1、,30,000,5,131,8,019,6,2001,193,312,561,1,282,18,81,40,2,500,256.4,50.4,32.0,51.3,85.5,427.4,128.2,128.2,2015E,2002,2003,2004,2005,2006,2007,2008,2009,2010,2011,40,000,35,000,30,000,25,000,20,000,15,000,10,000,5,000,0,500,400,200,100,0,Company,Suning,January 22, 2013China: RetailTransforming China: O
2、nline RetailSeries 1: Challenge and opportunityEquity Research,First, the good news: Rmb3 tn in online sales by 2015EWe expect the growth of Chinas online shopping market to be swifter thanwhat has been seen in the developed world. There are several factors inChinas favor: 1) lower retail market con
3、solidation; 2) a largeronline/offline price gap; 3) lower search costs and higher pricetransparency 4) demographics support online shopping; 5) shippingcosts are lower; and 6) lower taxes. In 2011, the size of Chinas onlineshopping industry surpassed Japans, and this year we expect it to eclipsethe
4、US market. By 2015, we forecast China will have 700 mn internet users,with 55% of them shopping online and spending an average of Rmb8,000per year. In 2015, we forecast Chinese online sales of Rmb3.06 tn, a 39.1%,ONLINE RETAIL LOOKS SET TO RAMP UP IN CHINA.2001-2011 SalesCAGR=105.4%, 2011-2015ESales
5、 CAGR=39.1%WITH APPLIANCES & CONSUMER ELEC. LEADINGAppliance and 2015E,CAGR in 2011-15E, with 10% of consumer goods bought online. We expect,Consumer Electronics,2009,2010,2011,base case,37% of appliance and consumer electronics sales will be online by 2015, up,Total Sales (Rmb mn),914,348 1,065,813
6、 1,253,414 1,986,006,from 12% in 2011.and now the bad: Pain in store for traditional retailers,Online Sales (Rmb mn)as % of Total Online Salesas % of Total 3C &Appliance market,39,49715.0%4.3%,82,58917.9%7.7%,150,35719.6%12.0%,734,39124.0%37.0%,Although Chinas traditional retailers face a larger onl
7、ine opportunity thanoverseas peers, they also face a much bigger challenge. Unlike retailers inthe US and Europe, many of Chinas traditional retailers lack strong retail,SUNING & GOME SALES SHOULD BENEFITOnline Sales (100mn Rmb),identities. Chinas retailers suffer from: 1) poor product and brand,300
8、,Suning,Gome,management ability; 2) difficulty bearing inventory risk; and 3) capital-intensive operations hit by rental and labor cost inflation. We expectthe rise of online retail to put more pressure on offline retailers, particularlybrick-and-mortar appliance stores. Based on our scenario analys
9、is, we,expect an online/offline price war could tighten margins by 1.5-3.5ppt.,2011,2012E,2013E,2014E,BUT OUR RATINGS/TPs REFLECT THE CHALLENGES,GS SUSTAIN: Brick & mortar electronics retailers vulnerable,Ticker Rating Price Target Price Up/Downside002024.SZ Neutral 7.38 Rmb6.15 -16.7%,Increases in
10、online shopping tend to affect consumer electronics/appliance,Gome,0493.HK,Sell 0.97,HK$0.69,-28.9%,retailers first, and we note that online penetration in China is relatively low.Our GS SUSTAIN framework shows that Suning and Gome are likely toface lower returns and weaker industry positions over t
11、he next three years.Sell Gome (-28.9% potential to TP); Neutral Suning (-16.7%)Suning and Gome are adopting online/offline collaborative strategies, butwe expect short-term pain. Given low visibility on store restructuring andonline profitability, we expect pressure on SSS and gross margins. ForSuni
12、ng, we raise 2012E-14E EPS 3.7%/28.3%/22.9% on higher GPM butlower our 12-m SOTP-based TP 4% to Rmb6.15 on roll forward of valuationperiod to 2013. For Gome: maintain estimates, Sell rating, and HK$0.69 TP.,Source: Gao Hua Securities. Share prices as of Jan 17, 2013.RELATED RESEARCHGS SUSTAIN: Onlin
13、e opportunity or obsolescence: Framingthe online risks and retailer responses, Nov 13, 2012Weibo Hu+86(21)2401-8944 Beijing Gao Hua Securities Company LimitedJoshua Lu+852-2978-1024 Goldman Sachs (Asia) L.L.C.,Goldman Sachs does and seeks to do business with companies covered in its research reports
14、. As a result, investorsshould be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investorsshould consider this report as only a single factor in making their investment decision. For Reg AC certification and otherimportant disclosures, see the D
15、isclosure Appendix, or go to Analysts employed bynon-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc.,3,6,15,17,24,28,30,37,41,43,44,46,-,-,-,-,-,-,-,2,January 22, 2013Table of contentsOverview: Chinas retail revolution has begun, a
16、nd its acceleratingThe opportunity: Rmb3 tn in online sales by 2015E, 40% CAGRThe challenge: How much pain is in store for traditional retailers?What shocks are appliance and consumer electronics stores facing?Scenario analysis: Price war would impact margins 1.5-3.5ppt.We prefer Sunings online busi
17、ness strategy to GomesComparing discretionary retailers: The GS SUSTAIN frameworkValuation: Maintaining SOTP approach: Neutral Suning; Sell GomeSuning (002024.SZ, Neutral): Waiting for online sales to bear fruitWhen will Sunings eGou platform become profitable?Gome (0493.HK, Sell): Uncertain earning
