Glorious HQ

To the Glorious Legion,

I’ll begin with an apology for the delay since the last PTR, we're definitely long overdue! We wish we could be reaching out under brighter circumstances in the world. But despite the chaotic start to the year, the team has been busy as ever at Glorious HQ. After a strong holiday season and a very successful launch of Model D, we've finally been able to shift some attention to a lot of much-needed internal housekeeping. We have been settling into some shiny new office space in Plano Texas, while continuing to build our team and strengthening the foundation to support Glorious' recent rapid growth.

Over the last several months we've been able to ramp up a lot of ongoing R&D projects. There are some truly game-changing product launches coming down the pipe we can’t wait to share with you.

Unfortunately over the last month or so, like many companies around the world right now, some of our attention has also had to shift towards dealing with effects of the COVID-19, novel coronavirus outbreak has had on supply chains. Fortunately, as a result of some thoughtful early planning and quick action by our team, we are in a much better place than many consumer tech companies to cope with these effects. However, we are also wary of continued risks given the rapidly changing situation.

Overall, despite the uncertainty, we are confident 2020 will be a productive milestone year for Glorious. And as usual, keeping with our belief in total transparency, we want to keep our loyal supporters fully in the loop. We also hope some positive news will be a welcomed break given the situation.

SHIPPING & LOGISTICS

Coronavirus & Supply Chain Effects

Starting with the less Glorious news. As you are probably aware, the ongoing viral outbreak has caused massive disruptions to the world’s economy. The nearly month-long shutdown of factories across China and neighboring countries has had ripple effects throughout supply chains in nearly every major industry. As China has become the global hub for high-quality consumer electronics manufacturing, the tech industry has been hit especially hard. Even many factories based outside of China still rely on them for inputs ranging from IC chips to mechanical parts to essential raw materials. Aside from the slowdown in production & movement of goods, tech companies with significant brick & mortar presence in the region have seen dramatically reduced retail sales.

We’ve been monitoring the situation since the early days of the outbreak, and have stayed in active communication with our production facilities and logistics partners abroad. Although our factories have been affected like most other gaming hardware companies, we fortunately took pre-preemptive action to stockpile inventory in anticipation for the expected annual shutdown around the Lunar New Year celebrations. We currently have plenty of stock of our core B2C products in our warehouses expected to last through Q2 into Q3 2020. We've also been working with our B2B partners to ensure we can fulfill their inventory needs. And we do not have any significant brick and mortar retail presence in China.

Over the last several weeks, restrictions in China have been easing in many areas, and most factories have started to reopen as they meet new government-imposed safety standards. However, with large numbers of people still under restricted movement or not returning to work, worker shortages remain a widespread problem. It may be several weeks before full production capacity is restored (assuming the situation stays on the current course).

Shipping out of Asia has also been significantly affected. Nearly half of air freight from major Chinese routes is transported in the cargo holds of passenger flights. With mass flight cancellations throughout Asia, air freight capacity has been significantly reduced, thus leading to increased shipping prices and delays. Fortunately, Glorious relies mostly on ocean freight via container ships to export inventory. While ocean-bound capacity has also been reduced due to shortages of both port workers and lowered demand, we have been able to successfully move shipments of already finished products out of Asia. We’ve recently received news from our logistics partners that these issues are expected to improve in the coming weeks.

From even before the outbreak, we have been working to further diversify our production supply chains to reduce future risk from shocks and increase cost efficiencies. At this time, we are in a comfortable position to meet the needs of both customers and B2B partners. However, depending on how events unfold in the coming weeks, there is the potential to see further disruptions that may lead to shortages of certain products or issues with fulfillment.

Our HQ team is currently working remotely to protect our employees. As of time of writing this our 3rd party fulfillment centers are still fully operational. But if these fulfillment centers are unable to continue normal business operations in the coming weeks, or if domestic supply & fulfillment chains are otherwise affected, we could experience some delays delivering products to customers.

There is currently also heightened risk posed by travel bans and additional cancellations of commercial airline flights. This could have ripple-on effects on shipping and fulfillment operations both internationally and domestically.

We will do our best to keep everybody in the loop as this situation continues to progress. Our hearts and sympathy go out to everyone who has already been affected by this virus. We encourage everybody to practice safe social distancing and remember to wash your hands before and after using your electronics! On the bright side, everybody will probably have a lot more time for gaming over the next several weeks.

Logistics

On a more positive note, we have continued to focus a lot of attention on improvements to both our B2B and B2C logistics & fulfillment operations in the last months.

As part of the ongoing effort to better serve the needs of international customers. our sales team has been hard at work adding even more 3rd party distribution partners around the world. We mentioned in the last report the recent addition of a new overseas warehouse for B2B fulfillment - that warehouse is now fully up to speed. This will greatly improve our ability to ship inventory to our international vendors faster and more efficiently.

