Thailand’s COL, a subsidiary under Central Group held a shareholders meeting Wednesday and made significant announcements regarding the future of its online business. The group is planning to sell its B2C online businesses to its parent company to focus on growing online B2B operations.
COL has three key businesses:
- B2S books and stationery stores
- OfficeMate stationery stores
- Online platforms Central.co.th, Robinson.co.th and Zalora.co.th.
According to an attendee of COL shareholder meeting, originally posted on LongTunMan blog, the following took place:
The most significant moment of the meeting came after a reflection of last year’s performance. Management explained why they were “taking a step back from online business”. The main reasons being:
- Market leader and new competition within the ecommerce landscape
- Unlikely to be profitable in the near future (subsidies too high)
- The online business requires more monetary investments at a large scale
“Currently, ecommerce in Thailand is a cash-burning race. The top performing player, LAZADA, is losing billions of baht. Central is not ready to experience losses of that scale in order to participate in the online race. All B2C online businesses under COL will be sold to Central Group, which has significantly more resources to fight the competitors,” wrote the attendee of the meeting.
COL business plan* shows that in 2016 the net loss of its digital & online business was 330 million THB (9.5 million USD).
That is almost double the net loss of 185 million THB (5.3 million USD) in 2015. Stepping out of online business will significantly improve COL profits.
The attendee of the shareholder meeting noted that as soon as the management made their announcement, shares went up 22% to 39.5 baht. What do shareholders think about this?
“Some may be disappointed that COL is pulling out. However, shareholders prioritize a company’s profitability. If we were to study performance results from 2016, it becomes clear that by removing its online businesses, the company will gain 86% in profit,” says the LongTunMan post.
Next steps for COL
In its business plan, COL has defined that one of the key strategies to continue sustainable growth is to develop a new online B2B platform that matches vendors and potential customers in various industries.
By focusing on B2B operations, it will serve as a quicker win for COL. The company already has a strong consumer base in that area.
According to LongTunMan, “management has announced that COL will now be an abbreviation for “Central Omni Logistics”, as the company will shift its focus to B2B.
This is where the company’s expertise lies, and remains a market leader. COL currently claims 80% of market share for office supplies.
“This decision shows that in some cases, it is better to take a step back in order to move forward and focus on where your business’s strength lies. Simply put, it is not worth it for COL to put all of its resources into fighting with other players, who have more resources to burn,” says the LongTunMan’s blog post.
In addition to moving to B2B online operations, COL also wants to step up its logistics game and in the future sell third party logistics and fulfillment services to other market players.
These changes in COL are aimed to turn the company into “the region’s leading business solution center”. The company is moving away from loss making activities to focus its efforts in the B2B area in hopes of a more profitable business model and where it has significant strengths.
Find the COL business plan presentation from the annual shareholders meeting in English here.
The original version of COL shareholders meeting attendee was published in Thai, and can be found on LongTunMan’s blog here.
* NOTE: The original version of presentation from the COL shareholders meeting, accessed by ecommerceIQ on April 7, included the slide which detailed how big company’s net profit would be without its Digital & Online business. This slide, however, is missing from the latest version of its business plan’s presentation available on their website.