8month19On the evening of the same day, Gome founder Huang Guangyu issued an open letter stating that “strive18The goal of 'restoring Gome's original market position within a month' was not achieved, and a new three-year profit target was set. Huang Guangyu described the strategic adjustment of Gome Retail as 'strategic hibernation,' stating that 'Gome Retail will focus on its core business, shed its burdens, and go into battle lightly.'
Why has Gome Retail focused on electrical appliances and consumer electronics again? Does Gome's focus on e-commerce give it unique advantages? Gome plans to further acquire Ant Logistics. Is building its own logistics a necessary choice for e-commerce companies? In the operation of e-commerce businesses, which key business processes help achieve positive cash flow? Frost & SullivanFrost & SullivanFrost & Sullivan consulting advisor Liu Yaoqian, referred to below as 'Frost & Sullivan', was a guest on the Titanium Media's 'Weekly Capital Market Observation' program to discuss the future development direction of e-commerce enterprises.
Titanium Media
Q
8month19On the evening of the same day, Gome founder Huang Guangyu issued an open letter stating that “strive18The goal of 'restoring Gome's original market position within a month' was not achieved, and a new three-year profit target was set. Huang Guangyu described the strategic adjustment of Gome Retail as 'strategic hibernation,' stating that 'Gome Retail will focus on its main business, shed its burdens, and go into battle lightly.'
Why has Gome Retail once again focused on electrical appliances and consumer electronics?
Liu Yaoqian, a Frost & Sullivan consultant and industry analyst, said that the home appliance sector has always been a strength of Gome Retail. This business adjustment is aimed at strategic focus. Gome intends to deepen and perfect its core businesses in home appliances and consumer electronics first, and then expand outward. This is a 'smart choice'.
First, look at the product itself. Home appliances have always been “618"The category with the highest transaction volume among all categories, ranking at the top of the transaction volume list for many consecutive years, and its turnover has also been2020year621Rising by hundreds of millions to this year879Yuan. Among them, the performance of white goods in niche areas is also very outstanding. In terms of consumer electronics, mobile communications are also in the618Top three in transaction volume It can be seen that as the new generation gradually becomes the main consumer group, markets for household appliances, consumer electronics, and emerging small appliances are continuously expanding.
In addition, Liu Yaoqian believes that From a macro perspective, in the first half of this year, due to repeated outbreaks of the pandemic, economic growth rates declined, and the retail industry was also affected to some extent. this year1 - 7In the month, the total retail sales of consumer goods in society were24.6trillion yuan, a year-on-year decrease0.2%Despite the government and local authorities introducing policies to boost consumption, physical retail is still facing difficulties, with frequent store closures. Online e-commerce also faces challenges such as traffic saturation and increased costs.
At present, for enterprises such as Gome, it is necessary to first distinguish between primary and secondary contradictions, seeking survival before development. Gome focuses on its core business to capture core capabilities, build a moat, and cope with market uncertainties and competition. In addition, Gome's 'Home Life' track includes household appliances, home use products, home furnishings, home decoration, etc., representing the most core part of national consumption. According to relevant estimates, this is a scale30A trillion-dollar blue ocean market. Gome's focus on its core business this time is to build a core competitive strength first, and then proceed with expansion.
Q
Does Gome's focus on e-commerce give it unique advantages?
Liu Yaoqian summarized four unique advantages that Gome possesses, covering aspects such as track record, operational conditions, strategic thinking, and development plans:
1Gome is located at30A trillion-dollar big track. Scenarios include store visits, home delivery, online orders, and door-to-door services. The categories cover household appliances, daily necessities, home furnishings, and home improvement, which are related to the consumption of countless families. In addition, after the founder's return, from2021Since the beginning of the year, there have been frequent actions that have changed the internal and external structure of Gome, accelerated the internet process, etc. The overall business strategy and the return of the founder have both raised external expectations for Gome;
2) has opened up a new track for entertainment retail. Gome with "True Happiness"applicationAs a traffic entrance, an ecological closed loop has been created through an entertainment strategy. Gome has rich offline physical store operation experience and can utilize thisapplicationAbsorbs traffic and integrates resources from core business districts across the country. Based on Gome2021Annual report, "So happy"applicationofGMVYear-on-year growth108.4%, with monthly active users remaining stable at5000Over 10,000. Liu Yaoqian pointed out that both from the perspective of consumers and partners, the industry is in an upward trend.
