Q4 2023 ATRenew Inc Earnings Call

Participants

Jeremy Ji; Director, Corporate Development and IR; ATRenew Inc

Xuefeng Chen; Chairman, Chief Executive Officer, Co-Founder; ATRenew Inc

Rex Chen; CFO; ATRenew Inc

Joyce Ju; Analyst; Bank of America

Junyun Chen; Analyst; CITIC Securities

Presentation

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.'s fourth-quarter and full-year 2023 earnings conference call. (Operator Instructions) Please note today's event is being recorded.
I will now turn the call over to the first speaker today, Mr. Jeremy Gee, Director of Corporate Development and Investor Relations of the company. Please go ahead, sir.

Jeremy Ji

Thank you. Hello, everyone, and welcome to ATRenew's fourth-quarter and full-year 2023 earnings conference call. Speaking first today is Kerry Chen, our Founder, Chairman, and CEO, and he will be followed by Rex Chen, our CFO. After that, we'll open the call to questions from analysts.
The fourth-quarter and full-year 2023 financial results were released earlier today. The earnings release and investor slides accompanying this call are available at our IR website, ir.atrenew.com. There will also be a transcript following this call for your convenience.
For today's agenda, Kerry will share his thoughts on our quarterly performance and business strategy, followed by Rex, who will address the financial highlights. Both Kerry and Rex will join the Q&A session.
Let me cover the Safe Harbor statements. Some of the information you will hear during our discussion today will consist of forward-looking statements, and I refer you to our Safe Harbor statements in the earnings press release. Any forward-looking statement that management makes on this call are based on assumptions as of today and that ATRenew does not take any obligations to upgrade our assumptions on these statements.
Also, this call includes discussion of certain non-GAAP financial measures. Please refer to our earnings press release, which contains a reconciliation of non-GAAP measures to GAAP measures.
Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB and all comparisons are on a year-over-year basis.
I'd now like to turn the call over to Kerry for business and strategy updates.

