Ann: Corporate Presentation, page-30

@SaberX

There isn't that much info that I'm aware of that discusses the contracts themselves, so my opinions are definitely my own based on what I've heard, and what I'm seeing through the financial analysis (and also what I know about the industry).

A few random thoughts below:

(1) The contracts are a combination of service fees and commissions per sale (FACT)
(2) The actual activities conducted by RLG are likely to vary from contract-to-contract. RLG puts itself out there as offering a full end-to-end offering to customers, my guess is that this means a customer can outsource some or all of the various activities that go into selling the product on Tmall - this would possibly include things like website/store build, images/descriptions, translation, payments (processing/cash receipt), logistics, customer interaction, marketing, after-market support... who knows, I guess the list goes on. We've seen with Murray River Organics (the 10m contract) that this can also include the offline sales/marketing of products through different channels in China (e.g. CostCo and others)
(3) From the "services" offered by RLG above, perhaps the only thing that would not grow as the volumes grow would be the website/store build, which is one-off. Other things that are within the contract are things that will also grow. Perhaps these are things that are included as part of the commission that RLG earns, which may mean we have a stronger commission for some contracts than others. The other thing that's unclear is the margins we would earn of these contracts. I would expect that as volumes grow, we get some scale efficiencies that will push us into profitability over time.
(4) Following from the above, there is also some type of "maintenance fee" in the contracts which seems to be an annuity - i.e. a fixed fee we receive from the customer regardless of sales volumes. Given all contracts are in their infancy (all less than 12 months old), my guess at this stage is the vast majority of the $2.5m quoted is this stable service income, which has grown as more customers have come on-board (especially since none of the stores are yet trading at volumes that would generate significant revenue from sales commissions (even if the commission was something like 50% - which it won't be). This is why I think the $2.5m will create a new lower-baseline for the company for future quarters. This baseline should continue to grow with new customers, and then (as volumes on stores increases), we should get the extra boost from sales commissions.
(5) As for the $10m contract, this is still very fresh, so I doubt we would be seeing a large chunk of the $2.5m coming from this in Q3. As we continue to learn more though, I guess the story will evolve. Let's see. Interested in others thoughts. The company is still incredibly young, but has already shown me so many positive signs for the future, let's hope it continues on this path
(6) Why use RLG? E-Commerce in China is definitely unique. One of the major drawbacks I hear re. RLG is that they are not offering anything unique - that a company could just do it themselves. Yeh - okay, I hear that. How many companies have the ability to build an online store? Sure, okay, medium-sized companies might. How many can then translate that into Chinese? Okay, possible again, but you need to pay someone to do that as that's not a skill that western companies possess in-house. How many know how to get paid? Pretty big issue, and it is hard. How do you market? find influencers? protect your brand IP? deal with delivery of products into random chinese addresses? offer payment options for locals that aren't credit card based? tap into local alternatives like a wechat storefront, etc. etc. This list is an absolute mind-f*** for anyone who doesn't have a strong Chinese presence and/or experience dealing directly into the Chinese market. Most will use a local distributor, but the potential for growth, profit value back, downside risk re. controls with foreigners, etc. etc. is huge. My guess is that RLG will be super attractive. The real question here for me is - how the hell does RLG find the right customer? Not sure how that's done, but I reckon the pitch is the easy part to be honest!

Read this (and the hundreds of other similar articles): https://www.cnbc.com/2019/04/18/amazon-china-marketplace-closing-down-heres-why.html - now tell me RLG is doing something that anyone can do. Being in bed with tmall is like being on the right hand of god.

All the best to holders. Only a matter of time!