Hello everyone, and thank you for joining 111's Conference Call today. On the call today from the company are Dr. Gang Yu, Co-founder and Executive Chairman, Mr. Junling Liu, Co-founder, Chairman, and CEO, Mr. Luke Chen, CFO, and Mr. Harvey Wang, COO. As a reminder, today's conference call is being broadcast live via webcast. The company's earnings press release was distributed earlier today, and together with the earnings presentation are available on the company's IR website. Before the conference call gets started, let me remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known and unknown risks, uncertainties, and other factors, all of which can cause actual results to differ materially.
For more information about these risks, please refer to the company's filings with the SEC. 111 does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under applicable law. Please note that all numbers are in RMB, and all comparisons refer to year-over-year comparisons unless otherwise stated. Please also refer to the earnings press release for detailed information of the comparative financial performance on a year-over-year basis. With that, I will turn the call over to 111 CEO, Mr. Junling Liu. Please go ahead.
Good morning and good evening, everyone. Thank you for joining our Third Quarter 2024 Earnings Call. The information we'll be discussing is also available in the slides posted earlier today on the company's website. I encourage everyone to download the presentation as well as the earnings report from our investor relations website at ir.111.com.cn. China's challenging macroeconomic environment continues to have an impact on our entire industry, including both the upstream and the downstream sectors. While challenges are inevitable, we still achieved a stellar performance, maintaining operational profitability for three consecutive quarters. This achievement is primarily driven by our ongoing enhancements in operational efficiency, which have helped us navigate the unfavorable environment. In today's call, I will provide an in-depth overview of the current market situation facing our industry, as well as the long-term outlook and the opportunities ahead, along with our key financial highlights.
I will also discuss how we are leveraging new technologies to strengthen operations, our supply-side initiatives, and our recent templates. Finally, I will outline our future growth strategy before handing over to our CFO, Mr. Luke Chen, who will provide a detailed analysis of our financial performance. First, on the macroeconomic side, in light of weak consumer sentiment, sales growth in retail goods has slowed in China. Our industry is also experiencing cautious household spending on healthcare. According to data from the National Bureau of Statistics, per capita healthcare expenditure's growth rate declined 11.5 percentage points from a year earlier for the first nine months. Additionally, our downstream pharmacies are facing ongoing healthcare reforms, including adjustments to individual medical accounts and the gradual implementation of coordinated outpatient benefits alongside increased regulatory oversight. While these reforms are designed to drive long-term development of the industry, the short-term outlook remains challenging.
An aggressive expansion of pharmacies was fueled by optimism during the pandemic. While the total number of stores has increased, market growth has not kept pace, as evidenced by a 2.2% decrease in China's retail pharmacy sales from the first nine months of 2024, according to Zhongkang CMH system data. This disparity has led to reduced per-store revenues and intensified the competition among pharmacies. Many large chain pharmacies are now grappling with significant declines in net profit, while independent pharmacies, with their limited resources, are under even greater pressure. For instance, Yixintang , or YXT Health, reported a 94% year-over-year decline in Q3 net income attributable to ordinary shareholders, followed by a 68% decrease at Jianzhijia or JZJ China Drug Store, 37% at Lao BaiXing, or LBX Pharmacy Chain, and 22% at Dashenlin, or DaShenLin Pharmaceutical Group.
Against this backdrop, it is more critical than ever for digital transformation in this industry, which presents vast opportunities for us. Pharmacies must navigate subdued consumer sentiment, slower growth in household healthcare spending, and the shifts in patient behavior, while addressing cost pressures alongside operational efficiencies. Looking ahead, there needs to be more innovation in service delivery and strategic adjustments to categories to sustain growth and adapt to a transforming market. For this, digitization and AI applications could serve as solutions for retail development. As a leader in this digital revolution, we have already implemented cutting-edge digital technologies to enhance every aspect of our operations, from sales and procurement to customer demand analysis, inventory management, and warehouse allocation, and so on. We are committed to empowering our upstream and downstream partners with our fully digitized operating system, further reducing their ongoing costs and increasing efficiency.
