*AOV = Average Order Value
**Conversion = The percentage of shop visitors who bought something
This report presents an overview of group business performance in the second quarter without eliminations, focusing on revenue, gross margin, and key highlights. During this period, we encountered challenges that led to a reduction in revenue and gross margin. However, there have been notable achievements, including successful expansions in international sales channels and the growth of our own Moomin branded product category.
In Q2, we experienced a 7% Year-on-Year (YoY) drop in revenue amounting to 219,035 euros. This decline can be mainly attributed to challenges in obtaining new products and a slowdown in demand for certain existing inventory items.
Furthermore, the gross margin in Q2 suffered a YoY drop of 34%, resulting in 61,106 euros. One of the significant contributing factors to this drop was the writing off of products from our inventory that were not moving. This measure was taken to optimize our inventory management and ensure a healthier balance between supply and demand.
Chinese consumer behavior has undergone a dramatic shift due to several significant factors. The implementation of the zero COVID policy and releasing it in Q1/2023 had a profound impact on the Chinese consumer market, leading to a surge in unemployment rates. As a result, consumers had to reevaluate their spending habits and priorities. With an increasing focus on outdoor activities and experiences, they allocated more of their budgets towards leisure, travel, and exploration, while reducing their spending on in-house products, which previously enjoyed strong demand, like those Euroeat used to sell. This change in preferences and consumption patterns presented both challenges and opportunities for Euroeat businesses in China, requiring us to adapt our strategy to cater to the evolving needs of the Chinese consumer landscape.
Faced with the declining consumer interest in certain product categories, we are uniquely positioned to meet these challenges through the ongoing strengthening of our own product development capabilities. We have now developed and launched nine distinct products, contributing to a total of 21 Stock Keeping Units (SKUs), with a turnaround time of 6 months and positive feedback from customers and partners in Finland and Japan.
- Through the analysis of monthly page view reports (PV) on the RED dashboard, we have gained valuable insights into the steady growth of Moomin awareness.
- Challenges in New Product Acquisition: Acquiring new products has been a primary challenge during Q2, impacting our sales performance. To address this, we are actively exploring Moomin licensors new products and focusing on our own product development to revitalize our offerings.
- Expansion of Whole Sales Channels in Mainland China: Despite the challenges, we are actively opening new wholesale sales channels in Mainland China. This strategic move is expected to enhance our market reach and drive revenue growth in the region.
- Emerging Benefits of Own Products: The introduction of our own products has started yielding positive results. Notably, we have successfully opened new sales channels in Finland and Hong Kong, offering promising potential for increased sales and profit. We are actively working towards entering the Japanese market as well, with plans underway.
- Focus on New Service Customers: In addition to product expansion, we have prioritized acquiring new service customers. By placing a high priority on our service customer funnel, we aim to secure new business opportunities and diversify our revenue streams.
- Board Update: We would like to inform our stakeholders that Raimo Puustinen has resigned from the board and the position of Chairman due to personal reasons. In light of this change, Richard Järvinen has been appointed as the new Chairman of the Board. We extend our appreciation to Raimo for his contributions and welcome Richard in his new leadership role.
As said above, the market dynamics have shifted, and consumer behavior is evolving rapidly. We are keen on exploring new avenues for customer acquisition and expanding our service offerings. Your expertise and connections could provide valuable hints, leads, or opportunities that may help us identify potential customers and foster fruitful partnerships. Thank you for your continued dedication, and I look forward to collaborating with you on these vital endeavors.
Despite facing challenges resulting in a reduction in turnover and gross margin, our second quarter has seen noteworthy achievements. We have successfully expanded our sales channels in Mainland China, witnessed the growth of our own product category, and capitalized on the benefits of our own products and international set up in new markets. Additionally, we are actively pursuing new service customers to diversify our revenue streams further.
Looking ahead, we are optimizing inventory management, and capitalizing on opportunities to drive growth and enhance profitability. By refining our strategy, fostering strong partnerships, and maintaining a customer-centric approach, we are confident in achieving sustainable success in the coming quarters.