Gome shuts 50 stores, moves into malls

Chinese retailer Gome Electrical Appliances Holdings plans to close about 50 stores across the country in 2014 and partner up with department store chains to explore second- and third-tier city markets, Securities Daily reported on Monday.

Facing online competition, Guangzhou Gome is cooperating with Guangzhou Mopark Department Store to operate electrical appliance counters in Mopark malls, the Beijing-based newspaper reported.

Cooperation with Mopark is the first step in a multi-platform plan, the report said, citing an unnamed source from Gome. Gome is also negotiating with Beijing-based retail chain store operator Wumart Group, the source said.

Gome will manage the electrical appliance purchasing, marketing, distribution and after-sales service at electrical appliance counter in Mopark pilot stores, the Beijing-based China Times reported Saturday. The two companies will also share staff and offer more favorable policies to their members, the newspaper said.

Gome reportedly plans to shut down 50 stores and move into more department stores and shopping malls in first-tier cities, and also open 80 to 100 new stores in second- and third-tier cities in 2014.

Gome has shut down 110 stores, according to its 2013 third-quarter report. Sales in the first three quarters were 41.66 billion yuan ($6.89 billion), an 8 percent year-on-year increase, according to the firm's third-quarter report.

Gome's bold move is an innovative attempt to address competition from online retailers, Li Weihua, a professor of the Franchise Research Center of the China University of Political Science and Law, told the Global Times Monday.

"By moving into department stores or shopping malls, Gome can share customer traffic with its cooperating partners and avoid the risk of site selection by itself," he said.

A major Gome competitor, Suning Commerce Group Company announced Monday that it will launch Wednesday Lingqianbao - licai.suning.com - a Yu'ebao-like fund investment platform for online shoppers.

The two companies are taking two different directions, Li said.

"Comparing online with offline models, Gome is better at offline marketing," Li said. "Opening more stores in second- and third-tier cities will help Gome expand its market."