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Chairman's Statement

Dear Shareholders,

In 2017, GOME Electrical Appliances Holding Limited changed its name to GOME Retail Holdings Limited (the “Company”, with its subsidiaries, the “Group” or “GOME”) and launched its “Home • Living” strategy in the second half of the year, confirming the Group’s strategic blueprint of evolving into a one-stop home solution provider, going beyond the traditional home appliance retailer field. The launch of the new brand vision “Better lifestyle through GOME” is set to facilitate hundreds of millions of Chinese households in their leap from quality living to fine living. The Group will promote the brand image of “Enjoy GOME, Enjoy Living”, improving customers’ living standards with technology and style.

In the last 40 years, families in China have experienced improvements in standard of living in three different stages: from merely surviving to quality living and to fine living. The industry also underwent constant changes. In the past year, online retail growth slowed down while the competition in offline retail intensified with Internet companies rushing to compete offline. A lot of the retailers with new technology, new business models and new products benefitted from investments, which shows that the new retail is now being embraced by the venture capital. It also shows that businesses are willing to work together to boost their strength in the market. But what’s the real reason behind that drives online and offline companies to suddenly decide to cooperate with each other? We believe there are two reasons: First, they cannot find their own model of success; second, they may not have the capabilities to do it on their own. For the enterprises that went from online to offline, there were significant issues with their business models and capabilities. And offline businesses also encountered problems in their pursuit of online business.

The current situation highlights the competitive edge of GOME. With 30 years of experience and a good understanding of the application of internet technology, GOME enjoys a high-level of consumers’ recognition and a good reputation. GOME has strong capabilities when it comes to opening stores across the country, managing merchandise, delivering large and medium-sized goods and providing after-sales services. GOME can also connect with its customers through many scenarios, and even can connect its customers through services at home, which is one of its major strength.

In response to the development of the market, GOME hopes to serve a wider consumer base, from solely in the electrical appliance business to “Home • Living”, a one-stop home solution provider. The home appliance market is valued at RMB1.8 trillion, whereas the “Home • Living” market is valued at RMB10 trillion. This presents a new challenge to our services which we will meet head-on with a high-level of efficiency, openness and mutual benefits.

The development of the retail industry has seen companies evolve from using automation and information system to embrace the internet and smart technology. We will continue to focus on the application of new technology and actively seek technical support on the business side, to lower the costs and increase efficiency. The technical side of our business will actively explore the value of business operations and offer support with continuous upgrades of our technology. At the same time, with the two-way interaction between business and technology, the needs of the business side become more specific, product acceptance and delivery become more precise, and the technical side actively seeks the realization of demand and technology monetization to empower the business.

Last year, the Group vigorously promoted the integration of its online and offline businesses and launched the new GOME APP, confirming the shared retail model of “Social + Business + Shared Benefits” for online transactions and offline experiences. The move initially achieved online and offline unification in areas including merchandise, memberships, pricing, marketing promotions, inventory, logistics, etc. In addition, the capability of the Group in providing services has also been continuously upgraded. Logistics capabilities, such as “Three Deliveries/day”, “Precise Delivery” and “Installations with Delivery”, covered 95% of the prefecture-level cities, 91% of the counties and 85% of the rural towns. At present, delivery + installation monitoring service, one-touch subscription for repairing, service, service rating, electronic warranty card, appointment service, etc. are available on the “GOME House Manager”.

The year 2017 marked the 30th anniversary of GOME and it was also the year we redefined retailing. By exploration, we identified the strategy of “Home • Living”, established the new brand positioning of “Better lifestyle through GOME”. In 2018, in the 31st year since the founding of GOME, we propose internet-enabled shared retail. GOME will attach more importance to information and connectivity, and promote full use of internet and digitalization. We value the idea of “Boundless Business and Symbiotic Coexistence”, so we use the internet to enable a shared retail model that combines community, business and benefits sharing and allows the customers to buy online while enjoying offline experiences. The model uses GOME APP as its main gateway to attract user traffic. GOME will strive to enhance the three core capabilities of “Products, Operations and Services” and create core business systems for electrical appliances, home decoration, household products and home services. We are looking forward to forming a valued community of “Home • Living” and a collaborative platform of efficiency, openness and win-win synergy. With the endeavors mentioned above, GOME will meet consumers’ desire for good living.

Finally, I would like to express my heartfelt admiration and appreciation for the untiring efforts of all GOME staff members as well as my sincere gratitude to all sectors of the community for their support. We will continue to devote ourselves to the interests of shareholders, employees and customers as well as the long-term sustainable development of GOME. I am very confident that under my leadership, GOME will develop rapidly and steadily, overcome all challenges and realize the continuous execution of the new retail strategy.

Zhang Da Zhong