An accusation often levelled at UK investors is they don’t ‘do’ technology.
If the demand for shares in Samarkand Group PLC (LON:SMK) is anything to go by then their appetite is definitely changing.
The China-focused e-commerce specialist’s IPO on the Aquis Stock Exchange was heavily over-subscribed and it will bank £17mln (slightly less after fees) in growth capital rather than the asked-for £10mln.
A cursory inspection of the business reveals why there’s been so much interest.
Samarkand has bucked the trend in the tech sector. It is a fully formed company, with a proven model backed up with a significant revenue stream.
It’s not some bright idea with a hastily scribbled business plan or an ill-thought-out reverse takeover with a bunch of disgruntled legacy shareholders.
For want of a better term, Samarkand was and is ‘oven-ready’.
Look beneath the hood
A look beneath the hood reveals it to be much more than a run-of-the-mill online vendor.
Instead, it offers turnkey solutions to brand owners wanting to tap into the giant Chinese market enabled by a platform that combines a managed service with the company’s software expertise.
Its Nomad technology platform helps Western business navigate the parallel digital universe that has developed under Xi Jinping and his predecessor Hu Jintao.
As Samarkand chief executive David Hampstead points out, China doesn’t have Amazon, instead, it has Tmall, JD.com and Xiaohongshu (Little Red Box).
“There’s no Facebook or Instagram,” he adds, warming to his theme.
“It’s WeChat or Weibo. And for payments, there’s no Visa or MasterCard, people don’t use those in China; it’s Alipay and WeChat Pay.
“And then there’s the logistics and delivery companies, UPS, DHL; these kinds of companies aren’t used by or particularly familiar to Chinese consumers. They have their own services, the most well-known of which is SF Express.
“So, what we’ve done is plugged into all parts of the Chinese [e-commerce] ecosystems so that we can then offer the brands a bridge or route into this market.”
The Nomad offering has four facets – Checkout, Storefront, Commerce and Distribution – while Samarkand also markets its own Probio7 probiotic product on the platform.
Its software-as-a-service proposition Nomad Checkout allows Chinese consumers to pay for clients’ goods using methods such as Alipay and WeChat Pay rather than the traditional credit card.
Storefront, meanwhile, puts Western companies on popular e-commerce sites such as the aforementioned Tmall and Xiaohongshu. Not only that, it provides product management, order processing, stock management and analytics.
The Commerce product is for companies that want to establish their own customised presence in China, while Distribution provides access to local influencers and potential celebrity backers of European products.
Brands such as 111SKIN, Shay & Blue, Omorovicza, ICONIC London, Philip Kingsley, Temple Spa, Zita West Products, and Planet Organic use Samarkand’s services in one form or another. And the list is growing.
Revenue from these products and services is a mix of project fees, commissions and recurring payments (for the SaaS elements, at least).
Using the platform to promote its Probio7 product has seen sales grow from £1.5mln in 2019 to £3.5mln in the most recent year. Not a bad effort.
“We refreshed the brand a little and marketed to China,” says Hampstead. “We’ve managed to do in 12 months in China what it has taken years in the UK; we’ve seen explosive growth.”
Use of proceeds from its recent IPO will include acquiring new branded products that have the potential to undergo a similar commercial revival.
“There are a couple of acquisitions that fit the model – complementary brands – that we can see,” Hampstead explains.
As well as this, funds will be deployed to develop Nomad and roll out the Checkout service, fulfilment, and the firm’s “operational capabilities”.
In opting for a listing on the Aquis Exchange, Samarkand has taken the route less travelled; AIM would have been its traditional home.
Brits really do ‘get’ technology
Aquis has had its detractors as, in its former incarnations as NEX and PLUS, it was seen as a place smaller companies went to atrophy and slowly die.
Under current management and a new name, it has styled itself as the lighter touch, technology-driven alternative to the now rather clunky and expensive LSE junior market.
“We spent some time talking to the people at Aquis, and I think we are both very well aligned; we are both trying to do similar things; we are disrupting the distribution industry,” says Hampstead.
In listing on Aquis, Samarkand has shown you don’t have to go to the US to get a following – and that we Brits get technology.