Hong Kong, 0... Preferred Partner "Introduction XpressAsia.com is set to become the leading Internet based immediate delivery service in Hong Kong. Initially the business will concentrate on restaurant delivery services and will develop from that to cover all products and services for which a market exists for home delivery. Such further products would include wine, basic household items, emergency supplies, gift items, flowers, dry cleaning, toiletries, tickets and so on. It is expected that after some 18 months, restaurant deliveries will cease to be the major service provided. XpressAsia.com believe that as Internet use becomes more common across all sectors of the community there will be a tremendous growth potential in the home delivery market. We plan to concentrate initially on restaurant delivery since we believe that this offers a sensible entry into this market – being an extension of existing home delivery services already offered. This initial concentration will allow us to develop the infrastructure and networks required to launch into the broader range of services available. Notwithstanding the significant growth potential, we will expand cautiously. XpressAsia.com will offer a one-stop shop allowing consumers to select a variety of products for direct delivery from the comfort and convenience of their own home or office. Unlike the traditional home delivery options, the XpressAsia.com web site will permit the consumer the advantage of being able to make an informed selection from a variety of sources all from the one site. Different items selected can be put into the shopping basket prior to confirming the order, allowing orders from different restaurants, plus wine, cigars or other items to be combined with one order in a simple and convenient process. The order process makes it easy for customers to check their order, and will minimise the risk of the errors prevalent in phone ordering services. However, phone orders will be accepted in the early stages of the business as customers become accustomed to the new technology. The web site will permit more detailed descriptions of the products available, including photographs, thereby enabling, and encouraging, a more comprehensive selection. The site will be constantly kept up to date to allow for changes in the restaurant menus and the introduction of new products and suppliers. XpressAsia.com will establish exclusive, and non-exclusive arrangements with participating suppliers to ensure broad and varied options for the consumer. The selection of restaurants and other suppliers will be based on a combination of factors, including convenient location for pick up, speed and responsiveness to orders, reliability and customer preference. It is not initially planned to carry any inventory of products, with all orders being collected directly from third party vendors. However, as the business develops it may be desirable to operate a small warehousing facility for core or fast moving products. In addition to a growing selection of core products and services XpressAsia.com will also be able to respond instantly to ‘hot’ items as they emerge in the market. We will develop relationships with relevant vendors to enable us to keep abreast of such developments. For example, we would offer the latest electronic gadgets or software. XpressAsia.com will be the first to offer this type of service in Hong Kong. However, such services are being developed elsewhere in the world and serve as a useful reference point to the potential that exists. For example, ‘urbanfetch.com’ is a New York based web site offering free delivery, within 1 hour, of a wide variety of products including books, music, movies, games, electronic items, drugstore items, food, gifts and so on. We believe that the dynamics of Hong Kong are perfect for such a service to succeed in this environment. Office Operations Orders placed on the web will be received at the company’s offices in Lyndhurst Terrace, Central and monitored in real time by sales order clerks – who will directly fax through to the restaurant (or other vendor as appropriate). The fax will be followed up by a telephone confirmation. In time, as vendors themselves become more sophisticated, a greater element of the order process will be automated – but it is expected that for the time being most small restaurants and vendors will continue to require such fax and telephone interface. The sales order rep will then coordinate with one of the Company’s delivery staff to collect the food (and or other items) and deliver to the customer. Initially XpressAsia.com will cover Central, Mid-Levels, the Peak, Wan Chai, Causeway Bay, North Point, Tin Hau, Sheung Wan and Pok Fu Lam residential areas, but will subsequently expand to more areas as the business develops. Deliveries The prompt and efficient delivery of products ordered is essential to the success of the business. A coordinator will be employed as the principal interface between the sales order and delivery operations and who will be a single reference point for the logistics of this activity. Deliveries will be by motorbike or scooter. To ensure reliability of delivery significant effort will be made into the maintenance of the vehicle fleet. As operations expand it will be necessary to have in-house maintenance personnel, although initially all such maintenance will be outsourced. All delivery staff will be fully insured. Customers will pay the delivery staff by cash or cheque. All such proceeds will be returned to the office the same evening and crosschecked to the orders placed to ensure completeness of funds. Delivery staff will not be permitted to hold funds overnight. A credit card facility will be established in due course. As more regions are introduced a