Dear Shareholders,
This year marks the 30th anniversary since the establishment of the Group, which is also the 25th anniversary for listing on the Hong Kong Stock Exchange. We always remind our colleagues that the success of the Group lies in striking balance for the interest among investors, staff and customers. We hope that our colleagues who spend their time here feel that this is where they can fully demonstrate their strength. Investors are able to have good return. Consumers can get better services, which is unique in the market, in terms of innovation and quality. “Always Something New” means looking for new challenges, being innovative in resolving issues; which has also been the key characteristic of the Group over the past 30 years, and which has been our foundation for success.
In 2021, HKTVmall achieved strong growth in business, outperforming the overall retail industry in Hong Kong. When we talk about success, it does not only consist of customer number or turnover growth. The success that HKTVmall attained in 2021 mainly means that over the past year, more retailers and brand authorized dealers in Hong Kong recognized that they need a platform like HKTVmall to expand their online business. If we call HKTVmall the leader in online retailing in Hong Kong, this does not imply that customers have no other choices (in fact, there are lots of choices available online for consumers). We are indeed referring to the fact that retailers and brand authorized dealers have no better choices for “online shopping mall” in Hong Kong. We provide the perfect one stop solution ranging from sales, warehousing, last mile delivery, to settlement and after sales services.
In 2021, what HKTVmall did disappointingly was the “30% off eGift Voucher” program. That was the first time that the Government launched consumption voucher and we were worried that if the offer made by HKTVmall was not attractive enough, consumers would turn to other sales channels thereby undermining our long term growth. As a result, the deep discount seriously impacted the second half financial results for the Group. This taught us a major lesson. We should not merely focus on “marketing promotion”, but should devote more resources to enhance service levels. In fact, customers doing online shopping may attach more importance to service quality rather than just “price cut”. Some investors or our own colleagues might have misunderstood. They assumed that we are selling supermarkets, beauty, skincare and health supplement products. In fact, our main offers are “freedom of choice” and “quality fulfilment service”.
To further enhance and complete our fulfilment service, we will launch an important project in two phases by the end of 1H2022 and 1H2023. The aim is to shorten the delivery lead time for customer orders. In phase one, the order cutoff time will be changed from 9am each day to 1pm. This means that for customers placing orders before 1pm, they will receive their purchases on the next day. The target for phase two is to enable goods to be delivered to customers the next morning so long as the order is placed before midnight. To achieve this target, we must be able to provide third party logistics service. Also, the top 85% merchant products will be stored and picked in HKTVmall automated fulfilment centre. Therefore, we will build a larger logistics warehouse with most of the merchants making use of our logistics service on paid basis with us handling their goods. This will not only enhance the quality of customer fulfilment service, but will also enhance the bonding and mutual reliance between us and the merchants.
The fifth wave pandemic has brought many long term negative consequences. As you all know, the impact has been profound. Industries across the board are all badly hit. Even after the fifth wave pandemic subsides, we believe that it will take at least one to two years to restore the economy to normal level. Having to go through this experience brought by the fifth wave pandemic, retailers have lingering fears about the situation and will no doubt become more cautious in expanding physical outlets in future, while putting more resources in online retailing.
All in all, this is the best time for HKTVmall to leverage on its solid foundation to continue investing more in online shopping business compared to other Hong Kong companies, whether it is software technology, automated warehouse, fulfilment logistics fleet and big data analysis. We will continue to be the No.1 online shopping mall in Hong Kong. We have set a target earlier that the overall GMV on order intake will reach HK$12 billion to HK$15 billion in 3 to 5 years. We are confident that this target is highly achievable.
Despite the efforts made in the last year or so, the project of promoting “online shopping mall” system and software of Shoalter Technology Limited (“Shoalter”) to global markets is fraught with difficulties. It is simply “too difficult”. It turns out that, many large corporates and organizations lack talents who are good at both technology and business. Even though we can provide the entire set of software system, even though they understand that this is the “future” and a must-have for retailing, even though they understand that there is “huge market potential”, they do not have the confidence to develop a large online shopping mall from scratch. While Shoalter faces development constraints in Hong Kong, we will look for overseas market development in full force after the pandemic. At the same time, we will devote full efforts to provide full suite of technology support, to assist EESE, to become a successful role model.
On the other hand, this may be good news to us. According to the local big conglomerates whom we have contacted, their wariness has nothing to do with our systems. After thorough study, they consider that this business is too difficult! This makes us even more confident that in the foreseeable future, HKTVmall will maintain our unique position in Hong Kong online shopping market.
We have completed the installation for the first “Fully Automated Retail Store” with pilot run in software and hardware in full swing. We are confident that the first several “Fully Automated Retail Stores” will be launched in UK within this year as planned. At the same time, Amazon Fresh and Tesco in UK, have opened six to seven “unmanned stores” in London. The technologies deployed are totally different from ours. They installed several hundreds of camera on the ceiling of a normal store, in order to use visual analytic technology to analyze every “action” of the customers to determine whether they are buying certain goods and debit their credit cards directly. Although this model can bring entry and exit convenience to customers, there is no competitive advantage in terms of operating costs. In reality, as what we have seen in London, the manpower required is more than a normal store. And as they need to cater for the operation of visual analysis, the goods on shelves have to be tidier. They also need more security guards to prevent theft.
Our patented invention is indeed a totally different technology concept. The store will be operating 24 hours and will not require any manpower for surveillance and theft prevention. Labour costs are saved significantly. We strongly believe that this model is the perfect solution in cost efficiency for “unmanned store” or “Fully Automated Retail Store”.
Without doubt, we have to face many challenges and difficulties when attempting to open any new market. We will proceed step by step and tread carefully in developing the UK market. Meanwhile, we are studying other European markets, such as Switzerland or North Europe, where labour costs are even higher and hence the competitiveness of our system is even more conspicuous.
In order to continue enhancing the functions and technology of “Fully Automated Retail Store” system, we will continue to invest in technology research and development, including imaging artificial intelligence and automated picking system.
The Group was renamed as “Hong Kong Technology Venture” last year. We think this befits us. Over the past 30 years, the successes that the Group has achieved in various industries mainly derived from our attitude — dare to try, dare to fail, dare to examine and make use of technology to transform every industry. This applied to IDD telecom, fibre broadband and even TV content production. Investing in technology may fail, and we cannot be sure of the chance of success. On the contrary, if we do not give it a try, there is certainly no chance of success. The management of the Group hopes investors and our colleagues appreciate this. This is exactly what sets us apart and helps us do much better compared to other conglomerates. The DNA of our entire team from top to bottom is full of venturing spirit, which is the “soul” lacking in most of the big corporates.
Cheung Chi Kin, Paul
Chairman
Wong Wai Kay, Ricky
Vice Chairman
Hong Kong, 30 March 2022