3Relatively ample cash reserves. 2021year3In the month, Gome Retail's distribution and placement agency signed a placement agreement with a seller, raising a net amount of approximately45HK$10 billion was used to repay debts and replenish operating funds. The financial report shows that as of2020At the end of the year, Gome had approximately96yuan, as of2021At the end of the year, Gome had cash and cash equivalents45Yuan. In comparison, Suning's cash and cash equivalents have shown a negative net increase for three consecutive years.
4Online and offline integration, with full-scenario interaction and integration. From the perspective of e-commerce enterprise development, physical stores may not necessarily be a 'burden'. If physical stores are treated as pre-shops for inventory management and used for display and experience, they can actually be an advantage. Gome itself1987Since its inception in 2019, it has accumulated over30With years of experience, the company has a strong supply chain and has established deep cooperative relationships with many manufacturers. This can be considered as GM's infrastructure and one of its moats.
Gome can build its own operations through its offline stores.+The supply chain model can achieve on-demand material customization and secure direct access to raw materials. Under the impact of the pandemic, it can ensure continuous supply, control quality and costs from the source, and is more conducive to online-offline integration and full-scenario interaction and fusion. Financial reports show that2016There are offline stores of Gome in [year].1000Multiple, as of the end of last year, we have exceeded4000home.
Q
Gome plans to further acquire Anxun Logistics. Is self-built logistics a necessary choice for e-commerce companies?
Liu Yaoqian pointed out that logistics is a labor-intensive industry. If e-commerce platforms want to build their own logistics system, they must first make long-term investments in human resources, material resources, and financial resources.
In the past, there was a polarized view on whether e-commerce companies need to build their own logistics. Some believe that light assets are more suitable for e-commerce, while others argue that heavy assets also have their advantages, such as JD.com's long-term growth achieved through logistics.
Logistics is a very important part of shopping. Building one's own logistics can bring better shopping experiences to users and raise the industry threshold for oneself. For example, JD Logistics has become a barrier for JD.com. In addition, due to the pandemic, the global supply chain faces challenges and opportunities. Logistics enterprises need to put forward higher requirements in technology and service. Against this backdrop, it is necessary to connect their industrial chains and establish intelligent and efficient digital...The advantage of logistics services is significant. JD.com was one of the earliest to recognize the value of self-built logistics, and since then, Alibaba has also increased its stake in YTO and expanded Cainiao Network through premium pricing, indicating that e-commerce companies have also realized that self-built logistics can effectively enhance business layout.
Liu Yaoqian believes that Gome initially had an elastic logistics system, combining distribution models, self-operation, and third-party delivery. However, this is not a complete logistics system. At that time, Gome was in the position of a retailer within the supply chain, so its logistics only included procurement, sales, distribution, and other aspects. Now, Gome has also started to make efforts in logistics. The integration of Ant Logistics into Gome's supply chain system can also serve as an important vehicle for development.
From a business perspective, this acquisition will make Gome's supply chain more complete, providing better services for both suppliers and consumers, thereby enhancing Gome's profitability. Moreover, from a financial standpoint, Ant Group Logistics itself is also a high-quality asset. In the first half of this year, despite the impact of the pandemic, Ant Group Logistics' operating income still maintained double-digit growth.
In summary, the upper limit for e-commerce enterprises in the future lies in the depth of the extension of the e-commerce industry chain. The gradual transformation of e-commerce towards self-operated models is determined by the general environment and future trends.
Q
In the operation of e-commerce businesses, which key business processes contribute to generating positive cash flow?
