Hong Kong e-commerce start-up Zirkol aims to compete with the city's wet markets on price
South China Morning Post
5 min read
An e-commerce start-up in Hong Kong that saw downloads surge during the city's fifth wave of Covid-19 infections is hoping to retain users by offering goods cheaper than those sold at local wet markets, as more people in the city start to shop online during the pandemic.
Shopping app Zirkol, founded in July 2020, saw its weekly order numbers jump 500 per cent in the second week of March, according to founder and CEO Samson Ho. On March 2, Zirkol was the second most downloaded shopping app on Hong Kong's iOS app store.
The surge in downloads and orders came amid panic buying in Hong Kong earlier in the month, when markets and stores were stripped of fresh food and groceries over fears of a potential large-scale lockdown.
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"We were really busy [trying] to handle and fulfil all the orders," Ho said in an interview with the Post, adding that 20 per cent of his staff were out sick when orders increased by five times. "It was a nightmare."
E-commerce adoption has always been weaker in Hong Kong than in many other developed markets, thanks to the convenience and accessibility of the city's network of bricks-and-mortar retail stores.
In 2019, online retail sales accounted for only 5.7 per cent of total retail, compared to 10.8 per cent in the US and 34.1 per cent in China, according to a report published in 2020 by the research office of the Legislative Council, the city's legislature.
But like elsewhere, online shopping in Hong Kong was given a boost by the Covid-19 pandemic. The US International Trade Administration estimates that e-commerce sales in Hong Kong grew 27 per cent in 2020, and that 50 per cent of consumers now prefer online shopping.
In February this year, online retail made up 10.8 per cent of total retail sales, according to data published by the city government's Census and Statistics Department.
Zirkol is already seeing fewer downloads now that panic buying has subsided in Hong Kong, ranking at below 70 on the city's iOS shopping category. However, the company believes it will be able to hang onto users it won over after the Covid-19 situation eases because it sources products directly, enabling it to offer lower prices, according to Ho.
"If you want to buy choy sum or pork chop from a wet market, there are usually six layers of middlemen, including farms, exporters, importers, wholesalers, distributors and retailers," Ho said. "We only connect farms and consumers."
On Saturday, Zirkol was offering choy sum, a leafy vegetable common in Hong Kong, at HK$8.9 (US$1.13) per 300g, while the same amount cost over HK$10 at some wet markets.
According to Ho, Zirkol now has over 100,000 family users, which the company defines as number of unique residential addresses that made at least one order in the period. The platform is providing more than 1 million individual food items to these family users every month, Ho said.
Zirkol is a unit of Aigniter Holdings Limited, which operates the Jarvix Pay payment service and a logistics business called Jumppoint. Using an in-house delivery network also helps Zirkol cut costs, Ho said.
In January, Aigniter raised more than US$5 million from investors including Mindworks Capital, Chinachem Group, Headline Asia and the Hong Kong government's Innovation and Technology Venture Fund.
Hong Kong shoppers visit a HKTVMall physical outlet in the city. Photo: SCMP / Dickson Lee alt=Hong Kong shoppers visit a HKTVMall physical outlet in the city. Photo: SCMP / Dickson Lee>
Zirkol faces an uphill battle in grabbing market share from existing e-commerce leaders in the city. HKTVMall, Hong Kong's biggest shopping app, boasts more than one million unique customers in a city of 7.69 million. The number of unique customers at HKTVMall increased 16.3 per cent in 2021 to 1,287,000, from 1,107,000 in 2020, according to the Hong Kong-listed company's annual results published March 30.
However, Ho said Zirkol does not aim to compete with shopping apps such as HKTVMall, which make money by collecting platform fees from retailers, who offer products at normal retail prices. HKTVMall founder Ricky Wong Wai-kay called the shopping site an "online landlord" in a May 2021 interview with Forbes.
HKTVMall reported a net profit of HK$14.3 million in 2021, the second year the company became profitable, down from HK$183.6 million in 2020. The company attributed the drop to the absence of consumption subsidies given out by the city government in 2020, and to its expenses from promotional coupons launched "in response to fierce competition in the retail market".
Instead, Ho said Zirkol aims to compete with offline retail outlets, including wet markets and ParknShops, one of the city's two biggest supermarket chains.
"Population density is high in Hong Kong and the retail market performs quite well," Ho said. "So we don't aim to solve the convenience problem ... We focus on saving money."