Xuefeng Chen

(interpreted) Hello, everyone, and welcome to ATRenew's fourth-quarter and full-year 2023 earnings conference call.
In 2023, ATRenew achieved record-breaking revenues and profits with a continuously strengthened pre-owned supply chain capability and our ongoing increase in brand recognition. Our total revenues reached RMB13 billion, representing a year-over-year increase of 31.4%, significantly outpacing the growth rate of the secondhand industry and consumer sector as a whole. I would like to express my gratitude to our colleagues on the frontline and in all departments for their hard work.
Our total transaction volume in 2023 was 32.3 million units. We adhere to the strategy of prioritizing self-operated business that provides better services and user experience. This focus has yielded significant results, with our [Wati] transaction volume increasing by 50% year over year in 2023.
Regarding third-party platform businesses, we actively adjusted our development strategy and made efforts to develop merchant ecosystem and service capabilities. The overall platform take rate increased by 92 basis points to 5.39% in 2023. The number of registered merchants on PJT Marketplace reached 596,000, a strong growth of 46.2% compared to the previous year, which lays solid foundations for future development.
2023 was also a year of consolidation and efficiency. We further solidified our secondhand supply chain capabilities, providing more valuable services on our platforms. At the same time, we were also more disciplined at the pace of our expansion and investments in new initiatives. At the profit level, we achieved a solid non-GAAP operating profit of RMB252 million, with a non-GAAP operating profit margin of 1.9%, exceeding our target for the year.
Those achievements are firmly grounded in our strategic focus. Firstly, we appear to effective customer customer acquisition scenarios on the recycling front; secondly, strengthening robust supply chain capabilities as a foundation; thirdly, driving efficiency improvements through technology; and fourthly, being agile in seizing new traffic opportunities and capturing new customer demand.
Now, I will walk you through these four strategic perspectives. First, on the recycling front, we continue to successfully execute our customer acquisition strategy by leveraging our precise recycling scenarios. By the end of 2023, we have presence in 268 cities in China, reaching consumers through 1,819 AHS stores offline. We have constantly enhanced our service accessibility in high-quality business districts and communities.
We further penetrated the market by combining offline stores with online platforms. Over the past year, consumer awareness and trust in our AHS Recycle brand have steadily improved, especially in big cities where recycling rates are improving. By leveraging our physical stores, freemium service reputation, and retail partners, we precisely target [using] mainstream recycling scenarios. With competitive prices and higher efficiency, we obtain high-quality sources of free on goods, fortifying the group's supply chain capability in the main business lines.
In June 2023, we were pleased to announce the official collaboration with Apple for its recycling and trading services in Mainland China. Our partnership is designed to meet user demand for convenient recycling and low-cost upgrade to brand-new item products. This service is now available at the brand's official website and online flagship stores. Notably, during the fourth quarter, despite flat iPhone sales, this collaboration contributed RMB300 million to our revenues.
Additionally, in terms of e-commerce partners, we have solidified our collaboration with JD's mobile and electronics retail departments, offering one-stop, single-device and multi-device trade-in services. This caters to JD's wide user base who seek more cost-effective shopping options and better recycling experiences when operating their gadgets. Overall, the growth recycling value of trade-in business on JD channels doubled in 2023.
By expanding our multi-category recycling efforts, we have further strengthened appeal of our second scenario for users. The updated slogan Apple show, recycling more for you, reflects our commitment to expanding into additional categories beyond our core focus on consumer electronics. We are dedicated to fulfilling the growing demand for recycling and cash for high value -- cashback for high-value categories such as luxury goods, gold, and vintage wines. Looking ahead, we aim to expand to lower value item recycling while promoting the recycle and reuse of more idle goods.
Building market cap with recycling capabilities primarily involves upgrades of family wealth, upgrading story experiences and IT systems, while fully establishing fulfillment capabilities with professional service providers. Our fulfillment strategies vary with the residual value of goods, with in-store drop-off and doorstep pickup options, users could circulate more used products with ease.
By the end of 2023, we have introduced model at recycling services into 262 AHS stores. During the year, the GMV for nine electronic products at the recycling front exceeded RMB1 billion. At the same time, we bring AHS Recycle brand closer to communities and users' daily lives. Our extended presence in communities and commercial areas, coupled with an increasing density of multi-category recycling stores, encourages customers to reuse our services more often.
Moving on to our supply chain processing capabilities, our highly efficient supply chain management ensures recycled goods are inspected at a lower cost while achieving accurate grading and pricing results. This allows a consistent and stable supply of goods. We have also improved our operation center's shipping and receiving capacity and enhanced their space utilization efficiency.
Furthermore, our main operation centers are equipped with compliant refurbishment capabilities. The annual revenue from our self-operated compliant refurbishment business reached RMB810 million, accounting for 9.4% of the core one fewer second business segment revenue.
Notably, in the fourth quarter of 2023, revenue from the refurbishment business increased by 41.5% compared with the previous year, while the gross profit margin was 1.6 percentage point higher. This is mainly attributable to our intelligent supply chain system, which enables more accurate identification of devices suitable for refurbishment, resulting in a higher number of devices in various conditions being selected for the project.