In addition to the unstoppable trend of digital transformation, we remain optimistic about China's healthcare market in the long term for two key reasons. First, the deepened national anti-corruption campaign in the healthcare sector, which will foster greater transparency and integrity in hospital procurement, is expected to accelerate the shift of drug sales and prescriptions to retail pharmacies. This will become a trillion RMB out-of-hospital pharmaceutical distribution market, which will amount to almost half of the entire distribution market within about three years. Our customer focus is on chain pharmacies, and with our expertise in the out-of-hospital pharmaceutical market, we are well positioned to capture the significant growth opportunities this shift brings. By offering a comprehensive and cost-efficient product range, coupled with an unwavering commitment to customer experience, we aim to increase market share in this sector where challenges and opportunities coexist.
Second, we expect China's large aging population and the rise of the silver economy to drive significant demand for healthcare consumption. Given the healthcare expenditure as a proportion of GDP in China is still lower than in developed countries, the overall outlook trend in the pharmaceutical and healthcare market remains strong in the long run. In Q3, our commitment to operational efficiency continued to drive significant results. We achieved profit from operations for the third consecutive quarter. Income from operations in Q3 was RMB 2.4 million, compared to an operating loss of RMB 80.4 million in the same quarter last year. Non-GAAP income from operations was RMB 7.1 million, compared to a non-GAAP loss of RMB 54 million in Q3 over the prior years. These performance improvements underscore the effectiveness of our growth strategies and the resilience of our business model.
We observed consistent positive changes across nearly all business segments. Total operating expenses in Q3 were 5.8% of net revenues, a 160 basis points decrease from the prior year. Fulfillment expenses remained steady at 2.8% of net revenues, in line with the previous year. However, we successfully reduced the general and administrative expenses to 0.4% of net revenues from 1.3% a year ago. Selling expenses decreased to 2.1% of net revenues, compared to 2.6% in the prior year. Technology expenses were 0.5% of net revenues, down from 0.7% a year earlier. Excluding share-based compensation, operating expenses as a percentage of net revenues dropped 100 basis points to 5.7%. Additionally, we remained positive. Operating cash flow of RMB 110 million for the third consecutive quarter.
Our investment in infrastructure and optimal staffing allocation have proven to be effective in navigating the current economic challenges while maintaining robust performance. We have maintained our focus on areas that foster long-term sustainable growth, ensuring that our digital capabilities remain at the forefront of industry standards. This quarter, our advanced digital infrastructure consistently delivered exceptional value to our customers, with further reductions in technology and staffing expenses. These operational efficiencies have not only allowed us to withstand a competitive market, but have also supported our ability to adapt and thrive amidst broader economic uncertainties, as well as prepare us for long-term opportunities. While our revenue remains comparatively smaller than some more established players, we continue to boast operational efficiency metrics, positioning us competitively.
We remain dedicated to setting the industry benchmark for efficiency, with a clear goal of reducing operating costs even further and improving profitability with more refined and bigger operations. This steadfast commitment is a cornerstone of our strategy and represents a vital part of our unique competitive advantage of moat. Those savings from our ongoing efficiencies will add flexibility and strength to our business while reinforcing our position as a leading healthcare e-commerce operator. They could be reinvested into strategic areas such as technological innovation, market expansion, and enhanced customer engagement when appropriate. Technologically, we continue to invest in system development, models, algorithms, and data applications to build our core competitiveness in digitization. Consequently, we have made notable advancements by applying digital and AI technologies that have strategically positioned us for continued success.
