Gome Electric’s business and profit model

The operation and profit model is to earn the price difference. The merchants who settle in the platform will receive a portion of the money from each transaction made by the Gome platform, and the source of goods will still be provided by the merchants themselves.

The profit model of earning the price difference, which can also be called the "eating the price difference" profit model, is the "only way" for most retail companies to complete the accumulation of original capital and realize profits, and it is also the starting point of retail.

This traditional profit model of retail enterprises is to expand the scale of outlets and increase sales scale so that they can take the initiative in bargaining with suppliers, thereby "forcing suppliers to lower purchase prices." , while reducing its own other procurement costs, and then using the strategy of small profits but quick turnover, that is, low prices and low profits to expand sales, to obtain the difference between the purchase price and the retail price to achieve the purpose of profit.

Gome Electric Appliances is a leader in the home appliance retail industry. As a leading enterprise, it has more than 1,200 directly-operated stores in nearly 280 large and medium-sized cities in China. In addition, Gome Electric launched a new e-commerce website in April 2011. This "physical store B2C online and offline sales model makes Gome It has the widest sales network and strong sales scale.

Small profits but quick turnover is the business strategy of Gome Electrical Appliances, which enables Gome Electrical Appliances to better attract more consumers. At the same time, Gome Electrical Appliances has a large purchase volume, good sales performance, and strong sales capabilities that make suppliers willing to By cooperating with Gome, Gome has an active position in bargaining with suppliers, so that suppliers "voluntarily" lower their purchase prices. The greater the sales volume, the lower the purchase price. The lower the purchase price, the greater the sales volume. Gome's profits and sales scale will gradually increase. In this way, Gome Electrical Appliances has formed a cycle system, as shown in the figure.

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Gome Corporate Strategy:

The core of the low-cost strategy is that the company uses all possible ways and means to reduce the company's costs and become the lowest-cost player among market competition participants , and use low cost as a means of competition to gain competitive advantage.

The low-cost advantage usually comes from two aspects. If it is sold at a lower price than competitors, it will be able to impact and penetrate the market at a low price, gain a higher market share, and increase market share. It will also promote the expansion of production scale, thus setting a scale door machine for competitors. The expansion of scale will reduce costs, thus setting a cost threshold for competitors.

If the product is sold at the same or similar price as competitors, the cost advantage is converted into a financial advantage, and low-cost enterprises will obtain higher profit margins. If a company can obtain and maintain an overall cost leadership position and price its products at or close to the industry average cost level, it will become a high-level operator in the industry.

Gome Electric’s non-main business income:

Mainly composed of sales promotion income, admission fees, management fee income, listing fees, air conditioning installation management fees, booth fees, and agency fees. , advertising fees, etc., these incomes ultimately come from supplier rebates and channel fees paid. Taking the admission fee as an example, the fee rate is as low as 15 and as high as 30. Such a profit model not only enables Gome to gain huge hidden profits, but also explains why Gome frequently launches price wars but still has abundant funds to protect the losses caused by low prices by making considerable profits from non-main business. Land made up for it.

Reference materials:

Baidu Encyclopedia-Gome Electrical Appliances