We actively participated in [taking] advantages to drive industry prosperity. In 2023, as a major drafting party, ATRenew played a key role in establishing the Electronic Product Refurbishment Industry Committee initiated by the Shenzhen Electronics Industry Association. We contributed to various group standards, including general requirement for refurbishment, labeling and information disclosure, quality management, and technical specifications. These standards serve as industry references for intellectual property protection, product data security quality, as well as user rights protection.
On distribution, our advantages of an integrated B2C plus B2B platform will further magnified. In 2023, GMV of the core self-operated retail business totaled RMB2.88 billion, leveraging our supply chain strengths. Paipai has trends in its [1P2] consumer retail capabilities, meeting consumer demand for high-quality pre-owned products. To highlight, 1P2 consumer compliant refurbished product sales contributed RMB560 million in revenue.
In 2023, we introduced a new consignment model to address the challenges faced by secondhand industry merchants, difficulties in operating to consumer e-commerce stores, and the struggles of small businesses. Through PJT Marketplace, we effectively connect Paipai stores with small- and medium-sized merchants, thus removing barriers that previously hindered small merchants from integrating their supply into our platform.
Merchants now only need to lease their products and confirm pricing, while the platform takes care of the store operations, sales, customer services, and after-sales support. This initiative significantly lowered the entry barrier for B2C merchants, enriches the platform supply forces, and ensures a seamless purchasing experience for users. GMV for the consignment business summed up RMB70 million in 2023.
In the fourth quarter of 2023, the overall business of PJT Marketplace rebounded, primarily due to a recovery in trading activities and the 35.3% year-over-year increase in the number of active merchant users. Additionally, we took the strategic decision to restructure the low commission rate spare stock business, and this reduced our costs and optimized the overall take rate of B2B platform.
As a result, in the fourth quarter of 2023, service revenues from PJT Marketplace increased by 14.9% year on year, and the overall take rate rose by 69 basis points to 6.02%. On an annual basis, its overall take rate reached 6.17%, a significant improvement of 189 basis points compared to the 2022 level. We are proud of the proven business model of PJT Marketplace, as it's an indispensable infrastructure of the industry.
Looking ahead, we will further open up our supply chain advantages and become a high-quality supplier for pre-owned products in the industry. At the same time, we will provide models suitable for B2C retail and steady supply through online e-commerce platform, live streaming channels, as well as offline mobile phone retail networks and service stations. In an environment where consumers are more cautious with their expenses, ATRenew aims to leverage its competitive pricing and quality assurance of pre-owned products to foster mutual success with our partners.
Firstly, in terms of technology and efficiency, we continue to promote the application of automation technology. Firstly, we have enhanced the accuracy of quality inspection. The automated quality inspection system, represented by Matrix 3.0, has reduced losses caused by quality inspection errors by 19% throughout the year.
Secondly, with our focus on 1P business, we improved capacity utilization in our automated operation centers in South and East China. Thirdly, through optimizing supply chain management for receiving and delivering goods in different locations, we reduced logistics costs. As a result of these initiatives, our non-GAAP fulfillment expense as a percentage of total revenue has continued its downward trend, reaching 8.5% for the full year 2023, significantly down from 10.9% in 2022. And this underscores our dedication to achieving further cost reduction at scale.
In the overseas market, we are delighted to see strong interest in our automated technology for pre-owned consumer electronics. Beyond the Mainland China market, our quality inspection technology has been successfully deployed in Hong Kong and Japan.
In November 2023 -- in October 2023, we expanded our global footprint by collaborating with our European partner to bring our one-stop recycling kiosk solution to Sweden. Our one-stop solution effectively addresses the international demand for C2B recycling services. Moving forward, we remain committed to our growth trajectory and will continue to support global circulation of pre-owned products.
Looking ahead to the first quarter and the full year of 2024, we believe that ATRenew operates in a sustained circular economy that is impervious to economic fluctuations and technological changes. We identified several key trends in the sector. On the recycling front, we see a definite demand for convenient, high-priced, and trustworthy recycling services. On the purchasing end, we see a stronger demand for value-for-money goods from service consumers. On the fulfillment end, we see an unchanging need from secondhand merchants for efficient and hassle-free trading and logistics solutions. In late February this year, President Yi emphasized the promotion of a new round (technical difficulty)
As a leading company in this field, we are strategically positioned to capitalize on this upward trend and better facilitate JD and brand owners training programs. Once again, it demonstrates that recycling and trading are encouraged by national policies as a long-term stable industry with high certainty and low policy risks. Going forward, we will adhere to our long-term core strategy and fortify our business foundations.
While enhancing brand awareness for AHS Recycle, we aim to address users' fundamental pain points and collaborate with industry partners to explore the untapped potential of high-quality secondhand products. We will maintain patience in the long run while steadily releasing profits and achieving growth.
Finally, I am delighted to announce an international accolade. In November 2023, ATRenew was honored as highly commended by the judging panel at the Reuters Global Business Responsibility Award in the circular transition category. This marks a milestone for ATRenew as it is the first time we have stood shoulder to shoulder with global multinational companies such as Oracle, Schneider Electric, and Pepsico. The recognition from Reuters and the expert panel is a testament to our innovation and our technological achievements. Moving forward, we will continue to deepen our commitment to the circular economy, driving sustainable industry development through technological innovation.
Now, I'd like to turn the call over to our CFO, Rex, for financial updates.

