Dear Shareholders,
With reference to HKTVmall’s operation experience in 2021, we are more prudent on marketing spend in 2022 which has brought profitable effect in these six-month results. We will continue with this strategy on target-oriented promotion to bring better returns to our investors.
We keep reflecting on our development: If COVID outbreak was the only reason that HKTVmall was able to accomplish the outstanding results? When the pandemic ceases, will our sales drop back to pre-COVID status? The Gross Merchandise Value (“GMV”) on order intake decreased from its peak of HK$854,000,000 in February 2022 to HK$631,000,000 in July of the same year when the fifth wave of the pandemic was settled, but still, it had more than 10% growth comparing to July 2021. All sales data show that the pandemic has fuelled the quick expansion of online purchases, and even when the outbreak has subsided, a year-on-year increase in online shopping sales is still recorded. The management is confident in reaching the target of GMV on order intake of HK$8,000,000,000 this year.
Over the past few months, a few changes took place in Hong Kong eCommerce market. First, the online shopping mall “EESE”, with our subsidiary Shoalter Technology as its technology solutions support, has ceased its operation on 12 July 2022 due to financial conditions and business considerations of its parent company. Shortly after this, Tmall Hong Kong announced its closure by the end of October. As far as we are aware, other online shopping portals or online stores have not made much progress in terms of order volume, customer experience and logistics. Why only HKTVmall can be tenable in the Hong Kong online shopping market?
The Group's management eyes on long-term objectives since we were running telecom business, by investing billions of dollars in building our own infrastructure than relying on outsourced assistance. The infrastructure for telecom industry is the optical fibre network covering Hong Kong, while the infrastructure in the world of eCommerce is the extensive distribution network consists of numerous automated fulfilment centres, logistics fleets and physical stores, which has lowered the operating costs through automated technologies and economies of scale. Even if other operators try to enter the market, these infrastructures serve as a barrier making the new entrants challenging to quickly compete with us. As a result, we strongly believe that HKTVmall will continue to dominate the market leadership position.
The number of merchants joining online market, as well as the number and categories of products being sold online determine the overall sales attributed to the Hong Kong online shopping market. Apart from supermarket groceries that have already become major items for online shopping, the online shopping segment for digital and electrical appliances and apparels only make up a small portion of the entire Hong Kong retail sector, which has a tone of space for improvement when comparing with other overseas markets. In light of this, we will be more focusing on assisting more merchants to start their online business, by leading them into the world of HKTVmall.
Hong Kong’s total retail sales value in 2021 exceeded HK$350 billion (source: https://www.censtatd.gov.hk/tc/web_table.html?id=89#), while the GMV on order intake for HKTVmall only accounted for less than 2% of Hong Kong's retail market sales value. In the coming years, we hope that HKTVmall's sales will rise to 4-5% of the total retail market sales value in Hong Kong. Nevertheless, after years of effort, HKTVmall's biggest challenge comes from limited internal resources — i.e., to launch more new initiatives with limited IT and product development capacity.
Therefore, HKTVmall will withhold investing resources in developing non-core projects, such as Lite App and Open Databank, which will maintain at their current service level. Rather, we will devote more resources to assist determined and ethical brands and merchants to build and grow their online business, including at HKTVmall and their own online shopping platforms. To accomplish this goal, two major projects will be developed in the coming 18 to 24 months.
The first major project is the 3PL services. The development of online shopping in Hong Kong, in terms of number of platforms and logistics service performance, has been lagging behind neighbourhood districts and countries. Over the past few years, the Group has spent hundreds of millions of dollars on logistics infrastructure to increase the capacity, lower the operating costs and enhance the efficiency for order fulfilment. These infrastructures consumed tremendous resources to build even at HKTVmall’s scale. For individual retailers and specific merchants, this is a “mission impossible”.
Therefore, the Group is setting up two 3PL centres, making every effort to develop 3PL services to offer warehousing and picking services for merchants with 364-day operation (only close on the Chinese New Year’s Day), targeting to cover top 85% of merchant products (estimated to be approximately 150,000 SKUs), and to increase HKTVmall customer orders to reach “orders being placed this morning will be delivered in the same evening” and “orders being placed this evening will be delivered in the next morning”. This service will be very versatile and will also be made available to merchants on nonHKTVmall online marketplaces. It is also possible to opt for warehousing and picking services only and then turn the deliveries to other logistics companies.
The second initiative is a solution service to help retailers setting up their own independent online stores. Even though there are other similar services available in the market (like Shopline or Shopify), they merely provide online store software service, with insufficient operational support (such as customer traffic diversion), which leads to some merchants who use the software giving up because they are unable to succeed in the online shopping industry. We believe that this, in the long run, will be detrimental and will kill the development of Hong Kong online shopping market, as those failure experiences of merchants using those systems will send a wrong message to the market, leading the market to assume there is no future for online shopping in Hong Kong. We must thus rectify this misconception.
Currently, around 20,000 merchants in Hong Kong of various scales using these online store softwares. HKTVmall will assist them in setting up their own independent online stores and also to operate their stores at HKTVmall. These merchants can manage two online stores concurrently through a single system supported by HKTVmall, so that they can leverage on the customer base of HKTVmall to build their successful online business.
In the next two years, the development of HKTVmall will not be confined to a leading online shopping mall in Hong Kong, we intend to grow HKTVmall into a one-stop shop, trustworthy and comprehensive eCommerce enabler and a must-have partner for all local retailers and brand owners.
On the other hand, as prolonged time is required to obtain various technical regulatory approvals and for leasing arrangements in the UK, the introduction of Fully Automated Retail Store and System will be delayed. We are still confident that the opening of the first Fully Automated Retail Store and System will be launched in the UK within this year. Currently, the team commences the feasibility study on establishing Fully Automated Retail Store and System in other European countries next year.
Cheung Chi Kin, Paul
Chairman
Wong Wai Kay, Ricky
Vice Chairman
Hong Kong, 30 August 2022