more specialised billing system will be introduced to cover the additional costs of delivery to more distant locations. Marketing Initial marketing will be by way of fliers distributed to the residential areas covered. Subsequently, focussed advertising will be placed in magazines and newspapers, and potentially on local television as the services offered increase. Of course, existing customers will be monitored and will be targeted directly with follow up marketing based on their preferences. Technology XpressAsia.com currently uses Miva Corp. shopping cart software to offer and display its products. Miva Corp. is a company specialising in shopping cart software and is a leader in the US at providing companies of all sizes with easy to use e-commerce solutions. The Miva Merchant product, which XpressAsia uses, is very flexible and can be quickly adapted to changing business conditions. XpressAsia.com has found it more efficient to out-source programming of its website to a professional Miva Merchant design team in the U.S. called DesignExtend.com Management The two directors of the Company are Chris King and Mina Cheuk. Chris King is the CEO and holds a Masters degree in Business Studies from City University in London, UK and the Ecole Superieur de Commerce in Paris. He has been working as a senior broker at a leading futures and options broker in Hong Kong since 1996. He will become full-time in the business within 3 months. Mina Cheuk is the General Manager and has been office manager at a prominent engineering firm in Hong Kong since 1997, Cosmo Ltd. A special advisor to the firm is Richard H. King who is a developer of financial software training programs - Market Skill Builder Software which has been successfully sold throughout the world in downloadable format since 1996. Revenues XpressAsia.com will earn a commission, or rebate from the supplier for each order delivered. The rates will vary depending on the particular restaurant or product, but will generally be between 13% and 20% of the sales prices (for restaurants) and are expected to average at approximately 18%. In addition a 10% delivery charge will be added rendering the total commission approximately 28% on food items. Different commission rates will apply to other products with cigars at 15%, flowers 10%, and other products expected to average 25%. Sales proceeds collected will be settled, less commissions, to the suppliers on a week-to-week basis. Running costs, staffing and equipment The Company has offices (900 sq ft) in Lyndhurst Terrace, a convenient location close to the restaurant areas in Central. In addition to the delivery staff, the headcount needs are limited, being sales order processors and delivery coordination. A sales manager will be responsible for monitoring existing suppliers and developing new products for inclusion in the web site. The major equipment requirement will be for delivery vehicles. Competition There is, as yet, limited competition in this area of home and office delivery. To the extent that such competition exists it has been focussed on food items (e.g. Food by Fone). We believe that the extension of the product range carried by XpressAsia.com will provide an additional edge over other operations. Other revenue sources Opportunities exist to enter into partnerships with suppliers for a variety of specialized products. The business will accommodate any product that may be delivered directly and promptly to the customer. As the business develops an additional source of revenue will be in advertising opportunities. Financial statements and projections The company has been in operation for some two months and is about to commence preliminary operations. Financial projections have been prepared to indicate the potential earnings from this business and details of these are attached together with some explanatory notes. The Company is expected to make a loss of some HK$900,000 in 2000 and reach profitability by end 2001. A summary of the projected financial statements is set out below for reference. Income projections HK$ 2000 2001 2002 Gross Revenue $6,818,380 $21,450,242 $41,283,938 Gross Margin (inc delivery) $1,838,224 $5,608,606 $10,549,685 Delivery costs $634,128 $2,129,791 $4,285,558 Overheads $2,112,506 $3,577,589 $4,069,078 Net profit/ (Loss) ($908,410) ($98,775) $2,195,049 Initial funding, capital structure and requirements Initial funding has been by the directors who have invested personal funds of some HK$210,000 into the business. 5% of the company’s share capital has been sold to a private investor for US$60,000. The directors own the balance of 95% equally. The directors are seeking additional investment of US$300,000 in exchange for 20% of the issued capital. The funds are required to finance the growth until revenues achieve breakeven point – which is expected to be within some 18 months. For further information please contact Chris King on 81005777 or 97333063. Explanatory notes to the financial projections Minimum sales orders accepted will be HK$120 for local areas with higher minimums for more distant locations. The average order size varies based on the product, and a table is attached with our assumptions. The number of orders per day is expected to be very small initially – but will grow during the first year as the product becomes established and the marketing effort is expanded. By the end of the year we are expecting some 180 orders per day. With the continued development of new products combined with marketing, we expect a rapid growth in the daily orders to 360 by the end of 2001 and 700 by the end of 2002. Restaurant sales will be the principal activity in the first year ( with some 80% of total revenue). Howeve...
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