Shenzhen online seller Cogobuy targets Chinese manufacturers

Shenzhen online seller of electronic parts sets sights on small manufacturers ahead of IPO

PUBLISHED : Saturday, 15 February, 2014, 1:47am
UPDATED : Saturday, 15 February, 2014, 1:47am

Cogobuy, a Shenzhen-based e-commerce firm specialising in online sales of electronic components, said it plans to capture more small and medium-sized electronic goods manufacturers on the mainland, part of its marketing strategy for its planned Hong Kong initial public offering.

In an interview with the South China Morning Post, Jeffrey Kang, chief executive of the listing hopeful, said the mainland's two trillion yuan (HK$2.5 trillion) - and still growing - integrated-circuit market offered an economically viable opportunity for the firm to get makers of mobile phones and electronics gadgets to place orders online.

"The mainland's online shopping market is undergoing a transformation where we see a pick-up in business-to-consumer transactions from a consumer-to-consumer model on the back of the country's economic transformation," said Kang, who owns Nasdaq-listed Viewtran Group, formerly known as Cogo Group.

Unlike many technology startups in the United States and mainland China, Cogobuy is turning to a third-party sales model to lift profit margins. It has been profitable since 2010 as it gets a significant discount from overseas suppliers and then offers attractive deals to manufacturers.

Under third-party selling, online retailers sell the stuff of other people to customers without taking inventory risks. Preliminary figures showed Cogobuy's operating and gross margins stayed at 4 and 7 per cent, respectively, with about 10,000 active users.

"We are not taking Viewtran private at this juncture since we are undergoing a share buy-back programme," said the 42-year-old entrepreneur. "The favourable regulatory environment in Hong Kong offers a natural advantage for technology listings, even though valuations in the US and mainland China markets are much higher."

Cogo Group raised a combined US$150 million in 2005 and 2007, when the firm went public and issued a secondary offering.

Jones Lang LaSalle said in a report last year that mainland China's e-commerce business would top US$1 trillion by 2020, making it the world's largest. The value of goods and services purchased online by mainlanders in 2020 will be equal to the world's 16th-largest economy.