eCargo (ASX:ECG) placed for strong eCommerce growth in Asia in 2022

Interviews

by Melissa Darmawan

eCargo Holdings Limited (ASX:ECG) Head of Corporate Marketing Lewis Bacon provides an insight into how eCommerce will continue to grow in China and across Asia, and eCargo’s position to assist brands with market entry.

Melissa Darmawan: Ecommerce in China is accelerating at a faster pace. Joining me from eCargo Holdings (ASX:ECG) is Head of Corporate Marketing Lewis Bacon. Lewis, nice to meet you.

Lewis Bacon: You too, Melissa.

Melissa Darmawan: Talk us through what market needs eCargo addresses, your business model, and your value proposition.

Lewis Bacon: Sure. So, eCargo is passionate about building brands in the world's most exciting markets, Asia and China. Now, traditionally with brands, we take on a partnership role as an importer, distributor and service provider for the region, and we assist brands throughout their export journey from overseas warehouse to the hands of the Chinese consumer, all the way through from market entry, through to eCommerce growth, offline distribution, and then regional expansion. In terms of financials, we work with brands through a range of payment structures, be it monthly fees and commissions or retainers, depending on the services that we provide our brands.

Melissa Darmawan: Thanks, Lewis. The past two years have brought unique challenges to the table. How have you dealt with these challenges, what impact have they had, and how will you continue to grow your customer base?

Lewis Bacon: Sure. So, obviously, over the past two years, there have been a range of issues brought up by the COVID-19 pandemic, by the changing macroeconomic environment between Australia and China, and also new Chinese regulations centred around consumer protection. But the strength of our team, our expertise and capabilities in eCommerce, and also our strategic relationships with other businesses and government organizations, has enabled us to weather this storm.

Firstly, eCommerce has continued to grow over the past two years and we have continued to bring brands into market, be that in their market entry phase or in the more intermediary phase of their growth in China. Particularly, we have seen a large growth in cross border eCommerce, which we foresee will continue to grow through 2022 and 2023.

In terms of the changing macroeconomic environment, we've seen that Brand Australia is still strong in the eyes of the Chinese consumer, and Chinese consumers still associate Australian products with a trustworthy, natural product that they feel safe providing to their family and loved ones.

Finally, there have been regulatory trends in the past year when it comes to consumer protection, particularly around product labeling and product traceability. Now, we've been able to weather these changes based on our strategic partnerships with legal agencies here in China, with government organisations here in China, and also overseas in Australia and Europe, which has enabled us to work with these organisations and ensure that our brands are not caught out in the cold when it comes to bringing their products up to standards.

Melissa Darmawan: So, let's dovetail this into the eCommerce growth in China and the opportunities. Talk us through how eCargo is looking to capitalise on this channel.

Lewis Bacon: The way that I'd explain eCommerce in China is that it's optimised to a level unseen around the world, and it is also growing at a rate unseen around the world. There is huge ubiquity in Chinese society. There's integration both online and offline with most brick-and-mortar stores now having some of eCommerce integration in them.

Now, eCargo has worked in eCommerce and China over the seven years of our existence, which has enabled us to gain a deep insight into the strategies and the tools that brands need to use to grow in China. We plan to use this expertise and these capabilities that we have to actually begin to identify high-potential international brands through which we can take equity states, bring them into market in China, and expand them throughout Asia through cross border eCommerce channels.

Melissa Darmawan: Recently, eCommerce sales events in China have been growing in popularity. Can you tell us more about these sales events, how they work, and how brands should approach them?

Lewis Bacon: Sure. So, these eCommerce sales events in China have become huge online and offline affairs, and the most well-known event is probably going to be 11/11 Singles' Day. Now, last year, 11/11 Singles' Day saw US$139 billion worth of sales across both Alibaba and JD.com, the two major eCommerce platforms here in China, which was a 20 per cent increase on 2020 levels. 80 per cent of all Chinese online shoppers participate in the event, and it's really become a cultural event -- a bit of a combination, if you will, between Black Friday and Cyber Monday in the West.

In terms of organisation, our eCommerce team here in Shanghai and down in Shenzhen actually start planning for this one-week sales event six months ahead, and all planning must be completed two months before the event actually happens to allow for the best results for our brand partners and also to ensure that there is enough product.

So, they're very, very important when it comes to branding awareness for brands in China, not just revenue. Because a successful Singles' Day, or a successful eCommerce event throughout the year, be it 618, another very popular one, or 305, another very popular one, a successful shopping event such as this will bode well for the six to 12 months ahead for that brand in terms of branding awareness.

Melissa Darmawan: Lastly, what's the outlook for eCargo? What's ahead for driving revenue growth.

Lewis Bacon: I've already touched on our desire to start identifying high-potential international brands which we can actually make equity plays into, bring those brands into China, and expand them throughout Asia, but also to continue leveraging our offline distribution network, which covers about 3,000 supermarkets across China, mainly focused on food and beverage and health and wellness products. Now, finally, we also are seeing a reemergence of the Daigou market. Now, if you have not heard of the Daigou market before, the Daigou market is Chinese resellers living overseas who will purchase and send back high-demand products to China and sell them within their own networks.

Now, in terms of new revenue streams, we are really starting to build up our technology capability. We're seeing that, over the past two years, trading businesses have had issues with working capital and increased cost of doing business, be it through shipping, be it more costly to buy and sell products, or issues related to the inability to travel and working capital, as a lot of businesses don't do credit anymore. Now, we are seeing that with our unique set of capabilities and expertise, we can actually bridge this gap and provide services to businesses which are going to enable them to accelerate their export business worldwide.

Melissa Darmawan: Lewis Bacon from eCargo Holdings, thank you so much for your insights. I look forward to speaking to you again.

Lewis Bacon: Thank you, Melissa.


Ends

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.