Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to ATRenew Inc. first quarter 2022 earnings conference call. At this time, all participants are in listen only mode. We'll be hosting a question and answer session after management's prepared remarks. Please note that this event is being recorded. I'd like to turn the call over to the first speaker today, Mr. Jeremy Ji, Director of Corporate Development and Investor Relations of the company. Please go ahead, sir.
Thank you. Hello, everyone, and welcome to ATRenew's first quarter 2022 earnings conference call. Speaking first today is Kerry Chen, our Founder, Chairman, and CEO, and he'll be followed by Rex Chen, our CFO. After that, we'll open the call to questions from analysts. Our first quarter 2022 financial results were released earlier today. The earnings release and investor slides accompanying this call are available on our IR website at ir.atrenew.com. There'll 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. Please note that since Shanghai is under lockdown, management joined today's conference call via different lines in Shanghai. Kindly excuse us if there is any connectivity issue during the call.
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 statements that ATRenew 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 discussions of certain non-GAAP financial measures. Please refer to our earnings 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.
Hello, everyone, and thank you for joining us on our first quarter earnings conference call. In the first quarter, we realized rapid growth during a very challenging period of time during the highly transmissible Omicron variant. GMV for the first quarter increased by 51.6% year-over-year to CNY 9.38 billion, and the total revenue increased by 45.7% year-over-year to CNY 2.21 billion, both exceeding our guidance. Starting in mid-March, we faced headwinds of the pandemic. Against this difficult backdrop and off-season of the Spring Festival, we are delighted to announce that we have extended our past quarter's strong performance into this quarter to achieve non-GAAP operating profit. In addition, we recorded a positive cash flow from operating activities of CNY 120 million.
As we navigate the pandemic challenges, I would like to address two issues in today's earnings call. First, how do we respond to the transitory difficulties caused by the pandemic? Second, what is the outlook for consumer demand in the longer term, and how can we seize opportunities in the post-pandemic circular economy?
Q1线上门店交付，交付口径的GMV占集团的总GMV为14.5%。第二个特点是我们全国的门店布局分散。通过自营和联营的布局，爱回收的门店分散在全国214座城市，所以局部城市的封控不会造成全面的运营中断。第三个特点是我们的运营中心分散，相互支撑。除了全国六个大型运营中心之外，我们截止一季度末，在全国分散化布局了116个城市小运营中心，靠近货源，并且就近提供商家服务。大小运营中心相互支撑，分布式的发货和收货，高效率的分配周边的自检订单，一定程度上减轻了城市封控和物流中断对于我们的运营体系的影响。[Foreign language]
On the first issue regarding the pandemic and our reactions. There are three characteristics of our business, which I trust many of our audience today are familiar with. First, our online business constitutes a large proportion of our overall business. Specifically, PJT Marketplace and Paipai Marketplace are both online trading platforms, and therefore experienced a limited impact from offline lockdowns. AHS recycle, though characterized by offline source, also receives a large proportion of its orders online. Taking the first quarter as an example, 58% of recycling orders were placed online through JD app, AHS recycle app and mini programs. GMV for the orders fulfilled through our offline stores contributed 14.5% of total GMV in the first quarter. Second, our offline stores are located throughout China.
As a result of our self operated plus jointly operated strategy, AHS stores have expanded throughout the country with locations in 214 cities nationwide. Therefore, temporary regional lockdowns will not cause operational interruptions on the group level. Third, our operation facilities are decentralized and function collaboratively. In addition to our 6 regional operation centers, we have rolled out 116 city level operation stations throughout the country by the end of March 2022. This enhances the agility of our business and allows us to secure sources of supply and improves our ability to provide supply to merchants at convenient locations. Our major operating centers and city level operation stations function collaboratively to source supplies, deliver products and allocate inspection orders with a high degree of efficiency. This helped us mitigate the impact of lockdowns and logistics interruption on our operations.
自从三月中旬开始，上海的疫情对我们的业务产生影响，并且在Q2进一步的加剧。我们估算Q2疫情对于整体收入的影响约为20%到25%。但是由于以上的业务特点，疫情对我们的业务影响只是局部的，并不是全局性的。[Foreign language]
The regional lockdown in Shanghai since mid-March has dragged our business growth and its adverse impact expanded into the second quarter. In the near term, when quantifying the impact, we anticipate such headwind to drag on 20%-25% of our overall revenue in the second quarter. However, taking a holistic view, the pandemic will not fundamentally impair our business, thanks to the resilience of our business model, as I mentioned earlier.
