The competition among China's home appliances retailers heated up this summer, with each trying to open more stores and expand its businesses, the China Securities Journal reported.
China's largest household appliances retailer, Gome Home Appliances, announced it had bought Shenzhen's E-home Co. Ltd. Gome's president Huang Guangyu said that Gome planned to bring its sales revenue up to 120 billion yuan (approx. U.S. $13.1 billion) by 2008, edging into the rank of the world Top 500. Thereby, Gome will open 130 new stores this year across the country.
Suning, another leading home appliances retail giant in China, has similar ambitions. It plans to open 100 new stores this year and bring the number of its stores nationwide to 1,400 in 5 years. President Sun Weimin said Suning will build stores in all capital cities in China in the next 5 years.
Statistics show that the number of stores opened by China's top 10 home appliances retailers now total 1,300, with an annual sales volume of 106.3 billion yuan (approx. $14.8 billion). It indicates that the fight for rapid expansion among these retailers is just warming up. Expansion of these retailers hinges on reducing costs, said the paper, noting that the major costs for the retailers include rent for land and daily maintenance fees. Although most of major home electrical appliance chains are optimistic about their expansion plans, experts said that the strategy has high risks.
The paper noted that China's four major commercial banks have made it clear that they would be very prudent in providing loans to the commercial and circulation sectors. Manufacturers' dissatisfaction is another hidden trouble in the expansion of household appliances chains, the paper said. The early rapid growth of home appliances business didn't rely on improving efficiency and management, but on sacrificing manufacturer's interests.
Rapid expansion and frequent promotions by appliance retailers have put producers on guard. Whenever manufacturers find any problem in the operation of a certain retailer, they might stop providing goods and rush to demand payment for their goods, which would be a deadly blow to retailers, the paper said. (Xinhuanet, China View)
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