Monday, 2023 October 2

China’s former richest man is planning a comeback following jail time

Huang Guangyu, the founder of retail giant Gome, is committed to returning his company to its former glory within the next 18 months, he said at a meeting with company executives on Thursday. Under a new strategy, he plans to leverage Gome’s Zhenkuaile online shopping app, as well as its network of brick-and-mortar stores, while also opening its supply chain to other companies to boost sales of consumer goods across various categories.

Gome relaunched its shopping app under a new name Zhenkuaile on January 12 this year, aiming to bring social and entertainment elements to shopping by enabling livestreaming and building an online community among buyers.

Boosted by Huang’s first public speech out of prison, Gome Retail shares surged 18% on Friday in Hong Kong, closing at HKD 1.96, more than doubling so far this year.

“In the new year, we will keep pushing forward and update our ‘Home Living’ strategy,” Huang promised in his speech, which was posted on the company’s official WeChat account. Huang, who was China’s richest man in 2008 before his arrest, was sentenced to 14 years in prison, but released more than two years early on parole in June 2020. His parole just expired on February 16.

Gome’s vice executive president Xiang Hailong revealed that the number of daily active users on Gome’s Zhenkuaile app has reached more than 10 million while gross merchandise value (GMV) on the platform has more than doubled in just two weeks after the shopping app’s debut, according to a 36Kr report on January 22. Xiang resigned from the senior vice president of China’s largest search engine Baidu in May 2019 and joined Gome three months later.

Li Chengdong, founder of the retail-focused Dolphin think tank, doesn’t believe that developing Zhenkuaile is the right strategy to compete in a crowded e-commerce market. “It would be better for Gome to ally with internet companies for further development,” Li said. He doubts that Gome can stage a comeback as the environment has changed, although he admires Huang’s entrepreneurial spirit.

Back to the top?

Gome was once China’s largest home appliance retailer. In 2007, it ran 726 stores, generating RMB 42.5 billion in revenue and about RMB 1.1 billion in net profits, leaving behind Suning who took in RMB 40 billion in the same year.

But the retail landscape has changed in the time Huang was behind bars. In the first half of 2020, Suning dominated China’s home appliances market worth RMB 336.5 billion (USD 51.87 billion) with a 23.9% share, followed by with 17.2%. Gome trailed behind with a mere 5.2% share of the market.

Struggling during the pandemic, Gome teamed up with Pinduoduo and last year, while both e-commerce platforms purchased convertible bonds from the retailer worth a total of USD 300 million. In the first six months of 2020, Gome boosted the GMV it generated from e-commerce platforms by more than 100 times year-on-year, according to a release from the company.

Zhuang Shuai, the founder of Bailian Consulting, believes Gome can once again take on former rival Suning. “I think it is very likely that Huang can honor his promise, based on my understanding of the retail guru,” said Zhuang. Back in September, when Gome’s stock traded at below HKD 1, Zhuang believed that at this price it was undervalued.

Jingli Song
Jingli Song
I believe Chinese innovation at various level needs to be known by the world.

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