Rex Chen

Okay. Hello, everyone. I'm pleased to report that 2023 was a year of significant achievements for our company. Both revenue and operating income saw better-than-expected results. Total net revenue increased by 31.4% to RMB13 billion, and adjusted operating income of 2023 totaled RMB251.7 million, a remarkable 36.5 times the number of 2022. Cash inflow from operating activities was healthy, totaling RMB236 million for the carousel. 2023 was our year of consolidation and efficiency.
Moving on to the fourth quarter 2023, we are pleased to announce another profitable quarter, and we recorded another new record non-GAAP operating income on revenues that was, again, exceeded the top end of our guidance.
Now, let's take a detailed look at our financials. Please note that all amounts are in RMB, and all comparisons are on a year-over-year basis, unless otherwise stated. In the fourth quarter. Total revenues increased by 29.9% to 3,873.6 million, driven by strong growth in net product revenues and a rebounding service revenues. Net product revenues increased by 31.1% to 3,502.5 million, while net service revenues was 351.1 million, representing an increase of 19.7%.
Closing net product revenues was primarily driven by an increased U.S. sales of preowned consumer electronics through both PJT. and paper marketplaces as well as offline channels, of which sales of LinkedIn purposed devices totaled 278.2 million, which increased by 41.5% sequentially. Increasing service revenues was primarily due to the recovery of paper and the PJT. market process with the efficient online and offline customer acquisition and better execution of our take rate of our marketplaces went up 56 basis points from the fourth quarter of 2022 to 5.6% in the fourth quarter 2023.
Now, let's discuss our operating expenses to provide greater clarity on the trends in our actual operating expenses. We will also discuss our non-GAAP operating expenses, which better reflect how management views our results of operations. So reconciliations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form six K furnished with the SEC.
Merchandise costs increased by 32.9% to stand at 115 million. So increase was in line with the growth in product sales. Gross margin at the Group level was 18.7% in the fourth quarter. Gross margin for our 1P business was 10.6% in the fourth quarter.
Hey, Justin, you saw soft April 15th services. We implemented a proactive approach to attract customers with aggressive pricing strategies causing gross margin compression. We believe that as our market share within these channels gross So gross profit away, it will gradually return to normal levels. Fulfillment expenses increased by 9.5% to 301.1 million, excluding share-based compensation expenses, we will which we will refer to as SBC from PR. Non-gaap fulfillment expenses increased by 14% to 295.6 million, and the non-GAAP measures to increase was primarily due to an increase in personnel and logistical costs as we conducted the motorcycle and the transaction certain activities year-on-year.
Non-gaap fulfillment expenses as a percentage of total revenues decreased to 7.6% from 8.7%. So overall, decreasing retail fulfillment expenses reflects the impact of the economies of scale and efficiency improvements through automated operations, specifically has a number of onetime orders grow. So average fulfillment cost of product was reduced. Selling and marketing expenses decreased by 46.6% to 317 million, while excluding SBC expenses and amortization and the impairment loss of goodwill and the intangible assets.
Non-gaap selling and marketing expenses increased by 11 points, 11.0% to 246.6 million, primarily due to an increase in the expenses related to marketing activities. Non-gaap selling and marketing expenses as a percentage of total revenues decreased to 6.4% from 7.5%. General and administrative expenses decreased by 18.8% to 62.2 million. Excluding SBC expenses, non-GAAP G&A expenses decreased by 17.4% to 45.2 million primarily due to a decrease in headquarter profit, office expenses and fees related to professional services.
Non-GAAP G&A expenses as a percentage of total revenues decreased to 1.2% from 1.8%. Technology and content expenses increased by 17.1% to 63.8 million, excluding SBC expenses and amortization and impairment loss of goodwill and intangible assets, Non-GAAP technology and content expenses increased by 52.6% to 58.3 million. So the increase was primarily due to an increase in personnel costs in connection with the upgrades of the complex operating center and the systems. Non-gaap technology and content expenses as a percentage of total revenues decreased to 1.5% from 1.3%. As a result, our non-GAAP operating income was 81.6 million in the fourth quarter of 23, representing a significant increase of 135.8% year-on-year. Non-gaap operating profit margin was 2.1% compared to 1.2% in 4Q 2022.
To provide some context regarding our balance sheet our inventories amounted to 1 billion as at the end of the fourth quarter of 20 industry, representing a sequential increase of EUR344.8 million compared to we see end of the third quarter of 20, the industry. This increase was primarily due to a surge in recycling volume generated from Apple's official trading program. However, that had a limited impact on our operating cash flow since we have our payment term of 45 days and effectively managing relevant payables through bank guarantees.
As of December 31, 2023, cash and cash equivalents, restricted cash, short-term investments and funds receivable from sort of partly payment of service providers totaled 2.9 billion. Our strong cash position safeguards our company's history, we will put we repurchased of four 4.5 million ADSs in the open market for a total consideration of USD8.1 million at December 31st contains three. We had repurchased a total of 18.4 million ADSs for USD56.5 million under our share repurchase programs. Today, we are delighted delighted to announce a new share buyback program. So that allows us to repurchase up to $20 million worth of our shares over the next 12 months is based on our confidence in our value creation, finish growth momentum and strong cash flow.
Now turning to the business outlook. For the first quarter of 2024, we expect total revenues to be between 3,550 million and three some of 650 million, representing an increase of 23.6% to 27.1% year over year. Please note that this forecast only reflects our current and preliminary views on the market and operational conditions which are subject to change.
This concludes our prepared remarks. Operator, we are now ready to take questions.

