GOME Electrical Appliances Holding Limited (the “Company” or “GOME”) and its subsidiaries (the “Group”) has achieved growth for 12 consecutive quarters as well as attained a stunning success for the “17 September” and “18 December” In-house Sale Carnivals in 2015. Nonetheless, all enterprises will have to face a slowdown of economic growth in the PRC in 2016. As for GOME, the challenges mainly come from the change in consumption demands. Given the traditional market practices, old marketing campaigns, store layout, commodities and services are no longer sufficient for the ever changing environment, GOME will have to make substantial transformation in order to satisfy the demand of consumers.
The current conditions and challenges mainly comprise three aspects. Firstly, the PRC economy is undergoing an in-depth reform, and the retail sector increasingly faces overcapacity and a severe shortage of product differentiation. The diminishing market demand dampens consumer purchasing power. On the other hand, some commodities lack competitiveness and severely lack product differentiation, as a result, inventories are piling up. This is one of the reasons for the supply side reforms advocated by the PRC government. Secondly, the rapid advancement of the Internet is transforming people’s lifestyle and consumption habits. Under pressure from the competition of the e-commerce and inspire by the new technologies, the traditional retail industry is in the midst of a dramatic transition. Where previously retailers with a large traditional network had the edge, now increasingly retailers with the ability to effectively link up with customers are winning out. Thirdly, with challenges brought by new technologies and new concepts, it is so critical for retailers to possess the capability of self-advancement and adopt new technologies for satisfying customers’ endless demands for consumption. Innovative technologies should be considered in a long-term perspective and with minds opened. Integrating such new technologies into the retail sector will enable us to create a better consumption experience and causing the traditional retail industry to upgrade and evolve.
After considering the meaning of “Internet Plus”, GOME transformed from a “Omni-Channel Retailer” to a “Total Retail Community” in 2015. “Internet Plus” poses challenges in terms of the restructuring of demand and supply, online and offline integration as well as emergence of new consumption trend. While tackling such difficulties, GOME adheres to creating value for consumers with the support of its low-cost and highly efficient supply chain. With the three-pronged approach of omni-channel, new scenario and strong linkage, GOME manages to secure a sustainable Total Retail development.
Leveraging on the retail business, and with its supply chain as its core competitive strength, GOME creates synergy among its platforms such as financial services, smart terminal, and cross-border e-commerce, etc., with the aim of establishing an integrated ecosystem in the retail sector. Establishment of a strong supply chain, change in the existing procurement methods, optimization of product mix and enhancement of total commodity operation capabilities are GOME’s focuses in the face of the ever-changing market environment and intense competition. Such approaches do not only create value for consumers, but also improve GOME’s profitability. In 2016, GOME will cooperate with scalable e-commerce platforms to open up its supply chain platform to the society. With the benefit of its strong supply chain, GOME undergoes one of its largest changes by epitomizing two different roles: a retailer for consumers; and a supplier for other retail platforms. As such, GOME is gaining more power to influence home appliance market.
The new scenario of GOME is to transform from an in-store product display and trading setting into a product application setting, that transforms a low frequency customers into high frequency buyers to attract more customers with new scenarios. In 2016, the new consumption scenario mainly includes the establishment of drone zone, fruits and vegetables experience zone, smart cleaning utensils zone, game zone, kitchen and restaurants, cooking workshops, in-store cinemas, dryer and laundry experience zone, air purifier zone and purified water experience zone to attract customer traffics. By enhancing customers’ experience in products via its offline physical stores, GOME capitalizes on such unique advantages and materializes the transition from a display and trading setting into a product application setting. Such modified stores, which integrating “food, beverage, entertainment, joy and shopping”, will become the new style stores, setting the role model in the “Internet Plus” era and the benchmark for home appliance retail sector.
Sharing economy lays the foundation for GOME’s strong linkage strategy. Emergence of social media signifies further fragmentation of economic individuals in the internet where everyone is able to become a self-media. In real life, we tend to first consult friends when we have demand for certain aspects but without a clue to judge. In view of such market change, GOME commenced its “GOME TOGO” project (GOME’s micro shops), solid linkages between GOME and its consumers are then formulated via the respective social-circles of GOME’s 100,000 sales persons. GOME’s micro shops will foster its physical stores’ penetration into the internet and realize seamless integration between online and offline. The social-circles will grow bigger through in-depth communications between GOME’s staff and potential customers. GOME will link to its customers through these communications and will be able to integrate and deliver the global premier products to the consumers. Such efforts will create value for the customers as well as further enhance GOME’s Total Retail community.
GOME HOUSE MANAGER
As an extension of its omni-channel, new scenario and strong linkage, GOME will spare no effort to develop “after sales service market of home appliances” by establishing the online “GOME House Manager” service which aims at extending all rounded home-alike services in relation to home appliances and ultimately form the home appliance life cycle including “purchasing, cleaning, repairing, recycling and repurchasing”, thus constituting the optimal GOME total retail community.
In general, the focus of the retail sector has shifted from physical location in the past to customer traffic and will further shift to linkage in the future. GOME will put the advantages of its total retail community into play and leverage on its supply chain as the core, continuously create new shopping settings for its consumers via its omni-channel. On top of these, by utilizing different services and experiences, GOME will enhance customers’ loyalty and formulate strong linkages.
Finally, I hereby express my sincere gratitude to our staff for their diligence and hard work, and to different stakeholders in the society for their support. We will continue to strive for the benefits of our shareholders, staff and customers while pursuing the sustainable development of the Group in the long term. I am very confident about leading GOME in maintaining rapid and stable business growth, overcoming all challenges and attaining a continuing development under the Total Retail strategy.
Zhang Da Zhong