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Appliance dealers need apt channel to rural market

By Chen Boyuan: 0 Comment(s)Print E-mail China.org.cn, March 26, 2013

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China wrapped up its five-year-long "Appliances going to the countryside" stimulus plan in late January of this year. The plan, meant to boost consumption amid the ongoing global crisis, has seen some 298 million home appliances of all kinds sold to towns and villages, registering a gross revenue of 702.4 billion yuan (US$112.38 billion), according to statistics from the Ministry of Commerce.

Long confirmed China's vast rural part is still a huge market that appliance businessmen with a long-term vision cannot afford to overlook. [Photo / Chen Boyuan]

The plan also left a legacy of around 220 thousand home appliance retailers nationwide in rural areas. They once flourished as a result of favorable governmental policies, but are now facing increasing pressure to change in the current post-stimulus era.

The rise of e-business has been a real treat for many brands. Online shops, headed by 360Buy, Amazon and Taobao, are chipping away at appliance malls' market shares with far lower prices and the larger variety in online malls provides customers with more options. Traditional appliance giants such as Suning and Gome are reportedly struggling to maintain profit.

Meanwhile, as a result of urbanization, more rural residents now have the financial capabilities to start thinking urban and living urban. These people are no longer content with locally produced appliances – also part of the stimulus package – and would love to buy, for example, an LG washing machine or a SONY TV – items not found in the "Appliances going to the countryside" catalogue.

"China's urbanization means more than just putting rural people in cities; we eye the integration of urban and rural areas," said Long Yongtu, a renowned economist and former secretary-general of the Boao Forum for Asia, on Monday. Long said the current pace of urbanization would increase by ten million new consumers each year, signifying business opportunities in both cities and towns.

Long confirmed China's vast rural part is still a huge market that appliance businessmen with a long-term vision cannot afford to overlook.

Despite their successes and established market standings, traditional appliance giants or e-business platforms both have their disadvantages.

Suning and Gome only have direct outlets, i.e. stores directly launched and operated by their headquarters, as opposed to franchise stores. This business mode provides better control but makes such stores difficult to root in rural areas where the circumstances diversify nationwide. At the same time, rural dwellers aren't in the habit to take the trouble to go into the cities for their purchases – despite such shops being unavailable in the towns.

Online shopping then is mostly popular among the younger and better educated people, whereas people in the rural areas, especially the older generation, still need time to get familiarized with this form of shopping. These people are yet to convince themselves that "it is simple and not always risky to buy things online," Long said.

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