“Home Living” Strategy Speeds Up at Its All-out Efforts and Successfully Completed the First Phase of Strategical Development
In the first half of 2020, the Group implemented steadily the strategy of developing into an Internet-based enterprise and strived to become an integrated solution, service solution and supply chain provider. During the Reporting Period, GOME made full use of the innovative platform of “Community + GOME APP” to capture chances brought by the rapid transformation of consumption pattern in “Stay Home Economy” and promote significantly the cash conversion rate of social media based online channels. As a result, the GMV of “Community + GOME APP” with GOME Retails’ genes grew by more than 70% year-on-year (“yoy”) and daily GMV occasionally exceeded RMB 1 billion. During the Reporting period, the number of online communities of the Group grew by over 40% yoy, representing a 65% increase yoy.
Explore Continuously New Retail Model and Create GOME’s New Growth Engine of Quality Live Streaming
During the Reporting Period, GOME has developed proactively its community marketing and leveraged fully GOME’s advantages on supply chain, logistics and community social interaction. As a result, the cash conversion rate of GOME online community reached 30%, significantly higher than the industry average, increasing by more than 150% yoy. Additionally, GOME capitalized on its resources and capabilities, creating a quality live streaming model characterized by “Knowledge-based contents + Premium IP with huge traffic + Immersive scenario”. In the first half of 2020, the Group already hosted over 2,000 live streaming events with various themes and scale, reaching over 100 million people. During the Reporting Period, in four of the super live streaming events, the Group’s sales revenue reached RMB2,500 million in total. In the second half of this year, the Group will continue to cooperate with top media platforms – CCTV News, and launch steadily live streaming events across 31 provinces nationwide, showcasing GOME’s “New Growth Engine” and its localized retail model to consumer across the country.
Open Supply Chain, Introduced Two Strategic Partners to Enjoy Mutual Benefits through Collaboration
The Group entered into strategic cooperation agreements with JD.com and Pinduoduo.com in the first half of the year. As of now, all parties have deployed in-depth cooperation at different areas. During the Reporting Period, the GMV of the Group generated from JD.com, Pinduoduo.com and other e-commerce platforms grew more than 100 times yoy. In August 2020, GOME and JD.com have strengthened their cooperation by signing up the joint procurement with an aggregate amount of RMB30 billion. This was ranked the largest year to date procurement in the home appliance and 3C industry in China. At the same time, GOME has been offered access to more than 20,000 non-home appliances SKU from JD.com. This line-up is expected to facilitate the sales of GOME’s full range of products. GOME will utilize the in-depth cooperation with JD.com and Pinduoduo.com to share edge resources from each other, develop continuously new retail model with online and offline integration, as well as realize greater synergy effects.
Coped Actively with the Impact of Pandemic and Cash-on-hand Maintained at a Healthy Level
The Group’s large home appliance business, which was affected seriously by COVID-19, recovered in the second quarter this year as reflected by a quarter-on-quarter increase of 103% in its sales revenue. On a positive note, sales revenue generated from large home appliance business remained resilient in June 2020 as compared with the corresponding period last year. In addition, overall gross profit margin also showed a trend of month-on-month recovery since the second quarter this year and rebounded to the pre-pandemic level of 16%. Moreover, the operating cost was reduced by 26% yoy. With regard to financial strength, the Group maintained sufficient capital after the full repayment of US$500 million overseas bonds during the Reporting Period. The Group’s cash and cash equivalents amounted to approximately RMB11.4 billion as at June-end, illustrating a healthy financial position.
Entered into the Second Strategic Phase of Open Sharing and Constructed GOME’s Own Integrated Online and Offline Retail Ecosystem
In the first half of this year, the Group’s business was impacted by the novel coronavirus outbreak. However, the Group withstood this stress test and successfully achieved the goal of the first phase of strategic development. Going forward, the Group will ride on its 33 years of industry experience and break new grounds in a bid to construct an integrated online and offline retail ecosystem featuring Social Interaction + Commerce + Sharing. GOME is the only enterprise in China with online and offline dual platform focused on “Social Interaction + Commerce + Sharing” covering a wide of products. With regard to offline platform, the Group has established a huge team of approximately 100,000 staffs, spanning across over 2,800 stores in the country. Leveraging the physical store as the center and the community in a grid network, the Group provides its services to users within three to five kilometers. Besides, leveraging the staff as the link, the Group realizes the face to face social communication with users. Turning to online platform, the Group owns e-commerce channels which supports the localized operational development, social sharing platforms, extensive communities and widespread users. In the past, by taking advantages of these resources, the Group maintained its leading position in vertical integrated home appliances sector. For future growth, the Group will be more open-minded to enter into the second phase of strategic development with a goal of achieving win-win synergy.
