EUROEAT

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Euroeat: 3Q 2022 business review

Overview 3Q/2022

*AOV = Average Order Value

**Conversion = The percentage of shop visitors who bought something

 

Important developments during 3Q

As always, 3Q is the in-between-quarter. No national shopping festivals so the sales volumes are typically lower than in other quarters. And so it was this year again.

If we first look at the Euroeat performance, the sales declined a little compared to 3Q2021, but we managed to improve our profitability, to keep it at the same level as last year in absolute Euros. AOV also declined somewhat, following the trend in China we come back a bit later. Conversion was actually on a very good level as our visitor numbers have grown significantly from last year. So again the actual number of shoppers was higher than last year, even though the conversion rate was a bit lower.

About the market performance & trends in China during 3Q: the overall retail sales grew slightly in 3Q, in August the growth was around 5.4%. So on the top level the market is still developing positively, but there are big differences between various categories within the retail sales. Car & vehicle market developed very positively, lifting the overall growth numbers. But in our main category, kitchenware, the development was strongly negative. The category declined clearly, how much exactly we don’t know. Some estimates put the kitchenware sales decline in 3Q as high as -40%! Taking this into account, we must be happy with our sales performance as we are clearly outperforming our peers.

And to make things a bit more challenging, the Covid lockdowns around China continued. During 3Q Chengu, Tianjin & Hefei got locked down.

At Euroeat we have been working hard on minimising the risks within our control: in terms of sales & sales portfolio this has meant broadening the selection of goods across various categories, and importantly, developing our “own production” (maybe better term for this is local production of our own designs). We have been writing about this for some time already and now during 3Q I’m happy to report that this work started to bring results: first own product, a candle holder, entered Top 10 sold products & the feedback & reviews from consumers from other products has been very positive (e.g. limited edition Moomin Day pin was sold out in record time). We are good to launch 6 more own products for the important 11.11. and 12.12 shopping festivals.

On other positive developments, our banking costs got reduced as the interest rate charged on our RMB loans got reduced by 0.5%. All in all we are at the moment in a balanced situation with our banks & financing. This slower/flat rate of growth has meant also that we have been able to consolidate our financing operations with our accounts payables & receivables.

 

Looking ahead for the 4Q2022

All eyes on 4Q and the 11.11. and 12.12. shopping festivals, ensuring our warehouses are properly stocked & logistics is ready for the volumes. As always, 4Q will define how the year ends for us as a whole. From the gross margin perspective we are in a better position than last year. If all goes well, we should end the full year with a small profit.

From the revenue perspective things don’t look as good. The year has been challenging as a whole & especially for our kitchen category. At best we should hit around the same revenue figures as last year. But it is also possible that we end up slightly below 2021 revenue.

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