Recently, bad news for Gome Electric Appliances has been emerging one after another. First, on October 13, Gome added two new consumption restriction orders, and the related objects were Dong Xiaohong, the legal representative and executive director of Gome Electrical Appliances Co., Ltd.; according to Tianyancha, Gome currently has 17 dishonest persons subject to enforcement, 230 final cases, and the total unfulfilled amount is about 840 million yuan.

Then on October 15, an insulting pop-up appeared on the Gome App lottery page, accusing its chairman Huang Xiuhong and founder Huang Guangyu of "arrears of wages and payment of goods" and other issues. Since the backend of the Gome App can only be modified by employees, it is suspected that this incident was involving internal Gome technical personnel.

From another perspective, Gome has almost lost control, and its employees are also on the hostile side of the company, and they are at odds with Gome's top management, led by Huang Xiuhong and Huang Guangyu.

Why did this company that changed China's home appliance market end up like this? Everything is inseparable from the founder Huang Guangyu.

Changing the pattern of China’s home appliance market

In the late 1980s, most home appliance sales in mainland China were monopolized by state-owned enterprises. High prices, poor service, and limited choices were the public's first impressions of them.

However, the only way to buy home appliances is monopolized, and consumers can only swallow their anger and queue up to buy "high-priced home appliances." The most difficult electrical appliance to buy at that time was the television, commonly known as the "four big items". The former Panasonic Paint King color TV was the most luxurious household item of that era.

In the movie "Hello, Li Huanying", the scene where the protagonist queues up to buy a TV vividly restores the scene of ordinary families buying home appliances in the last century.

This business scene was keenly noticed by Huang Guangyu and his brother Huang Junqin, who were 17 years old at the time. Although he is still young, Huang Guangyu left his hometown of Chaoshan fishing village at the age of 16 and went north to Inner Mongolia, where he and his brother engaged in the gray business of reselling electrical appliances. Huang Guangyu is responsible for collecting scrap electrical appliances, and his brother is responsible for dismantling and reassembling the scrap electrical appliances for sale.

After more than a year of reselling second-hand home appliances, the Huang brothers soon discovered that it was easier and more profitable to do business in home appliances. So with more than 30,000 yuan they had saved, they opened a store called "Gome" in Qianmen, Beijing, and officially started selling home appliances.

In order to obtain lower-priced goods, Huang Guangyu bypassed the traditional trading model of "agents + electrical appliance manufacturers" and cooperated directly with electrical appliance manufacturers. He obtained a stable supply of goods through the "one-vote buyout" underwriting system. Not only did he get cheaper goods, he also saved a lot of money for agents.

After having the supply of goods, Huang Guangyu had a vision beyond the society at that time and was keenly aware of the benefits of advertising to increase exposure for the company.

So in 1991, Gome published an advertisement in the "Beijing Evening News" saying "Buy electrical appliances, go to Gome" and regularly published the sales prices of electrical appliances so that consumers can know the prices of home appliances at a glance. At the same time, in order to avoid imitation by competitors, Huang Guangyu even booked middle-seam advertisements in newspapers throughout the year.

Huang Guangyu's advertising strategy that was ahead of the curve in the 1980s and 1990s was a great success and attracted a large number of customers.


Huang Guangyu

After having a stable supply of goods, Huang Guangyu began the "Gome style of play" that later generations are accustomed to: using price reduction sales to attack competitors, holding a large number of orders and then forcing manufacturers to lower prices, or even paying for goods first, extending payment cycles, and crazily compressing manufacturers' profit margins.

According to public information, in 1993, Huang Guangyu opened a number of stores in Beijing such as "Henderson", "Yahua" and "Guohao", which were subsequently renamed "Gome Electric" and formally proposed the concept of "home appliance chain store"; in 1999, Gome went out of Beijing and opened two chain stores in Tianjin; in 2001, Gome opened 13 stores nationwide.

By 2004, Gome had opened more than 200 stores in more than 60 cities across the country, with sales reaching 23.9 billion yuan, making it the largest electrical appliance chain company in the country. Huang Guangyu, the boss of Gome, also became the richest man in China that year.

China's home appliance market has officially transformed from a state-owned franchise system to a private directly-operated chain enterprise system.

The rise and fall of Gome Electrical Appliances

To get rid of the state-owned home appliance market, it can be described as a free-for-all between princes and a group of heroes vying for hegemony. Gome's old rival Suning also officially transformed from home appliance wholesale to chain retail in 1999, and opened Suning's first flagship store in Xinjiekou, Nanjing.

In addition to Gome and Suning, there are also provincial and municipal home appliance companies such as Beijing's Dazhong Electrical Appliances, Nanjing's Five Star Electrical Appliances and Jiangsu Golden Sun, Shanghai's Yongle Electrical Appliances, and Jinan's Sanlian Trading Co., Ltd. It can be said that in the early days of China's home appliance market, there were many rivers and lakes and many mountains.

But in the end, only Gome and Suning had the last laugh.

In 2004, Gome was listed in Hong Kong. With the blessing of the capital market, Huang Guangyu acquired Harbin Black Swan, Jiangsu Golden Sun, Yongle Electric, Dazhong Electric and other home appliance companies in one fell swoop, completely suppressing his old rival Suning.

