Dear Shareholders,
Recently, we have reviewed the Group’s vision and core values, and have looked back to the Vision Statement we set when we were running telecommunication services. We noticed that over the past 30 years, even though business natures changed from international calling services to territory-wide fibre broadband networks, and then to the starting of eCommerce and different technology businesses, our core values and culture have remained unchanged — always building our cores on “infrastructure investment” and “technological research” to redefine different industries and bring changes and enhancements to human societies. No matter what kind of business we are developing, we ask ourselves to continuously strive for the best and look for innovative changes. We will also keep looking for new challenges, turning “the impossible” possible.
Talking about corporate managing culture, we have maintained “Direct and Action Oriented”, “Integrity” and a “Strong Team with Smart and Capable People” as the Group’s core foundations which can guide us to reach higher peaks and make the Group the industry pioneer in the past, now and in the future.
In 2022, the retail industry suffered from many unstable factors. However, the business performance of HKTVmall has maintained high growth. Compared to the results in 2021, the GMV on Order Intake in 2022 is 25.9% higher than that of 2021, which is concluded slightly above the updated target by approximately 3.5%, outperforming the overall performance of Hong Kong’s retail industry. According to the figures from Census and Statistics Department, the provisional estimate of the retail online sales value in 2022 is HK$34.6 billion, an increase of 20.8% compared with that of 2021, which implies that online sales in Hong Kong have been growing and online shopping has become part of the daily lives of consumers. Although we believe the uncertainty of economic recovery will bring challenges to the local retail industry in 2023, we are still confident in the development of online retail businesses.
In the past few years, different corporates followed “others’ footprint” to take their first step into Hong Kong online shopping market by building all kinds of eCommerce platforms after witnessing the success of HKTVmall. However, due to different reasons, most of them quitted after running these platforms for a while. For HKTVmall, the performance of some projects did not meet our expectations, for instance, the need for food delivery for “HKTVexpress” was lower than expected, and “HKTVmall Open Databank” failed to attract the expected number of merchants to make use of it and carry out data analyses. Yet, we are determined to learn from our mistakes and fix them one by one in the coming 2-3 years to strive for a better return on our investment. In late 2022, we have already taken the lead to shift the resources used for food delivery service to an uncontested market area — wet market food express delivery — by launching a new wet market express delivery service “Wet Market Express”, to provide customers with fresh food purchasing service at “the same price as Wet Markets” and “delivery within 3 hours”. This new service aims at expanding customers’ online shopping options, which helps to acquire new customer segment.
The above not only shows our significant execution power but, at the same time, proves that businesses can never gain their foothold successfully if they only follow others’ practices blindly. More importantly, rather than being afraid of failure, we must insist on long-term investment with continuous enhancement and attempts.
We started “Ship to Macau” Service in early 2023 and have got satisfactory results. We are working on shipping HKTVmall’s products to other overseas countries, such as the United Kingdom, so that HKTVmall may keep close contact with mid-to-high-level customers.
Our business philosophy has been focusing on businesses that can infuse society with new values. This year, our goal is “Win Together” with Hong Kong’s retail industry. We hope that HKTVmall can grow with the merchants, and even other retailers and local or international brands, together. In hopes of empowering merchants’ and HKTVmall’s long-term and sustainable success, we are committed to increasing traffic in HKTVmall while assisting merchants to acquire new customer sources, to reduce operating expenses and to explore new business opportunities. There will be several core projects which target to “win together with Hong Kong’s retail industry” rolling out. Besides further consolidating our market-leading position in online shopping consumer market, we actively invest in a number of new businesses to serve Hong Kong’s retail industry and establish collaborative partnership relation through applications of advanced technology and system innovations.
I. Third Party Logistics Service (“3PL Service”)
The Group persists on looking at long-term development and keeps investing in building infrastructures. We believe “online shopping infrastructure” will become a long-term advantage that can build an effective competition barrier which can leave our competitors far behind us. Therefore, we have been actively developing B2C logistics infrastructure, including building automated fulfilment centres and intelligent logistics fleets. Now, we are putting all efforts into expanding our two logistics centres in Tsing Yi and Tseung Kwan O headquarters for developing 3PL Service.
The expansion plan is currently underway at Tseung Kwan O headquarters. The first phase of 33,000 square feet is already under construction and is targeted to be completed by Q2 of 2024. The other phases involve building a new fulfilment centre of 200,000 square feet, which is expected to be completed by 2027.
We rented an extra 144,000 square feet area for Tsing Yi Logistics Centre, investing approximately HK$120 million in hardware machines and related CAPEX. We are optimistic about the installation progress of Automated Robotic Pick & Pack Systems, and expect to be officially launched in July 2023.
Our Third Party Logistics Centre is operated with advanced automated technology settings, equipped with robotics arms and systems to enhance efficiency and accuracy in the pick-and-pack operations, which lower operation cost for HKTVmall merchants while allowing them to gain higher profit in eCommerce business than in running their physical stores. It also further achieves our service pledge of operating all year round, including weekends and public holidays, with a fast delivery within 8 to 12 hours, which means our customers who place their orders before 10am can receive the orders at night on the same day.
In the second phase, our 3PL service will be opened to non-HKTVmall merchants, so merchants of all scales can join our 3PL services to resolve issues on warehousing, pick-and-pack as well as logistics by utilizing automated technology. In this way, it can enhance the operation efficiency of running online businesses and further promote the development of Hong Kong’s eCommerce industry effectively.
II. All-in-One “Independent eStore” Solution
Our “online shopping mall” — one of the three core pillars — which provides products from 14 categories, giving customers over 1,300,000 product and service options, is our key to gaining traffic. We will leverage the concept of the “online shopping mall” to initiate a brand-new “independent eStore” solution, which started recruiting new merchants in March this year and will be soft-launched in early April.