此外，面对疫情，我们还采取了一系列的应对措施。一，上海的全员居家办公，通过在线办公软件提高居家办公的效率。二，聚焦核心的业务，我们评估并调整了部分的核、非核心业务，减少了不必要的费用支出。三，同时我们履行企业责任，公益投入约一百万人民币，为员工和社区居民提供生活用品和防疫物资。并且我们发挥二手3C供应链的优势，为上海市杨浦区全区提供核酸检测登记使用的专用手机。[Foreign language]
Furthermore, we responded quickly to the COVID resurgence. Our measures included introducing a work from home policy for employees in Shanghai and leveraging remote working tools to ensure productivity. We also budgeted for operating expenses through optimizing non-core business. We donated approximately CNY 1 million to supporting our employees and local communities by providing daily necessities and anti-COVID supplies. Leveraging the pre-owned consumer electronics supply chain, we provided dedicated mobile devices for PCR testing registration to Yangpu District in Shanghai.
相比短期的疫情冲击，我们更关心二手行业随经济周期波动的长期发展。我们相信在中国政府强有力的措施之下，疫情终将，终究会过去。但是我们谨慎判断，未来一段时间的宏观经济，尤其是居民，居民的消费增长会进入缓刑期，这对很多行业来说都是重大的负面影响。但是从日本和欧洲的过往发展经验来看，在消费增长放缓阶段，往往是二手经济实现逆势增长的机会。这种机会主要体现在两个方面。一方面，在消费收缩时，用户的回收变现需求可能放大，有更强的意愿把高价值的产品拿出来回收变现。另外一方面，在消费压力之下，相比价格高昂的新机，用户更加倾向于购买高品质的具有性价比的二手产品。[Foreign language]
Instead of being trapped by the short-term volatility caused by the pandemic, we take a long-term view of looking into the post-pandemic world as well as the evolving circular economy amid economic cycles.
The general belief is that the pandemic will eventually be brought under control. However, consumer spending is likely to grow at a slower pace for a certain period of time. This would lead to significant negative consequences for many industries. Based on the precedents in Japan and Europe, the second-hand economy demonstrated resilience in the face of consumption slowdowns, and possesses the potential to flourish amid economic headwinds. We perceive opportunities from two angles. First, consumers demand for cashback tend to increase under financial pressure, and they are more likely to recycle idle devices with high residual value. Second, consumers tend to opt for more economic solutions of purchasing high quality pre-owned used devices.
为了抓住疫情后的发展机会，我们会在既有的几点策略上继续深耕，坚持不懈。第一点，继续深化城市一体化的战略，提升城市的回收渗透率。手机回收是一个本地化的服务，有很强的区域属性。当前各城市的回收渗透率仍然比较低。我们相信以城市为单位，拉通业务，组合资源，以城市的综合渗透率作为衡量标准，以城市的整体损益作为团队的考核依据，可以有效拉动回收业务的增长。从数据上看，一季度推行城市一体化战略的二十二座城市中，十六座城市的增长跑赢了全国大盘，其中多数超大盘增长30%以上。城市一体化的战略对于商家获客同样提升显著。截止今年一季度末，拍机堂的注册商家数突破了三十万，商家数同比增长39%。[Foreign language]
As such, we remain committed to four key business strategies to seize growth opportunities in the post-pandemic world. First, we will further implement our city-level service integration strategy and expand in more cities to gain broader market coverage. Mobile phone recycling is a local service and needs to be close to consumers. Currently, the penetration rate is still at a very low level and has large growth potential. We believe that our refined strategy through synergizing service offerings locally and the performance review system across each city will benefit the growth of recycling, penetration rates and business scale. Statistically, among all the 12-22 cities that implemented the city-level service integration strategy in the first quarter, 16 of them exceeded the average growth rate, while the majority of these 16 cities exceeded by 30%. The city-level service integration model also noticeably improved new customer acquisition. By the end of the first quarter of 2022, registered merchants on PJT Marketplace surpassed 300,000, representing an increase of 39% year-over-year.
