Good News on Listing | Frost & Sullivan Assists Zhe Li Holdings Limited to Successfully List on the Hong Kong Stock Exchange (2209.HK)

Zhe Li Holdings Limited (hereinafter referred to as 'Zhe Li') successfully listed on July 9, 2021, with a global issuance of 39.5 million shares at an issue price ranging from HK$3.0 to HK$3.3, raising approximately HK$1.185 billion to HK$1.304 billion. Frost & Sullivan (Frost & Sullivan, hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for Zhe Li's listing and hereby warmly congratulate them on their successful listing.

During the process of listing in Hong Kong, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing the writing of relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important sections), helping the company communicate with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the company in completing feedback on various industry-related issues from the Hong Kong Stock Exchange.

According to Frost & Sullivan's report, driven by the continuous increase in online retail penetration rates, from 2015 to 2020, online sales in major regions (i.e., the United States, the United Kingdom, Canada, Australia, France, and Germany) all saw significant growth. Among the major regions, the United States is the largest online retail market, with online retail sales in 2020 amounting to approximately $730.2 billion. In 2020, the online retail sales in the three major European economies of France, the United Kingdom, and Germany were approximately $132.8 billion, $110.2 billion, and $94.6 billion, respectively. The online retail sales in Canada and Australia in 2020 were $27.3 billion and $16.1 billion, respectively. It is expected that the compound annual growth rate of online retail sales from 2020 to 2025 will be higher than that from 2015 to 2020. The following table lists the past and projected online retail sales in major regions during the indicated period.

Fashion products include clothing, footwear, handbags, accessories, etc. According to Frost & Sullivan's report, the online fashion retail market in major regions has shown significant growth, mainly due to increased consumer power, changing fashion trends, and continuous penetration of online shopping into the market. In the future, the COVID-19 pandemic will accelerate the shift towards online consumption and lead to changes in online shopping behavior, which is expected to have long-term impacts, resulting in faster growth in e-commerce B2C sales globally during the forecast period. For example, according to data from the Organization for Economic Co-operation and Development (OECD), although e-commerce in the United States only slowly increased its share of total retail from 9.6% to 11.8% in the first quarter of 2018 to the first quarter of 2020, it surged to 16.1% in the second quarter of 2020. The United Kingdom also has a similar development, with its e-commerce retail share increasing from 17.3% in the first quarter of 2018 to 20.3% in the first quarter of 2020 and significantly increasing to 31.3% in the second quarter of 2020. With the macro trend of online retail, the online fashion retail market is expected to achieve steady growth during the forecast period because fashion is centered around lifestyle and covers all aspects of modern daily life, from today's outfits to life attitudes. The following figure lists the past and projected online fashion retail sales in major regions during the indicated period.

For consumers shopping online, beauty products are one of the main product categories in the online retail market. The online beauty product retail market in major regions has shown significant growth, mainly due to increased consumer power, increased product selection, increased awareness of skincare, and continuous penetration of online shopping into the market. Similar to the future development of the online fashion category, the online beauty product retail market is also expected to grow significantly due to changes in consumer behavior triggered by the outbreak of COVID-19. Customers are becoming more cautious about staying in public places and have partially shifted from offline to online consumption to avoid inconvenience caused by crowds and offline shopping. It is expected that the number of online shoppers will gradually increase and expand from product categories that they only purchased in physical stores to online shopping. The following figure lists the past and projected online beauty product retail sales in major regions during the indicated period.

Korean beauty products are a subcategory within the entire beauty product category. Due to citizens' deeper understanding of Korean culture, as well as the foundation of improved product quality and reasonable prices, brand reputation has been enhanced, making Korean beauty products more popular in recent years. South Korea is one of the major beauty product manufacturing countries globally, with sufficient R&D and manufacturing capabilities ensuring stable supply chains, which is conducive to product expansion and meeting the diverse needs of downstream markets. The market share of Korean beauty products in the online beauty product retail market in all major regions has continued to grow from 2015 to 2020. It is expected that this market share will further increase by 2025. In 2015, 2020, and 2025, the estimated market share levels in major regions (the United States, the United Kingdom, Canada, Australia, France, and Germany) were 5.8%-13.1%, 10.4-14.5%, and 9.9-19.5%, respectively. The following figure lists the past and projected online Korean beauty product retail sales in major regions during the indicated period.

Online retail can be classified into cross-border online retail and domestic online retail based on the regions where merchants and consumers are located. Cross-border online retail is an international trade form where consumers purchase goods from merchants located in other countries and jurisdictions through the internet, while domestic online retail refers to online transactions between merchants and consumers within the same country or jurisdiction.

Online cross-border channels have become one of the main channels for consumers to shop. With increased per capita income, higher expectations for product variety or brands, and convenient logistics that prompt global freight and cross-border online retailers to advertise, consumers are becoming more accustomed to purchasing products or brands from multiple options, including foreign goods. The following table lists the past and projected online cross-border fashion retail sales in major regions during the indicated period.

In line with the trend of online beauty product retail sales, from 2015 to 2020, the global online cross-border beauty product retail market in major regions also experienced rapid growth. However, since online cross-border retailers can offer product options different from domestic online retailers, domestic consumers tend to use online channels to purchase products from overseas markets. The following figure lists the past and projected online cross-border beauty product retail sales in major regions during the indicated period.

Given the popularization of Korean culture, consumers' greater emphasis on skincare, and more beauty products available on cross-border Korean beauty websites, the online cross-border Korean beauty retail market in major regions has developed rapidly in recent years. In the future, due to easier access to Korean beauty products and the foundation of improved product quality and reasonable prices enhancing brand reputation, the market for online cross-border Korean beauty products is expected to continue growing.

In 2020, the proportion of online cross-border Korean beauty retail sales in major regions accounted for more than 40% of total online Korean beauty product retail sales. It is expected that by 2025, the proportion of online cross-border Korean beauty product retail sales in major regions will exceed 45%. The limited offline retail channels for Korean beauty products are the main reason why the proportion of online cross-border Korean beauty product retail sales exceeds that of online Korean beauty product retail sales.