China’s Pinduoduo to invest $200m in appliance retailer Gome

Chinese ecommerce platform Pinduoduo announced it will subscribe to US$200 million in convertible bonds issued by Gome Retail Holding, a Beijing-based household appliance and electronics retailer.

The move marks Pinduoduo’s first strategic investment after it raised US$1.1 billion in a private share placement in March to enhance its platform’s user experience.

Photo credit: Pinduoduo

According to a statement, the strategic partnership will strengthen Pinduoduo’s position in the household appliances and electronics sector. It will also accelerate its push into the consumer-to-manufacturer space, where Pinduoduo aggregates consumer demand and preferences to help manufacturers customize their products’ designs prior to the manufacturing stage.

The bonds will have a coupon rate of 5% per annum and a tenure of three years, with an option to extend by two years. They are convertible at over HK$1.21 per share, which would work out to around 1.28 billion of Gome shares or a 5.6% stake on a fully diluted basis, the announcement said.

As part of the deal, Gome’s entire product range – which includes domestic and international brands such as Siemens, Sony, Haier, Gree, and Midea – will be listed on Pinduoduo. Its logistics, delivery, and assembly services will be integrated with the ecommerce platform as well.

With the partnership, Pinduoduo’s users will be able to try and experience the products before placing orders, the statement said.

In addition to selling home appliances and digital devices, Gome provides other services such as equipment repairs and recycling. As of 2019, the company has over 2,600 offline retail stores across 776 cities in China.

Last year, Pinduoduo said it exceeded US$144.6 billion in gross merchandise value and saw a 40% increase in active buyers to 585.2 million, with annual spending per active buyer jumping 53%.