第二点，对门店结构进行升级，满足用户的更多回收需求。爱回收品牌的线下门店是线上线下融合的模式典范，也是万物新生集团多年积累的核心能力之一。截止一季度末，我们在全国214座城市总共有1,446家门店，其中自营门店598家，加盟合作门店825家，严选零售门店23家。在手机品类之外，为了满足消费者更多品类的回收变现需求，我们正在对门店分层升级。以北京和上海为例，第一层是数量众多的标准门店，以现有的手机3C业务为主，定位为社区周边的手机数码服务站。第二层则是十到二十家的主力门店，位于城市的副中心商圈。除了手机3C业务之外，还将提供更多的创新服务，比如奢侈品回收、影像器材回收等。通过爱回收的分层门店体系，丰富了我们门店的服务能力。在不额外增加投入的前提下，满足用户的更多回收需求，不仅能优化门店的经营效益，也为爱回收的业务拓展和品牌延伸打开了空间。[Foreign language]
Second, we have implemented a tiered store system to satisfy differentiated demand for recycling. The offline store network of 爱回收 is a good demonstration of online merge offline and one of our core competencies. As of the end of March, we had 1,446 offline stores across 240 cities in China. Among these offline stores, 598 are self-operative stores, 825 are franchise stores, and 23 are retail selection stores. In order to adapt to rising consumer awareness of environmental protection and demand for cashback from categories other than cell phones, we are upgrading our tiered store system. Take stores in Beijing and Shanghai as an example.
Firstly, we operate a large number of regular stores that efficiently recycle phones from neighboring communities. Then we add on or selectively transform some regular stores to 12 iconic stores located in newly developed central business districts, offering multi-category recycling services such as pre-owned luxury goods and camera equipment. By implementing a tiered store system and extending service offerings, we meet customers evolving demand for recycling, improve store economic returns without too much extra budgeting, create further growth opportunities, and in return elevate the brand equity of AHS Recycle.
第三点，抓住合规翻新的机会点，增加产业链的价值。今年四月，全国首个由检察机关主导的电子产品合规翻新指引，由深圳市人民检察院发布试行。该指引规定，企业可以使用官方配件或者第三方配件进行合规的翻新。这是行业的大事件，填补了产业规则的空白，对行业和企业的发展有以下几点积极意义。第一点，万物新生将全面开展规模化的合规翻新业务，产业链增值空间多了一层。第二点，从个人消费者回收回来的货源将有更多的比例能够通过合规翻新之后，以严选品牌的形式销售给消费者，实现端到端的全产业链闭环。第三点，政策的出台有利于产业的繁荣，更多的从业商家可以扩大业务规模。[Foreign language]
Third, we will add more value to the industry chain as compliance guidelines for the electronics refurbishment market are further operated. In April 2022, the first good guidelines for refurbishing pre-owned electronic devices in China was announced by the People's Procuratorate of Shenzhen. This marks a leap forward for the industry by establishing compliance guidelines that lead to healthier growth as industry participants are able to adopt either officially launched or certified third-party parts and components during recheck. Furthermore, we plan to roll out compliant refurbishment and repair services at scale, further expanding our margin along the value chain. We expect a larger proportion of directly sourced goods to undergo compliant refurbishment before retailing directly to consumers using the white label. We can further complete the closed loop from the supply side to the demand side.
The guidelines are expected to lead us to a more prosperous future of the pre-owned electronics transaction and services industry, while participant inclusion.
目前针对iPhone 12系列的屏幕更换服务已经在四月在拍机堂上线。东莞的运营中心承接维修，维修毛利约150元人民币每台。仅四月份已经服务了4,000多台机器。除官方换屏服务之外，我们还将提供其他的例如更换电池、外观打磨、提升成色等服务。预计今年上半年有望实现对6到7万台手机进行合规的维修增值服务。[Foreign language]
As of now, we launched a screen replacement service for the iPhone 12 lineup in PJT Marketplace and carried out the maintenance service in Dongguan Operation Center since mid-April. The 2-week trial program processed 4,000 phones, each bringing in a gross profit of roughly CNY 150. Besides screen replacement, we also provided other services including battery replacement, exterior restoration, and phone reconditioning. We anticipate conducting a compliant reconditioning of 60,000-70,000 smartphones in the first half of 2022.
第四点，加快通过自动化实现降本增效。我们在自动化检测技术上的长期投入已经逐渐成效。从各功能项的自动检测到外观细微划痕的计算机视觉检测、X光透视检测以及屏幕质量和帧稳的检测。我们领先行业实现了全流程的自动检、自检，效率得到了有效验证。在常州自动化运营的经验基础之上，东莞运营中心正在抓紧升级建设，全面的自动化运营体系将在今年的六月份逐步投入运营。工序自动化率在常州的基础之上进一步提升60%。我们将继续坚持供应链能力为本，也坚信技术驱动和规模效应所带来的效率提升。[Foreign language]
Finally, we will accelerate the automation process to improve efficiency and manage costs. We are delighted that our investment in the automated inspection system have been proven worthy. We are a pioneer in realizing an automated streamlined process from scratch-and-dent detection, AI exterior scanning, X-ray components inspection tool swing verification. Building on our automated operation experience in Changzhou, our Dongguan Operation Center is accelerating the initiation and testing of various automation modules. The comprehensive automation operating system will be put into use this June with an estimated automation processing improvement of 60% compared with Changzhou. We are a true believer in supply chain capability as the key. We also firmly believe efficiency wins, which is driven by technology and scale effects.
