Qingdao Footwear, Inc, through its subsidiaries, is a retailer and designer of high quality leather footwear throughout China under the brand name "Hongguan" sometimes presented as "HonGung". The Company offers a variety of men's and women's casual and business wear shoes. Products are primarily designed to meet the needs of China's price sensitive entry level employees, but also rise to the style of middle management executives of China's growing office and retail working population. The Company has outsourced production of its products through independent manufacturing companies. Sales channels include Qingdao Footwear owned retail stores as well as approved third-party retailers and distributors authorized to sell its products. As of March 31, 2010, Qingdao Footwear's products were sold through over 200 retail outlets. The company was formerly known as Datone, Inc. and was founded in 2003. Its headquarters and main sales office are located in the city of Jimo in Shandong province.
We believe that the market for affordable, high quality footwear in China provides us with attractive and sustainable growth opportunities. We intend to pursue the following strategies to achieve our goal:
Continue our aggressive marketing and advertising campaigns in order to gain brand awareness . We currently advertise and market our products throughout Shandong province in general and the greater Qingdao region in particular, using a combination of advertising across a variety of media, sales fairs, and billboard displays. We expect to continue to focus these efforts.
Expand distributor and third party operator stores in prime locations to maximize profits. We seek to place stores in locations we consider attractive from a business perspective. Potential attractive locations are typically in areas that are likely to have a sufficient population of "window shoppers" in the Registrant's target demographic (generally, consumers seeking business casual and formal leather shoes appropriate for an office setting). We do not currently plan to expand our geographic footprint beyond what we view as our core market, Shandong province. In addition, we expect that we will continue to strengthen our presence in the Qingdao region.
Bring more self owned stores online to increase higher margin sales. Although we have not established a timeline to increase the number of self owned stores we will open in the near future, we expect that we will open more self owned stores (and at a faster rate) if we complete this offering than we will open if we rely only on organic growth to fund such openings. The reason for this is that we have found that expanding our distributor network allows us to leverage our resources more effectively, even though we earn higher margins on our self owned stores. In the event we complete this offering, however, we would have free cash available to devote to opening self owned stores. In our experience, establishing a new sales point such as a company-owned flagship store in Qingdao typically requires approximately three months and costs approximately $120,000.
Continue to strive for excellence in quality, customer service and design in order to attract new and retain repeat customers. We have an in-house product design team, which is responsible for designing our product lines. We have worked with this team and our advertising team to develop an image for our Hongguan brand that we believe will continue to attract customers in our target demographic of office workers. We recognize employees on a regular basis to encourage a concerted effort of high quality customer service.
Leverage our growing purchasing power with manufacturers to lower costs. At present, we have found that Chinese shoe manufacturers have unused manufacturing capacity. To the extent we have demand from customers for our branded shoes, we believe we benefit from a favorable market in which to purchase from such manufacturers. If we continue to grow, we will be able to use our increased purchasing power and the desire of manufacturers to make use of such untapped capacity to reduce our costs to purchase footwear.
As of December 31, 2010, we had 12 flagship stores, 11 exclusive third party managed retail outlets and 192 outlets managed by distributors. We plan to open a minimum of 5 additional flagship stores in 2011. We directly own or lease and operate all of our flagship stores. All located in Jimo or greater Qingdao. Each store has an individual sales team and managers that report to our central office in Qingdao. All sales staff are compensated on a commission based pay scale. Locations are selected according to management's estimation of market opportunity. Our flagship stores bear the Hongguan brand name and exclusively retail Hongguan footwear.
The following diagram details our current distribution channels:
Sales, Assets & Liabilities
Total revenue for 2010 was $21.2M.
Revenues have increased exponentially since 2007:
2007 2008 2009 2010 ____ ____ ____ ____ $8.6M $13.9M $17.9M $21.2M Our net sales increased to $21,272,234 in the year ended December 31, 2010 from $17,863,891 in 2009, representing 19.1% revenue growth. As retail sales trends and broader economic growth in the PRC have been positive despite a global economic downturn, during the year ended December 31, 2010, we increased prices by 26% in order to achieve higher gross profit, which resulted in a decrease in sales volume of 1% as compared to the same period of 2009.
Advertising & Marketing
Our sales and marketing department is responsible for the organization of sales fairs, selection, review, execution and management of contracts with third parties and distributers, and operation of our own retail outlets. We utilize television, print media, radio, the internet and outdoor billboard displays to build brand awareness. Chinese popular television star Ren Quan is currently the face of Qingdao Shoes' advertising campaign. In 2006, we entered into a contract with Ren Quan and purchased the rights to use his image for our marketing purposes, and he is often featured in our television commercials and our various advertisements. We are contractually obligated to maintain confidentiality as to the terms at which we acquired his rights. In 2010, we entered into a contract with another Chinese popular television star Liu Xiaohu and purchased the rights to use his image for our marketing purposes, and he also is featured in our television commercials and our various advertisements.
Share Structure for QING : ( verified with T/A 11/08/2011 )
Authorized shares: 100,000,000
Outstanding shares: 12,123,679
Float (non-restricted): 3,345,139
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