E-commerce platform backed by venture capital

Yoho Group, a local e-commerce platform operator, has submitted a listing application to Hong Kong's bourse.

Founded in 2013, Yoho adopts an online-merge-offline business model, whereby it operates its e-commerce platform available on desktops and mobile devices, and two retail stores in Kwun Tong and Cheung Sha Wan.

The Hong Kong-based start-up carries over 23,000 stock-keeping units with a focus on consumer electronics and home appliances and has established a customer base of over 590,000 registered members, according to its prospectus.

It attracts Hong Kong consumers by sourcing and introducing new and trendy products which have yet to gain a foothold in the city. For example, Yoho first sold the products of Iris Ohyama, a Japanese brand, in 2015. The dust mites vacuum cleaners for bed are among Yoho's best-selling products. It also sells knee massagers and HIFU machine for facial emaciation.

According to a commissioned report by Frost & Sullivan, Yoho ranked first as an e-commerce platform with a focus on consumer electronics and home appliances in Hong Kong measured by website traffic. It attained roughly 34 million website traffic and derived nearly 80 percent of revenue from online operation for the year ended March 31, 2021.

Also, it recorded the highest online retail sales of consumer electronics and home appliances among all Hong Kong e-commerce platforms with a market share of around 5.6 percent in 2020, the report said.

However, the company warns in the prospectus that it faces significant competition in the business and profitability and that prospects for future growth depend on the ability to compete effectively with the other competitors.

This came as mainland e-commerce giant Alibaba (9988) has announced the launch of Tmall Hong Kong in May, focusing on local services and quality assurance products. The Hong Kong unit starts with products from more than 2,000 brands, involving beauty makeup, clothing, home appliances, and electronic products.

In particular, the company said there may be hostile and unfounded negative reviews or feedbacks on its products or customer services published by the public which could have a significant negative impact on reputation and on the popularity.

Many customers were seen to complain about the delivery and customer service on Yoho's Facebook page.

Yoho's gross merchandise volume (GMV), a metric used in the e-commerce sector to measure transaction volumes, grew to HK$506.15 million in 2020 from HK$117.92 million in 2018, suggesting a compound annual growth rate of 107.2 percent.

On top of that, Yoho has a delivery network covering residential and business addresses and more than 2,000 pick-up points scattered in Hong Kong. Such service is provided by independent third parties, according to the prospectus.

To that end, Yoho previously announced its tie with Japan Home Centre, a retailer of housewares items, personal care, snack and household fast-moving consumer goods under International Housewares Retail (1373), in marketing, warehousing services and distribution channels in May.

Yoho's net profit surged 48.78 percent to HK18.32 million in 2019 and then further by 56.83 percent to HK$28.73 million in 2020.

However, the gross profit margin dropped from 24.3 percent to 17.4 percent in three years, due to its widened product portfolio, which includes certain brands carrying lower profit margins, and year-round promotional campaigns.

The net proceeds will be used to launch an online marketplace and expand business to the mainland market.