最后总结一下，2020年疫情期间，我们果断决策，成功应对。当前的疫情之下，我们更加齐心协力，一定可以克服暂时的困难。[Foreign language]
To conclude my part, we responded swiftly and effectively to the COVID-19 outbreak in 2020. Even though Omicron infections surge today, we have more faith in navigating through the near-term challenges and are steadfast in our clear strategic roadmap.
更重要的是，我们坚信二手经济是一个政策稳定的、有着长期价值的赛道。中长期来看，我们的发展策略清晰，通过城市一体化战略提升市场的渗透率，并且保持业务基本面的良好增长。通过门店分层结构及高价值的多品类的回收业务延伸业务空间，通过规模化的合规翻新业务增加产业链的利润，通过加快自动化技术的应用，进一步提升运营效率。只要我们方向坚定并且执行有力，一定可以抓住特殊时期二手行业历史发展的机遇。[Foreign language]
More importantly, we firmly believe that circular economy in China is away from policy interruptions. This business, when goes into a synchronizing trajectory, is a sustainable business. In the mid to long term, we are committed to the clear core strategies, namely increase market penetration rates and maintain healthy growth through city level service integration, extend business scope through tiered store management and high value recycling across categories, capture more value through compliant refurbishment at scale, and further improve operational efficiency by accelerating the application of automation technology. As long as we implement these strategies effectively, we surely will be able to unlock the next wave of growth.
下面请公司的CFO Rex介绍一下财务情况。谢谢。[Foreign language]
With that, I will hand the call over to our CFO, Rex, to go over the financials.
Thanks, Kerry. Hello, everyone. We are very pleased to report that our first quarter revenue exceeded our previous guidance despite the macroeconomic headwinds. I will start by sharing some of our financial highlights before we go into a more detailed look at the numbers. Please note that all amounts are in RMB, and all comparisons are on a year-over-year basis unless otherwise stated. In first quarter of 2022, despite the fact that it was an off-peak season, we delivered 45.7% revenue growth to achieve total revenues of over CNY 2.2 billion, exceeding the high end of our previous guidance range provided in the first quarter earnings conference call. Total GMV grew by 51.6% to CNY 9.4 billion, driven by strong growth in both product sales GMV and online marketplace GMV, which were 57.1% and 50% respectively.
In this quarter, the commission rate of our third-party marketplaces was 4.1% at the group level, relatively stable compared with that of the first quarter 2021. Gross margin at the group level was 25.7% in the first quarter. Gross margin for our 1P business was 14.1%. In the first quarter, we meaningfully optimized cost structure compared with the same period last year. This is seen in the GAAP fulfillment expenses, selling and marketing expenses, general and administrative expenses, as well as technology and content expenses. As such, we are delighted to report an operating margin of negative 7.2% under non-GAAP measures. Now let's take a detailed look at the financials. In the first quarter, total revenues increased by 45.7% to CNY 2,206.5 million.
Net product revenues increased by 45.7% to CNY 1,908.9 million, while net service revenues increased by 46% to CNY 297.6 million. Growth in net product revenues were driven by continued increases in the density of our AH stores, our reinforced trading collaboration with JD.com, and a greater consumer mindshare that benefited the growth of direct to consumer sales through Paipai Marketplace. Growth in service revenues was primarily driven by growing transaction volumes and an increase in value-added services from our marketplaces, especially through inspection and delivery fees on PJT Marketplace in the first quarter of 2022. Next, turning to our operating expenses to provide greater clarity on the trends in our actual operating-based expenses.
We will also discuss our non-GAAP operating measures ex expenses, which better reflect how the management views our results of our operations. The reconciliations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form 6-K furnished with the SEC. Operating costs and expenses increased by 44.7% to CNY 2,332.5 million. Non-GAAP operating expenses, which exclude share-based compensation expenses and amortization of intangible assets resulting from business acquisitions, increased by 43% to CNY 2,213.9 million. Merchandise costs increased by 49.7% to CNY 1,640 million. This is in line with the growth of our 1P product sales revenues.