Question and Answer Session

Operator

(Operator instructions) Joyce Ju, Bank of America.

Joyce Ju

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Thank you for taking my questions and congratulations on the very solid results this quarter. I would like to ask about your overall growth and guidance for 2020 for Additionally, once you have some colors on what is the growth target for the motor, a multi-category recycling business? Thanks a lot. I think I said to you on a comment on the our Nielsen on the assignment handlers, Yahoo. Shellfish, you got totals only options, synergy Dollar Tree choice in diabetes drug, the Toscana AMI or canola, Yahoo. For you.

Xuefeng Chen

So you can see in the year for your pension shoot whole system down. So it isn't on our supply chain team. So we will have an impact in the sensors and the sensor suite. So that can be done that Kindle tablet utilizing Toquepala patent, the patent commitment on the guarantees you tweet or seeing what you saw the two terms of Finland, Franco can target, you're going more convenience and that's higher income couldn't go to Saudi. Cision can do that. We needed being chip changing the CODA IRBs. Will that impact your assortments. Carlos, as you know, downtown Calgary more showing the key Pacific capturing valuable for me, momentum to recharge our Paducah. You pay the shareholders, certainty the B2C Hapag team, a full full and tall shops on the other products to see Santander Consumer going back to do some mental shelf. It doesn't go MassMutual. Now also, you're watching the commercial channel controllers on agenda on the US and in key product handwriting here for Hertz in Banco. So charge only doubling to three. What is your pricing?
We have seen quarter one, frankly. So almost 17, Tony, on the seed and the Parkway, more nickel sulphate PEGE. geo-fencing that just selling EOD warm and her daughter seen don't impact your consumption of assets on the January.
Thomas ET. comment on please, on your financing, the Sofitel Washington payer is still pointing to awaken to reorder self-injection homeostasis into EP. that you have. I mean, if you step back and essentially Sundar permit on that.
Well, thank you for your question. During 2022 and 2023, we saw a shift in consumer behavior. Our users' focus transition from consumption upgrades to emphasize on value for money during this transformation, we noticed a shift right fleet, the right user demand for trillions and recycling in exchange for cash. As we mentioned, our 1Q revenue grew 34.4% year-over-year in 2023 was trade is still clearly more than doubling compared to the previous year. We will continue to drive the core growth flywheel of 1T Rocephin business and to extend our industrial operating profit margin further by bringing our operational efficiency to the next level, we are steadfast in investing in the brand of interest to recycle to unleash growth of traffic and economy of scale.
Further, in terms of our platform business, we've strengthened the synergies between TJC. marketplace and other marketplaces that and provide a small merchants with upgraded consignments services. This helped us build a more robust to supply and meant we could offer a more diverse selection of high-quality secondhand products to our users and looking ahead to 21 for workplace user experience as our top priority and while providing the utmost support to the restocking and trading offerings of JD.com and Apple's official training program. We believe that the support from the central government for large scale trading policies and consumer goods will benefit our collaborations with JD and brand partner together, we elevate consumer awareness of trading and cost ratio has been made during consumption twice. Because of this.

