*AOV = Average Order Value
**Conversion = The percentage of shop visitors who bought something
Important developments during 2Q
A challenging quarter.
Not only for us at Euroeat as you can see from the table above, but for the whole consumer & retail business in China. The government’s official GDP growth figure for the quarter was only 0.4%, positive mainly through strong exports performance. In April the China retail sales decreased by 11%, followed by 6.7% decrease in May.
This was as we predicted in our 1Q business review. Thanks to our timely cost cutting measures, we managed to control the impact to our bottom line & minimize the negative impact. From that perspective we can be satisfied with our performance: the team’s ability to forecast & act has improved tremendously during the past two years or so. And we have been able to build some organizational resilience too.
The challenges in the markets resulted mainly from the continued Covid lock downs & subsequent limitations to sales & deliveries. As an example, during the quarter 6 out of top 10 cities (in terms of sales revenues) were locked down for various lengths of time, making deliveries from outside the cities impossible & resulting also in clearly higher returns. These lock downs had also an impact on some of our suppliers, as factories had difficulties to deliver. A good example of the negative impact of these lockdowns is Shanghai: its economy contracted by a whopping 20% (official figure) during 2Q.
So given the overall market situation, I would say our performance was satisfactory.
And there were some positive developments too:
- We managed to launch the much anticipated own products in time for 618 sales. Two products to start with: moomin stickers and a candle holder. More own products to be launched before the end of the year & for the big shopping festivals.
- Our Tmall shop in the kitchenware category was again ranked among top 5% online shops. This means more visibility & traffic to our shop. And more revenue.
- We continued to broaden our sales portfolio, diversifying it & spreading revenue across several products & categories.
- Due to our relative success in the marketplace (and due to government support policy towards SMEs), our local loan quotas got further increased. This is important for us as we see the growth continuing during the 2H2022 & the ability to raise additional working capital remains on top of our agenda.
- We successfully opened new shop & social media activities on the RED platform.
- We had our Annual General Meeting in early May in Helsinki. Most importantly, the continuity is there: the whole team, including the Board of Directors, continues their work for the digital silk road.
Looking ahead for the 2H2022
The market situation remains challenging throughout the rest of the year, but we also see hope for recovery & a strong end for the year. A lot also depends on the Covid situation & how it may/may not affect the economy during the coming autumn. Zero-Covid policy is likely to stay anyway.
As always, the whole year’s results depend on how well we perform during 4Q. 3Q is the only quarter without any major shopping events & festivals, so our focus is on keeping the costs down & fine tuning our marketing & delivery machinery ahead of 4Q and the major shopping festivals, 11/11 and 12/12. We still foresee a good likelihood for a strong rebound for sales for 4Q as people get back into their normal daily lives.