On our PCGamingrace.com webstore front were also making significant headway. We’ve recently upgraded the back end of our warehousing systems to enable us to better facilitate the high load of orders coming through. And next month we plan to open 2 new fulfillment warehouses in LA and Chicago. All of this should help us decrease shipping costs and delivery times for webstore customers.

Inventory

Last year inventory was somewhat of a wildcard area for us. After Model O launch, stock levels were volatile as we adapted to rapidly increased demand. However by Q4 we were able to get a handle on it, and we scaled production to keep our core products consistently flowing into our warehouses. We’ve been proud to successfully keep most SKUs of Model O / O- / D in stock throughout the heavy holiday sales period of Q4 2019 until now.

That said, we’ve still had some key items go out of stock for extended periods of time, such as GMMK TKL, Tridents, and certain colors of Ascended Cables. (PSA - Ascended cables are on the way and expected back in stock shortly). While we can’t promise we’ll never sell out of items in response to changing customer demand, it is a top priority for us to continuously improve this area of business to keep OOS times to a minimum.

We are also in the process of exploring putting new systems in place to keep customers in the loop about out of stock items coming back online. This is a much needed area of improvement for us.

Customer Protection Measures

Since the Model O launch we’ve noticed a significant increase in orders from unauthorized resellers. Internally we have no issue with our customers reselling individual Glorious products they’ve purchased for personal use, or with any of our approved distributors working with us through our official B2B wholesale operations - however we know many unauthorized commercial-scale resellers are buying large quantities of products through our webstore to list on sites such as Amazon and Ebay at extreme price markups. Often these listings are deceptively disguised as an official Glorious retail page.

While these bulk sales generate substantial revenue - we feel they’re against the best interest for our customers and our brand objectives for several reasons.

They work against our core values to keep price points affordable and product in stock. This is especially true for our most popular products. They cause confusion among customers who don’t always realize they are not purchasing directly from Glorious. We have no way to ensure they have the same purchase and fulfillment standards. We have no way of verifying the quality or authenticity of units these resellers are shipping. We’ve already seen instances of customers unknowingly receiving used or defective items through unauthorized resale channels. We are unable to provide the same level of customer support to customers who buy through unauthorized channels. For example, they may be unknowingly purchasing products with already expired warranties.

While these orders violate our current TOS and we’ve made an effort to cancel them when caught by our team - many slip through the cracks. The problem is further compounded by our decision not to sell certain products directly through Amazon.

To combat this issue we’ve begun rolling out additional countermeasures to limit the volume of unauthorized resale purchases.

We will be implementing strict purchase quantity restrictions - for most items customers will no longer be able to purchase more than 2 per order through www.pcgamingrace.com.

We will begin issuing take down notifications, cease and desists, and reports on deceptive 3rd party Amazon listings.

Any purchaser interested in bulk quantities will be directed through our wholesale order channel, and must agree to abide by our brand and resale guidelines - including price and brand standards.

We’ll be updating our website TOS policies with even more strict language related to the unauthorized resale of products. Additional action will be taken to anybody attempting to circumvent these policies.

We will be exploring partnerships with qualified distributors in regions where unauthorized resellers have filled in supply gaps.

We hope these measures will help better protect our customers, as well as the universal brand standards and values we’re building for Glorious. We encourage anybody who sees 3rd parties using deceptive practices or unfair pricing to sell Glorious products to contact us so we can deal with them.

Performance

Sales have been very strong throughout Q4 until now, as we stay on our upward trajectory. Holiday sales we’re especially excellent (up over 1100% from last year!), and fulfillment went smoothly. The mice line continues to dominate in webstore volume, but we’ve seen rapidly increasing demand for many of our other products, such as the GMMK Compact and Helios mousepad.

We’ve also started to see an uptick in competitors coming out with some similar copycat products to ours. However, thus far we’ve managed to stay on top by winning on production quality, price, and service. We’re pretty confident we can continue to sustain dominance in our segment - if anything we are flattered other companies are taking our lead, and happy to encourage positive changes in the industry.

Model D Launch

We took some definite risk launching Model D right after the holiday season - especially as an ergo design has a more niche demand. However, we were reasonably confident that there was still enough demand from Glorious fans to make it worth it. We chose to implement the same reservation system we used for Model O which had received positive feedback .

The launch went about as perfect as we could have hoped. Around 80% of people who reserved units completed their order - comparable to Model O launch figures. We are extremely proud to have been able to ship all reserved units within 48 hours of launch! Following reservation orders, most new orders began shipping within 24 hours. (We’re getting pretty good at this!)

Early response to from customers and independent reviewers so far has been phenomenal. We expect the popularity of D to continue to grow throughout 2020.

