Macao market

1. Introduction to Macao

Macau is situated 60 km (37 mi) southwest of Hong Kong and 145 km (90 mi) from Guangzhou. It also has 50.2 km (31.2 mi) of coastline, yet only 0.31 km (0.19 mi) of land border with Guangdong. Land size is 30.4 km². It is the most densely populated region in the world, with a population density of 21,185 persons per square kilometer in 2016. Table 1 shows the basic economic indicators in Macau, the Gross Domestic Product per capita in Macau was last recorded at 53,619 US dollars in 2015. Macau's economy is based largely on tourism. Other chief economic activities in Macau are export-geared textile and garment manufacturing, banking and other financial services. The clothing industry has provided about three quarters of export earnings, and the gaming, tourism and hospitality industry is estimated to contribute more than 50% of Macau's GDP, and 70% of Macau government revenue. Macau is a founding member of the WTO and has maintained sound economic and trade relations with more than 120 countries and regions, with European Union and Portuguese-speaking countries in particular; Macau is also a member of the IMF. The World Bankbclassifies Macau as a high income economy and the GDP per capita of the region in 2016 was US$51,511. According to the statistical analysis from Statista in year 2016, the retail sale was 1.29 billion MP to household electric appliances, the market share of household appliances was 2.24% in retail system, and it was not the major consumption in Macau. As we think in the market of Macau, its economic development most focused on the gambling and tourism, so the ratio of sales of household appliance in Macau was a small market, and the purchase could be from the residences not tourists.

2. WDIRC selling

The forecast of WDIRC selling can be shown in Table 2 during the first ten years since product launched. Here the assumptions of households, occupancy ratio, initial sale, selling price, and manufacture cost are 170,769, 0.0200%, 34, 350 and 200, respectively. The first year is set as the baseline for comparison with the following years, the sale volume, year penetration, revenue, cost and profit are 34 (sets), 200 (ppm), 11,954 (USD), 6,831 (USD) and 5,123 (USD), respectively. As we think, the growth rate with years will be 1, 3.00, 4.93, 6.45, 6.75, 9.01, 11.78, 15.56, 15.92 and 17 times over the first year. The year penetration of WDIRC will be from 200 ppm to 3,396 ppm at the end of tenth year, the totally ownership (penetration) is close to 1.825%, it still is a low penetration ratio in Macau even WDIRC listed in market for ten years. However the revenue, manufacture cost and profit these three also present an ascending trend, the profit earned from Macau is about $ 0.087 million at the tenth year in an exclusive market, it owns a huge market and profit in this market. Totally according to our prediction and assumption, the selling in Macau will be up to 3,117 sets, even this, the penetration ratio is still lower than other consumption electric products such as TV, Refrigerator, Air conditioner, and Wash machine.

How about the annual growth rate for selling WDIRC in Macao market? Fig. 3 shows the result. Here the calculation of revenue can use this equation as “WDIRC’s Revenue = Annual growth rate * Year + Baseline”, the formula can be written in a mathematic equation in Figure. According to this regression by data simulation, the annual growth rate it take about 22.14k per year (r² =0.9753), in other words, by averaged the annual revenue is $22.14k in Macao market for selling WDIRC product.

3. Rice selling

A ten-years forecast to WFR sale, after WDIRC launched in Macao market, is presented in Table 3. The first year since the marketing of WDIRC, online/offline deals for WFR sale are 550 kg, here the assumptions of population, rice consumption, sharing of WFR, online buying rate and market sharing are 597,126, 36.90, 0.10%, 5.00%, and 50%, respectively. How to calculate the WFR volume by online/offline sale, Eq. 1 is the equation for calculating the WFR sale volume.

Eq. 1 SaleVolume=Population x RiceConsumption x WFRratio x On/OffBuyingRatio x MSharingRatio

(e.g. 550 = 597,126 x 36.90 x 0.001 x 0.05 x 0.5)

The use rate of WFR is set as 0.00092 kg/person-year. Based on this, we can get the annual revenue is $ 1,100 (WFR priced as $2), and the profitability is set to 10%, so the profit that will earn $ 110. Changing with the time, the ratio of WDIRC in kitchens will increase and cause the use of WFR increasing. We assumed the series of growth rate (G.R.) by years is 1, 4.07, 6.35, 9.16, 13.61, 19.22, 24.49, 34.67, 39.97 and 51.05. G.R. it is based on the prediction of WDIRC’s growth. By this series of G.R., both revenue and profit, they will also be presented like this serial when the dealing cost of WFR through online/offline transaction is keeping constant. Whatever the cost of online/offline transactions depends on the volume of WFR’s selling, so if the volume with time is scaling up, the dealing cost will be significantly lowered, in other words, the profitability with time will increase more than our prediction. If all hypotheses are true, the profit in tenth year will approach to $ 5,616. Eq. 2 calculates the penetration of WFR which to be used in this country by people. From this indicator (URate of WFR), we can see the level of penetration of WFR, even at the tenth year, the level of WFR use rate in Japan is still underestimation, that’s meaningful for us to optimistically think, the use rate of WFR can be easy completed and it will be grew up more than our prediction.

Eq. 2 URate of WFR = SaleVolume of WFR / Population

(eg. 0.00092 = 550 / 597,126)

Regarding the revenue of WFR selling in Macao, Fig. 4 shows the result. This is a prediction by data simulation according to our assumption, the regression could be calculated as “WFR’s revenue = Annual growth rate * Year + Baseline”. The result shows the annual growth rate is 5.966k per year (r²=0.9491), in other words, the increasing of revenue of WFR selling in Macao is $5.966k dollar per year. This growth can help the company to maintain its team in the local market for servicing customers.

4. To summarize the revenue and profit

Here according to the estimations above, we summarize the incomes from sales of WDIRC and WFR in Macao. Both revenues and profits are presented in Table 4. In the first year, the products of WDIRC and WFR are unfamiliar with Macao people; namely the recognition and acceptance aren’t well to local consumers, so on the beginning (1^st year) sales would be not good and the totally revenues and profits will be $ 13,054 and $ 5,233, respectively. Both of them will increase with years when selling with good experiences and promotions. Through our forecast, at the end of tenth year, the profits of WDIRC and WFR will be up to $ 87,000 and $ 5,616, and the totally profit will be $ 92,616, this is a huge profit which be created in Macao market by our novel products and services.

Totally the revenue of WDIRC and WFR (2W) selling in Macao market can be shown in Figure 5. The 2W revenue in first year is $13.054k dollars, after that the growth rate of revenue is $28.106k per year, this is a simple regression by mathematic model to predict the revenue on product selling. In practice, there are other factors that need to be considered much more, it could be higher than this or lower. Whatever by this calculation let us to trust that the market it always be there.