Joyce Ju

We are confident in achieving a 30% year-over-year revenue growth for our OneTEAM business, why you thought in the equally so on the US and in Toby, Nadir, so you got more agents helpful at CONMED. So you go through that Tondach data on the Australian front cohort can be made up through forgot can go to Amazon India or majority pool charge on your quarterly average of combing the Hilton Madison suite, James Young for TNT, some TSO charges, only 2G and control your pool sale booked in equity, so future season to EPSO. T cells.

Xuefeng Chen

If we saw the drop-off in 2023 in January for our multi-category second business, about 1 million army. This business has grown rapidly in sales. We set a model take rate for this business segment in 2003, we trust there is ample growth potential in the take rate in 2024, our focus is enhancing user awareness of a transfer cycle as the leading national recycling brands, our core strategy is to fail to build an even better user experience. To achieve this, we will provide more structured products into our platform and improve our pricing capabilities. This will drive more recycling transactions across a wider range of categories.

Operator

Junyun Chen, CITIC.

Junyun Chen

Thank you, Kim, and thanks for taking my question and congratulations on good results. I have two questions. First, could you provide more color on the higher than expected profitability this year? And what's your profitability target for 2024 and for the medium to long term?
And second in late 2023 and already 2020 for the iPhone 15 series of face some challenges from Huawei. How does management view the challenging commodity landscape, a more optimal biopharma manufacturers? And how did your Apollo trading business performed in Q4 2023? And what are your scale and profit targets for 2024?

Xuefeng Chen

Thanks to our very own joint venture into cancer going tangential, Akiva goes to constitute a degree or two below tied to that yet, will that Lynch the differentiation of 19,000 tons to Teradata as Danielle, you entitled to any of the different science to address us from you if you don't have to constantly review the GE crush at semaglutide and you haven't seen a change going forward on our own to the iPhone short-selling attack or amateur Trulia 20 Jasmine tornado milling unit to show you how it began. Glad to have one-time Google to come back in financial challenges and are going to be our peak quarter to one point. Joe, quick question on your sensitivity to gas in some. Yes, RCM growth, any growth going or will you move down? Sorry.
Okay. Thank you. So I will take your first question and I carry out your with the kiosk. Second, the questions. Okay. So for our first submission in 2023, we once again achieved breakthroughs in terms of cost efficiencies. And then in capital measures, fulfillment, selling and marketing, G&A and other administrative and technology and content expenses as a percentage of revenues for 8.5%, 7.3% and 1.5% and 1.3% respectively. These figures correspond to a year-over-year decrease of 2.4% to 1.6% and 0.1% and 0.6% respectively.
In terms of fulfillment, we achieved a remarkable efficiency improvement, our efficient system of production to offer incentives and a centralized self-operated operation stations have further improve our inspection quality and cost conscious skewing effect created by the use of automation. Technology at shopping centers has also had a positive impact. We are now seeing lower costs related to sourcing quoting, especially in the warehouse when compared to our previous approach of using decentralized jointly operated stations, we have also leveraged data to optimize small items deleverage with low cost of ownership. This has driven down shipping and receiving costs of all our operations center expenses in logistics costs decreased by 9% and 8%, respectively. During 2023. This resulted in Yunnan CapEx limited expense of 1.1 billion, a year-over-year increase of around 2%. Our total net GAAP selling and marketing expenses in the travel industry was 940 million. This was a year-over-year increase of 7.8%. Also a lot lower than all our revenue growth rate over the same period this was mainly driven by HR efficiency improvements from deploying advanced digital CRM tools of the P2P sales team. The results was a 19% cost reduction compared to the pervious year 1423, Non-GAAP general and administrative expenses, 190 million, a year-over-year increase of 21.9%. This was mainly due to office grant and various other administrative costs, including employee travel, training and benefits. Our Non-GAAP technology and content expenses were 170 million in 2023, thanks to the gradual maturation of our platforms at a margin. That's our official launch of our South China automation of incentive. We did not see significant cost growth in this category. In addition, as I call them, maturation initiative we launched in 2022 was completed in 2023. This contributed to an overall decrease in technology and content expenses as a percentage of revenue, representing an improvement in scaling effects.
So Brooks, some breakdown above highlights the enhancements satellite to the increasing our non-GAAP operating profit in terms of industry for path to profitability growth, our primary focus of our 1P, gross margin and operating efficiency. Our long-term goal is to improve our non-GAAP operating profit margin by 1% every year.
In terms of our 1P business, we have prioritized ability to control first hand supply while also enhancing user awareness of our C2B Brent, a virtuous cycle. We saw the first hand suppliers with competitor. We're recycling prices. Meanwhile, we continue to unleash our self-operated and refurbishment businesses. While we diversify the standard of supply to pipeline, we expect a larger proportion of 2C sales as we seek a higher profit margin of 1P revenue.
I'd like I'd also like to add more color on our corporate collaboration with Apple. In the fourth quarter, our Apple business achieved sales of 300 million. However, as this business is relatively new and is still being defined as gross profit margins below an ideal level. Going forward, we plan to optimize our pricing mechanism to strike a balance between profitability and growth.
In terms of operating efficiency, we are constantly optimizing our full cost to revenue ratios. Our automation capabilities will continue to improve our fulfillment efficiency, especially cost per device was diluted due to an increase in ASPD.
In terms of selling and marketing, we tried to maximize the effectiveness of our B2B sales team. At the same time, we plan to strategically leverage social media traffic to attract customers. So probable reserves and location. Data service capabilities of short video platforms such as Boeing, will help us target potential users with greater accuracy. This approach has the added benefit to further strengthen our sourcing demographics and the market position. We recognize that the key to building a successful second hand opinions also lies in our ability to acquire supplies through brand at par. As such, our agents through a cycle brand is pivotal to our long-term driver with government passed at this at this stage, we believe strategically allocating appropriate put the soft resources to social media traffic will solidify our long-term competitive position in this dynamic market.

