The retail sector is one space which has confronted continuous challenges one after the other, and the industry has revolutionised with the introduction of e-commerce and online transactions. From a very long time, retailers have been focussed on creating convenience for customers while adding value and enhancing the shopping experience for the target segment.
Since convenience and better shopping experience remain at the heart of the retailing strategy, we have seen businesses adopting the online retailing model as it offers more significant advantage to the companies as well as customers.
Amidst the coronavirus outbreak, customers have been locked up in their houses while sellers have been forced to shut-down stores. Both these groups have been relying on online retailing not only in China but also in Australia as well. As the number of infected cases spike, the lack of clarity amongst the people and events of panic buying surface in the market, leaving shelves empty. Online retailing might just be the right rescuer.
Out of the many worries for the people, one primary concern is the uninterrupted availability of essential items of necessity. As people remain highly uncertain about the impact and spread of the coronavirus pandemic, the retailers offering online sales provide an easy solution for the people.
AU8 Records Online Sales of $1.7 million in February 2020
AuMake International Limited (ASX: AU8) has reported a significant shift in China-based consumer purchasing behaviour towards its online channels in the times of fast-spreading and severely impacting novel coronavirus.
The shift in the behaviour is seen as an effect of the restrictions placed on the public gatherings and physical movement of the people in China which leaves consumers with less opportunity to visit offline stores for purchasing supplies and products.
The AU8 Business (Company's Report)
The current online stores of AuMake have put forward an excellent performance with online sales in February 2020 noted to be at $1.7 million equal to online sales during December 2019 of $1.7 million.
AU8 believes that online stores are an endless source of revenue that is helping to cope with the financial impact on sales through the offline store because of restrictions on people movement due to COVID-19 outbreak and deliver improved EBITDA performance.
AU8 launches Broadway’s online store
In response to the progressive shift in the consumer buying behaviour in China, AU8 developed and opened Broadway’s online store (WeChat) in late February 2020, which was designed in association with influential travel agents in China and is prepared to satisfy the product needs of affluent tourism demographic of the country.
Through this platform, Broadway’s reliable network of tourism associated partners shall be able to promote Broadway’s mix of new and high margin products for the first time directly to their customers who have either visited or are planning to visit New Zealand and Australia.
Although travel restrictions are in place, the company believes that the development of the latest Broadway online store shall offer a welcome opportunity for tourism partners to generate revenue.
Looking at the performance of the Broadway online store since its launch, the company is of the view that the business has produced encouraging initial results and looks forward to continuing refining this innovative online model in close association with tourism-related partners.
Development of Customer Database Underway
In recognition of the importance of customer database, the company is further engaged in developing a strategic CRM and direct marketing database from existing and new customer records, which shall encompass compilation of Broadway’s customer data consisting of over 120,000 affluent customers who have earlier visited Broadway stores in Australia and New Zealand.
The company looks forward to utilising the data in structuring future product development exercise and offering future direct and indirect marketing opportunities and considers growing the database by securing consumer data throughout the complete store network.
AuMake believes that it has enough financial resources available and plans for unforeseen events in place to endure through the remainder of the calendar year 2020, which is supported by its strong cash position.
To some extent, the implementation of cost mitigation measures and close working relationships with its trading partners have resulted in such a strong balance sheet.
The Road Ahead
Going forward in the ecosystem full of challenges, the company is optimistic about the demand from Chinese consumers for Australian products to stand firm and further expects a material acceleration in demand once bans are lifted, and physical channels to the Chinese market reopen.
AuMake is keeping a close watch on the market activities and has acted immediately to tame its cost base through continuous receipt of timely and authentic information in a highly dynamic environment through genuine sources like official government notifications and its web of travel agents and China-based logistics providers.
Based on the latest information received from its network in China, the situation looks like improving as a more significant number of people are returning to work, and businesses are setting up to recommence trading. This information has resulted in the hope that there could be an acceleration in product demand as well as consumption.
Highlighting the commitment of AU8 to the Asian domestic and tourist market for the long term, AU8’s Executive Chairman, Mr Keong Chan, commented:
“As a Board and management, we are completely focused on managing through the impact of COVID-19 with the utmost diligence, while at the same time continuing to innovate and assess opportunities for growth such as the collaborative co-creation of the Broadway online store with our tourism partners.”
How are others doing?
Other retailers like Coles Group Limited (ASX: COL) and Woolworths Group Limited (ASX: WOW) also cater to its customers through online mode and have recorded a significant increase in their online sales.
During the half-year ended 31 December 2019,
- Coles Online attained growth in sales revenue of 24% on pcp, and it now constitutes 4.0% of sales revenue from Supermarkets.
- Coles has also introduced ‘Delivery Plus’ subscription service in Coles Online.
- Online growth remained robust for WOW through WooliesX at 38.1% in the first half with penetration increasing to 4.4% of Australian Food sales, while group online penetration stood at 5.1%.
- WOW recorded Group online sales of $1,650 million, representing an increase of 31.6% year over year.
The sharp increase in the online sales of the retailers validates the change in customer buying behaviour and is only expected to grow amidst crisis like the coronavirus entailing lesser footfall at the physical stores.
Generally stated, the novel coronavirus is spreading at an increasing pace in other countries as new cases have been reported recently. The retailers in other countries as well are experiencing complete sell out of the stocks of particular products from their stores. Products are going out of stock from online platforms as well that operate physically.
As covid-19 makes its way to other countries and precautionary steps mandate less travel and physical movement, international retailers have an opportunity at their doors to serve unmet demand through their online platforms across borders.
The AU8 stock declined 8.163% intraday and closed at a price of $0.045 during the day’s trade on 12 March 2020.
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