18、s outlook, reiterate SellChina appliance and consumer electronics market scaleDisclosure AppendixAll prices in this report are as of the market close of January 17, 2013, unless mentioned otherwise.The authors would like to thank Nick Hartley and Lin Tang for their contribution to this report.Exhibi
19、t 1: Global appliance chain stores valuation,China: Retail52,EPS,P/E,EV/EBITDA,P/B,P/S,ROE,Dividend yield,Company,Ticker,Currency,Price(Jan 17),Rating,TP,Market 2012-14Cap (mn) CAGR,2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E,Best BuyRa
20、dio Shack,BBYRSH,USDUSD,14.622.23,Not Rated -Neutral2.60,4,943 -13.8% 5.7222,7.2,7.6,3.716.0,3.15.1,2.83.2,1.60.3,1.50.4,1.30.4,0.100.05,0.10.1,0.10.1,24.0% 20.8% 17.7% 1.4% 4.5% 4.8%-9.8% -5.5% -1.7% 11.2% 0.0% 0.0%,Yamada Denki,9831.T,JPY,3370,Neutral,3300,325,707 -1.5%,8.5,9.4,8.7,5.9,5.7,5.2,0.6
21、,0.6,0.5,0.2,0.2,0.2,7.4%,6.3%,6.4% 2.1% 2.3% 2.5%,Ks Holdings,8282.T,JPY,2251,Neutral,2100,137,371 -1.8%,7.2,7.9,7.5,5.9,6.3,6.1,0.8,0.7,0.7,0.2,0.2,0.2,11.1% 9.3%,9.2% 2.6% 2.8% 3.0%,SuningGome,002024.SZ0493.HK,RMBHKD,7.380.97,NeutralSell,6.150.69,54,487 -10.2% 18.816,369,24.742.1,23.422.8,7.6,10.
22、120.6,8.410.5,1.80.9,1.70.8,1.60.8,0.50.3,0.50.2,0.40.2,11.1% 7.2%-4.2% 2.1%,7.1% 0.3% 0.4% 0.2%3.6% 0.0% 0.0% 0.1%,MedianAverage,-6%-7%,7.910.1,9.418.3,8.714.0,5.97.8,6.08.4,5.66.0,0.81.0,0.80.9,0.70.9,0.20.2,0.20.2,0.20.2,9.2%6.6%,6.7%6.7%,6.8% 1.8% 1.4% 1.3%7.1% 2.9% 1.7% 1.8%,Source: Bloomberg,
23、Goldman Sachs Research estimates, Gao Hua Securities Research estimates.Goldman Sachs Global Investment Research,1.,2.,3.,4.,5.,6.,3,January 22, 2013,China: Retail,Overview: Chinas retail revolution has begun, and its acceleratingTransforming China continues; kicking off Online Retail SeriesWelcome
24、to the latest installment of Transforming China, a series of thematic reportsfocused on industries that we expect to undergo significant transformation over thenext few years. We expect these industries to be affected by a wide range of factors,including changes in the competitive landscape, the int
25、roduction of new technology,and developments in the global environment. Leveraging our industry expertise andresources, we hope to bring fresh perspectives and unique insights to the analysis ofthese trends. We also utilize our GS SUSTAIN industry framework to identifycompanies with superior and sus
26、tainable business models that we think can generateindustry-leading returns and become long-term industry winners. Along with ourindustry valuation analysis, we provide actionable investment ideas that we believewill generate alpha in the timeframe presented.In addition to being part of our Transfor
27、ming China research offering, this report alsokicks off our Online Retail Series, which will assess how the rise of online shopping istransforming the landscape for retailers in China.Chinas retail revolution has already begun, and it is acceleratingOnline continues to gain influence over retail spe
28、nding and consumer behavior, a secularshift across the consumer landscape with far-reaching implications for investors. This isespecially true in China, where we expect the growth of the online shopping market to beeven faster than what has been seen in the developed world. As online penetration inC
29、hina continues, the implications of this tectonic shift in consumer behavior are slowly butsurely starting to sink in. The risks and opportunities of the online revolution are alsomorphing, as consumers begin to shop more via mobile devices and embrace thedevelopment of new technologies, requiring r
30、etailers and consumer companies to respond.In this report, we track the top-line trends towards onlinewith a focus on consumerelectronics/appliance retailersand frame the bottom-line risks and opportunities of onlinefirms, particularly Suning and Gome.In the United States, it took ten years for the
31、online penetration rate to grow from 1.2% to4.2%. In China, this took only four years, and the online penetration rate in China continuesto rise faster than it has for overseas peers. We forecast Chinas online sales will reachRmb3 tn in 2015, capturing 10% of total retail sales of consumer goods. We
32、 believe thelarge potential of Chinas online market is supported by the following six key factors:Industry concentration for retailers in China is low compared with developed nations,so the new online business format more easily breaks down traditional retail channels.The price differential between
33、online and offline goods is relatively large in China, andChinese consumers are more sensitive to price.Lower search cost and higher price transparency of online shopping.The consumption habits of people born in the 1980s and 1990s lean more towardonline shopping.Differences in shipping costs and ef
34、ficiency between China and other countries.Lower e-commerce taxation in China vs. other countries.Goldman Sachs Global Investment Research,4,January 22, 2013,China: Retail,Great opportunities can entail great risks; this is no exceptionAlthough online shopping represents a significant opportunity fo