Fulfillment expenses increased by 32.8% to CNY 296.2 million, excluding share-based compensation expenses, which we will refer to as SBC from here on. Non-GAAP fulfillment expenses increased by 26.2% to CNY 281.5 million. Under non-GAAP measures, the increases were primarily due to, first, the increases in logistics expenses and operation center and self-operated store related expenses, which were in line with the increasing sales of pre-owned consumer electronics and the addition of 155 self-operated AH stores compared with the first quarter 2021. Second, an increase in personnel cost in connection with the company's growing business.
non-GAAP fulfillment expenses as a percentage of total revenues was 12.8%, consistent with that of 2021, and it decreased 1.9% from that of the first quarter of 2021. Selling and marketing expenses increased by 38.3% to CNY 307.8 million, excluding SBC expenses and amortization of intangible assets. non-GAAP selling and marketing expenses increased by 41.2% to CNY 206.6 million under non-GAAP measures. The increase was primarily due to, first, an increase in sales promotion and coupon expenses in connection with business development, where we increased the investment into promoting Paipai by CNY 45 million year-over-year. For context, we started our P2C business through Paipai in the first quarter of 2021, and enlarged our investments in the following quarters.
Secondly, the growth of non-GAAP selling and marketing expenses was also due to an increase in personnel costs in connection with the company's growing business. Non-GAAP selling and marketing expenses as a percentage of total revenue was 9.4%, slightly lower than 9.7% in the first quarter of 2021. In light of our traditionally off-peak season in the first quarter, we saved such expenditures in coupons on Paipai sales, promotions and commissions to JD.com. General and administrative expenses increased by 33.1% to CNY 45 million. Excluding SBC expenses, non-GAAP G&A expenses decreased by 3.4% to CNY 28.4 million. Similar to the first quarter of 2021, the decrease in non-GAAP G&A expenses showed an improved cost efficiency in our middle and back offices.
Technology and content expenses increased by 14.4% to CNY 63.5 million. Excluding SBC expenses and amortization of intangible assets, non-GAAP technology and content expenses increased by 6.5% to CNY 57.4 million. Under non-GAAP measures, this increase was primarily due to the increase in operation center and automated inspection system upgrade related expenses in connection with the company's growing business and R&D expenses related to innovation projects. As a result, our non-GAAP operating income was CNY 3.9 million in the first quarter of 2022. Non-GAAP operating margin was 0.2% compared with -2.2% in the same period last year. As of March 31, 2022, cash and cash equivalents, short-term investments and funds receivable from third-party payment service providers totaled CNY 2.4 billion with stable and sufficient cash on hand.
We are confident in sustainable business operation. As a recap, we announced our $100 million share repurchase program on December 28, 2021 out of the management's strong confidence in the company's solid fundamentals and growing momentum. As of March 31, we have repurchased over 4.7 million ADSs in the open market for a total cash consideration of $22 million. Now turning to outlook. For the second quarter of 2022, the company currently expects its total revenues to be between CNY 2,000 million and CNY 2,050 million. The highly transmissible Omicron might impose adverse impacts on the operations of our stores and facilities, as well as the transaction activities of merchants in 2022. Thus, this forecast only reflects the company's current and preliminary views on the market and operational conditions, which are subject to change.
This concludes our prepared remarks for today. Operator, we are now ready to take questions.
Thank you. We'll now begin the question and answer session. When asking the questions, please state your question in Chinese first, then repeat your question in English for the convenience of everyone in the call. The first question comes from Lynn Lim of Goldman Sachs. Please go ahead.
Thank you management for taking my question and congratulations on the solid Q1 result. Can management share with us the COVID impact on supply chain and consumer demand across business lines, especially in Shanghai, where the headquarters is located? What are the key assumptions behind our second quarter guidance? Looking forward, what are our expectations on the second half of 2022? Thank you.
Okay.
实际上呢并不影响业务的全局。我们认为Q1的季报只是一个截面，可能无法体现疫情影响的全貌。[Foreign language]
During the quarter, the impacts of the pandemic were limited to several provincial capital cities, including Xi'an, Tianjin, Changchun, and Tier 1 cities such as Shanghai and Shenzhen, with a stronger impact on offline recycling business. We consider this quarter's result as only a cross-sectional view of the pandemic's overall influence on our business.
从C2B的回收业务看，三月中旬开始，区域性的封锁对我们上海的业务带来了短期的挑战。为响应防疫政策，我们的总部员工开始居家办公，上海的门店全面暂停运营。虽然爱回收的一千四百多家门店分散在全国，但产量最高的约六百家自营门店仍然主要分布在经济发达的一二线城市，其中上海有一百零二家门店，北京有八十九家门店，深圳有五十六家门店。当前，深圳已经恢复了正常生活，但是北京和上海的管控措施仍然在继续。也就是说，在Q2我们预计有三分之一的自营门店的经营受到不同程度的影响。[Foreign language]
From the perspective of our C2B recycling business starting in mid-March, regional lockdowns posed short-term challenges for our business in Shanghai. To comply with the zero-COVID policy, our Shanghai-based employees started to work from home, and all offline stores in Shanghai were temporarily closed. Although our 1,400 AHS stores are located throughout the country, the most productive ones are in the 600 self-operated stores, mainly located in the first- and second-tier cities, where users have stronger recycling awareness and the unit price is high but they are negatively affected by the lockdown. We have 102 stores in Shanghai, 89 in Beijing, and 56 in Shenzhen respectively. At present, Shenzhen has returned to normal, but the control measures in Beijing and Shanghai are still continuing.
