Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 109

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 5
Chunk 109
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 Due to an increase in competitors during COVID-19, the fierce competition affected our online
sales during the period of early 2022. The Group offered discounts to customers to maintain and grow its market share, but at the same
time was able to transfer part of that cost to suppliers who offered more competitive product costs.

Personnel Costs:

“ Personnel Costs”
represents the costs directly related to the revenue such as operation employee of experience store and retail shops. Due to COVID-19,
we had to close all our experience stores in 2022. The closure of all retail locations also corresponded to a decrease in the revenue
from experience stores.

Lease expenses:

“ Lease expenses”
represents (i) the lease expenses associated with the farm land located near Shanghai, and (ii) the experience store lease expenses.
Our total lease expenses for the year ended December 31, 2021, 2022 and 2023 were RMB3.4 million, RMB0.6 million and nil respectively.

Others:

“ Others” primarily
includes depreciation and amortization expenses for equipment directly related to revenue. For the year ended December 31, 2021, 2022
and 2023, other costs represented less than 1% of total costs respectively.

Operating Expenses

Our operating expenses consists
of (i) fulfilment expenses, (ii) sales and marketing expenses, (iii) general and administrative expenses and (iv) share-based
compensation.

                                                                                         For the Year Ended December 31,                                                                                      
                                                                                         2021                                                 2022                      2023                                  
                                                                                         RMB                                                  RMB                       RMB                                   
 ──────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────
  Fulfilment expenses                                                                                                         23,967,825                10,630,884                 7,315,978       1,030,434  
  Sales and marketing expenses                                                                                                59,239,750                20,763,218                17,440,192       2,456,400  
  General and administrative expenses (including research and development expenses)                                           66,870,023                53,543,862                82,460,706      11,614,348  
  Impairment loss on goodwill                                                                                                 —                                  —                 6,592,220         928,495  
  Share-based compensation