Having experienced rapid growth in China's major big cities, domestic home appliance chains are now spreading the fierce competition into a new battlefield -- the nation's small and medium-sized cities and towns.
Leading chain retailers like Gome and Suning all plan to open more stores this year in these markets, as well as further strengthening their competitiveness in major markets.
Statistics show Gome Appliance, founded in 1987, and Suning Home Appliance Chain, established in 1996, have expanded from small electronics retailers into leading businesses in the country's retail sector.
According to a list of China's top 30 chain store operators in the first half of 2004, published by the Ministry of Commerce, Gome and Suning ranked second and third, following hot on the heels of the Shanghai Bailian Group.
The two retail giants recorded a sales volume of 14.83 billion yuan (approx. U.S. $1.79 billion) and 10.55 billion yuan (approx. $1.27 billion), respectively in the first half of 2004, both notching up year-on-year growth in excess of 60 percent.
Other home appliance chain brands have also performed well in recent years. For example, Yongle Electronic, previously run locally in East China's Shanghai Municipality, ranked ninth in the list.
The great success of these retail chain giants was mainly in big cities like Beijing, Shanghai, and Guangzhou. Their expansion led to cut-throat competition, which also means there is less room for further development.
In Beijing alone, there are 12 Suning shops, 13 Gome outlets, and 50 Dazhong home appliance chain stores. Retailers have kept cutting product prices to lure more customers.
Sales of these retailers account for about 60 to 80 percent of the city's total electric home appliance market, according to a market survey conducted by the Market Economy Research Institute under the State Council Development Research Centre.
"The hot competition in the first-tier market has led to shrinking profit margins for home appliance retailers," said Lu Renbo, deputy director of the center's research institute. However, they could not shift market pressures to manufacturers, he said.
So far, traditional distribution channels such as department stores and sales agents for designated brands continue to dominate the second and third-tier markets. The retail chains' sales are less than 20 percent in these smaller markets.
"There is large room for their development, and the trend towards specialization in global economic development indicates a bright future for them," said Yuan Jianjun, a retail analyst from Huaxia Securities. (China Daily)
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