Letter from CEO Jia Dongmei to ShareholdersDear Sir or Madam,
Glad to notice you that Good Life and Esprit officially signed restructuring and listing agreement on Nov.28, 2007. We are now preparing necessary document to relevant authorities. The reverse merger is expected to complete before Jan 1, 2008. At that time, Good Life will obtain a new stock code and CUSIP code and list in US.
It is no doubt that the news is so encouraging! Our experience and team left good impression to Mr. Garr Winters, CEO of Esprit, and his team. Both of us are full of confidence that we can make more opportunities in China and develop our business.
Since its establishment in 1998, Good Life has developed with surprising speed. On the Christmas Day in 1998, the first store of Good Day named Unity in Cangzhou opened. It had area of 70 square meters, and accommodated 3300 varieties. With the high praise of customs, its sale achieved 15,000 RMB on the same day, creating the highest gross margin and average benefit of single shop of Hebei industry, which indicated the lucky start of Good Life.
Good Life developed rapidly in these 9 years. Its sale and stores increased with the speed of 95% every year: from 1 store to 1,600; from 5 shareholders to 100; annual sale increased from 30,000,000 RMB to 500,000,000; annual profit increased from 300,000 RMB to 17,000,000; from the first team of 5 people to the management team of 50…So far, we have experienced the joy of sharing success in the progress of growth, the tough revolution of business star up and innovation; the failure of the market management, the advancement of turning passive acceptance to active enterprising. Diligent management, continuous improvement and creation of experience and new mode form the brand culture and value of Good Life. We are so pleased that we made a young, professional and dedicated team with good ability of learning and creating.
During these 9 years, our team led our staff, owners of franchise stores, cooperative suppliers making lots of contributions and achievements in the progress of serving customers, attending social commonweal activities, upgrading the business management and developing franchised stores. We have won highly praise of customers, suppliers, and stores owners. With the support of the government, society and banks, we have established good reputation, obtaining extensive support and praise from public and medias.
We have won a lot of awards from government during the past 9 years:
Member of China Chain & Franchise Association, Enterprise of Franchise Registration
Member unit of Hebei Chain & Franchise Association
First franchise commercial enterprise passed the certification of ISO9000 Quality System
China Famous Commercial Enterprise
China Famous Commercial Service Enterprise
Credit level AA enterprise of Industrial and Commercial Bank of China (ICBC)
Excellent experimental enterprise of “Market Project of Thousands of Villages and Townships” of Ministry of Commerce of PRC
One of the industry leaders of Hebei circulation sector
Demonstration unit of Hebei enterprise informationalization application
The Consumer Creditable Unit of Hebei Province
Demonstration enterprise of Hebei E-Business
Hebei Famous Commercial Enterprise
Most Competitive Enterprise on the Market of Hebei Province
Hebei Famous Commercial Service Enterprise
From 2005 to 2007, Good Life launched the plan of retail franchise stores through E-net in Chinese country, which won encouragement of project of country informationalization, innovation fund, and stores exploitation of Market Project of Thousands of Villages and Townships from China government.
Due to the attention and exploitation it made to country market, Good Life achieved great successful these years. The company makes use of its own brand, marketing mode and management skill to extend chain sites from city to country, forming the development pattern of integration of urban and rural, and the interaction between urban and rural, exploring a path to develop rural market with the feature of Good Life.
According to the developing requirement of market and enterprise, making use of eternal site of supermarket in rural areas, brand influence of multi-year management of chain supermarket, credit advantage, and powerful logistics delivery system, Good Life established rural E-business integrated service platform in 2006 which combined “chain supermarket real net” and “E-business fictitious net”. Since it is the first platform of China rural E-business, the governments pay more attention to it. Therefore, Good Life won many awards as China Famous Commercial Enterprise, Demonstration unit of Hebei enterprise informationalization application, Demonstration enterprise of Hebei E-Business, and Most Competitive Enterprise on the Market of Hebei Province, etc.
Influence of Good Life in rural areas: Good Life is the first retail enterprise that entered in China rural market. Since 1998, it has 9 years’ experience in country and villages in the field of retailing. Good Life has profound understanding of rural market and consumption habit of peasants, and established stable foundation in rural market.
Every franchise store joined Good Life can upgrade its business management, especially in rural area: first, “Good Life” peasant shop makes good demonstration there, and many grocery shops run by couples want to join “Good Life”; second, franchise stores win excellent profit that the average sale is 1,200 RMB per day, and the profit reaches 1,000-3,000 monthly. The sale of all franchise stores joined Good Life increases by more than 50%. For example, one store in Liminju Village of Hejian is a private store before joining, with the daily sale is only hundreds RMB; after joining Good Life, the average sale achieves 3,000 RMB per day. Third, normal peasant shop of “Good Life” has a great variety of goods. It is welcomed by peasants because of the proper price, good reputation and service. Peasants say that “Good Life” bring them good life.
Management mode of Good Life brings profit increase: The management mode of profit of Good Life is consisted by three main businesses: logistics service, business management, and E-business operation service.
