21st Century Business Herald, 11/22/11
Gao Jiqun, Guangzhou general manger of Chinese home appliance and consumer electronics retailer Gome (0493.HK), revealed yesterday that some of Gome's top-performing subsidiaries would begin cross-regional expansions in 2012. Subsidiaries Yongle (Shanghai-based) and Dazhong (Beijing-based) will open new stores outside their home areas. At the recent annual operations meeting for Gome, president Wang Junzhou said that the company would plan to expand operations over the coming five years.
"There is some internal controversy over the plan," Gao said, "but the majority of those involved - from headquarters to subsidiaries - are in favor of it. The plan may create some internal conflict and lead to some duplication of efforts and investment, but it will be key to our plans for expanding market share."
The Gome subsidiaries that will expand outside their home areas under the plan are the company's more competitive subsidiaries. Guangzhou Gome, for instance, has opened 33 new stores since the start of 2011, and could see 15% year-on-year sales revenue growth to RMB 8.3 bln, with profits of more than RMB 3 bln - a 30% YoY increase. Guangzhou Gome will move into Hunan province, where the relatively weak provincial Gome subsidiary has only 23 stores. Having stronger subsidiaries overlap with subsidiaries in less developed areas is the idea behind Wang Junzhou's plan.
Gao said that Guangzhou Gome would form a new management team to dispatch to Hunan in 2012, and would furthermore open 20 new Yongle stores in Guangdong cities surrounding Guangzhou, including Dongguan and Foshan. Shenzhen Gome may open Yongle stores in Guangzhou, and other high-performing Gome subsidiaries like Beijing Dazhong, Shanghai Yongle, and Tianjin Gome will expand into less-developed surrounding regions.
The entry of the more developed, more experienced Guangzhou Gome into Hunan will lead inevitably to competition between Hunan Gome and the Guangzhou Gome-managed Hunan Yongle. Guangzhou Gome will develop its own logistics system in Hunan - though Gao downplayed the potential for redundant investment, noting that Gome relies on third-party logistics companies.