Dear Shareholders,
2023 marks a turning point for our outlook and future prospects.
Amid a complicated and ever-changing global economy and political environment, the Hong Kong economy and society are constantly evolving. Hong Kong’s population, including its demographic composition, educational mindset, income levels, age distribution, etc., is undergoing structural changes. Coupled with the downturn in economic confidence, volatile and softened financial and stock markets, falling property prices and reduced trading volume, the retail consumption atmosphere has been significantly weakened. In parallel with the influence from external and global economic and political environment, we anticipate a decline in the local consumer market, in which significant growth as in the past will be unlikely. Although HKTVmall has established a leading position in the Hong Kong Ecommerce market, there is still room for further development with a current market share of less than 5% in the overall retail industry. However, to sustain high growth momentum, it is necessary to capture business from the physical retail market, which will be challenging, thus requiring more efforts in marketing promotion.
In addition, citizens have resumed outbound travel together with the change in consumption patterns for some Hong Kong consumers with increasing confidence towards the quality of Mainland’s products that lead to a surge in cross-border consumption, the retail industry in Hong Kong, especially in houseware products, supermarket products and groceries, faces competition pressure from physical stores and Ecommerce platforms in Mainland. In light of these changes and reasons, we are seriously considering adjusting the future contingency plans and strategies for HKTVmall:
1. Achieving the target of HK$12 billion in the overall GMV on order intake by 2026 is not an easy task. To achieve this goal, we will significantly increase advertising expenses and marketing promotion costs. However, we anticipate that even with a substantial increase in marketing efforts, the growth rate of GMV on order intake will slow down compared to previous years. Therefore, the target of 2026 may need to be delayed.
2. The Group has never been afraid of competition and continuously evaluates the market competitive environment. To cope with the competition pressure from physical stores and Ecommerce platforms in Mainland, we need to attract more merchants outside Hong Kong and may need to engage in price wars to gain market share while increasing operational costs in all aspects.
3. In the coming years, we will accelerate the deployment and investment in “Wet Market Express” services as it will become one of HKTVmall’s unique advantages. As mentioned in point 2, Hong Kong’s houseware products, supermarket products and groceries face competition pressure from large-scale supermarkets in Mainland. However, local fresh food and wet market goods still possess certain “irreplaceable” advantages. Although this service is currently operating at a loss which may continue to expand in the next year and the following year, this situation is similar to the early days of HKTVmall. We must first increase the business volume to further reduce the cost per order and turn losses into profits.
The Fully Automated Retail Store and System in the UK are still in the investment phase. We need an additional one to two years to refine the design of the system and stores overall operations. Although we are confident in this new technology and consumer acceptance, developing new business in the UK faces certain difficulties including insufficient management resources, work cultural differences, establishment of relationships with UK suppliers from scratch, and the time required to form an efficient work team. Despite facing various challenges, we still believe that for the long-term benefit of the Group, it is a necessary task to expand business outside Hong Kong and diversify business operations and investment locations.
The management has always put “long-term growth” as the prime mission. When balancing long-term survival goals and short-term profitability, we prioritize the former. To face the structural changes in Hong Kong’s society and economic system, we must strengthen investments in all aspects and actively explore new businesses in and outside Hong Kong. At the same time, we aim to maintain a stable management team and workforce to bring long-term returns to shareholders.
We hope our shareholders understand that in the next three to five years, the Group will roll out many new concepts, technologies and business development, where allocation of resources and funds will be needed. Use of internal resources and balance between income and expenses will be the management’s major consideration.
Meanwhile, we will continue to buyback the Company’s shares. We firmly believe that this action provides a more appropriate path for investors who choose to leave the Group while increasing returns to shareholders who are confident in the Group to make long-term investments.
Cheung Chi Kin, Paul
Chairman
Wong Wai Kay, Ricky
Vice Chairman
Hong Kong, 27 March 2024