35、r Chinas traditionalretailers, they will have to overcome a number of challenges to take advantage of it.Unstable market structure, low market concentration of traditional retailers: In 2011,market shares held by the leading retailer, top five retailers, and top ten retailers in Chinawere 1%, 4.7% a
36、nd 7.4%, respectively, while in the US they held 11.5%, 22.5% and 31%; inEurope they held 10.3%, 32.4% and 40.7%. Due to the relative instability of Chinas retailmarket, it is easier for online retailers to penetrate there than in Europe and the US.Traditional retailers lack strong retail identities
37、: Most traditional retailers in China lackstrong retail identities due to their poor product and brand management ability as well asthe difficulty they have bearing inventory risk. Retailers in Europe and the United States, onthe other hand, have much greater operating strength based on good product
38、management capabilities and their ability to undertake their own upstream research anddevelopment. They have more own-brand products, are willing to take on more inventoryrisk and are skilled at customer research. Also, online retailers in China with stronger ITbackgrounds are capable of mining cust
39、omer data to better meet and direct customerdemand.Higher rental and labor costs adding further pressure: As traditional retailers are capital-intensive, their ROIC has been hit by rental and labor cost inflation in recent years.Where are the future opportunities?Business model restructuring: Amazon
40、, as a leader in global online retail, has alreadysurpassed traditional retailers and adopted an increasing number of the features usuallyassociated with technology and logistics companies. Another growing trend among onlineretailers is to break through the traditional business model of earning buy/
41、sell pricedifferences in order to create massive platforms where they can earn fees from activitiessuch as services, advertising, cloud storage and logistics.Technology-led integration focused on consumers: More and more online retailers areattracting and servicing consumers through mobile devices,
42、operating systems and portals,which have taken on an increasingly important role in retail restructuring. Besides B2B, P2P,B2C, C2C and group-buying, new business models like C2B and O2O (online to offline) areconstantly emerging. With the support of theories like long tail and crowd sourcing, onlin
43、eretailers have become more like platforms without borders, which not only sell physicalproducts, but also intangible and virtual ones. Traditional retailers are also trying to rely ontechnology to realize online/offline client interactions and conduct precision marketingdirected toward offline cons
44、umers.Maintain Neutral on Suning, Sell on GomeAppliance and 3C products are facing a bigger impact from online: In global markets,consumer electronics is one of the categories most affected by online shopping. Weestimate online penetration of China appliance and 3C products will increase from 12.0%
45、in2011 to 37% in 2015, and their share of total online retail sales will increase from 19.6% in2011 to 24% in 2015.The pain of transition: Suning and Gome are striving to adopt online/offline collaborativedevelopment strategies, but pain looks inevitable in the short term. Firstly, uncertaintyremain
46、s regarding store restructuring in tier-1 cities. Moreover, the pace and effect ofchannel penetration in third- and fourth-tier cities remains to be seen, while SSSG in theshort term is still under pressure. Secondly, the companies gross margins are underpressure as online shopping attracts offline
47、consumers and lowers prices. Based on ourGoldman Sachs Global Investment Research,5,January 22, 2013,China: Retail,scenario analysis and dynamic gaming, we estimate a price war among online retailerswould lower gross and net margins for appliance chain stores by 1.5-3.5ppt. Furthermore,we note that
48、online business currently has low earnings visibility.To reflect higher GPM expectations for Suning due to its better-than-expected 3Q12 GPM,we are raising our 2012E-14E EPS 3.7%/28.3%/22.9%. However, as we are rolling ourvaluation basis forward to 2013, we lower our 12-month SOTP-based target price
49、 fromRmb6.4 to Rmb6.15, implying 16.7% downside potential. We continue to value Suningsoffline stores on a P/E of 13X and its online operations using a P/GP of 4.8X. We maintainour Neutral rating.For Gome, we maintain our estimates and 12-month SOTP-based target price of HK$0.69,which implies 28.9%
50、downside potential (we rolled forward our valuation basis for Gometo 2013 on November 20, 2012). We continue to value Gomes offline business on a P/E of11X and its online business using a P/GP of 4.8X. We reiterate our Sell rating.Upside/downside risks: Higher/lower-than-expected gross margin and SSS; better/worse-than-expected development of online shopping.Goldman Sachs Global Investment Research,