With our digitized JBP platform and inventory sharing technology, we seamlessly integrated with upstream suppliers to form a unified and comprehensive stock pool that has significantly boosted stock volume and availability. This advancement has enriched the product selection of additional 23,000 new SKUs. As a result, our supply capacity has been strengthened, ensuring that we can meet customer demand more effectively and efficiently. We also utilize the supply chain optimization and smart pricing tools for the B2C online retail segment to enrich product offerings and adapt to market demands. This resulted in a 100% increase in product categories and a record-high customer conversion rate of over 13%. This progress highlights the significant impact of data-driven decision-making and platform innovation in sustaining growth within the challenging retail environment. Moreover, we made outstanding progress in applying AI-driven solutions, particularly in the Chinese herbal medicine sector.
By training and refining algorithm models for specification recognition, we increased the recognition accuracy of our AI model from 77% to an impressive 98.18% through multiple iterations. The accuracy rate of content matching for herbal medicine has similarly improved, rising from 43% to 96%. Our competitive edge gets sharpened by optimizing inventory management and enhancing product offerings. Our focus on continuous technological innovation is strategically important, as it supports our mission to build a resilient, efficient, and customer-oriented business for adapting to evolving industry needs. By integrating advanced digital technologies and AI solutions, we are laying the groundwork for future growth and making ourselves better navigate future market challenges. Next, let's delve into our supply chain management. We are setting an industry benchmark in supply chain excellence, consistently innovating in procurement, warehousing, and order fulfillment to elevate efficiency.
Our expansion over the Kunpeng network is pivotal, aimed at providing streamlined logistics services that enhance both internal and external operations at lower costs. During Q3, this cross-fulfillment center transshipment model enabled an extended proprietary network that connects our five major superhubs across East, Central, South, North, and the Southwest China. This development is setting the stage for a comprehensive Kunpeng national network, enriched with first-mile and last-mile services to ensure seamless end-to-end supply chain control. I want to highlight that under the Kunpeng Pharmaceutical Logistics Network, we added eight new transportation routes in Q3, bringing the total to 28. The network also increased its external customer base by 12, reaching a 16.7% rise from Q2. This project achieved cost savings of more than RMB 5.3 to date. As the Kunpeng network scales and integrates last-mile services, we have witnessed a decrease in logistics and delivery expenses.
When combined with optimized warehouse labor, packaging, and warehousing, these efforts have driven an 8% year-over-year reduction in fulfillment costs to RMB 277 million in the first three quarters. Moreover, to drive future growth and coordinate with our strategy for the nationwide Kunpeng network, we also strengthened our supply chain infrastructure. We completed the Guangzhou Fulfillment Center relocation project in Q3, which is projected to yield monthly cost savings of RMB 800,000. We're also expanding our fulfillment centers nationwide, with four new facilities in Wuhan, Guangzhou, Yunnan, and Shijiazhuang, amplifying our existing supply capabilities. These centers notably cut delivery times for local customers by up to two days, reinforcing our ability to cover over 300 major cities within 24 hours and nationwide within 72 hours. With each new center, we reduce local fulfillment costs by as much as 20%, providing clear strategic advantages.
The expansion is also marked by an upgrade in our product assortment, with the Guangdong Center adding 5,000 new SKUs. Now, our network encompasses 15 fulfillment centers. Five of these centers act as central hubs, supporting deeper penetration into Tier 3 to 6 lists, where over 60% of our pharmacy customers' base resides. To further enhance reach and service, we have adopted a collaborative approach for faster fulfillment center expansion. By transforming existing warehouses into full-fledged fulfillment centers with 100% use of our digitized systems and processes, we cut setup time by 70%. Our newly adopted franchise model, which provides 111 with a share of gross merchandise value, presents a highly effective, margin-friendly solution for reaching remote regions. 111 plans to expand its fulfillment center's footprint by adding at least five more centers over the next year.
Furthermore, as we review this quarter's achievements, I would like to highlight some significant honors that underscore our operational strength and a strong business influence in the regional markets, along with our continued technological advancements. In September, our Southwest Operations Center, Chongqing Yihao Pharmaceutical Co., Ltd., was named among the top 100 service industry enterprises in Chongqing for the second consecutive year. In October, our Central China Operations Center, Hubei Yihao Pharmaceutical Co., Ltd., was included in the top 100 private enterprises in Wuhan list for the second consecutive year. Additionally, in October, our South China Operations Center, Guangdong Yihao Pharmaceutical Co., Ltd., earned a place on the 2024 Top 100 Private Enterprises in Guangdong, and it was also named among the Top 50 Private Service Enterprises in Guangdong for 2024.
