China Post-Tom e-commerce venture to step up expansion after new financing

Fundraising backs firm's growth hopes for partnership with mainland giant

PUBLISHED : Friday, 28 February, 2014, 1:10am
UPDATED : Friday, 28 February, 2014, 12:37pm

Tom Group, which saw its net loss widen last year, expects its joint venture with China Post to significantly expand this year and become one of the mainland's leading e-commerce service platforms after the business raised US$110 million from its initial round of financing.

Ule, the Beijing-based venture founded by China Post and Tom in August 2010, has gained four new investors and put the e-commerce platform's valuation at US$830 million.

China Post remains Ule's largest shareholder, with a 44.24 per cent stake. Tom, the media conglomerate controlled by Li Ka-shing, owns 42.51 per cent, while the new investors have a combined 13.25 per cent. The new funding was completed last month.

Ken Yeung Kwok-mung, Tom's chief executive, yesterday told the South China Morning Post: "This new investment not only shows how vibrant the e-commerce market is on the mainland, but it proves that Ule's business model is working."

Ule provides a business-to-consumer e-commerce platform that supports online and offline store integration, distribution and logistics, and promotion to more than 5,000 merchants in 31 provinces.

Its gross merchandise volume last year rose to 1.43 billion yuan from about 500 million yuan in 2012.

Yeung said the new investment from the unnamed investors would help accelerate Ule's mobile e-commerce activities, especially in the mainland's countryside where consumers typically get internet access for the first time on smartphones. "We also want to develop Ule into the preferred platform for government agencies and state-owned enterprises to do bulk purchases online," he said.

Unlike Alibaba Group's e-commerce operations, which rely on third-party logistics service providers, Ule is backed by China Post's massive resources. These include 52,000 postal outlets, 40,000 Postal Savings Bank branches, 150,000 postal delivery workers, 50,000 direct-sales staff, 80,000 postal vehicles, 433 train carriages and 18 cargo aircraft.

Data from JP Morgan and iResearch forecast the mainland's e-commerce market to reach US$436 billion next year.

Tom reported a wider net loss of HK$550.07 million last year from HK$337.18 million in 2012. It reported a HK$1.7 billion write-off, mainly due to its exit from 2G mobile games and music services as those offerings were shifted to 3G and 4G mobile users.

The firm's revenue fell to HK$1.93 billion from HK$2.21 billion in 2012. Tom shares fell 7.24 per cent to close at HK$2.05 yesterday.