After more than 10 years in jail for insider trading and bribery, Huang Guangyu, founder of Chinese electronics retail chain Gome Retail Holdings and formerly the country’s richest man, announced ambitious expansion plans in a bid to regain lost ground in a market that has drastically changed since his incarceration.
In his first public appearance since rejoining the company, Huang expressed confidence during a Gome global investor call on Wednesday night about
During Gome’s global investor call on Wednesday night, in his first public appearance since rejoining the company, Huang expressed confidence in his company’s ability to take on the country’s e-commerce giants Pinduoduo, JD.com, and Alibaba Group Holding, the owner of the South China Morning Post.
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“We’re open in both mindset and strategy. No one can kill the other. As long as the business direction and strategy are right, constraints from others will be temporary,” Huang said. “We see [Pinduoduo and JD.com] as mature sales platforms; we can go to them to sell and attract traffic, and they can also cooperate with us.”
The electronics giant revealed plans to expand its offline stores to more than 6,000 locations from its current 3,400 over the next 18 months. The company is also looking to use entertainment and social networking to bolster its app, Zhenkuaile, and increase the number of monthly active users from 40 million to 100 million in the same period.
Huang said he wants Gome’s consumers to participate in and share in-app entertainment and to think of the shopping experience as having fun.
“It will become the reason for consumers to store [our] app on their mobile phones,” Huang said.
To achieve its ambitious plans, Gome faces a steep climb. Its retail revenue for 2020 fell by 26 per cent and losses ballooned 142 per cent to 7.2 billion yuan over 2019, making it the retailer’s fourth consecutive year of losses, according to Gome’s annual results published on March 31.
Before his arrest in 2008, Huang was one of China’s most influential entrepreneurs.
While his wife, Du Juan, held the reins of his bricks-and-mortar electronics empire until his early release on good behaviour last year, China’s retail market underwent dramatic changes as online shopping disrupted the traditional offline model. E-commerce now makes up nearly half of all retail sales in China, and it’s a popular means of buying even large home appliances.
“Twelve years ago, Huang was the one who knew Chinese business best,” said Ding Daoshi, director of Beijing-based internet consultancy Sootoo. “Now, more than 10 years later, facing the intricacies of competition in the retail industry today, does he have the large resources and financial capabilities to get Gome back to the same position in just 18 months?”
China’s electric appliances market is now dominated by Suning.com, which made up 23.3 per cent of the market in the third quarter of 2020, according to a report from the state-owned China Household Electric Appliances Research Institute. Suning, which also started as an offline retailer, was followed by JD.com with 15.4 per cent and Tmall with 9.7 per cent. Gome was down to 5.6 per cent.
Things are worse for Gome in the online market for consumer electronics, where it has just 1.5 per cent share and is again eclipsed by Suning, JD.com and Tmall.
“I think Gome has almost no possibility of a comeback in the current e-commerce or new retail environment,” said Cao Lei, director of the Hangzhou-based China E-Commerce Research Centre. “Because whether from his strategic planning or business layout, it is still a traditional retail enterprise.”
“Considering that even Suning is suffering from competition with online retail giants like Taobao and JD.com, the market left for Gome will be even smaller,” Cao added.
One bright spot for Gome is partnerships it struck last year with JD.com and Pinduoduo, which Sootoo’s Ding said could give the company a chance at a comeback.
In April of last year, Pinduoduo announced that it was investing US$200 million in Gome to help with the company’s digitalisation. The following month, Gome announced “strategic cooperation” with JD.com, which bought US$100 million worth of convertible bonds from the electronics retailer.
“Gome has the absolute advantage of its offline stores across the country and logistics from first- to lower-tier cities,” Ding said. “The relationship between Gome and JD.com and Pinduoduo is not competition, but more like cooperation by complementing each other’s resources. Their future rivals will be other online retailers, led by Alibaba.”
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