Summary of Key Points
In the first half of the year, Beike reported an unusual set of financial results: total transaction volume decreased by 4.5%, revenue fell by 12%, yet net profit soared by 79.4% to 3.879 billion yuan. This improvement was not due to a reversal in the real estate market, but rather the result of extreme cost-cutting measures such as layoffs and closing stores. However, the market did not buy into this performance (the stock price remained stable), as this profit growth was more of a numerical illusion. The underlying transaction activity remained weak, new businesses shrank, and there were limits to cost reduction, casting doubt on the company's sustainability in the long term.
I. The Profit Surge is a Result of Cost-Cutting, Not a Sign of Market Improvement
Beike's profit increase was entirely due to savings and had nothing to do with generating new revenue:
- Revenue Decline: Revenue for the first half of the year was 43.4 billion yuan, 5.9 billion yuan less than last year (a 12% decrease); total transaction volume was 1.65 trillion yuan, down 4.5%. Although transaction volume turned positive in the second quarter, revenue still decreased by 5.7%.
- Drastic Cost Cuts: Operating costs were reduced by 18% (faster than revenue), and sales and marketing expenses were cut by 32%. Labor costs were saved by nearly 1 billion yuan. Management explicitly stated that they prioritized cash flow and cut unnecessary expenses, essentially living a more frugal lifestyle.
- Market Disapproval: The stock price did not rise because it was clear that the profit increase was achieved through cost-cutting measures, and the underlying transaction activity was still poor. For example, the average transaction value for second-hand homes decreased by 15.6%, leading to lower commission income. The growth in transactions in the second quarter was driven by policy incentives (such as relaxation of purchase restrictions) and seasonal factors, not a true market recovery.
II. The Claim of Improved Efficiency is a Statistical Trick; Layoffs and Store Closures Have Their Limits
The financial report claimed that the average transaction volume per Beike employee increased by 50%, which sounds impressive, but it was actually due to a smaller base of employees.
- Layoffs: Beike laid off thousands of employees, reducing the workforce from 119,200 at the end of last year to 107,400 (with a peak of over 130,000). With fewer employees, the average performance improved, but this was not a true sign of enhanced efficiency.
- Potential Problems: Real estate agencies rely on a large workforce, and Beike's core advantage, the ACN cooperation network (where agents share listings), depends on the density of stores and the number of agents. Excessive layoffs can weaken this network; for example, closing marginal stores reduces the availability of listings, affecting transactions.
- Internal Dissatisfaction: Agents complained that executives earn millions while they receive only a small portion of the company's profits in the form of Beike tokens. Peng Yongdong's salary for 2025 is 235 million yuan, compared to the average agent's salary of 176 million yuan, leading to significant dissatisfaction among employees.
III. New Businesses Have Stalled, and the Second Growth Driver Has Faded
Beike's previous strategy of focusing on multiple businesses (real estate brokerage, home improvement, leasing, and Beihaojia) aimed to find new sources of growth, but all have now slowed down or stopped developing.
- Home Improvement Business: Although it grew by 24% in 2024, revenue in the first half of this year decreased by 26%. This was due to the elimination of costly customer acquisition methods and the abandonment of scale as a key objective. Although profit margins improved, the business volume decreased, preventing it from becoming a significant growth driver.
- Leasing Business: The number of managed listings increased by 34%, but revenue fell by 8.5%. Beike changed its profit calculation method from including all rental amounts to only considering commissions, and it also abandoned scale as a goal, preferring to minimize risks.
- Beihaojia: Beike completely abandoned its own property development efforts and shifted to a lighter asset model (C2M, directly connecting consumers with developers), avoiding any involvement in project management.
IV. Can the Future Rely on Franchising to Sustain Growth?
Beike's new focus is on developing a franchise business model.
- Franchise Growth: Franchise transactions increased by 5.4% in the first half of the year, and revenue grew by 16.1%. Franchises avoid the costs associated with operating stores and hiring employees, resulting in higher profits.
- Pressure Shifted to Franchises: By closing stores and laying off employees, Beike is shifting these costs and risks to its franchisees. However, whether franchisees can handle these challenges and maintain service quality remains uncertain.
- Market Doubts: Some users on social media criticized Beike for focusing solely on profits and neglecting the needs of agents. Others argued that the real estate industry still needs a service approach similar to Peng Yongdong's leadership style, suggesting that Beike's reputation is declining.
V. How Long Can This Cost-Cutting Strategy Last?
Beike's profit growth is temporary, and it faces three major challenges:
1. Limits to Cost Reduction: There is a limit to how much can be saved through layoffs and store closures.
2. New Business Failures: Both the home improvement and leasing businesses have slowed down, and no new growth drivers have emerged.
3. Slow Macro Environment: The real estate market is recovering slowly, and without significant growth in overall transactions, Beike's cost-cutting strategy will not sustain its performance for long.
Peng Yongdong described the second quarter as just the beginning, but the market is more concerned about what Beike will do to achieve sustainable growth in the future. Will it continue to cut costs, or will it find new growth drivers? The answer is still unclear.
In summary, Beike's temporary success is the result of defensive reforms, not a reversal in the industry. While short-term profits are impressive, there are many long-term risks: cost reduction has its limits, new businesses are struggling, and the franchise model carries risks. Whether Beike can sustain its growth in the future depends on the real estate market's recovery and its ability to find new sources of growth.