On the afternoon of June 24, a market rumor surfaced that Huang Guangyu, former chairman of Chinese retail giant Gome Electrical Appliances Holdings, had been released from jail.
The news spurred a sharp rise in shares of the Gome family, with Hong Kong-listed Gome Retail rising 18 percent on the news.
From richest man in the country to behind bars
In January 1987, Gome set up the first store in Beijing, which was less than one hundred square meters, to deal with all kinds of household appliances.
In 1993, Gome began to unify the name of its stores, the way of displaying its products and the after-sales service in its stores, establishing a low-cost, replicable development model and forming the prototype of the Chinese home appliance retail chain model.
In June 2004, Gome was successfully listed in Hong Kong (stock code: 00493).
In June 2004, Gome was successfully listed in Hong Kong (stock code: 00493). In the same year, Huang Guangyu and his brother were listed in the Hurun 100 list, which was the first time that Huang Guangyu was the richest man in mainland China by virtue of his assets of 10 billion yuan.
In July 2006, Huang Guangyu restructured the debt and assets of Zhongguancun.
In the secondary market, Huang Guangyu used 79 personal accounts to buy shares worth over 1.4 billion yuan, with book gains of 300 million yuan at one point.
On April 28, 2008, the China Securities Regulatory Commission (CSRC) opened an investigation into unusual trading in Zhongguancun's shares.
In mid to late November 2008, Huang Guangyu was taken away by the Beijing Municipal Public Security Bureau for investigation.
On December 23, 2008, Huang Guangyu's wife, Du Juan, resigned as a director of Gome.
In April 2010, Huang Guangyu's case was heard by the Beijing Municipal No. 2 Intermediate People's Court, where he was charged with three counts of illegal operation, insider trading, and bribery.
On May 18, 2010, the first trial of Huang Guangyu was held, and the court found Huang Guangyu guilty of operating an illegal business, insider trading, and bribery. Guangyu was convicted of illegal business operation, insider trading and bribery of an organization and was sentenced to 14 years' imprisonment for all three crimes. Gome was fined RMB 600 million and its assets were confiscated RMB 200 million, while Gome was fined RMB 5 million.
On 30 August 2010, the second trial upheld the original verdict and sentenced Gome to 14 years' imprisonment for all three crimes and a fine of RMB 800 million.
On June 18, 2012, Huang Guangyu received a 10-month reduction in his sentence.
On May 31, 2016, Huang Guangyu's sentence was reduced by 11 months.
Dramatic changes in the retail landscape of Chinese national appliances
Currently, Gome Retail is in a critical period of strategic transformation, with its traditional business suffering and facing a decline in performance and market share far behind its competitors.
In 2017, Gome, listed on the Hong Kong Stock Exchange, changed its Chinese name to Gome Retail, and Gome gave an official The explanation is that Gome is exploring new retail paths and models. But the actual effect of the transformation does not seem to be obvious.
According to the 2019 China Home Appliances Industry Annual Report, in terms of overall market share by channel, Suning.com accounted for 22.8% of the total JD.com accounted for 14.4%, Tmall accounted for 8.8%, and Gome only accounted for 5.8%, ranking fourth.
In terms of online channels, Gome performed even worse, with JD.com, Suning and Tmall accounting for one, two and three, and a total of With over 90% of the total online share, Gome has a very weak presence at 3.5%.
This can be "seen" in the Gome retail results report, which shows that in 2019, the group's sales revenue was 59.483 billion, down 7.57% year-on-year; loss attributable to owners of the parent company of about $2.59 billion, down 7.57% year-on-year The loss was $4.887 billion.
Gome Retail's online sales accounted for only 3.45% of total revenue in 2019, with the remaining $57.4 billion in revenue coming from Offline "sales of electrical and consumer electronics". In addition, Gome Retail's share of online sales declined both in dollar and percentage terms compared to 2018. Online sales were $3.943 billion in 2018, accounting for 6.13% of total sales.
Can Gome catch up?
On the eve of Huang Guangyu's release from prison, Gome's retail sector has been making frequent moves, driving a 50% surge in Gome's retail share price in Hong Kong over the past month.
In April and May this year, Gome announced a series of deals with internet giants Pinduoduo and JD.com. In a strategic alliance, the two took an equity stake in Gome in the form of a convertible bond subscription, which enabled Gome to take advantage of a new strategic partnership between the two companies. Pinduoduo brings in online traffic and integrates JD.com's online and offline supply chain and logistics.
At this point, a three-way home appliance retail alliance including Gome, JD.com and Pinduoduo has taken shape.