Logistics: At present, Good Life has three logistics and distribution centers, with the total area of the centers is 90,000 square meters, 20 trucks, average varieties sending out reach 7,000 per day, separately take charge of the goods supply for stores in Beijing, Shijiazhuang, and Cangzhou. The logistics center adopts commission distribution service, that is, supplier commission logistics center to store goods and distribute goods to stores, and terminal store makes order from the net, pays for goods directly to account of supplier. After supplier’s confirmation, the distribution center will send goods to terminal store. Peasants’ shops distribute goods once every 2 days, and stores in village and town distribute goods once per day. Service fee the company charges for suppliers is 3-5% of distribution expense per year. Compared with original logistics mode, the company reduces more than 3% distribution cost for suppliers. Moreover, through the logistics center of Good Life, suppliers can obtain stable sale market and income, which is also the reason why the logistics service win praise of suppliers. Recently Good Life intends to construct more complete logistics system. Regarding Beijing, Tianjin, and Hebei as the center area, the logistics center may achieve 19 in three years, and extend to the whole country. They will use more advanced system of automatic selection and distribution to improve supply efficiency further.
Business management: With the advantage of store network entering and serving rural area, Good Life directly develops the purchase and sale of agricultural products and sideline products, and provides agricultural production property, fertilizer and other projects. This direct service reduces the supply chain and brings obvious profit. With in the vast market, Good Life vigorously develops business as brand making, exploration and business management, in order to bring alternant and different service to all member stores and peasants members, as diverse native product, special product, diverse goods, proper price for supply, all kinds of products. The service can not only win satisfaction and loyalty of customers, but also strengthen franchise stores’ ability of acquiring profit and competition, bringing more benefit to Good Life in the same time.
E-business operation service: E-business B2B trade platform of Good Life can support stable and high efficiency information system of E-business management and service for real store net, logistics and suppliers; provide excellent service for suppliers, franchise stores, and logistics members, and meanwhile win profit.
Expensive rural market:
China has 950,000,000 rural populations that take 75% of the total population of the country, which provides good opportunity for the construction of supermarket chain. However, the truth that people living dispersedly in most areas influences the collection of business net and the exploration of supermarket chain. In a way, rural market, especially market which regards villages as supply target, is not developed. The particularity of rural population makes the “whole-big, part-small” feature in rural market. The bigger the income and purchase ability of customers are, the higher the turn over of supermarkets. Due to this rule, there are two aspects reflected on the peasants’ income: On one hand, peasants’ income continuously increases every year. The average net income increases from 500 RMB in 1985 to 3,587 RMB in 2006. On the other hand, the increase range of peasants’ income is low. From 1997 to 2003, the extent of average net income keeps below 5%, and the real extent reached 6.2% in 2005, and 7.4% in 2006. Compared with the real extent 9.6% in 2005 and 10.4% in 2006 of urban residents, the income extent of peasants is smaller.
In 2005, the Ministry of Commerce of PRC launched Supermarket Chain Construction Project of Thousands of Villages and Townships, intending to establish 250,000 standard commodity supermarkets in 70% towns and 25% natural villages of the whole country within 3 years. The old market will be changed into the new strategic area for franchise through the powerful support of government. Good Life will also keep developing in such a market.
Looking forward to the future:We plan to open 20,000 stores in Beijing, Tianjin and Hebei area with in 3-5 years, realize 30,000,000,000 RMB deal of commodity, agricultural production and property supply online per year, invest to establish 19 new logistics distribution centers, and finish daily business 100,000,000 RMB of E-business B2B with the market covering Beijing, Tianjin, Hebei, and Shandong. On the basis of such big business service operation network, we will realize our three main businesses step by step, establish system that combines real net and fictitious net of “Good Life franchise stores” + “Good Life E-business platform + new logistics distribution”, and collects services of E-business, franchise management and logistics distribution to rural area, and gradually extend to other service fields as science and technology information, finance, credit of small sum, insurance agricultural futures and so on.
The successful merger with Esprit establishes a fast financing channel for the management and development of the company and the development of rural logistics trade. Good Life is the representative of China northern rural area. Therefore, that you choose to invest in Good Life means you invest in China rural market. We believe that the special mode of E-business Good Life selects to serves rural market has vast developing space. In next 5 years, Good Life will still establish and strengthen the retail marketing and logistics system that face rural area. Regarding suppliers and retailers of rapid consumable as service targets, integrated service system of combination of B2B E-business trade platform, logistics, and retail terminals as operation mode, Good Life will provide more products and excellent service for customers in urban and rural areas, and create the biggest integrated service system that is consisted by retail net chain based on E-business B2B and logistics. The cooperation between Good Life and Esprit is a good start. Esprit can bring new management concept, business mode, advanced managing skill and international experience to Good Life on the management and service to rural area, accelerating the development of the company.
In the end, I want to express my gratitude to all shareholders for your trust ad support. Our target is continuously developing our business and searching for new opportunities to create new value for shareholders. We believe the future of Good Life will be much better.
Jia Dongmei CEO
December 18, 2007
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