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We refer to your query dated 19 May 2000 and reply today instead of yesterday as requested. The reason for the slight delay is that the announcement has to be reviewed by our Director who is responsible for 18all.com, who returned to the office this morning from an overseas trip.
We are pleased to respond as follows :
1. Assumptions and bases for developing the business model
(a) As a logistics and distribution specialist, Tamadam is well positioned to provide fulfilment services for e-commerce.
(b) As Tamadam currently has about 500 active customers, many of whom manufacture and/or distribute consumer goods, by establishing an e-commerce website, Tamadam can provide an additional service to these customers: distribution direct from the warehouse to the consumer or b2c distribution.
(c) By developing web construction and e-commerce capabilities, Tamadam will have more services to offer our existing and potential customers.
(d) By establishing a home delivery distribution network, Tamadam will be able to open a new market to cater to customers who want total logistics services in which one company can provide a complete range of logistics services in-house ranging from forwarding, warehousing, stock control to distribution, whether to dealers or direct to the house. This results in better service to end users as one company is responsible for the total solution.
(e) Tamadam already has much of the 'hard' infrastructure: warehouses, personnel and trucks. Accordingly, investment to establish an e-commerce site is mainly in 'soft' infrastructure: people and software. As the investment in 'hard' infrastructure is much more expensive than in 'soft' infrastructure, Tamadam can establish an e-commerce site (with full fulfilment capabilities) with lesser investment than if it were starting from scratch.
(f) 18all.com is a dealer for all products sold. 18all.com is NOT a mall (malls are an aggregation of product offerings from individual retailers in one website). As such, 18all.com is better able to deliver consistent service as it has more control over the product offering and service level.
(g) Tamadam already has about a year's experience in retail as we started Warehouse Direct, our electrical products store, which takes orders over the telephone, in June 1999.
(h) 18all.com currently has two sections: an online magazine and an e-commerce store. 18all.com is considering adding more sections in future.
2. Revenue generated by warehouse-direct.com since implementation
Warehouse-direct.com was launched on 18 June 1999. Between the date and 31 December 1999, warehouse-direct.com has generated revenue of RM906,222.
3. Financial impact of the venture
18all.com is expected to be loss making until at least 31 December 2001 due mainly to start-up and promotion costs.
4. Business prospects of the venture, including key assumptions
It was imperative for Tamadam to start up 18all.com. 18all.com has many spin-off benefits for the Tamadam Group including :
(a) Continue the migration for the Tamadam Group from being an asset based (i.e., warehousing) group to being a services (i.e. logistics, retail, IT) group.
(b) As a fully integrated e-commerce player, the Tamadam Group can capture value along more components of the e-commerce chain. Tamadam not only has a revenue center in 18all.com (its retail arm) but also in its logistics arm, which does the fulfilment wherever possible.
(c) 18all.com has helped to raise the profile of the Tamadam Group.
(d) 18all.com's service levels to customers are high. As a result, 18all.com is a good marketing tool for the Tamadam Group as customer feedback has been overwhelmingly positive. Remember that the service promise is delivery of the goods purchased within 48 hours! These high service levels have seen a high proportion of repeat customers for 18all.com and also led to Tamadam serving more customers for our logistics services!
We are also positive of the prospects for 18all.com for the following reasons:
(a) The prices for 18all.com's products are competitive.
(b) The service level of 18all.com is high.
(c) 18all.com sells a wide range of products ranging from electrical products, IT products and mobile phones to magazines.
(d) We have learned from our experience with Warehouse-direct.com and 18all.com is the result.
