eCargo Holdings (ASX:ECG) connecting global brands with Chinese buyers, August 2021


by Lauren Evans

eCargo Holdings Limited (ASX:ECG) Group CEO Lawrence Lun provides an introduction to the company's platform, partners and retail brands, discussing how it grows sales in China through a combination of data and technology.

Lauren Evans: Hi. This is Lauren Evans for the Finance News Network. Joining me from eCargo Holdings (ASC:ECG) is Group CEO Lawrence Lun. Lawrence, welcome to FNN. It's nice to meet you.

Lawrence Lun: Hello, Lauren. A pleasure meeting you as well.

Lauren Evans: First up, can you start with an introduction to the company?

Lawrence Lun: eCargo, simply put, is we help brands sell more in Asia, primarily with a focus on China, given the size and the opportunity, and we really do this by providing a full set of end-to-end services, from logistics, market activation, content generation, brand management, all the way down to sales and distribution for online and offline. And we do this with the support of our own proprietary technologies that include a warehouse management system and order management system. Now, since 2014, we've worked with over 80 brands across fashion, beauty, personal care and food, but a majority have been Australian brands, and we generate over $100 million in sales, US dollar terms, for our brand principals.

Lauren Evans: Thanks, Lawrence. So, before we talk about your platforms and partners, which channels do you operate in and what are the key channels in the China market?

Lawrence Lun: Well, effectively we help brands and retailers sell across online and offline channels in China. The first being cross-border e-commerce, which is really selling brand goods from outside of China to Chinese consumers directly online. Domestic e-commerce, which is imported goods into China, and we're selling in online channels to consumers directly. And then the other one is really domestic wholesale distribution, which is really what we call offline trading, and we will trade directly to retailers, groceries, convenience stores and more. Now, online is still where we make most of our sales, given that online retail sales makes up over 40 per cent of total retail sales in China. Now, for offline retail, it's a little bit more complicated because China's offline retail market is very highly fragmented. Rightly so, because although there's over 100 cities with population of 1 million and above, each province and region will have a different set of retail chains and local cultural differences. And, because of that, we have now established over 3,000 point of sale locations, working with over 100 distribution partners across different cities.

Lauren Evans: So, now to your platform and your partners, can you tell us more, starting with platforms and retailers?

Lawrence Lun: Perfect. I guess with platforms and retailers, I'll start from online. Now, for online we work with platforms like Tmall and JD, whether it's through setting up our own flagship stores or selling direct. Tmall and JD dominates over 65 per cent of the online market in China. Now, in addition to those two, we also sell across 20 other different online platforms, which really helps us to grow and capture the other 35 per cent of the market.

Now, for offline retail, some of our largest partners includes Ole, Heli and Zhongbai, which across just these three alone, they have over 200 stores in China covering Northern, Southern and Eastern China.

Now for brand partners, we work with actually a number of different brand partners, but I'll probably focus for this call just for a quick one, which is introducing Australian Dairies, which is part of the Fonterra company. We've worked with this brand for over three years now, and we support them selling through cross-border, domestic online. We also help them with offline distribution. We do marketing and also market activation in China for the brand. I also wanted to highlight quickly Blackmores. This one's a bit unique. I know our discussions have been around China, but we also replicate our model across different parts of Asia, including Southeast Asia. So, for Blackmores, we actually took their infant formula product and we kicked off into Vietnam and Cambodia, expanding this product range across 3,000 footprints across those two countries.

Lauren Evans: Thanks, Lawrence. And can you tell us more about your strategy and where you guys are headed?

Lawrence Lun: Sure. Having built a strong foundation of B2B service capabilities, our focus now is really around digitising our offering so that we can accelerate and scale, taking on more brands into China and into Asia. Now, how we do this is really across three areas. The first is launching our own online B2B marketplace, which we call JJX, allowing brands and retailers to put their products onto our platform and allowing our distributors to acquire them. Now, eCargo will provide the services in between, which includes logistics, payments, order management, everything digitised. The second one is really further building out our private channel network, which is in other words a consumer-to-consumer network, basically people selling to their friends and family. Word of mouth and recommendations is still a very key channel, so we're going to continue building it and building technologies to help scale that. Lastly is really around establishing our strategic partnerships, buoying that network more, so that whether it's working with new and upcoming platforms or working with other service providers to expand our service scope.

Lauren Evans: So, the last question from me, Lawrence, is there anything else that you'd like to add today?

Lawrence Lun: With our established distribution network and our service capabilities, we generated our first EBITDA profit last year of Australian $1.3 million. Now, unlike some peers in market where they out-source parts of their service, what makes us really unique is that we control all the services across the supply chain and distribution, which really allows us to drive efficiencies and cost savings, better access to data. And we also give brands an immediate access to a distribution network of over 4,000 point-of-sale locations, both online and offline, in China. Our next step for us is really to focus on improving our margins, through changing up our product mix, improving our inventory turnover, and replicating our business models to other parts of Asia, including other countries in Southeast Asia and India. And as I mentioned before, also building out our dedicated technologies to help us digitise and scale our offer.

Lauren Evans: Well, Lawrence Lun, thanks so much for the introduction today, and we look forward to hearing from you later this year.

Lawrence Lun: Thank you, Lauren.


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