Summary of Key Points
In its 2026 fiscal year, Dongfang Zhenxuan presented a “shining” set of financial results: revenue of 5.7 billion yuan (a 30% increase) and net profit of 540 million yuan (a 9378% increase). However, there are underlying concerns. The impressive figures are mainly due to the company’s move away from MCN partnerships, which saved 400 million yuan in salaries, and the success of its own-branded products, which accounted for 95% of total revenue. Nevertheless, net profit is half that of the peak in 2023, as the company had to spend more on advertising (marketing expenses increased from 300 million yuan to 1.1 billion yuan) after losing Dong Yuhui as a key influencer. Additionally, Dongfang Zhenxuan’s dependence on the Douyin platform has deepened; although Yu Minhong has freed himself from relying on a single superstar influencer, he has become even more reliant on the platform itself.
The Secret Behind the 900% Increase in Net Profit
The 9378% increase in net profit can be attributed to two main factors:
1. Saving on Influencer Salaries: By cutting ties with high-paid MCNs, such as Dong Yuhui (who earned 140 million yuan in half a year in 2024), the company reduced its salary expenses from 1.2 billion yuan to 800 million yuan, turning this savings into additional profit.
2. Properly Managed Own-Branded Products: The GMV of own-branded products rose from 3.8 billion yuan to 5.4 billion yuan, accounting for 53% of total GMV. Since own-branded products generate full revenue (unlike third-party products, which only result in commissions), they contribute 95% of the company’s total revenue. Without intermediaries, these products have lower costs and higher margins, making them a crucial profit driver.
Why Have Own-Branded Products Become So Successful?
The number of own-branded SKUs (product varieties) increased significantly from 120 in 2023 to 1,009 in 2026, a more than eightfold increase. This success is due to the company’s focus on “productism”:
- High Profit Margins: The company owns and sells these products, bearing the inventory risks itself, which eliminates middleman profits and results in higher margins. For example, its own-brand sanitary napkins sold 20 million units in just two months, demonstrating their popularity.
- Consumer Trust: Consumers now buy products based on the Dongfang Zhenxuan brand itself, indicating that the product quality and reputation have been established.
Concerns: Lower Net Profit Compared to the Peak
Although net profit has increased significantly, it is still half of what it was at the peak in 2023. The main issue is the rise in marketing expenses:
- In 2023, marketing expenses were only 300 million yuan, as Dong Yuhui brought in a large amount of organic traffic. In 2026, they soared to 1.1 billion yuan, primarily due to advertising costs on Douyin and additional expenses for product development and personnel.
- In other words, Dong Yuhui acted as a free source of traffic; without him, the company has to pay more to acquire traffic on Douyin, eroding much of its profit.
The Strain of Relying on Douyin
After losing Dong Yuhui, Dongfang Zhenxuan has become even more dependent on Douyin, which has become a critical platform for its business:
- Dominant Platform: Douyin accounted for 97.4 million orders in 2026, with only about a hundred users on the Dongfang Zhenxuan app and one physical store in Beijing. Other channels are not as effective.
- Previous Attempts to Diversify: The company tried to expand to Taobao Live in 2023 but had to return to Douyin within a year. Yu Minhong has now acknowledged a closer partnership with Douyin, indicating a lack of alternative options.
- The downside is that Douyin’s influence over marketing costs is increasing, putting more pressure on the company’s financial performance.
Yu Minhong’s Dilemma
Yu Minhong faces a tough choice between two options:
- Relying on Super Influencers: This would mean paying high salaries, which would reduce company profits.
- Depending on Platforms: It would require substantial advertising expenses, also reducing profits.
He chose the latter option, cutting ties with high-paid influencers to save on salaries but incurring higher costs for advertising on Douyin. While this strategy has helped the company remain profitable for now, future risks, such as increased advertising fees or changes in Douyin’s policies, could pose significant threats.
In summary, Dongfang Zhenxuan’s strategy of moving away from MCN partnerships and focusing on its own products has been successful, but its dependence on Douyin has become a major challenge. While the financial results appear positive, the company’s success is more difficult to achieve, and its fate is tied to the platform’s decisions.