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Hong Kong e-commerce platform Ztore recently completed USD 8 million Series B financing, led by Weiguang Ventures (Welight Capital) and Guihong Group.Previously, Ztore also received a seed funding from SF Group Series A funding from Guihong Group. Since its establishment in 2015, their funding has exceeded US$20 million.
The Hong Kong retail industry is very matured. In a small land of about a few thousand square kilometers, you find retail stores such as Watsons and Wanning in almost every street and more than 900 7 eleven convenience stores. However, Hong Kong has not caught up with e-commerce as compared to what China has achieved today because of its small market size is small, established offline retail industry, and high labour costs.
However, founder and CEO of Ztore , Cen Dizan, said that the Hong Kong government has vigorously developed electronic payment in recent years. WeChat Pay and Alipay have entered Hong Kong. The Hong Kong Government Monetary Authority has also launched “转数快”, a fast payment system. Retail shops are gradually transitioning and Cen believes that there is still a shot for e-commerce. At present, online shopping in Hong Kong only accounts for 4.7% of Hong Kong’s retail industry.
“Although there are still many brick-and-mortar stores, users will not want to go to the convenience store to get the rice noodles back home after work. In addition, many categories are not available at convenience stores near homes, such as special pet supplies, organic food, etc.,” said Cen. “The demand for e-commerce by Hong Kong consumers has always existed, but no existing platforms satisfy their needs.
From the English word “Store”, Ztore is a popular name for small grocery stores in Cantonese. Cen said there used to be a lot of traditional stores in Hong Kong are small yet has diverse products. However, with the arrival of large supermarkets and shopping malls, the traditional Ztore stores became less popular. Many local brands are being threatened by the shelf price and unfavourable laws, and what’s left eventually are the foreign brands.
Now, there are more than 330,000 SMEs in Hong Kong, accounting for more than 98% of the total number of enterprises locally. Many retail brands are even family-run small-scale stores with excellent quality. Therefore, Ztore hopes to dive into the e-commerce market with local brands and products made in Hong Kong, establish sales channels for these products, and tap the brand potential in various ways to provide consumers with better services.
At present, there are more than 1000 “made in Hong Kong” products on the platform. Cen said that the brand is mainly divided into two types, one is niche brands that have limited offline sales channels. The other type is relatively mature and bigger brands, but are usually distributors and are less familiar in dealing with end-users, In addition, Ztore will also cooperate with non-profit organisations to integrate public goods into the platform. Ztore will also explore the potential of the brands with original content to help brands market their products. For example, they will be interviewing a traditional egg-roll shop that only limits its sales to only 10 boxes a day, and produces a video about the story behind them on social media. “Our average user age is between 28 and 45 years old, but many young people have become interested in local brands after seeing content on social media,” said Cen.
Local brands appeal to local and brands can build brand awareness on the platform. However, in order to expand the scale of the category, Ztore not only focuses on local brand products. but also includes common necessities found in supermarkets. At present, the total platform SKU is more than 10,000. In the past two years, it has accumulated 200,000 registered users. The average customer acquisition cost is HK$100, and an average customer pays about HK$580 (about RMB 508). An average user repurchase once a month. In terms of payment methods, Ztore supports traditional credit cards, UnionPay, PayPal, Octopus, and Alipay.
Cost of rent, manpower, and logistics are also important factors of consideration in e-commerce. Ztore currently has a central warehouse in Hong Kong with a turnover rate of around 15 days. Ztore chose to develop its own logistics management system and cooperate with local logistics companies. Delivery time is 1-2 days and the fastest delivery is 7 hours. Users are entitled to free shipping if their purchase exceeds 350HKD.
In addition, Ztore recently launched a new business called “邻住买”, which allows group purchase. Each day, different types of products are recommended according to the needs of users in different communities. Currently, the platform sells mainly grocery. “Neighboring Buy” and Ztore have more than 40 offline pick-up points in Hong Kong, and an average of 2 items can be delivered.
Di said that in the past three years, Ztore has mainly served the local market. This round of financing will be used to upgrade the warehouse and logistics system. Ztore also will adopt algorithm recommendation and enhance the users’ shopping experience. In addition, Ztore hopes to develop cross-border e-commerce services in the next two years so that Hong Kong-made products can be exported to other cities in the Asia-Pacific region.
Wu Shuguang, former senior executive vice president of Tencent Group and the founder of Welight Capital, said: “We are optimistic about the development prospects of Hong Kong’s e-commerce market, and the business philosophy of Ztore. The operating model also expands the overall size of the retail industry, and we are very pleased to support Hong Kong’s potential startups.” There is currently no e-commerce platform in Hong Kong that is dominated by local brands and prominent leaders are HKTVMall and PCCW’s Habbitzz (so-called Amazon of Hong Kong).