Shares in microcap digital commerce business eCargo Holdings Ltd (ASX: ECG) soared more than 200% at the open today after the company announced it had been engaged by Woolworths Limited (ASX: WOW) to provide services to Woolworths’ operations in China.
eCargo will build and manage Woolworths’ storefront on Tmall, the largest B2C (‘Business To Consumer’) online marketplace in China.
While Tmall is unlikely to ring a bell with readers, they may recognise the name of its owner, Alibaba Group. eCargo will coordinate Woolworths’ inventory, packing, and distribution as well as conducting digital and social media advertising on Woolworths’ behalf.
The announcement was light on details such as the anticipated windfall for eCargo, although management quoted market research that indicates China’s total e-commerce sales in 2018 could be US$1.568 trillion, up from an estimated $672 billion this year.
A number of Australian companies like Blackmores Limited (ASX: BKL) and Bellamy’s Australia Ltd (ASX: BAL) have made a splash in China, and eCargo’s product offering looks to be a unique way to grow off the success of others.
Certainly China is an enormous opportunity for many Australian companies, and these companies will likely require assistance (in one form or another) to enter China with its brands and/or products. eCargo Holdings would appear to have a decent opportunity ahead if it can successfully deliver on its promise.
Curiously, despite today’s rise, shares in eCargo are still down somewhat from recent highs of 40 cents hit earlier this year. Shares in Woolworths were up 0.9% at the time of writing.
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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.