Recently, the transformation of such franchises and live streaming is in full swing, which may make the market see the possibility of a further reversal. If the transformation path of Gome retail can be carried through, it will also provide a new reference for the entire industry.
In recent years, the physical retail industry as a whole has been under pressure due to factors such as channel changes and the impact of the epidemic. Even this year, this trend of pressure has not changed significantly. According to Incomplete Business Statistics, at least 4,181 physical retail stores closed and left in the first half of the year.
During this period, many well-known enterprises involved have also experienced significant setbacks. For example, Gome Retail experienced a “double kill” in performance and valuation, and its stock price continued to decline. It is not too exaggerated to describe it as “falling into the darkest hour.”
However, the author noticed that the recent stock price performance of Gome Retail was not normal. It rose more than 80% on November 17. The last time there was such a sharp increase was when founder Huang Guangyu returned in February 2021; subsequently, despite fluctuations, Gome retail stock prices remained relatively high, rising more than 87% in the past six trading days.
Source: Futu
The capital market has always been the most sensitive. What might be the supporting point behind this phenomenon?
Leaving aside other factors, in my opinion, at least Gome retail is still showing determination and effectiveness to help itself. Recently, such affiliation and live streaming transformation are in full swing, and the market may see the possibility of a further reversal. If the transformation path of Gome retail can be carried through, it will also provide a new reference for the entire industry.
1. The first-class franchise model is effective and releases rich information
Intuitively speaking, a franchise is a new business model created by Gome Retail after transforming its live streaming business. That is, Gome Retail and franchisees (covering various types of enterprises such as physical stores and platform services) join hands to set up joint ventures and empower them to achieve a win-win situation in the fields of open business platforms, brand resources, and supply chains.
Currently, this model has received relatively positive market feedback and is being expanded at a rapid pace.
According to market data, the consultation situation at the Gome franchise center is booming. It has received more than 2,000 calls and inquiries, and has had in-depth conversations with more than 300 companies that intend to cooperate; as of the beginning of November, Gome has signed a total of 17 joint venture contracts, and 55 companies are still in the process of signing contracts.
Relevant cooperative enterprises are spread all over the country, including northeastern regions such as Shenyang and Jilin, East China such as Shanghai and Suxichang, and western regions such as Yunnan, Guizhou, and Chengdu.
Meanwhile, on the eve of the 11th, the Gomei franchise joint venture cooperation has entered the stage of substantial operation, and the first batch of related companies have been launched one after another and achieved a “good start.”
Taking the Shenyang region as an example, the Gome franchise joint venture “Eleventh” achieved sales of over 10 million on the day it opened. The four stores in Dongzhong Street, Tiexi Plaza, Northbound, and Xizhong Street have successively launched a 10-day “Shengshi National Day Offer Mid-Autumn Festival” promotion campaign. According to incomplete statistics, the cumulative sales in Daqing exceeded 36.52 million in 10 days. Among them, the high-end kitchen appliance brand Fangtai sold more than 2.93 million in a single store at the Tiexi Plaza store, and the sales volume of the high-end home appliance brand Casadi exceeded 287 orders.
In the Tianjin region, the Gome franchise joint venture also achieved sales of 7.56 million during the 11th period.
Looking further, there is still profound significance behind these positive developments.
1. The overall retail supply chain in Gome has recovered, and operations are expected to return to the right track
The premise of these positive developments is the overall restoration of Gome's retail supply chain. On the other hand, it shows that Gome may have found a new model to regain the trust of suppliers and boost their confidence in their transformation prospects. As the saying goes, “Confidence is more important than gold in the face of difficulties”. Only confident suppliers can actively cooperate to provide better products and better services, and can Gome retail truly drive the full recovery and continuous upgrading of the supply chain.
The intense sales trend of joint ventures between the US and the US mentioned above has also injected new “strength agents” into suppliers.
Furthermore, as a result, Gome retail is expected to return to the right track of business, including relying on a franchise model that accelerates supply chain development to reshape its own “hematopoietic” ability, thereby fundamentally solving or mitigating a series of problems it faces.
2. The “win-win” effect of class membership has been initially verified, and it is expected that large-scale expansion will accelerate
The rapid development of the first batch of domestic and American franchise joint ventures visually shows the “win-win” effect of this model, which is expected to accelerate the signing of cooperative enterprises and form a large-scale franchise network.
Specifically, “win-win” is mainly reflected in two aspects. One is that Gome Retail, as an established retail giant, has formed strong brand awareness and a perfect supply chain system after years of accumulation. These capabilities are difficult to replicate and have a competitive advantage, enabling joint ventures to rapidly enhance brand strength and competitiveness and drive sales; second, Gome uses this to achieve rapid market expansion and share the growth of communities of interest, collect service fees, and relieve financial pressure.
Moreover, this model actually relies on a huge demand market and has its own “multiplier effect,” so the initial results achieved are scalable.
