As the retail sector faces the vicious cycle of prioritizing profit over growth, leading to spiraling losses despite growth, Gome continues to forge ahead on its path of dual-income growth—balancing both revenue and profit. Following the close of trading on August 28th, Gome Retail (00493.HK) released its financial results for the period ending June 30, 2017. During this time, the Group's total GMV surged by 23% to RMB 61.7 billion. Offline GMV reached RMB 41.2 billion, while online GMV hit RMB 20.5 billion. Notably, mobile GMV saw a remarkable year-on-year increase of 75%, accounting for 74% of the online GMV. Gome achieved sales revenue of RMB 38.07 billion, representing a 7.8% year-on-year increase—a figure that far outpaced the 3.1% growth in the retail sales of China's top 100 large retailers during the first half of 2017.
Thanks to the renovation of new stores and the optimization of product offerings, Gome’s comprehensive gross profit margin stood at an impressive 17.8%, with the comparable growth rate in the second quarter reaching 8.5%, surpassing industry averages significantly.
During the reporting period, EBITDA rose by 59.1% year-on-year to RMB 672 million, with net profit attributable to shareholders of the parent company reaching RMB 122 million. Gome Retail's President, Mr. Wang Junzhou, noted that the company has rebranded itself as Gome Retail, a name that better reflects its current position and business model as well as its transformation journey. Gome’s approach ensures that its transformation does not come at the expense of profits or investor interests. Instead, it focuses on sustainable growth. The company’s transformation strategy centers on user-centric thinking, leveraging big data, artificial intelligence, and the Internet of Things to shift from price competition to value-driven competition. This approach has allowed Gome to carve out a distinct path compared to its competitors.
The semi-annual report highlighted that the same-store growth rate in Q2 reached 8.5%, a figure that outpaced its peers by nearly three percentage points. Over the last few years, Gome has consistently invested in renovating its stores, creating high-frequency scenes and immersive experiences. For instance, they have introduced new home-centered "home improvement + home appliances" and "entertainment + leisure" setups. In the first half of this year, the world's first professional VR theater was launched, with plans to expand to 20 locations in major cities by the end of 2017. Additionally, Gome has made a strategic investment of RMB 356 million in the Internet home improvement company Love Space, with the first home improvement model already operational in Beijing.
Furthermore, Gome has integrated home improvement designs, electrical kits, whole-house plumbing systems, central air conditioning, and complete cabinetry into its stores across Beijing, Zhejiang, Chengdu, and Shanghai. These efforts aim to deepen the overall family Solutions offered, enhancing customer engagement and brand interaction. It’s worth noting that Gome has collaborated with home improvement firms like Mud Commune, More+Cattery, and Caramel Decoration, with plans to introduce nearly 100 additional stores in the second half of the year. This initiative is expected to contribute a 2-3% boost to same-store sales in 2018.
In terms of gross margins, Gome has maintained a robust level over the past two years, with differentiated competition playing a crucial role. Its supply chain model has emerged as a key competitive advantage. During the reporting period, Gome's comprehensive gross margin was 17.8%, marking a 1.4 percentage point increase year-on-year, approximately 3 percentage points higher than its peers. Industry experts suggest that Gome secures unique pricing advantages through price locks and leverages big data analytics to collaborate with manufacturers on customized products. Currently, 40% of Gome's offerings are differentiated products. Moreover, the 2017 semi-annual report indicates that 56% of Gome’s goods generate higher gross profits, underscoring how the product mix directly impacts a retailer's overall gross profit margin.
Looking ahead, Gome is expanding its social e-commerce services, integrating platforms, and exploring下沉markets. According to reports, Gome’s mobile GMV grew by 75% year-on-year, accounting for 74% of online GMV. On 618 Day, GOME Plus saw a staggering 378% year-on-year increase in transaction volume (GMV), with over 1 million cumulative rebate transactions. Fang Mei, CEO of Gome Internet, emphasized that "the era of pure e-commerce growth dividends is waning, giving way to a post-e-commerce phase focusing on social, community, and content-driven development. Since 2015, Gome Internet has been building a business + social + sharing ecosystem. In the future, Gome aims to integrate online and offline operations seamlessly, becoming a trinity platform encompassing e-commerce, community, and physical presence."
Gome has developed a unique business model, exploring the growth strategy of "stock + incremental," and is continuously seeking new profit drivers across three critical areas: market下沉, post-service, and logistics. Data from Ovid Cloud Network reveals that the household appliance market in the third- and fourth-tier cities reached RMB 332.1 billion in 2016, representing a larger share than the primary and secondary markets, with steady annual growth. Gome plans to use counties as hubs, aiming to cover 80% of county-level cities within 2-3 years and open 2,000 physical stores.
Regarding logistics infrastructure, Gome’s network now covers 95.5% of prefecture-level cities, 91% of prefecture-level districts, and 71% of townships. Besides constructing logistics bases in Xi’an, Shenyang, and Ningbo, Gome is investing heavily in self-built logistics warehouses to further extend its nationwide network coverage. By the end of the year, the company plans to increase warehouse space by 1.96 million square meters.
In post-service operations, Gome is building a technology-driven distribution system, promoting the integration of delivery and installation to establish a competitive edge in appliance services. It is projected that the number of TV sets shipped will reach 500,000 units in the second half of 2017, rising to 1 million units in 2018, with similar targets for air conditioners and washing machines.
Moreover, Gome is utilizing IoT technology to expand the post-service market, aiming for trillion-dollar potential. In the latter half of 2017, Gome plans to upgrade its supply chain management system with air conditioning, clean water, and air filtration solutions. This initiative is expected to yield RMB 500 million in profits over the next couple of years.
Wang Junzhou concluded that in the ongoing race, the focus has shifted from price competition to value creation. By optimizing its supply chain, creating new shopping experiences, and developing the post-service market, Gome is laying the groundwork for its new retail transformation while enhancing profitability for consumers and investors alike.
Fiber Optic Enclosure,Corning Fiber Optic Enclosure,Fiber Optic Enclosure Box,Plastic Fiber Optic Enclosure
Huizhou Fibercan Industrial Co.Ltd , https://www.fibercan-network.com