That is to say, in the second quarter, we estimate that the operation of one third of self-operated stores has been affected to varying degrees.
从B2B的平台业务来看，各地区的加码疫情封控，阻碍了B2B的商家触达和进仓入仓物流配送的时效，以及我们的运营中心和城市小仓分布分散，尽管相互支撑预约能力受到的冲击有限，但是我们对于本地商家的拓展和运营仍然受到了较大的影响。此外，宏观消费需求的疲软，尤其是一季度的手机出货量的同比下降，同样影响到了B2B所覆盖的广大商家的回收量。[Foreign language]
For our B2B platform business. Strict pandemic control policies disrupted our interactions with merchants. Although our operating centers and city level operation stations are geographically dispersed and can support one another during lockdowns, which reduced some pressure on fulfillment, we still face significant difficulties in terms of operations and expanding local merchant coverage. In addition, soft consumer demand for new phones also affected the volume of supply of pre-owned devices sourced by merchants, especially for the number of cell phone orders shipped out during the first quarter.
从B2C的零售业务看，消费者购买需求的下降和暂时的物流阻碍同样造成了一些压力。但我们看好消费下行环境下，消费者对于高性价比产品的需求，以及中长期通过拉通供应链规模化的合规翻新，提升我们从2C回收的货源中适合2C零售的比例，这将真正拉通产业链，实现产品质量和产业链利润的优化。[Foreign language]
For the B2C retail business. Although we faced headwinds including the decline in consumer spending and recent logistics interruptions, we are optimistic about consumers' need for good value products, a particular virtue in shoppers' eyes during a recession. We also feel confident that in the mid- to long-term, compliant refurbishment at scale can increase the proportion of goods recycled from our service offerings that are suitable for direct-to-C retail. This helps to include more nodes to the industrial chain and realize the optimization of product quality as well as profit from value-added services.
我们也看到恢复增长的希望。上海宣布从六月一号开始逐步实施疫情的常态化管理，恢复了全国，啊全市的正常生产生活秩序。总的来看呢，虽然业务面临短期的挑战，但我们对扎实的业务能力、供应链的灵活和抗风险能力，以及2C零售新的利润增长点还是十分有信心的。[Foreign language]
We have also seen hopeful signs of a recovery. According to the Shanghai officials, starting June first, pandemic controls will be downgraded to a regular level and a gradual recovery of work and life is expected. Although we are still facing challenges in the near term, we are very confident in our business model, the resilience and flexibility of our supply chain and additional margin improvement from confined refurbishment.
好的，谢谢。[Foreign language]
Thank you. The next question comes from Joyce Ju of Bank of America. Please go ahead. Okay.
谢谢，谢谢提问。我们会更加审时度势。考虑到疫情封锁的挑战仍然没有解除，可能会有持续的影响。今年呢，我们会更加注重控成本、提效率、优化现金流。需要重申的是，我们会坚持全年non-GAAP运营利润的目标不变，坚持全年实现non-GAAP运营利润为正的目标不变。扩张节奏方面呢，OK，translate。[Foreign language]
Thank you. We will be even more meticulous when assessing market conditions. Considering lockdown restrictions are still in place in some parts of China, the impacts created by the pandemic are ongoing. Therefore, we will increase our focus on cost management, efficiency improvement and healthy cash flow this year. Our goal to achieve a positive non-GAAP operating income for this year remains unchanged.
扩张节奏方面，我们全年门店的扩展目标不变，还是以每年新开设两百到三百家门店，但是会采用更加审慎的门店扩张策略。主要是控制一二线城市的自营店的新开店，更多以三四线城市的联营店作为门店数量的增长动力，保持全国回收交付范围的继续扩大。 Bonnie Lu of China Renaissance
In terms of store network expansion, we are targeting the same number, opening 200-300 new stores for this year, with a more disciplined approach while prioritizing the opening of jointly operated stores. This enables us to extend our branded recycling network nationwide, sharing profits while handling risks together with local partners.