As mentioned earlier, the physical retail industry under pressure is a common challenge faced by a large number of physical retail enterprises. Relevant micro, small and medium-sized enterprises are weak in their ability to withstand risks, and are in urgent need of systematic transformation and upgrading, including the improvement of brands, supply chains, and digital multi-dimensional capabilities. However, unlike large enterprises, even though micro, small and medium-sized enterprises are well aware of the urgency of transformation, they are often unable to find a complete set of solutions through their own abilities and need to be empowered by external forces.
The comprehensive empowerment provided by the franchise model may be just what micro, small and medium-sized enterprises need.
At the same time, it is reported that joint ventures can also develop a second type of franchise cooperation and establish multi-level joint ventures to help enterprises quickly form a huge franchise network. Judging from the background of such franchise cooperative enterprises, there is no shortage of powerful enterprises, such as a foreign trade enterprise with an annual turnover of around 1 billion yuan.
3. Gradually shift to asset-light operations to improve the efficiency of capital utilization and resource allocation
From another perspective, with the adoption and development of the new franchise model, Gome retail will also gradually shift to an asset-light operating model. This means that Gome Retail is expected to continue to improve the efficiency of capital utilization and resource allocation, provide greater flexibility and scalability for its development, and increase operational resilience and elasticity accordingly.
Finally, it is also worth noting that the recently officially launched “Gome Supermarket” (operated by Huang Guangyu and a third party) has also continued the franchise model with a view to rapid development. Although this business is not a group business, it still leaves some room for imagination in the market, that is, if it progresses smoothly, it may be incorporated into a listed company.
2. The transformation of live streaming goes extraterritorial, starting a new stage
On the other hand, looking at the progress of the transformation of live streaming in retail in China and the US, there are two major events worth reviewing.
First, in July of this year, 100 self-operated stores owned by Gome Electric officially entered Douyin and Kuaishou platforms, becoming the first major home appliance 3C chain brand to enter the Kuaishou platform.
This shows that Gome Retail has begun to expand its business beyond the borders, tap new volume through more diverse online channels and marketing models, and thereby further link online platforms and offline stores to create a more complete service system.
Second, this year's “Double 11", the first “Double 11" since Gome Retail announced the transformation of live streaming, was not only broadcast live on the local Gome app and foreign platform Kuaishou, but was also equipped with a very sincere guest lineup and product lineup. Huang Xiuhong, chairman of Gome Electric, personally participated in the live broadcast. At the same time, he joined hands with the executive team and Liu Jianhong, a former famous CCTV host, to bring nearly 100 welfare products. These products cover various categories such as color TVs, refrigerators, digital, kitchen appliances, alcohol, etc., mainly from well-known brands such as Fangtai, Haier, Hisense, Supor, Shangling, and Huawei.
On the one hand, this shows that Gome has mastered rich experience and a certain degree of confidence in the whole live streaming process, and has entered a new stage in exploring the transformation of live streaming. On the other hand, it also further confirms the overall recovery of Gome's retail supply chain, and reflects the normal operation of after-sales systems such as Gome logistics.
Moreover, it is easy to see from this that Gome Retail attaches particular importance to the Kuaishou platform in terms of foreign channels.
Behind this, the relevant person in charge of Gome once said that Kuaishou has a huge user base and a perfect content ecosystem, can effectively connect brands and users, improve Gome's ability to acquire customers, and in particular, sink the market, and help Gome accelerate the transformation of local consumption. Gome will receive additional platform subsidies and traffic support from Kuaishou to increase conversion rates, repurchase rates, and word-of-mouth communication effectiveness.
Furthermore, in the author's view, there is a “two-way choice” between Gome and Kuaishou. Kuaishou's support for Gome stems from its deep cultivation in the field of local lifestyle services, etc., which also lays a good foundation for Gome's subsequent related exploration.
Nowadays, the boundary between Internet e-commerce and local lifestyle service platforms is gradually blurring, and Douyin, Kuaishou, Xiaohongshu, etc. have entered the field of local lifestyle services one after another. At the same time, local lifestyle services are closely related to public life, have rigid user demand, high user stickiness, and high corresponding commercial value. It is also because of this that Internet giants are competing for this, hoping to consolidate their dominant position in the future.
Gome first proposed a “home life” strategy in 2017, and then gradually built a local lifestyle service system from store to online.
At the same time, Kuaishou's advantage in this field is that users in sinking markets often have more flexible time and less pressure, making it easier to access the local lifestyle services it provides. For Gome, this will indeed help accelerate the transformation of local consumption.
III. Concluding Remarks
Gome retail has always been a representative presence in the history of the Chinese retail industry, and its difficult business situation reflects the difficulties faced by the vast number of physical retail enterprises. In the short term, “Gome Retailers” may still have to endure major challenges, but crises are often accompanied by opportunities, and adversity also often spawn innovation. This can be seen from today's Gome retail, and it has brought new vitality to the transformation and upgrading of the industry.
Although the future may be full of unknowns, in the process, you might as well have more confidence in the reversal of Gome Retail and look forward to the arrival of a new development cycle.
Returning to the perspective of the capital market, there is no shortage of cases of returning to the top in the market. Does Gome retail have an opportunity to create a gold pit for investment? We might as well wait and see.