We will offer a one-stop eStore setup and management service to both local and international retailers. With a user-friendly system, merchants are allowed to set up their own domain, design, and operate their eStores in addition to managing customer orders, using various tools for marketing, promotions, and data analysis, and having flexible delivery options in one system. On top of these, merchants also have the option of running their online stores on HKTVmall at the same time and managing both online stores in one system, which aims at improving the operation efficiency to reach the greatest performance.
Except for its own domain, every “independent eStore” will also appear in “HKTVshops” in HKTVmall app, where approximately 1,500,000 monthly active users will be brought to merchants’ independent eStores, to provide merchants with stable traffic. Merchants can also analyze visitor and customer data to plan precise marketing strategies and promote their products to the targeted customer segment effectively.
III. Live Shopping to Bring “Video Sales”
To supplement the social interactivity of online shopping and to allow customers to be more engaged in the shopping atmosphere and communicate more effectively with salespersons, we launched live shopping channel “HKTVLive” in early 2021 which has received overwhelming support from customers and merchants.
To help physical store retailers extend their business hours and boost sales, we will launch a new “Video Sales” service this year. We will extend the live shopping channel to non-HKTVmall merchants, allowing any merchants or retailers and local or international brand owners with physical stores to create live shows on HKTVmall App. New merchant recruitment has commenced in March, and will have a trial broadcast in mid-April this year. In the first phase, we will support 70 live channels, and we plan to officially launch it in May and gradually expand to 100 channels.
Unlike the existing HKTVLive, merchants can conduct “Video Sales” anytime and anywhere 24 hours a day, 7 days a week, using the space and salespersons in their physical stores as hosts, making use of the existing resources of physical stores thus saving additional setup costs. Customers can contact the salespersons of the physical store through HKTVmall App at any time, just like holding a video conference between customers and salespersons. Salespersons can introduce products and answer customers’ enquiries through video, and complete transactions with a simple process.
During the first year of implementation, merchants can become HKTVLive and “Video Sales” merchants for a registration fee as low as HK$1,000, with commission rate as low as 3% based on successful orders. Merchants can choose to arrange delivery through HKTVmall or on their own, providing greater flexibility in handling customer orders.
IV. Everuts — A reassuring platform matching global consumers and international personal shoppers
Traditional retail relies on brick-and-mortar stores to choose what products to sell, and consumers can only choose from the products that have been selected by the stores. This even applies to traditional online shopping such as HKTVmall, we can only gather millions of items from thousands of merchants for customers to choose from that have no fundamental changes on the merchant-driven model.
In recent years, “personal shopping” service model has become popular. Consumers first search online for their favourite products from around the world, and then the personal shoppers can purchase the products worldwide for them. By searching online first, consumers are greeted with a wider selection, newer styles, and lower prices, releasing them from the limitations of stores. “Personal shopping” is not a new concept, but currently, such services on social media are not widespread because consumers face great risks, on main one being that they do not receive their goods after payment. In 2022, there was significant increase in scams in Hong Kong, mainly contributed by “Online Shopping Scam”, reaching 8,735 cases, where victims suffered monetary losses.
Earlier this year, the Group launched a new cross-border “personal shopping” service called Everuts through its subsidiary Offbeat Technology Hong Kong Limited, providing a credible and trustworthy platform for personal shopping services. This platform not only matches consumers with global personal shoppers but more importantly ensures the shopper will get paid after shipping, whilst the buyer will receive the goods after payment. It can be seen as an analogy to a bank issuing a letter of credit for global import and export merchants.
A good start is to first leverage the needs of the millions of HKTVmall customers in Hong Kong. This then allows us to establish a network of thousands or even tens of thousands of international personal shoppers to which we then promote this service to consumers around the world.
V. Patented Fully Automated Retail Store and System
The first launch of our self-invented and patented Fully Automated Retail Store and System is set to operate in Manchester of the United Kingdom in mid-2023, and the interior decoration of the store is currently underway. During the initial phase of starting our business in the UK, we encountered many difficulties due to unfamiliarity with the local business environment and regulations. In the past year, we have resolved them one by one and adapted to the local business environment and regulations, which caused certain delay in the plan. Our engineering teams in Hong Kong and the United Kingdom are in the process of enhancing and upgrading machine design and capability and preparing for mass production.
The management strongly believes that this is a revolutionary new invention in the global retail industry. Although it is understood that this is a project that requires several years or even longer investment period, and will encounter many technical and operational difficulties, we will still insist on investing a large number of resources to ensure the success of this project.
The Group has gone through a difficult road in the past 8 years, gradually dominating the leadership position of the Hong Kong eCommerce industry that possess data from one to two million online consumers in Hong Kong. In the future, we will continue to adhere to our beliefs, fully utilize our successful experiences to provide diversified business solutions and enable different types of merchants, retailers, and brands to develop their online businesses at lower costs, promoting and leading the progress of the entire eCommerce industry.
In our latest Vision Statement this year, we have set new goals and directions for ourselves: “We will be one of the well-known technology adventurers in this city. Our track record includes international calling services and territory-wide fibre broadband networks. Currently, our products and services range from an online shopping mall, multimedia information, eCommerce fulfilment, automated logistics services, big data analysis, and impressive online customer experiences. We continuously make human lives more abundant with technology, and we’re even exploring cross-industry healthcare and medical technology projects.” Regardless of any industry, we firmly believe that investing in infrastructure and technology will bring betterment to the human society.
Cheung Chi Kin, Paul
Chairman
Wong Wai Kay, Ricky
Vice Chairman
Hong Kong, 29 March 2023