We greatly appreciate recognition from local markets and the industry, and I believe these acknowledgments will enhance our credibility as we continue to expand our footprint and drive innovation in the healthcare e-commerce space. Last but not least, I'd like to outline our strategies for revenue, margin, and profit levels. At 111, our business approach emphasizes providing customers with the most comprehensive selection of pharmaceutical products at attractive prices for greater customer engagement. Through leveraging data analytics and market research, we can efficiently refine our product portfolio to align with customer preferences while maintaining competitive pricing by utilizing intelligent digital tools. We're also committed to enhancing our cooperation with pharmaceutical companies. By expanding these collaborations, we aim to diversify our range of medicines on our digitally empowered platform, increasing sales that generate mutual growth, especially across lower-tier cities.
Our robust digital marketing network is integral to this strategy, enabling pharmaceutical companies to curate and showcase their product offerings more effectively. We will also utilize targeted marketing initiatives to raise brand awareness and expand to previously underserved markets. Through our platform, pharmaceutical companies can access valuable insights, strengthen their product selection, and efficiently scale their operations. For us, as we provide an optimized product portfolio and sell more products, we will see an improvement in our overall profitability. Moreover, we're prioritizing investments into our JBP platform. This unique model has proven highly effective in engaging new partners and offering a broader range of products, showcasing its powerful value proposition. By refining the platform to satisfy partner needs and extending its reach, we expect to cultivate a more diverse partner base and unlock expanded sales opportunities.
As we continue to enhance and scale the platform, we believe this model will solidify our competitive position and evolve into a catalyst for stronger growth and profitability. We remain focused on enhancing operational efficiency, supported by ongoing investments in leading technologies that streamline processes, reduce waste, and boost productivity. Our emphasis on AI and full-scale digitization is critical to maintaining industry-leading efficiency, improving customer engagement, and fostering the development of new products and services. These efforts are designed to reinforce our market leadership and stimulate fresh growth avenues. Digital transformation is pivotal to our future. With 100% of our internal systems now digitized, we have enhanced financial outcomes while positioning ourselves as a transformative leader, empowering the industry. Our full-spectrum technological ecosystem supports internal processes and extends its benefits to upstream and downstream customers, offering them access to the state-of-the-art digital solutions and specialized expertise.
Looking ahead, we will amplify our commitment to digital innovation by integrating emerging technologies into our operations to create a more seamless, more efficient customer experience. With that, I'll hand the floor to Mr. Luke Chen to walk through our financial results. Thank you.
Thank you, Junling, and good morning or evening, everyone. Moving to our financial performance, my prepared remarks will focus on a few key business and financial highlights. For details on our third quarter 2024 results, please refer to slides 17 to 20 in section 2 of our presentation. Again, all comparisons are year-over-year, and all numbers are in RMB unless otherwise stated. Let's start with the third quarter results. Total net revenues were RMB 3.6 billion, remaining relatively flat compared to the same quarter of last year. Gross net profit for the quarter grew 10.5% to RMB 210.6 million.
Total operating expenses for the quarter decreased 23.2% to RMB 208.2 million. As a percentage of net revenues, total operating expenses for the quarter were down to 5.8% from 7.4% as we continue to enhance our operating leverage and optimize our operational efficiency. Specifically, fulfillment expenses remained steady at 2.8% of net revenues, in line with the previous year. Sales and marketing expenses, as a percentage of net revenue for the quarter, were 2.1%, down from 2.6% in the same quarter of last year. General and administrative expenses accounted for 0.4% of net revenues, down from 1.3% in the same quarter of last year. Technology expenses amounted to 0.5% of net revenue, down from 0.7% in the same quarter of last year.
