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GOME: Former Retail Giant Returns after a Silent Spell
COVID-19 and China
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►The company had been struggling for years with deteriorating market shares and unfavorable financial results. 

►Newly prepared thanks to team-ups with JD.com and Pinduoduo, GOME looks to have finally found its way out. 

Since the strategic investments from JD.com were announced, the stock price of GOME Retail has been increasing for ten consecutive days.

On May 28 JD.com subscribed to USD 100 million of convertible bonds on GOME with a 37.91% premium, boosting all the listed companies’ prices under GOME Gr. Among which, GOME Retail has constantly been outdoing itself, with the stock price increasing for ten consecutive days.

This is not the only case. On April 19, GOME announced a strategic cooperation with Pinduoduo, which has invested in GOME’s convertible bonds to the tune of USD 200 million, at a premium of 66.44%. GOME Retail’s price surged 16.44% the next day, with the transaction volumes boosted. The stock price of Pinduoduo was also pushed up 12.71% to a record high. 

Teaming up with two e-commerce giants in two months, integrating traffic pools and logistics systems, GOME is building its new consumption pattern. After falling silent for years, the former retail giant is expected to come back. 

Pre-cooperation

GOME has experienced some tough times in recent years. 

According to the 2019 annual report for the Chinese home appliance industry, the retailing scale for the industry reached CNY 803 billion, among which Suning ranked first at 22.8%, JD took up 14.4%, followed by Tmall of 8.8%. GOME only accounts for 5.8%, ranking No.4. 

The revenue of GOME recorded CNY 59.48 billion at a YoY decrease of 7.57%, and a narrowing net loss compared to 2018, recorded at CNY 2.59 billion. However, when contrasted with Suning, which was at the same level as GOME, we see a reported net income of CNY 11.02 billion in 2019. 

Among the CNY 59.48 billion revenue, CNY 49.6 billion comes from the offline stores. The online business. The new retail model, which combines both online and offline, hasn’t been applied by GOME.

Renaissance

Fortunately, the pandemic has pushed GOME to transform. 

The company’s exploration in online selling has started to produce results. GOME cooperated with CCTV (China Central Television) to stream live, with sales figure exceeding CNY 723 million in three hours. Some other livestream approaches also showed success. The company has discovered a new and suitable online expansion path, based on community marketing and logistics advantages. 

Moreover, with the collaborations with JD.com and Pinduoduo, GOME is speeding up the transformation process. The integration of online expansion and offline stores, as well as the logistics network, coupled with the collaboration of supply chains and traffic pools backed by JD.com and Pinduoduo, has fueled GOME’s momentum in sustainable growth. 

Without a doubt, GOME’s brand and value need reassessing.

Editor: Luke Sheehan

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