Liu Yaoqian summarized three strategies for e-commerce companies to achieve positive cash flow:
1Short term: Open source cost reduction. Make some adjustments at the operational and management levels to maintain healthy short-term cash flow. For example, inventory clearance, adjustmentsSKU, adopting a presale model and simplifying the shipping process, etc. Specifically, although streamlinedSKUIt may sacrifice gross profit margin, but it is conducive to maintaining healthy cash flow. The presale model enables early collection of funds.
2Mid-term: Control costs with external assistance. Cut costs by seeking financing and enjoying policy subsidies. For example, currently, local governments have enhanced credit, increased loan amounts, and provided loan interest subsidies to help enterprises reduce financing costs in order to promote sales; in addition, enterprises can enjoy preferential policies such as tax exemptions, rent reductions or deferrals.
3Long-term: Optimize operational strategies. Under the impact of the pandemic, e-commerce companies selling different categories of goods have been affected differently. Operating only a single category of products may help an enterprise increase its market share, but it will also result in a loss of certain risk resistance capabilities. Therefore, e-commerce companies can plan to expand their product categories and not put all their eggs in one basket. In addition, risk management and establishing emergency plans are also very important. E-commerce companies must actively manage risks by setting up risk reserves or other types of funds to deal with emergencies.
Liu Yaoqian pointed out that competition among e-commerce companies appears on the surface to be a battle for market share, but from a financial perspective, it is actually a battle for cash flow. Returning to Gome, while developing online and offline layouts, in order to avoid excessive cash investment, it is also necessary to adopt a light-asset model for resource integration, leveraging upstream and downstream1+1>2With this approach, Gome's input-output ratio is expected to be better than the industry average.
Q
What impacts will the rise of brand live streaming rooms have on individual e-commerce anchors and offline brand stores?
Liu Yaoqian believes that brand live streaming rooms are a highly efficient channel for brand promotion. The core value lies in improving the efficiency of information transmission and matching in the retail chain, while also accumulating private domain traffic, which is conducive to long-term operations.
From different perspectives, In the information transmission process, Brand live streaming rooms have a higher information density compared to offline stores. They can achieve two-way interaction with consumers, provide them with rich, timely, and high-quality content output, offer personalized customization, transmit brand and product information more comprehensively, accurately, and efficiently to consumers, and ensure that consumer questions are promptly responded to.
In the information matching phase, Compared to individual anchors, brand-owned live streaming rooms have brand endorsement and are more likely to establish trust relationships with consumers. Based on this, information matching can be completed more effectively, leading to higher sales.
For offline stores, the rise of e-commerce has had a significant impact on physical stores. The emergence of live streaming sales has taken away some of the traffic from physical stores. However, if the brand itself operates digitally, its live streaming rooms can be linked with offline stores, which can in turn support offline sales. E-commerce live streaming has a very strong social attribute; it can optimize the consumer experience, narrow the relationship and trust between consumers, and also increase the brand's own awareness. The rise of brand live streaming rooms has had a positive impact.
For individual e-commerce influencers, in the early days, influencers attracted followers by offering low prices. Whoever could get a lower price and higher discounts could carry more goods. In this case, the personal live streaming room of the e-commerce influencer determines the exposure volume, while actual conversion is determined by multiple factors such as brand, product itself, and discount rates. Today, this approach is no longer applicable because many brands have realized the need to control traffic in their own hands. In the future, brand-owned live streaming will become the norm, and it is even possible that brand live streaming rooms offer discounts greater than those of individual live streaming rooms. Today's live e-commerce is no longer about individual anchors competing solely on low prices; it is developing in a more advanced and mature direction.
In summary, brand live streaming rooms will definitely have a very positive impact on corporate branding and consumer conversion. The rise and development of brand live streaming rooms are also the future trend of the e-commerce industry.
*This article is reprinted from Titanium Media , Original title: Huang Guangyu called for another fight3In [year], do Gome and Suning still have a chance? | Weekly Capital Market Observation ">