同时，在第三方商家、商家和零售端，我们继续通过城市一体化的战略下沉获客，通过同城业务提升二手回收和服务市场的渗透率。在今年的一季度，除了我们提到的十六个城市的跑赢，增长跑赢了全国大盘，湖州、合肥、昆明、石家庄等千万级以上规模的城市，C2B加上B2B的业务不仅逆势实现了环比增长，而且实现了更高的高双位数字的增长。石家庄在C2B和B2B的交易规模上分别取得了120%和200%的同比增长，这是我们通过城市一体化，在抓货源和服务本地市场商家的标杆成绩。 [Foreign language]
On the third-party merchants and retail end, we continue to acquire new local customers through city level service integration, enhancing the penetration rate of the secondhand market through the rollout of intracity business. Among the 16 cities where growth exceeded the nationwide average, we achieved high double-digit year-over-year growth of our C2B plus B2B business in Huzhou, Hefei, Kunming and Shijiazhuang. Growth momentum was especially strong in Shijiazhuang, where we achieved about 120 year-over-year growth in GMV for C2B business, and almost 200% year-over-year growth in GMV for B2B business. These are our benchmarks for implementing the city level service integration model in terms of sourcing supply and penetrating local markets.
疫情是一个无法回避的问题啊。四月份，疫情导致了全国多地的防控政策趋严，我们对商家的触达和零售端的服务受阻。城市一体化的试点城市的增长出现了短暂的放缓，但这些城市的GMV和单量相对于全国的大盘都体现出更多的韧性。 [Foreign language]
The pandemic remains a challenge for us. In April, the recurrence led to stricter controls in many regions across China. We faced interruptions in both connecting with merchants and providing platform services on the retail front. Growth temporarily slowed down in those pilot cities, but we saw GMV and other volumes in those cities demonstrated higher resilience compared with the national average. We pay more attention to our own operating efficiency. For sales and marketing expenses, we will further optimize our costs. Instead of spending on short-term promotions, we will pivot to the longer term by further investing in building the brand equity of AHS Recycle, and with acquiring greater consumer mindshare by providing timely and quality services to our customers. In addition, we did well in controlling our back-office fees, in particular general and administrative expenses.
We have kept these at a low level for four consecutive quarters by implementing a compact but organized structure for our mid and back offices. Macro headwinds and consumption slowdown are challenging issues to almost every industry. In the long run, what we see is the huge and underserved second-hand electronics transaction and service market. As we mentioned earlier, we believe in our core strategies of expanding the city level service integration model to increase the penetration rate. Using a tiered store strategy to offer differentiated services. Continuing to improve cost efficiency by investing in automated quality inspection technology. Seizing the chance to profit from the open policy window in the electronics refurbishment market.
Okay.
Thank you.
Thank you.
Again, if you have a question, please press Star then One. The next question comes from Jiao Wang of CAPI, Yuan International. Please go ahead.
In the prepared remarks, the management mentioned that the new recycling policy of the industry. Are there any specific business trends to share with us? Okay. Thank you, Jiao Wang. I will take this question. In April, Shenzhen issued the first guidelines for electronic product refurbishment, which for the first time clarifies the boundary of engaging in compliant refurbishments, including the source of goods must be legal. The purpose of repair is to restore the function and appearance. Official accessories or third-party accessories with quality assurances can be used, such as batteries and the screens of third-party brands. Personal data must be strictly cleared. Recycled products should be clearly marked as pre-owned or refurbished to avoid confusion. Quality warranty should be included. Traditionally, the repair and refurbishment industry had many hurdles.
The refurbishment was mishandled by merchants as there were no relevant regulations. Merchants were worried about potential risks and operate on a small scale. Meanwhile, mobile phone brand manufacturers control the supply of repairing components, since they do not recognize the use of third-party components. The supply of high-quality goods suitable for B2C sales in the market is insufficient. As a leading platform, ATRenew has always carried out operations cautiously to avoid selling risky products, and since it had little participation in refurbishment, it has always lacked a segment of industry chain profit. We believe the guidelines for refurbishment can benefit the industry and the company. More merchants can conduct repair and refurbishment with confidence, which will help expand the business scale of recycling and sales. We also aim to seize such opportunity, and here's our plan.
We adhere to combined repair refurbishment on a large scale and increase the profits reasonably. Previously, our self-recycling products and third-party supplies were not repaired or refurbished, hence we only earned gross profits and service fees from testing and reselling. Our value chain lacked the maintenance and value-added links. Recently, we conducted a pilot project which verified that by changing the screen and the battery, the gross profit per unit can be increased by 15%, excluding the cost of the component. On average, a phone with a B2B selling price of CNY 1,600 after compliant refurbishment can be sold on the B2C platform come at around CNY 2,100. After deducting the component cost, the gross profit per unit increased by CNY 300, about 15%.
