(Yicai Global) Dec. 9 -- Gome Electrical Appliance will shutter small, unprofitable stores in 30 regions across the country and move into live-streamed e-commerce in a bid to stay above water in a changing retail landscape, a source close to the struggling Chinese electrical appliance chain told Yicai Global.

Amid the current downturn in consumption, the traditional brick-and-mortar retail model is not working and Gome has to innovate, the person said yesterday, referring to a meeting of top executives on Dec. 7. It will close those outlets that are losing money, but keep the large, profitable ones open. Gome’s transformation requires a complete change of awareness, he added.

The Hong Kong-based firm will embrace an Internet-based marketing model and revolutionize its retail format through live streaming, he said. Gome plans to launch several live sales promotions during the upcoming Double 12 online shopping gala this month by linking arms with TikTok’s Chinese version, Douyin. It will offer discounts on a wide range of products from color TV, refrigerators, washing machines, to air conditioning.

For the first time, Gome will distribute discount coupons in advance of a live sales event in the hope of attracting more customers, a company executive told Yicai Global. The tie-up with Beijing-based Douyin will help Gome’s regional branches in Guangzhou, Xuzhou and Nanjing divert customers to the live streaming studio through short video advertisements and coupon distributions, he said.

The household appliance industry has experienced years of price wars and profits have been very thin, the source said. Gome has used all its money to pay rent and utility bills and there is nothing left to pay employees and suppliers, he added.

But Gome appears to have found a way to pay staff salaries, after earlier saying that it would delay paying employees for the next six months to after October next year due to operational difficulties.

Owner and founder Huang Guangyu will grant parent firm Gome Retail Holdings an interest-free, unsecured loan of HKD150 million (USD19.2 million) to be used as general working capital, which can be used, but is not limited to, paying staff wages, Gome Retail said yesterday.

As part of the restructuring, Gome will also start a franchise-like business model to attract a wider range of "social resources," which include property owners, household appliance makers, store managers and agents, the person said.

Under such a model, Gome will only provide support in the form of brand management and supply chains. It will reduce Gome’s risks and allow more resourceful people to participate in the operation of stores, thereby enhancing their competitiveness, he added.

Editors: Tang Shihua, Kim Taylor