GOME Proactively Responds to National Strategies with Expansion of Business Quality and Quantity in 1H 2021
GOME (493.HK) accelerated the implementation of the second phase of “Home Living” strategy in the first half of 2021, with focus on technology retailing and digitalized empowerment. The Company put full efforts in creating integrated online and offline operations under the philosophy of user-oriented, platform-based operation, technology innovation and closed-loop development. These initiatives were positioned to construct GOME’s new retailing ecosystem and echo proactively to China’s strategic direction of driving an acceleration in the development of new consumption.
China has stepped up efforts to tackle monopoly and improper competition since the beginning of the year, with a view of creating a fairer and healthier business environment and room for development of the industry. Meanwhile, a number of policies for promoting consumption and stimulating domestic demand have been introduced, thereby significantly alleviating the impact of the COVID-19 pandemic on the retail industry. GOME has improved its retail service capabilities substantially by continuously optimizing its dual-platform new retail ecosystem with its leading edges in precision supply chain management, nationwide logistics network and professional services. During the Reporting Period, the Company’s revenue reached RMB26,040 million, up by 36.5% year-on-year (“YoY”). Consolidated gross profit topped RMB3,711 million, up by 67.0% YoY. Consolidated gross profit margin rebounded solidly, moved up by 2.7 percentage points YoY to 14.3%. In view of the relatively low penetration rate and huge growth potential in the consumer markets of the third tier and below cities in China, GOME proactively explored the blue ocean opportunities of these markets with the strategy of “prioritizing large region over small region, prioritizing counties over towns and leveraging counties for exploring towns”. During the Reporting Period, the Group opened nearly 600 new county stores and planned a full year opening of 1,000 new stores. As of 30 June 2021, the Company operated a total of 3,895 offline stores, including 2,556 county stores. Meanwhile, capitalizing on the flexibility of the social networking approach, employees of GOME stores acted as seed users to establish grid-based communities, and rapidly expanded the membership scale. During the Reporting Period, GOME created more than 180,000 new online communities and commanded a total of nearly 1 million online communities cumulatively. The cumulative number of online community members increased by 30% YoY. The total number of online and offline members reached 228 million. During the Reporting Period, GOME’s “FUN” APP online platform also achieved significant growth. In particular, the number of purchasing users increased 10 times YoY. Total number of products purchased and number of orders increased 4 times YoY. The number of active users increased nearly 3 times YoY. Member repurchase rate was approximately 30%. Monthly average number of repurchase users increased about 10 times YoY. SKU exceeded 600,000, of which 90% was derived from non-electrical appliances, reflecting the rising diversity of the Group’s product offerings.
Leveraged supply chain and channel advantages to reduce costs, enhance efficiency and increase profitability
On supply chain development, GOME integrated the four elements of entertainment, technology, low price and service to construct a three-in-one supply chain platform of “merchants invitation + self-operation + customization” and establish a delicate supply chain system based on the principle of intelligent customization and quality products. The Company continued to strengthen the supply chain of home appliances, and optimize the procurement, operation and service processes to achieve a high-efficient and low-cost operation model. GOME also joined hands with online and offline third-party vendors to create a professional home appliance supply chain with diverse products and price advantages. The Company cooperated with a number of strategic partners to continuously expand its market share by taking advantage of innovative marketing tools and the changing nature of the online and offline sales scenarios.
Regarding channel operation, GOME adopted the “self-operation + third-party + agency” model to realize cross-channel output through its own online and offline platforms, third-party platforms (JD, PDD, TikTok, etc.) and third-party agent operators. GOME also actively deepened its cooperation with industry-leading agent operators to realize in-depth integration and empowerment in the supply chain, transform agent operators into distributors and forge an innovative ecosystem of agent operations.
Efficient utilization of entertainment tools to stimulate consumer market vitality
With the trend of new retail reforms, GOME regarded entertainment as one of the important development pillars and fully deepened the entertainment marketing model to drive consumer demand. The Company strengthened the interaction between the platform and users in entertainment shopping through diversified means such as live streaming, talent show, limited-time offers, short video, matches and games. In particular, the classic combination of special promotional entertaining activities allowed users to enjoy quality products and services at low prices in a fun way, thereby providing enjoyable sales and shopping experience as well as spreading joy. In addition, GOME also cooperated with platform celebrities to conduct livestreaming marketing on popular short video platforms in China such as TikTok, Tmall and Kuaishou. In the first half of 2021, GOME completed 75,000 livestreaming shows, reaching over 38 million people.
To support the policy of “promoting sales and market development with special festivals” proposed by the Ministry of Commerce, GOME held the Euro Cup “Football & FUN” activity during the Reporting Period. This event showcased the crossover between sports and retail industry. It facilitated conversion through livestreaming of sales promotion matches. Football fans may share the “FUN” APP to friends by content sharing or word of mouth, thereby expanding the new customer base and bringing in new traffic. Subsequently, on 24 and 25 July 2021, GOME co-hosted the “2021 Super Music Festival” with iQiyi. As a continuation of the “FUN ZAO City” campaign, in addition to an extravaganza celebrity lineup, the festival also cooperated with brand sponsors to set up food stalls, fashion space, interactive sessions and other fun and trendy features to enhance customer experience.
