By 2000, Gome had become a large home appliance retail chain :
- An annual turnover of RMB 2.6 billion
- 21 retails outlets spreading across Beijing, Tianjin, Tianjin, Shanghai, Chengdu and
- Over 50% market share of Tianjin color television market
Top three retailers in the Shanghai Market
Gome initially only imported home applications, mainly Japanese color television . E.g. Toshiba, Panasonic, Hitachi and Sony. In 1996, Gome had shifted its focus from imported brands to domestically produced, joint-venture brands. ?
On June of 2000, to avoid the series of the Color Television Price War incidents,, nice core members of the color television industry- Konka, TCL, Hisense, Skyworth, Prima, Rowa, LG, Panda and Westlake launched the “Chinese Color Television Enterprise Summit”. This is the first price alliance.
Price control by alliance would choke off Gome’s business and their operation strategy of Gome: focus on retail only, thin margins for high volumes
Low prices strategy sustainability
In mid June 2000, nine color television manufacturers had indicated that production for domestic sales would be reduced by 15-20% and the pricing trend for color televisions might be significantly affected.
Over reliance on domestic color television suppliers
Gome’s major revenue was driven from the sale of domestic color television sector, and thus it has adverse impact on the business model and marketing strategy of Gome.
Branding and positioning
Gome needed to maintain the branding image of being the defender of consumer welfare
Limited distribution channel and negotiation power
The number of stores for Gome as well as the scale of its overall sales network was rather limited (Actual scope limited to 3 regions of Beijing, Tianjin and Shanghai)