Dear Shareholders,
The pandemic over the past years has caused a significant blow to the global economy, while the business environment of Hong Kong is under stress with declining consumer sentiment and shrinking middle and high-end consumer groups. For the period under review, the Group managed to maintain stable growth but we still recorded a drop in profit due to decrease in gross profit margin resulted by fierce market competition despite operating expenses in various aspects were well-controlled. Bearing with too many uncertainties in the outlook, it is difficult for the management of the Group to forecast our business performance in the next two to three years.
As an industry player in “Ecommerce” and “technology exploration” in Hong Kong, the Group has been dedicated to promoting the development of Hong Kong’s online shopping industry, as well as continuously investing in various technological research and development, with the goal of “improving and popularizing quality life of human being”. Facing the daunting and rapidly changing business environment in the future, instead of being nostalgic and satisfied with our current achievements, we must be determined and keep innovating, scientific researching and investing to survive.
The pandemic began to subside in the first half of 2023, and the society has gradually returned to normal. According to the analysis of the Group’s sales data, online consumers in Hong Kong keep shopping online instead of switching back to making purchases in physical stores. Consumers’ progressive shift from offline to online consumption is an irresistible trend which is also irreversible. The Group is expanding approximately 144,000 square feet third-party logistics fulfilment centre in Tsing Yi, and the automated fulfilment centre at Tseung Kwan O headquarters is also expanding for tens of thousands of square feet, which will be completed this year. In addition, an extra of approximately 200,000 square feet at Tseung Kwan O headquarters will be set up in the next three years. We will continuously set up technology research and development centres in overseas. Grounding on our consolidated foundation in Hong Kong, we eye on international markets to expand the Group’s businesses further, thus creating more extensive and long-term stable income sources.
In the coming few years, those engaging in retail or other businesses in Hong Kong will encounter the following issues:
(1) The decrease in the number of middle and high-end consumers
(2) The consumers’ tendency on shopping overseas or online
(3) The decrease in consumers’ night-out time
(4) The difficulty in recruiting staff at all levels
Being a mere commercial organization, we are unable to alter the above social circumstances. What we can change is to change our business model to adapt to environmental changes.
The number of consumers shopping on HKTVmall and the number of retailers operating on HKTVmall are, like chicken-and-egg, interrelated issues. In the past few years, online shopping in Hong Kong was in its infancy, and we implemented relatively strict requirements for all merchants to ensure the quality of online shopping services. Merchants have to meet certain standards, such as our delivery time, operations on Saturdays, Sundays and even public holidays, accurate product information descriptions, product inventory supply, etc., before they can launch on HKTVmall.
The birth of HKTVshops is to provide a more flexible model for more companies and merchants, regardless of size, international or local brands, to operate on HKTVmall. HKTVshops will help consolidate HKTVmall as Hong Kong’s retail hub, providing consumers with a one-stop-shop and all-rounded “gathering point”.
HKTVLive video sales, ShareHub social platform, and GroupChat are three of the sales tools we have developed for merchants. HKTVLive makes good use of stores’ idle time or non-business hours in the evenings, such as 11 am to 2 pm and after 8 pm, for sales and promotions when consumers are at work or home. ShareHub is a social platform that allows merchants, consumers, influencers and content creators to participate, and exchange experiences and opinions. GroupChat allows consumers to stay in close and instant contact with retailers 24 hours a day.
Our development direction is not limited to “dry goods”. We hope to provide services to consumers no matter in supermarkets or wet markets. Therefore, HKTVmall’s new service — “Wet Market Express” — provides purchase and selection services across Hong Kong, with delivery coverage reaching about 91.5% of HKTVmall existing customer base, delivering fresh groceries from wet markets within three hours.
Currently, about 10,000 supermarket products are available for same-day delivery service within 8 hours. To cater for the change in consumption patterns, we offer third-party logistics services for HKTVmall merchants. Together with Wet market Express, we target to provide consumers with options from 80,000 to 100,000 products, covering products from the wet market, supermarket and personal care, with same-day delivery within 3 to 8 hours, 364 days a year.
Everuts aims to offer consumers around the world a secure and creditable international shopping service, extending our service scope beyond Hong Kong. Firstly, no matter which country or region Hong Kong consumers want to shop from, even if the goods are not sold in Hong Kong, we can “surrogate” for consumers. Consumers use this service may partly because the products are not sold in Hong Kong, with more options in styles and models outside Hong Kong; or it may also because the products are selling at lower prices outside Hong Kong, especially for some high-end branded goods. Relying on the huge consumer base and brand reputation HKTVmall has established in Hong Kong, we have already built a network with 2,000 personal shoppers globally. Once this model runs smoothly, Everuts’ services will be promoted to other Asian countries.
Both consumers’ life and business models have to face structural changes owing to the emergence of different technologies. Comprehensive application of artificial intelligence, operational automation, online sale and globalized recruitment have already become the irreversible main trends. To meet the development needs of various businesses, the Group has full-time employees and part-time working team across Taiwan, the United Kingdom, Australia and Israel. For instance, there are over 100 programmers based in Taiwan, dozens of customer service Talents in the United Kingdom providing customer service in a time zone equivalent to Hong Kong afternoon to evening hours, and a small number of technical Talents engaging in information technology and scientific research in various fields in the United Kingdom, Australia and Israel.
Our first self-invented Fully Automated Retail Store and System has started trial operation in Manchester of the United Kingdom. This project is an important milestone for the Group in retail automation, and the brand “in:Five” symbolizes that it only takes 5 minutes from customers placing orders on mobile app, to collecting the items at elockers at our store. The implementation of this plan was delayed for a whole year compared to the original schedule as it involved many technical and regulatory obstacles. Finally, the team managed to tackle the problems one by one. Now, we are waiting and observing how the consumer groups react to this new sales model. In the meantime, the technical team is also working on enhancements on the related technology to reduce costs and prepare for mass production and installation.
This is an era of social environment and technological development. We have no choice but to continue to invest heavily to ensure the Group can develop sustainably and maintain our competitive advantage in such an environment, to ensure deserved returns to our investors and Talents.
Cheung Chi Kin, Paul
Chairman
Wong Wai Kay, Ricky
Vice Chairman
Hong Kong, 30 August 2023