Black Friday

On Black Friday/Cyber Monday, we rolled out our first annual “doorbuster” bundle deal. Overall the promotion was a big success. The GMMK bundles on offer sold out in 10 minutes, and the Mice bundles sold out in less than 5.

However, because of the higher-than-anticipated server load during BF/CM, we had to run our scripts a bit earlier than intended, which ended up opening the deals slightly before the originally promoted time. After realizing the error, we added many more bundles after 11:00 PM CST to compensate, but we understand some people still missed the sale. This was completely our mistake, and we sincerely apologize for the confusion and anyone who missed the door buster deal because of it.

Now that we are better equipped, we will be much better prepared for future “doorbuster” promotions .

Quality Control

As always, maintaining and improving our QC is paramount. The Model D launch was the most successful yet with a very small RMA defect rate of only 0.03% across B2C and B2B channels. We have been made aware of a few minor issues on a small handful of mice - these have included slight rattling of the scroll wheel, an audible ‘creak’ or squeak when using the mouse, and ‘mushy’ switch buttons. In the vast majority cases these do not affect gameplay, and we’re already working with our suppliers to eliminate those problems. Customers are being offered adequate compensation as needed. In the few instances where issues do affect gameplay, we are expeditiously issuing RMA replacements.

Our Model O and O- RMA defect rate has now decreased significantly to 0.44% and 0.19% respectively (down from 1% and 1.5% last quarter)! With manufacturer QC improvements and the new version of the ascended cable, complaints about cable disconnections from previous batches have dropped substantially. We haven’t received any disconnection complaints attributed to defective wiring in mice with the updated cable.

While it will likely never be 0, we are constantly working with our manufacturers to improve processes and production tooling in order to reduce defect rates as much as possible.

Customer Support

CS is still our highest priority area next to product development. We’ve made it a mission to offer the best customer support in the entire gaming industry. At one point immediately following the Model O launch, the entire Glorious team(which was much smaller then) were all-hands-on-deck, answering support tickets late into the night for days on end. Less than a full year later, we’re in a different universe in terms of our capabilities and sophistication.

Since O, we’ve added 15 dedicated support team members, and an excellent experienced CS Director. We’ve been able to upgrade a lot of our systems, and implement optimized processes and procedures to stream-line ticket resolution. We’ve also put effort into expanding our knowledge database as a central repository for all customer support issues. Our average first response time to a ticket is now just over 3 hours. This is down from 60 hours average response time following the Model O launch in May of 2020, and 5-6 hours at the time of our previous PTR.

A major CS goal we've been working towards is being able to re-enable the live chat feature on our website. We are very excited to have recently enabled a beta test version of live chat. From 10am - 4:30pm CST customers can now talk directly with a live agent for immediate assistance. So far it’s been a huge success. We hope to eventually expand these hours to eventually offer 24 hours live support.

We’ll continue to explore new ways to make the CS experience even better. We won’t stop even after we can definitively say we are the best in the industry.

NEXT STEPS & FUTURE

As we roll full speed ahead into 2020, we’ve been able to shift from constantly trying to play catch-up to the new rapid growth, to finally getting one step ahead. Our overarching goal remains to establish Glorious as a force that will change the entire industry for good. We’ve already made baby steps towards achieving it, but we’re now at a stage where we can really start putting the engine into high gear.

Over the next months we’ll continue to focus on developing new products, while also making some improvements to existing ones. Quality and Performance are the pillars of our R&D process, and we’re exploring new ways to utilize a lot of innovative new technologies. As always, we will continue to rely on the input of fellow gamers to guide us.

We also plan to put a lot more emphasis on engaging with the community. This is an area we’ve always prided ourselves on, but something we haven’t been able to focus on much lately. At the end of the day we’re in this because we’re gamers, and want to become a positive presence in the gaming community. You can expect to see us giving back a lot more - through partnerships, philanthropic efforts, and opening new communication channels.

Lastly, we will continue to improve all key areas of the business mentioned here and solidify the foundations of the company. We’ve been fortunate to have added some amazing new team members who have been able to hit the ground running and keep up with the insanity. We’ll continue to build this team, bringing on experienced people who are equally as enthusiastic about Glorious as I am.

As a reminder, the 3 core pillars of Glorious are:

1) Create high-quality, high-performance gaming gear, and sell it at reasonable prices

2) Listen & learn from the true enthusiast PC gaming community

3) Strive to provide excellent customer support at all times.

These values have been key to our success, and remain our permanent ethos. As we reach towards new horizons, they always stay on our minds. As we’ve said before - it's you guys who got us here, and we promise not to forget it.

We know this is a hard time for many of our customers, partners, and friends. But we will remain committed to supporting our community in any way we can. We’re all in this together - and we will come out stronger on the other end. If there is anything we can do to help you, please, just say the word!

Per Aspera Ad Astra.

Stay Glorious.

- Shazim Mohammad

CEO & Founder, Glorious PC Gaming Race