Date
17 October 2017

Fresh tie-up reignites hope in Tom Group’s e-commerce future

It is rare for Tom Group Ltd. (02383.HK), a small pocket of tycoon Li Ka-shing’s business empire, to do so well sharewise.

The counter has almost doubled since mid-January amid renewed hope a new venture with state-owned China Post Group could drive the Cheung Kong (Holdings) Ltd. (00001.HK) unit to bigger things in the e-commerce sphere.

The joint-venture agreement was signed earlier this month and before the ink was dry, the market had begun touting the deal as another savvy move by Asia’s richest man, who built his empire from brick and mortar, into the virtual world.

Alibaba and Tencent (00700.HK) had better watch out.

In fact, this is not the first time Tom Group and China Post are joining forces. They launched a B2C (business to consumer) website called Ule.tom.com {郵樂網} four years ago, but it was anything but exciting.

Ule made 520 million yuan (US$85.9 million) in transactions in the first half last year, a tiny fraction of Alibaba’s haul in the same period. Ule was nowhere near the top 10.

With their new venture, Tom and China Post have signaled their intention to strengthen their business ties.

The new venture brings in additional investors to Ule, Hong Kong Economic Journal columnist Gao Tianyou writes in a recent post. “This shows both parties have not given up on Ule. Something big could be cooking.”

Gao has more to say about Ule’s potential.

Logistics is the lifeblood of e-commerce. That’s why Alibaba has invested 300 billion yuan to set up Cainiao Network Technology {菜鳥網絡} and Tencent took a stake in China South City Holdings (01668.HK).

China Post Group has more than 50,000 post offices and more than one million employees. Without spending another dime, it already owns a nationwide network covering the biggest cities and the remotest villages, the kind of infrastructure Alibaba and Tencent can only dream of.

So why has Ule been underperforming? Gao blames the site’s failure to attract customers.

Major e-commerce players aggressively compete with each other with promotions and marketing campaigns. Alibaba’s Double 11 (Nov. 11) and Double 12 (Dec. 12) shopping festivals are two examples.

This kind of spirited, ambitious culture is lacking in Ule.

But with the right management and enough financial incentives for managers, Ule can become a very different company, Gao says.

– Contact the writer at [email protected]

RA

 

EJ Insight writer

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