As a result, income from operations was RMB 2.4 million compared to a loss from operations of RMB 18.4 million in the same quarter of last year. Non-GAAP income from operations was RMB 7.1 million compared to non-GAAP loss from operations of RMB 54 million in the same quarter of last year. Non-GAAP net loss attributable to ordinary shareholders was 12.4 million compared to 6.9 million in the same quarter of last year. As a percentage of net revenues, non-GAAP net loss attributable to ordinary shareholders accounted for 0.3% in the quarter, down from 1.8% in the same quarter of last year. As you can see, we're improving our financial performance quarter by quarter and maintained operating profit for the third consecutive quarter. Please refer to slides 21-25 of the appendix section for selected financial statements.
A quick note on our cash position: as of September 30, 2024, we had cash and cash equivalents, restricted cash, and a short-term investment of RMB 614.4 million. We are pleased to report positive operating cash flow for the three consecutive quarters. To date, the company has a total outstanding amount of RMB 1.1 billion, which has been included in the balance of redeemable non-controlling interest and accrued expenses and other current liabilities earned to a group of investors of 1 Pharmacy Technology pursuant to their equity investment made in 2020, as previously disclosed. 111 received redemption requests from certain of such investors in accordance with the terms of their initial investment in 1 Pharmacy Technology.
Following communication and negotiation, the company has reached agreements and/or commitment letters with investors representing approximately 90% of the total amount to reschedule the repayments, allowing for phased repayments as extended periods if the holders exercise their redemption right. The government has paid a portion of the repurchase funds upon signing the agreements. Additionally, the company is in ongoing discussions with investors who are holding the remaining approximately 10% of the total amount. This concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.
Thank you. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question.
Your first question comes from Jessie Liu with HSBC. Please go ahead.
Thank you for taking my question. This is Jessie from HSBC. First of all, I want to congratulate you on delivering a very resilient result despite the challenging macro environment. I have two questions. The first one on OpEx. I noticed that for OpEx, as a percentage of revenue, it is around 5.8%-6% over the past three quarters. I was wondering, going forward, is there room for this ratio to further come down, and what measures you will plan to do to drive that further improvement in OpEx optimization? The second question is on GP margin. Despite overall revenue has been flat year on year, we saw improvement for gross margin. Can you help us understand the factors driving this improvement? Thank you.
Jessie, first of all, thank you for the questions.
With regards to the question about OpEx, the short answer is yes. We will continue to reduce the expenditure in operating our business, and we will see more and more impressive OpEx numbers because from day one of the company, our philosophy has always been to leverage technology to reshape the value chain of the industry, and we want to be the leader in operational efficiency. So how do we do that? We believe that we have already become the leader in operational efficiency in the industry, and we remain committed to continuing our effort in all aspects of our operations. Our optimization across all the business segments is core in our management's daily work, and we review those metrics on a weekly basis. We call it WBR.
And of course, technology is essential in containing OpEx, and we benefited big time in the past, and no doubt it's going to continue to play an even bigger role in the future. In the meantime, we will constantly optimize our organization, and we'll do smart staffing. We believe a lot of those expenses are coming from people, and if we could deploy those resources carefully and intelligently, we can achieve savings. And of course, innovation in all aspects of our business is completely key. I'll lay out some examples, especially in our supply chain, to give you an illustration. That's going to help us to stay competitive. In the past, we only relied on building those fulfillment centers first-party, ourselves. Obviously, nowadays, we have joint venture fulfillment centers.
We also now have franchise fulfillment centers where the upfront capital outlay are all paid by our partners, whereas we can service our customers even better. We can produce a better customer experience. With regards to your question as to margin improvement, obviously, there are a few things we're doing and we will continue to do. First of all is the assortment management. We have an internal tool. We call it the Borguan . So Borguan really constantly engages customers' needs and ensures that our assortment is constantly optimized dynamically. With that, the assortment management is taken care of. Of course, the other thing we do is the category management. Once again, this is very important in our margin growth. You'll notice that our margin is growing faster than the revenue. Obviously, there are money-losing categories, and there are also money-making categories.
