GOME MIRROR REPORT: Comprehensive gross profit rate as high as 17.8% Q2 same store growth of up to 8.5%
When the retail industry is plunged into a vicious circle of "profit-for-growth, resulting in greater growth and greater losses," Gome is still adhering to its transformation path of double-income growth in income and profits.
After the close of the market on August 28th, Gome Retail (00493.HK) released its performance report as of June 30, 2017. During the period, the Group's overall GMV increased by 23% to RMB61.7 billion, of which the offline GMV reached 41.2 billion, the online GMV reached 20.5 billion, and the mobile GMV increased significantly by 75% year-on-year, accounting for 74% of the online GMV. Gome achieved sales revenue of 38.07 billion yuan, a year-on-year increase of 7.8%, which was far more than the 3.1% year-on-year growth of the retail sales of the 100 key large retail enterprises in the first half of 2017.
Thanks to the renovation of new stores and the optimization of commodity structure, Gome's comprehensive gross profit margin was as high as 17.8%, and the comparable growth rate in the second quarter was as high as 8.5%, far exceeding the industry level.
During the reporting period, EBITDA increased by 59.1% year-on-year to RMB 672 million, and net profit attributable to owners of the parent company was RMB 122 million. Mr. Wang Junzhou, Gome Retail's president, said that Gome has been renamed Gome Retail. The new name can more accurately reflect our current position and business model as well as the transformation path. The transformation of Gome will not sacrifice profits in exchange for growth, and it cannot be at the expense of the interests of investors. It is the sustainable development of both. Gome's transformation is based on user thinking. Through the application of Internet technologies such as big data, artificial intelligence, and the Internet of Things, the transition from price competition to value competition is achieved. In the process of transition, an alternative path that is different from its peers has emerged.
Strong growth of 8.5% in the same store
The semi-annual report showed that the growth rate of the same store in the Q2 single-season store was 8.5%. This data is nearly 3 percentage points higher than peers.
In recent years, Gome has continued to promote the renovation of its stores, remodeled offline stores through high-frequency scenes and immersive experiences, and set up new home-centered “home improvement + home appliances” and “entertainment + leisure” scenes. In the first half of this year, the world's first professional VR theater was completed, and it is expected that 2017 will develop 20 in core cities. 356 million yuan in strategic investment Internet home improvement company love space, the first home improvement model has opened in Beijing.
In addition, Gome has introduced home improvement designs and electrical kits, whole-house plumbing systems, central air conditioners, and whole cabinets in stores in Beijing, Zhejiang, Chengdu, and Shanghai, and continued to deepen the overall family solution to achieve customer drainage and brand interaction. It is understood that Gome has entered into cooperation with home improvement and decoration companies such as Mud Commune, more+ cattery and caramel decoration, and expects to introduce nearly 100 stores in the second half of the year. It is expected that the home improvement business will boost the same store by 2%-3% in 2018.
In particular, it is worth mentioning that Gome's comprehensive gross margin returned to a relatively high level in the past two years, with differentiated competition as the main content. The supply chain model has become the core competitiveness of Gome. During the reporting period, Gome's comprehensive gross margin was as high as 17.8%, an increase of 1.4 percentage points year-on-year, about 3 percentage points higher than its peers.
Industry insiders believe that, on the one hand, Gome obtains unique price advantage within a certain period of time through price locks; on the other hand, based on big data analysis, Gome and manufacturers jointly study differentiated product customization, and currently, the proportion of differentiated products in Gome It has reached 40%. In addition, the 2017 semi-annual report shows that 56% of the goods sold in Gome can obtain higher gross profit, demonstrating that the commodity structure determines the comprehensive gross profit margin of retail enterprises.
Online transformation of social e-commerce services, integration, and market sinking in the future
According to the report, GOME’s mobile GMV has seen a significant year-on-year growth of 75% and 74% of online GMV. According to statistics, the 618-day GOME Plus trading volume (GMV) jumped by 378% year-on-year, and cumulative rebate of merchandise rebates exceeded 1 million times. Fang Mei, CEO of Gome Internet, stated that “the pure e-commerce has seen a growth dividend, and the post-ecommerce era is gradually moving towards social, social, and content development. Gome Internet has started to create a business + social + sharing eغير مجاز مي باشدystem since 2015. In the future, Gome will be highly integrated online and offline and become a trinity platform for e-commerce + community + entities."
Gome has formed a unique business model, explored the growth mode of “stock + incremental”, and continued to explore new growth points and improve profitability in the three stages of market sinking, post-service and logistics.
According to data from Ovid Cloud Network, the household appliance market under the 34th and the fourth-tier markets reached 332.1 billion yuan in 2016, accounting for a higher proportion than the primary and secondary markets, and it has been increasing year by year. In the future, Gome will take the county as the center pivot, achieve the goal of covering 80% of county-level cities within 2-3 years and opening 2,000 physical stores.
In terms of logistics system, Gome's logistics network has covered 95.5% of prefecture-level cities, 91% of prefecture-level districts, and 71% of township level. In addition to the logistics bases under construction in Xi’an, Shenyang, and Ningbo, Gome will also vigorously develop self-built logistic warehouses and deepen the coverage of the nation’s logistics network, and plans to increase the warehouse area by 1.96 million square meters.
In terms of post-service, based on the integration of color TVs, Gome will gradually form a technology-based distribution system and comprehensively promote “integration of delivery and installation” to create a competitive threshold for appliance services. In the second half of 2017, it is estimated that the amount of TV sets shipped will reach 500,000 units, in 2018 it will increase to 1 million units, and air conditioners and washing machines will each reach 700,000 units.
In addition, Gome is using the "Internet of things technology" as a support to build the country's post-service market and to grow to the trillion market. In the second half of 2017, Gome will upgrade its supply chain management system with air-conditioning, clean water, and air-free nets. It is estimated that it will bring 500 million yuan in profits in two years or so.
Wang Junzhou said that in the second half of the race, the country’s competition is shifting from price competition to value competition. Through the optimization of the supply chain system, the construction of new scenarios, and the layout of the post-service market, the company will lay the foundation for a new retail transformation and at the same time continuously improve its profitability for consumption. Investors and investors create greater value.
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