Leading home appliance retailers China Paradise and Dazhong Electronics will work together to develop new markets outside the cities where they have already established strong positions.
The two companies signed a framework agreement for co-operation last weekend, Huang Jianping, a spokesperson for China Paradise, told China Daily on Friday.
Under the deal, Paradise and Dazhong will form 50-50 joint ventures in selected regional markets which the two companies have just entered.
The joint ventures will be responsible, in their respective regions, for the management of existing stores and business expansion.
The stores will stock both brands, and the companies will share the profits and business risks, Huang said.
However, he did not reveal in which markets the co-operation will start. Some analysts predicted that they may choose Xi'an and Qingdao as the first steps.
"It is clear that the two retailers are looking for complementary co-operation in this hotly competitive market," said Sun Luan, industry analyst from China Securities.
Based in Shanghai, China Paradise is relatively strong in East China and it holds more than 50 percent of the total market in Shanghai.
Dazhong is a local, but strong, player in the Beijing market.
"It could be a win-win deal, if the two companies join their efforts whole-heartedly," Sun said.
China's home appliance retailers have been seeking expansion and competing for a bigger market share during the past year.
Paradise, for example, doubled its store number to nearly 200 this year, through opening new stores and acquiring retailers like Tsann Kuen and Tongli.
During the rapid expansion, there has been some irrational competition, with some retailers paying high rentals for good business locations, regardless of losses it may cause.
As a result, retailers are facing high risks when developing new markets.
(China Daily December 17, 2005)