Chinese electronics retailer Gome (HKG:0493) has something of an odd e-commerce strategy, with its online interests represented both by its own Gome.com.cn site and its ownership of the Amazon-esque Coo8.com. Chinese tech blogs have been buzzing recently with rumors of Gome selling off its 80 percent stake in Coo8 – but now Gome’s VP, He Yangqing, has stepped forward to shoot down the rumors, saying that Gome is not selling Coo8 and has not been discussing such a sale.
Gome bought its sizable stage in the Coo8 site back in 2010 – a year before the massive brick-and-mortar retailer launched its own full shopping website. That stake cost just RMB 48 million at the time (US$7.63 million at today’s rates). But Coo8 has been struggling, incurring RMB 194 million ($30.84 million) in losses in 2011. The dual brand strategy might have also hurt Gome’s site, which lost RMB 197 million ($31.32 million) last year.
China’s B2C e-commerce scene is a tough one – especially so in the gadgets and home electronics sector, which is hit by frequent price wars and characterized by brutal amounts of marketing expenditures. Gome and Coo8 are up against China’s biggest online store, Tmall, plus more specialist sites like 360Buy, Dangdang (NYSE:DANG), Amazon China, and Suning. That last one, Suning (SHE:002024), is also a competitor of Gome’s on China’s streets, and it has been enjoying much greater success as it pushes into e-commerce, recently rising up to be China’s fourth biggest e-commerce site. Coo8 is down in eighth spot.
Gome VP He Yangqing went on to say the company has a clear strategy that goes through to 2013. Coo8 is targeting RMB 2 billion ($318 million) in sales in 2012 – three times higher than 2011’s figure.
But Gome seems insistent on its current path – unless the losses become untenable, or perhaps shareholders pressure the board to follow the lead set by Suning as it transitions from the High Street to the web.
[Source: Techweb - article in Chinese]
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