In-depth integration of online and offline operations to create a centralized business development ecosystem
With “designated webpage for each store”, GOME has facilitated the interaction between offline stores and online “FUN” APP platform, and provided multi-model, cross-channel, comprehensive and value for money shopping experience to community household customers within 1-8 km radius through output of “models + capabilities”. For offline operation, GOME’s grid-based network of offline stores consists of five types of stores: city stores, commercial complex stores, regional stores, community stores and community stations. They provide “Home Living” solutions for community household customers within 1-8 km radius. As of 30 June 2021, the total display area of offline stores reached 5.11 million square meters. In addition, GOME planned to proactively transform its offline outlets to “one store with multiple functions” guided by the four principles of “reuse of space, reuse based on time slots, equipment sharing and service sharing” so as to improve the utilization rate of space resources, propel sharing economy in terms of space utilization, and create an urban “social living room”.
Moreover, to support the Guidance on Construction of Urban 15-Minute Convenient Living Circle issued by the Ministry of Commerce, GOME promoted proactively the joint development of different business models in the convenient living circle, and built a comprehensive commercial service system with in-depth integration of online and offline activities and mutual support between virtual and physical operations. The Company planned to integrate fully merchant resources, and offer access to online functions such as shopping, catering, leisure, culture, elderly care and housekeeping through small programs, APPs and comprehensive service information platforms. These would provide residents with services such as search for nearby goods and services, information inquiry, bill payment, geographical navigation and online coupon issuance and offline redemption, connecting smart communities and intelligent housekeeping, and integrating commercial and social functions, thereby creating a centralized business development ecosystem.
Continued to improve logistics service capabilities to promote rural revitalization and facilitate development of low-tier markets
In recent years, GOME has continued to improve its logistics service capabilities and increased its efforts in rural market expansion to promote consumption upgrading in rural areas. During the Reporting Period, the company’s home delivery and installation, home repairing, home cleaning, housekeeping and home renovation services covered more than 2,000 regions, tapping into the potential demand in rural areas.
GOME is committed to creating high-standard service experience by focusing on three aspects of on-time delivery, speedy delivery and quality experience. In addition, as a provider of high-end on-time product for large goods warehousing and delivery, GOME provides customers with customized and on-time delivery value-added services. In the first half of 2021, GOME’s on-time delivery rate reached 98%. GOME also has stepped efforts proactively in creating the Japanese-inspired ultra-detailed service scenario, and provided users with differentiated service experience for large goods through standardized, high-quality, and detailed services with a customer satisfaction rate of 96%.
Moreover, leveraging its leading capabilities of logistics services, GOME has provided supply chain solutions for different industries. In the first half of 2021, GOME Anxun Logistics developed external customers from various industries, and cooperated with Duoduo Vegetable, Meituan Choice, Chengxin Choice, Ningbo Group Purchase and Supai to carry out community group purchase business. It also cooperated with ByteDance and Meituan to carry out moving business, cooperated with Shangpin Home, Wayes, Minhua, Original Elements and other merchants to develop home appliance and furniture delivery businesses. The Company strengthened actively cooperation with Xiaomi Youpin, Netease Choice and other e-commerce platforms.
Advocating fair competition to establish position as a retailing service provider with the philosophy of joint contribution and shared benefits
GOME has been advocating fair competition in a bid to help the retailing industry to grow in the direction of fairer and healthier development. The Company is dedicated to create an open platform for sharing and co-development geared to assisting suppliers, vendors and customers for executing highly efficient interactions. GOME has leveraged a decentralized retailing infrastructure coupled with its retailing capabilities as driving force to empower partners of the retailing industry in integrating more retailing resources and constructing a highly efficient ecosystem for the retailing industry. This approach would provide most consumers with a low carbon, environmental-friendly, highly efficient for all and data safe environment for sustainable consumption. Moreover, GOME has signed a cooperation agreement with state-owned Shenzhen Investment Holding Capital Co. Ltd and Shenzhen Eternal Asia Supply Chain Company Ltd (002183.SZ) in July 2021. Under this agreement, these three parties will cooperate in areas of capital, supply chain, channel and industry chain to establish a flat, sharing and decentralized strategic platform for massive consumption. Moreover, they will coordinate complementary support on resources. These industry leaders will join hands in sharpening complete chain and fully integrated service capabilities all the way from production, brand incubation, brand operation, channel management, marketing management and end-users sales.
GOME’s management concludes: “In the first half of 2021, although the pandemic has not yet subsided, a number of policies for encouraging consumption were introduced successively. They promoted the recovery of domestic consumption, paved way to effectively an expected full economic recovery and injected a booster for the retail industry. At the same time, China has been promoting vigorously the accelerated development of new consumption in recent years. Such efforts supported traditional commercial enterprises to accelerate digitalization and intelligent transformation, and promoted wider and deeper integration of online and offline operations. We are very pleased that the current national strategic layout and policy direction are highly in line with the development strategy of GOME in recent years. In the future, GOME will continue to persist in implementing national strategies, facilitate domestic demand expansion and consumer upgrading in China. We advocate fair competition and healthy development of the industry, and make continuous improvement to meet the consumer demand of “Home Living” services and benefit the general public. The Company strives to become a new technology integrated retailing service provider to serve the needs of the country, the industry and the public. GOME will continue to uphold the corporate mission of “Promote efficiency through technology, build better life through wisdom”, and continue to develop its “Home Living” business to become the leading enterprise in relevant sectors and create greater value for the community and shareholders.
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