Joyce Ju

Okay, of Dazzle, and he will elaborate on a pink or the tone cautious on?
Well, what you see in other cities such as etsy.com once again, the anomalies of a deal by deal using Yoshida and Okay. So the decency to Shin Ji, the claim of one to four year warrant portfolio was either with our budget. Omega is social media for them. As you also so far, the panel talking now a place of our job for Yahoo. For your laps, the Caisson social elements on Wahler, Panama, ease of use of oil. Can you I would ask digital consumer side and then maybe the timeline shows also finding somebody to go. You can House Counsel has tons of much OpEx. So this is up for Minda Aquasana, PMD, Central European Time. So I mean, you're full you can go eat your lunch in that case or to send essential each of points in the central it higher and Tata Tea symposium levers up almost like increases on the credit box chart, it's clear that in or out of the government of Mali, we adopt CGOV. So that's how we want to push you up taking or plan for you towards the end of the year for you.
So sorry, GBM, Central Europe and quite a male in backup center hockey concern, Jacada key measures.

Xuefeng Chen

I will answer the second question, we have systematically roll down our recycling and trading services on behalf of official website. And that 47 flagship stores for service and pricing were highly commended by users. On social media spontaneously.
In terms of scale, we have secured a significant amount of first densify by leveraging the substantial volume of new items shipments in the fourth quarter and by maintaining competitive research and pricing services contributed RMB300 million in product sales revenue during the fourth quarter. This was not this was a meaningful increase compared to the third quarter our suddenly volume is greater than our sales volume. This crude, that user acceptance of ethanol trading for new products is increasing and there is still much room for improvement in the penetration rate of trading products. We will maintain flexible adjustments to our pricing strategy based on market feedback to optimize our gross profit margin. Importantly, we do not handle front-end fulfillment and marketing for the Apple business. As a result, even though this business segment has a narrow gross profit margin, it has the potential to contribute a relatively higher operating profit margin.

Joyce Ju

Okay.

Operator

Due to the time limit on the call, I'd like to hand the conference back to management for closing remarks.

Jeremy Ji

Thank you all again for joining us today, and a replay of today's call will be available on our IR website, shortly followed by a transcript. If you have any additional questions, please feel free to e-mail us at ir@atrenew.com. Have a nice day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Editor^ Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.