@Floggit
Very good question and surprised there hasn't been more discussion about this. Here is Garrison's answer (which he asked be shared with other shareholders). The question was about the large increase in Sales Transaction Expenses, which seems to be the reason for the lower margins.
"Thank you very much for your support. We welcome shareholder questions. This question has certainly been asked already by a few others, we should have remembered to put a note in the annual report.
- These are fees we pay for the platforms such as Amazon, eBay, Catch and Kogan for selling on their platforms. Although we very much saved the cost of advertising, but we still have to pay these marketplace operators because they bring in the traffic, cover fraud charges, credit card or BNPL and other bank chargers etc.
- There has been an accounting software changes during 2020-2021. Marketplace transactional cost (fees) were classified into Cost of Goods in FY2020. The amount is at $472K. You may add this into “Transactional cost” to make the two year comparison.
- Overall, the ratio of the fees we pay to Marketplaces such as Amazon/eBay etc. are consistent according to our internal data.
- Also note that this fee included FBA fees which also covered delivery cost to customers as well as warehouse/pick&pack etc. by Amazon, since a big portion of the business is done via Amazon FBA, this contributed the increase in the “Transaction Cost” in FY2021.
- We have a large increase in revenue generated by the marketplaces in 2021 compared against 2020. Note that we only started the push into marketplace business and getting revenue at beginning of 2020. This also consequently reflected the significant increase in the total transaction cost.
- The business was more focused on gaining market shares in the 2nd of FY21, moving forward, we expect that margin will slowly improve because the following reasons:
- Better buying power
- Diversifying into some non-Tech categories
- Increasing import and Private Label business
- Balancing revenue vs gross profit (giving up some low margin brands or products)
Feel free to share with other fellow shareholders.
Garrison
"
