19 September 2018

GOME thinks big to hold off cheap cyber rivals

Two appliance retailers, two different pricing approaches and two contrasting sets of results. That was the story with Suning Commerce Group (002024.CN) and GOME Electrical Appliances (00493.HK) in the third quarter.

Suning suffered a loss after rolling out its ambitious O2O (offline-to-online) strategy while GOME fared better by finding a niche market to ward off the e-commerce challenge. That’s because, unlike Suning, GOME refuses to adopt the same price model for its online and offline channels to lure buyers. Instead, it relies on bulk underwriting to gain greater price concessions from suppliers and to offer a bigger range, enabling it to compete with emerging online rivals for price-sensitive buyers.

The bulk approach was apparent on Wednesday when GOME signed a deal with several household brands to buy a combined 9.6 million refrigerators and washing machines. The agreement dovetails with its month-long promotion which is set to reach a peak on November 11, the day of Alibaba Group’s online shopping bonanza.

GOME’s decision to concentrate its firepower on the fridge and washing machine market seems the right way to head off competition from online vendors, given that Chinese consumers generally feel better about buying large household appliances if they can first see the real thing.

According to GOME, e-retailers together sell just 2 billion yuan’s (US$329 million) worth of fridges a year. GOME, by contrast, expects to sell 20 billion yuan of the appliances this year.

National Business Daily quoted an industry analyst as saying that GOME also still has an edge over its cyber rivals in after-sales service such as installation, warranties and replacement, which are key considerations for buyers of big white goods.

– Contact the writer at [email protected]



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