradually recovering in the first 3 quarters. As we are entering into the fourth quarter, the scope of pandemic may further widen because of the weather and the corresponding provisions measures may strengthen as well. While there is uncertainty ahead, however, recently, China’s National Health Commission released a new set of refined pandemic provision and control policies, which are more scientific and more precise. As the overall economic environment will be getting normalized gradually, we believe our industry will be back to the growth track over time.
In user front, as we discussed in prepared remarks, the global medical aesthetic market maintained steady growth in the past years, and there is significant upside of the penetration rate of the Chinese market. According to the Frost & Sullivan, the global medical aesthetic market is expected to grow at a CAGR of around 13% from 2021 to 2025. In 2020, the number of medical aesthetic treatment per 1,000 people in China were just about 21 compared with 82 and 48, respectively, in South Korea and the United States, which are more developed medical aesthetics market. There is clear growth potential for Chinese market. With general economic situation back to normal, the customer spending will be back to growth track as well in our view. On institutional front, as the impact of uncertain factors gradually ease and when they can operate normally, we believe their marketing budget allocated to So-Young platform will go up gradually.
At present, we must commit to our long-term vision while making dynamic adjustment in short term and execute our exceptional strategy, improving the operation and providing high-quality user experience and forming closer relationships with industry partners. Users may pay more attention to daily necessity, like the gross . Overall performance of major online platforms were relatively soft compared to last year, while overall retail market is in a slow recovery stage. This is in line with the other consumer products and services. Despite our pressure on the overall consumption market, our daily online users during Double 11 stayed flat compared with last year.
Operator: The next question today will come from Chloe Wei of CICC.
Chloe Wei: Okay, I will translate myself. This is Chloe from CICC. I think you’ve done a great job performing above the breakeven target. And we continue to see strong subsidies in this quarter. And I wonder, are there enough levers in the business in China rationalizing the competition? That will be the first. And secondly, we’ve heard some new vocabularies during the prepared remarks. Could the management team share some colors on the ongoing new businesses? And how could that mean for the user engagement and for the P&L?
Xing Jin: First, on industrial outlook, I believe Medical Aesthetics has a broad perspective to seize the opportunity and achieve growth. The key point is to serve users well and combined with the industry more profoundly. Any peer platform must have a clear positioning for user service to clarify what kind of user demands it can serve. Through the years, we have built trust with our users when users have need for medical aesthetics, we can truly solve it and enable a better consumption experience. As we are not an entertainment platform, users don’t spend plenty of time watching video or reading post, but search for a product that satisfies their needs. We always emphasize that medical aesthetics are both medical and medicine and consumption.
So users’ consumption must be based on safety and the demand for beauty. Price advantage of an e-commerce platform will be the primary factor for consumers’ decision-making. I believe we should think about serving user from their perspective and their message at different stages of consumption. Through professional community content and deep combination with industry, we have established diversified consumption scenarios to cater to user demand. For our institutional clients, we trust we build with users make them willing to serve users better. For the new initiatives, we are exploring new consumption scenarios for users and serve them with a range of diverse solutions. For institution and us, the ultimate goal is to better serve users. Well, we actually suggest if you invest Tier 1 or Tier 2 some major cities, you can have try on what So-Young Prime products, it will be very different and will kind of excite you best.
Operator: Our next question today will come from Ingrid Zhang of UBS.
Ingrid Zhang: The question is more on the industry level. Based on the data, a shift in consumer demographics for medical aesthetics in terms of age, peers, income level, et cetera.
Xing Jin: According to transactions on our platform, mega cities such as Beijing, Shanghai, Guangzhou and Shenzhen have always led the consumption, with number of users placing orders and transactions activities at high level than other cities in China. But in 2022 are the new first tier cities, including Chengdu, Hangzhou, Wuhan, Nanjing and Chongqing are also become major cities for medical aesthetics consumptions. In terms of other categories on our platform, non-surgery accounts for over 80% of total orders, NTNG is one of the most favored category and the most frequently purchased product such as wipes and hydronic acid skin whitening and skin rejuvenation account for over 50% of total orders. The proportion is slightly higher than 2021, indicating users’ demands from non-surgery categories.
Targeting user demand, we continue to optimize a number of SKUs for non-surgery categories to provide high-quality supply. We also launched some products based on characteristics of certain categories, such as So-Young pin card, which includes several anti-aging products in our bottom of facilitated user choice. Well, in addition, please be noted that at the end of each year, usually, we will release a white paper in which we will discuss with the new regulatory policies, industry trend and other important topics.