According to public information, Gome's revenue in 2004 was less than 10 billion yuan. By 2008, Gome's revenue had reached nearly 50 billion yuan, and its profits soared from more than 300 million to more than 1 billion yuan, making it the leader in China's home appliance retail industry. Huang Guangyu became the richest man on the Hurun Report three times in 2004, 2005 and 2008.

At the time of the 2008 Beijing Olympics, Gome (and its subsidiaries Yongle Electrical Appliances and Dazhong Electrical Appliances) created a business myth of annual sales of 120 billion, and became one of the world's top 500 companies in one fell swoop.


Huang Guangyu

However, things must go to extremes. Just when Gome reached its peak, on November 17, 2008, Huang Guangyu was stopped by the police on his way home in his Maybach and taken away for investigation. This became the turning point for Gome's fall from the heights.

After Huang Guangyu was imprisoned, suppliers directly suspended supply and banks froze deposits. Gome, which had been expanding wildly, suffered an instant blow and its business conditions took a turn for the worse.

In order to reduce the losses caused by the imprisonment incident to the company, Huang Guangyu announced his resignation as director of Gome Electric Appliances, and his status as chairman of Gome was automatically terminated at the same time. Chen Xiao was appointed as the new chairman of the board of directors of Gome.

This also gave the old rival Suning an opportunity to develop. At the end of 2008, Suning's operating income began to surpass Gome; at the end of 2009, the number of Suning stores surpassed Gome; in 2011, Suning's operating income was nearly 100 billion, and its net profit was close to 5 billion. This has also become a highlight moment in Suning's development history.

As the saying goes, good fortune never comes in pairs, and misfortunes never come alone. Gome, which was originally hit hard by Huang Guangyu's imprisonment, started a drama of internal strife because of the inhumane entrustment it entrusted.

Chen Xiao, the new chairman of Gome's board of directors, is Huang Guangyu's most trusted and admired subordinate. However, shortly after his appointment, he couldn't wait to start "eliminating pornography" for Gome, fighting for power and profit, and eliminating Huang Guangyu's power.

The rise of the e-commerce era

The internal fighting at Gome lasted for more than a year. In the end, Chen Xiao failed in the struggle and resigned sadly. On March 9, 2011, Zhang Dazhong, supported by Huang Guangyu, succeeded Chen Xiao as chairman of the board of directors.

Although the internal troubles are over, there is not much time left for Gome, because the era of online e-commerce is coming.

On August 13, 2012, Liu Qiangdong, the founder of JD.com, posted on Weibo, declaring war on offline home appliance chains led by Suning Gome, and stated: JD.com’s major appliances will have zero gross profit within three years. Any salesperson who adds a dollar of gross profit will be fired immediately. All JD.com’s major appliances are at least 10% cheaper than Gome.

Liu Qiangdong also announced in a high-profile manner that he would send price intelligence agents to Gome Suning. If the price is not 10% cheaper, JD.com will immediately reduce the price.

This battle between online e-commerce and offline retail was called the "815 E-commerce Price War" and was eventually stopped by the National Development and Reform Commission. But JD.com became famous in one battle, and online e-commerce gradually replaced traditional offline store physical retail. More and more consumers favored e-commerce platforms with lower prices and more transparency.

Just two years later, online e-commerce has surpassed offline stores.

According to the financial report, in 2014, JD.com’s operating income was as high as 115 billion yuan, while Suning’s operating income was 108.9 billion yuan, and Gome’s operating income was 60.36 billion yuan.

Not only does Gome lag behind JD.com, but even its old rival Suning is far behind. Gome’s only hope can only be pinned on its founder Huang Guangyu.


Gome Electrical Appliances

In February 2021, Huang Guangyu, who was released from prison, passed the parole test period, was officially released, and returned to take charge of Gome. At that time, Huang Guangyu was very ambitious and stated to the outside world: "It will take 18 months for Gome to return to its original market position."

However, after being released from prison, Huang Guangyu successively tried a series of attempts such as building a low-price e-commerce platform, live streaming, and transforming the home decoration market, but all of them received very little attention and almost zero market feedback.

At the same time, the number of Gome employees has also dropped to an all-time low. According to Gome China Daily, at the end of 2021, Gome Group still had 32,278 employees. As of the end of the first half of this year, Gome Group had only 3,609 employees left.

Huang Guangyu, who has made continuous trials and errors and failed continuously, has to admit that he has fallen behind "an era" and cannot save Gome, which is "suffering from serious illness and difficult to recover from". Starting at the end of 2021, we will reduce our holdings in Gome Retail stocks.

According to data disclosed by the Hong Kong Stock Exchange, in January 2022, Huang Guangyu’s shareholding ratio was 59.94%, but by January 11, 2023, Huang Guangyu’s shareholding ratio had dropped to 10.79%.

From the high-spiritedness at the age of 17, changing the pattern of China's home appliances; to the collapse of the building at the age of 54, there is no way to recover... The thirty years of Huang Guangyu and Gome spanned an entire era, and were eventually abandoned by the times.

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