It's a fine act in balancing the two. We have to really minimize the money-losing categories and maximize the money-making categories. The other thing, of course, that's really important is to manage our upstream suppliers. Our first-party team worked really hard to find ways to get better deals from the pharmaceutical companies. We're going to make more investments in this area to have better coverage, especially those medium to small pharmas from whom we can get better deals. I hope those answer your questions, Jessie.
Yes, very clear. Thank you very much.
Your next question comes from Alvin Mau, a private investor. Please go ahead.
Hello. Thank you for taking my question. It's a wonderful quarter. Actually, I have three questions. The first is with three consecutive quarters of operating profit. Does the company anticipate achieving operating profit for the entire year?
The second is supply chain management has always been a key focus for your company. What improvements and efficiency enhancements were made in Q3? And the last question is, could you provide more insights into how the company managed to achieve positive operating cash flow for three consecutive quarters? Thank you.
Alvin, well, I'll take your first question. That's a great question about if we're going to achieve profitability for the whole year. Yeah. So we're quite optimistic in achieving operational profitability for the whole year. Thank you for that. I'll leave your next question to Harvey.
Regarding the supply chain management, you are right. It has always been our key focus. And we aim to set industry benchmarks in our supply chain management. And we continue innovating in sourcing, in warehousing, and other fulfillment, and the entire supply chain.
So in the past quarter, in Q3, our order fulfillment cost continued to decrease. It dropped from RMB 101.6 million of last Q3 to RMB 99.98 million of this Q3. So there is a net saving of RMB 1.62 million. And our year-to-date fulfillment cost as a percentage of our revenue also decreased from 2.76% to 2.62%. So in logistics, we have achieved some of the following progress. The first is our long-term logistics network. We scaled up the chain shipment network and also extended last-mile delivery services. So in this part, in this year, our delivery cost has been reduced from 1.35% to 1.31%. And secondly, our labor and packaging cost in our warehouse also has been optimized by streamlining our operational process. And this part, our labor cost reduction in this year from 0.7% in terms of total revenue to 0.68%.
Also, our warehousing cost, for example, we just relocated our South China warehouse. Our warehousing cost in this year decreased from 0.71% to 0.63%. So it's a reduction by 11.3%. And number two, actually, we are extending this fulfillment network to provide professional logistics services not only to our internal customers but also to our external customers. So in Q3, we established this network for our five major fulfillment centers. We call it our National Fulfillment Center in East, Central, South, North, and Southwest China. And we plan to establish this national network with added first-mile and last-mile services to our upstream and downstream customers to ensure end-to-end control over our entire supply chain. Lastly, in Q3, we completed our—just now I mentioned our Guangzhou, our South China fulfillment center relocation. We expect to have a remarkable cost reduction with this relocation.
And also, we are expanding our franchise fulfillment center model nationwide. In Q3, we opened a new facility in Wuhan and Guangzhou, reaching a total of six new model fulfillment centers in operation in Q3. And we expect to have more and more of this new fulfillment center in this new model in Q4 and also early next year. Thank you.
Yes. On the cash flow, as you can see, we have achieved a GAAP and non-GAAP operating profit for the three quarters, which means that we are no longer burning cash for this business. Instead, we are creating positive cash flows at the operating level for three consecutive quarters. We think we are doing the right thing in terms of working capital control. We have been very focused on improving the turnover days for inventory and accounts payable.
And we also introduced the third-party supply chain finance to many of our pharmacy customers. And we have also improved the turnover date for accounts receivable. There are still rooms for further improvements, and we are confident that we can do a better job in the coming quarters. Yeah. Alvin, we answered your questions.
Thank you. Our next question comes from Robert Sassoon with Water Tower Research. Please go ahead.
