Essay about Gome

2174 Words9 Pages
PROBLEM IDENTIFICATION
Gome, founded on January 1987 by Huang Guangyu, was a national retail chain selling various types of home appliances. The impressive growth that Gome had incurred during the 1990s was especially due to its offer to final customers: low prices and high quality for after sales services, key differential factors in a buyer market as the Chinese home appliances one.
In June 2000, nine of the most important Chinese color TV manufacturers established a Price Alliance that aimed to set a time-limited price floor, in order to conclude the price wars that had affected the market during the last decade, by reducing manufacturers’ margins to a lousy 5%. Manufacturers also announced their intention to shrink production for
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In the new Emerging model the specialized home appliance chains were the most important channel; by realizing economy of scale, they were able to obtain rebates and discounts from manufacturers, shoot down operational costs and sell at low prices to retail market. The new model, particularly successful in big cities, allowed the retailers to increase the network and the turnover in the industry, giving them the leadership in the channel.
By their side, consumers had changed their behaviour during the time. At the beginning, when the market was rapidly increasing and the prices frequently cut off, Chinese enjoyed the situation and used to buy at a lower price, always waiting for the next deal. But after some time the behaviour became more rational and mature; also due to a substantially lack of quality and technology contents in the domestic industry, customers looked at price reductions with scepticism. They were now seeking for a higher quality and a better customer service and sometimes preferred to buy when prices raised cause in their view a better product should cost more.

Gome was a first mover in the new sales channel model. Founded in 1987 as a single little store in Beijing, during the following 15 years had become a retail chain with a turnover of 2.6 billion RMB, generated by 21 outlets located in Beijing, Tianjin,
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