After deducting the labor cost and the platform fees, the net profit margin per unit is about 6%. By further carrying out compliant refurbishment in operation centers, we are confident to obtain high gross profit and service fees brought by such added value to the industry. With standardized refurbishment, we aim to increase the proportion of our recycled products that are suitable for 2C retail. Doing so can help us to achieve a closed-loop circular economy model and maximize the value of reused products. In the past, as products sourced from users had various defects and cracks, only 20% of them were suitable for direct 2C retail if known the password then.
We believe that in the future, combined with refurbishment at scale, we can further increase the proportion of sourcing products that are suitable for direct to C retail and so to improve the gross profit of product sales. We have just begun to engage in refurbishment and there is a lot of room for growth. We shall gradually explore, such as selecting some types of products to sell overseas after compliant refurbishment. Thank you.
Thank you. The next question is from Bonnie Lu of China Renaissance. Please go ahead.
Bonnie Lu: Thank you, management, for taking my question. These thoughts of going to the longer term? If so, how are you planning to reduce the impact? Thank you.
说话人 1: 谢谢提问，这个我来回答一下。我们看到新机在今年的一季度，尤其从三月起，面临较大的出货，出货量的下滑压力，用户的换机周期也在延长。从过去的一年到现在的二十个月左右。但是在万物新生呢，我们有几点自身的优势。 [Foreign language]
I'll take this question. In the first quarter, especially since March, we see that OEMs are facing greater downward pressure on new phone shipments, and the replacement cycle is also extending from about a year to more than 20 months now. We do have several advantages against downside risks.
第一点，二手市场的整体空间仍然很大。目前万物新生的市场渗透率比较低，有很大的提升空间。另外，在经济发展放缓的阶段，用户对于回收变现的需求增加，我们认为转化率有提升的机会。 [Foreign language]
The total addressable market of the secondhand consumer electronics is huge, and now we only have obtained some of it. Thus, we are poised to further expand our penetration rate. Besides, we believe that consumers' demand for instant cashback increases as economic growth becomes sluggish, and there are opportunities for converting more recycling orders.
第二点，我们主要服务的品牌还在增长。我们回收的主力机型是苹果手机。2021年，苹果的机型占到了我们总体的回收交易量的45%。相比其他品牌，苹果保持了更高的新机出货量的增速。因此，我们的回收大盘相对稳定。今年新机的出货量，新机出货压力大的主要是国产品牌。在这种情况下，我们也联合京东一起为品牌厂商提供以旧换新作为更好的促销措施。 [Foreign language]
Secondly, the key brand we serve is still growing. The main model we recycle is Apple, which accounted for 45% of the total C2B plus B2B recycling transaction volume in 2021. Compared with other brands, Apple has maintained a higher growth rate of new device shipments, so our recycling fundamental is relatively stable. This year, the pressure on new phone shipments is mainly from domestic brands. In this case, we work closely with JD.com to provide brands with trade-in solutions as a better promotion measure.
第三点，我们在尝试布局多品类的回收，以承接手机之外的回收变现需求，比如奢侈品回收、影像器材的回收以及其他高值产品的回收。我们认为开展多品的回收重要的是品牌信任、交付场景、质检、鉴定的能力。爱回收长期积累的品牌有号召力。我们认为多品类回收是爱回收品牌和服务的延伸。爱回收的全国门店是很好的履约交付基础。 [Foreign language]
Thirdly, we are also trying to deploy multi-category recycling beyond mobile phones, such as luxury goods, camera equipment, and other high-value products to meet consumers' varied demand for recycling. We believe that to carry out multi-category recycling, the most important things are brand trust, delivery scenarios and quality inspection capabilities. AHS Recycle has a long-term accumulation of brand recognition, and we believe that multi-category is an extension of our recycling brand and services. Our national stores have set a good basis for fulfillment, and we do not have to budget for extra investment into handle the non-3C categories. In terms of quality inspection, we aim to achieve it through self-build or collaboration with specialty retailers. As such, we trust online quotation plus offline fulfillment makes the best combination of recycling services. Although new phone shipments flattened, we remain prudently optimistic about our business outlook. Thank you.
As there are no further questions at this time, I'd like to hand the conference back over to our management team for closing remarks.
Thank you. Thank you all again for joining us. A replay of today's call will be available on our IR website shortly. If you have any additional questions, please feel free to email us at ir@atrenew.com. Thank you.
Thank you.
This conference is now concluded. Thank you for attending.