Strategic Direction

Dear Shareholders,

Since the official launch in February 2015, HKTVmall has been in operation for more than 3 years. The road towards “Online Shopping Mall” in Hong Kong has never been easy. With the joint efforts and persistence from HKTVmall and our 2,000+ merchants, we have gradually changed the shopping habits of Hong Kong people and have opened up a new direction for retailing in Hong Kong that is well-paced with the global technology trend.

It is now an indisputable fact that Hong Kong consumers demand for innovative online shopping services, and as evident from data, we are sure that Hong Kong possesses great market demand for “online shopping services”. There is one mission for our Group — we strike to build a competitive and scalable online shopping platform for Hong Kong to prevent our retailing industry from losing consumers, and to protect Hong Kong from losing its position as Shoppers’ Paradise to overseas online shopping platforms unconsciously.

Over the past years, we have made attempts and investments in many facets, including marketing promotions and sales, customer experience enhancement, warehousing, pick & pack system as well as logistics & delivery services, in order to search for an ideal online shopping operation model to suit Hong Kong’s business environment. Extending the Offline-to-Online Convergence strategy in 2017, we devote most of our resources in acquiring new customers, expanding warehouse, pick & pack as well as logistics & delivery capabilities in order to support sustainable growth to the Group’s business.

We have always been saying that Hong Kong is just a tiny little place, and online shopping business is a volume game that requires infrastructure from a strong platform, including a wide variety of product choices, tremendous browsing traffic and customers, automated pick & pack system that can handle large volume of orders, and also logistics & delivery; only online shopping platform with this scale can cater for large volume of orders, and to achieve breakeven or even profitability.

The operation model of HKTVmall has been questioned by many people, even from our internal colleagues, wondering why we do not consider to work with established companies from relevant industries with experience and expertise advantages. My answer is, the only way to minimize the opportunities that our business model to be replicated by our competitors is to build our own infrastructures.

Over the past three and a half years together with the coming year, we embrace a clear goal to build a large scale “infrastructure” for online shopping platform in Hong Kong, to build an “infrastructure” that competitors have to spend a long time to catch up with, to build an “infrastructure” that our Hong Kong retailers have not been trying to develop with science and technology over the past decades.

These “infrastructures”, including a system that handles and combines the order, picking, return, exchange and payment for our 2,000+ merchants; an automated warehousing, pick & pack system that keeps 20,000 to 30,000 products and processes more than 30,000 orders daily; a logistics and delivery system that collects and disseminates products from multiple merchants and consolidates into one single order. While you may not be able to imagine the difficulties and complications, this explains why there is no large scale online shopping platform in Hong Kong until today.

Apart from “infrastructure”, externally, we shall continue to work with merchants from different industries in the coming 2 to 3 years in order to enrich our product and service spectrum. Among all, financial products, such as general insurance (including travel, home, motor, personal accident, medical, critical illness, overseas study, domestic helper) and life insurance products (including term life), personal loan, credit card application, etc. are under the pipeline.

Internally, we are actively planning ahead for the breakeven or even the profitable stage, and have set 4 target stages for our operational model: Stage 1 is the cost control for warehousing, pick & pack and delivery services. Stage 2 is the online shopping mall operation costs, including merchandising, marketing promotions, new customer acquisition and customer services. Stage 3 focuses on supporting functions including finance, administration, talent management and benefits; while stage 4 is research and development including information technology and new service development. Stage 1 is primarily variable to the business growth, which is the major variables to breakeven while stage 2–4, are primarily in fixed cost nature to certain extent.

In May and June this year when our daily order exceeding 10,000, combining all the orders for HKTVmall and HoKoBuy, we have passed stage 1 of our breakeven plan. We target to achieve operational breakeven in coming 2 to 3 years, and to become the largest and profitable online shopping platform in Hong Kong.

We wish that you can stand by HKTVmall, and to support the only large scale online shopping platform for Hong Kong people!

Wong Wai Kay, Ricky
Chairman

Hong Kong, 30 August 2018