Hi. Thanks for taking my questions. I have a few of them. So let me start with this one. Based on the current market environment, how would you assess the company's performance in the third quarter? What are your expectations for the market environment in the coming quarters? And how do you think those expectations would impact on the development of the company's B2B and B2C businesses? Let me start with that. I have a few other questions after that.
Thanks, Robert. I'll take this question. First of all, we're pretty proud of the solid performance given the macro situation in China, as it's pretty widely known. Both our upstream and downstream customers are under tremendous pressure. The anti-corruption in the hospitals and also the campaign against Medicare fraud in the pharmacies area will create short-term pains. But we're quite optimistic that the industry will be more transparent long-term-wise. And we're quite optimistic about the future business. I'll give you a few reasons. First of all, with China's demographics, especially the aging population, the Medicare needs will definitely go up. And if we look at the big picture, healthcare expenditure in China is about 7%-ish, whereas in the United States, it's about 20%. There is a huge headroom for the market to grow.
And the other point I want to make is that the short-term economic challenge will force both the upstream and the downstream customers to be more efficient. And our digital capabilities will really enable us to create more value for both our upstream and downstream customers. I'll stop at that.
Thank you very much for those answers. I have a couple of other questions, more on the technical side. Could you actually highlight the progress and achievements that your company has made in the digital capabilities and the IT technology that you've been implementing in the third quarter?
Yeah.
And the second, sorry. I just want to follow up. The second question that I had to ask on that point is, can you outline the company's expansion plan in terms of product offerings and partnerships within the supply chain ecosystem?
Okay. Robert, thank you. I will take these two questions.
First one, regarding our digital capability and also IT technology. Actually, it's not only in the last quarter. Actually, from day one, we have continued to invest in our system development, our models, and also data application, and also all this effort to build our core competitiveness in our digitalization, also achieving quite a number of results, especially in the past quarters. First, through our JBP platform and the very new inventory sharing technology, we link our upstream suppliers' inventory to form a unified and integrated stock. As a result, we have added in 32,000 new SKUs and as well as their related stock volume to further improve our supply capabilities, and the second achievement is in the big data side. For Chinese herbal medicine, we have trained and applied agnostic models for specification recognition. For those herbal medicines, it's pretty complicated.
So based on these specifications, we developed an AI model that has improved its accuracy from 77% to 98.2% through multiple iterations. Additionally, the accuracy in content matching for those herbal medicines has increased from 43% to 96%. And as our upstream and downstream customers, the Chinese herbal medicine is a big part of their business and also a headache for everyone. So with this new technology, we believe we are really helping the entire supply chain to improve our accuracy and efficiency. And regarding the expansion plan in terms of product offerings and the supply chain side, actually, for product offerings and our supply chain ecosystem, we started from, as Junling just mentioned, we started from a first-party model, which offers a good customer experience.
But actually, years later, we realized that it would be very inefficient to expand our selection offering with a single first-party model alone, as we can imagine. Because you have to do everything. No matter if it's upstream or downstream, you have to do it alone. So we innovatively rebuilt our supply chain. Besides our first-party model, currently, we mostly deal with our corporate with these upstream pharmaceutical companies. We also set up a JBP model for partnership with distribution companies. And now, through the new JBP platform and this whole new inventory sharing technology, we have organically linked upstream merchant inventory to form our own integrated stock. So this is one very important part of our expansion plan in terms of product offerings. And also enrich our product selection of additional, as I just mentioned, 23,000 new SKUs in a very short period of time.
It is just in the past one more month. So we will implement this technology across the country. And I believe our product offerings will be improved to a new level in the coming quarters with opening of more franchise or joint venture fulfillment centers with this JBP platform and with this new inventory sharing technology. Thank you, Robert. I hope I answered your questions.
Yeah. That's great. I'll jump back into the line.
Thank you. That concludes the question and answer session. In closing, on behalf of the entire 111 Management Team, we would 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 us today. This concludes the call.