Focus on Local Retail and Create a New GOME Oriented by User, Platform and Technology
Capitalizing on the solid foundation of its current home appliances sales business, the Group plans to increase the business volume mainly through platforms, servicing external enterprises and the whole society. On the online platform, the Group will support the development of enterprises by empowering traffic, SaaS and intelligent management and decision system. Regarding the empowerment of traffic, the Group will share with the third parties its accumulated high-quality traffic with high conversion rate to facilitate their business development. With regard to the empowerment of SaaS, the Group will utilize its local retail operation and adopt the mode “one store one webpage” at the store end, “one community one webpage” at the community end, and “one people one webpage” at the user end to achieve coordinated development, significantly reducing their operation costs and helping them to diverse online traffic to offline. In the meantime, by offering digitalized artificial intelligence management tools, the Group will help them to enhance enterprise decision making and operation efficiency. In tandem with the ever-changing consumption pattern, online transaction has become a pronounced development trend. Therefore, e-commerce operation will emerge as the triggering point and remote control of industry development. The two core elements of offline platform were the showcase of quality products and life services. The Group will leverage fully the competitive advantages of its store network and provide strategic support selectively to those online enterprises which do not have offline outlets to showcase their quality products and associated scenarios. Moreover, the Group will strive to improve the offline supply chain operational efficiency of these enterprises by over 40%. Meanwhile, underpinned by various offline scenarios, the Group intends to bring in new operation model and content of home services. With the extension of home scenarios, namely living room, dining room, kitchen and showroom, and the theme of entertainment-styled marketing, the Group will provide users with various services related to catering, entertainment, shopping, leisure, etc., in the offline platform. Moreover, as a social interaction venue, the offline platform also provides users with quality time in social communication, meeting, relaxing and family gathering, thereby satisfying different demands from members of various ages and classes and of different families within the community. With its professional service team, GOME’s offline stores are able to provide comprehensive scenarios of In-store and In-home services at different time throughout the day. Leveraging the marketing of gridded community backed by life services and selected quality product showcases will render users in the community to become the loyalty member of GOME’s platforms, which serve users’ daily consumption needs and become cash conversion drivers.
Construct Diversified Vertical Supply Chain System through Stringent Selection
GOME will continue to strengthen its leading position in home appliances sector by deploying high efficiency and low-cost operation models. Moreover, the Group will continue to build up the supply chain system of home appliances with the advantages of rich product mix and bargaining prices. This would spearhead the Group to raise its market shares, regain its original position in the market and realize greater profitability in the shortest possible time. The Group strives to increase the number of offline stores by 20% next year or the first half of 2022 and realize the promotion of sales scale and profitability. In addition, the Group plans to share with the third parties its supply chain edges. This would be achieved by opening its supply chain system to the strategic partners and franchises in low tier markets. Leveraging the expansion drive of supply chain cooperation between the Company and strategic partners with same open-minded approach, this would enable all parties to consolidate their resources and create more opportunities through multiple channel sales, thus generating win-win situations for all parties. In third-tier to sixth-tier cities, the Group will continue to employ its asset-light business model to speed up the franchise expansion and explore profoundly the market potentials.
Meanwhile, the Group plans to expand its product mix to non-home appliance products through stringent selection. The Group currently completed the self-operated vertical sales trial of fresh foods, hotpot foods and home decoration services in its full industry chain. The Group has fine-tuned the operational process and improved the business model during these trials. The management expected to beef up efforts to promote such businesses in the future. Stringent selection use strict selection standard to further develop the integration advantages of upstream supply chain, expanding the customized category and scale. By providing the best quality goods and services, GOME can form a deep traffic interactive platform, transforming high-quality private sector traffic into public sector traffic of the platform, and improve the conversion rate of the platform.
All business segments in the “Dual Platforms” ecosystem are expected to benefit from mutual complement, connection and interaction. Both users and retailers would be served by rapid developing models such as panic-buying in social media, bonus sharing, entertainment-styled marketing and one store one webpage strategy. This in turn would bring about cash conversion. All platforms would share information and all retailers in the platforms would converge their traffic. Thus, the private sector traffic would precipitate the inflow of public sector traffic, thereby creating a virtuous cycle of expansion.
Mr. Wang Junzhou, Chief Executive Officer of GOME concludes: “In the first half of 2020, the Group has continued to uphold the spirit of persevering amidst adversities and overcame the difficulties and challenges from the pandemic. Meanwhile, the Group has further enhanced its capabilities on business operation and the scope of services in virtue of its advantages gained over the years. In the future, the Group will consolidate and optimize its existing resources in order to exert the ‘multiplier effect’ and gain more resources, enabling the ‘leaping’ transformation from the self-operated retailer to become GOME ecosystem combining online and offline platform. GOME is the only domestic online and offline enterprise with full category of online and offline platforms, which is focused on ‘Social Interaction + Commerce + Sharing’. In the past, we have been leading the industry in the vertical field of household appliances around price advantage, service standard and brand reputation. Now, we are going to enter the second stage of strategy faster and more openly, with full confidence and expectation: focus on local retail, and create a new GOME oriented by user, platform and technology”.
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