China's biggest household electronic goods chain Gome will open its first store in Macao soon.
The store, which will be the largest of its kind in Macao, will be unveiled at the end of this month, but will not start operations officially until the middle of March, the retailer said yesterday.
"We plan to open two to three outlets in Macao in 2006," said Li Juntao, general manager of Gome's purchasing and sales center.
Li said stores in Macao will stick to the company's low profit strategy, serving local consumers.
"It is natural for Gome to enter Macao, as it is now everywhere in the mainland and Hong Kong," said Andes Cheng, associate director with Hong Kong-based South China Research Ltd.
However, Cheng said that the move will not bring quick returns for the retailer, but will boost the brand.
To start with, Gome's Macao operations will follow the Hong Kong model of "fame coming earlier than profit," Cheng added.
Gome claims it has opened 13 outlets in Hong Kong since 2003, and its sales reached 1.5 billion yuan (US$185 million) last year, accounting for over 15 percent of the local market.
But Cheng said that its Hong Kong operation did not bring big profit due to rising rentals and customer loyalty to local players such as Fortress and Broadway.
"In the long run, Gome's operations in Hong Kong and Macao may be an important engine for profit, after it gets used to local markets and learns to control costs," Cheng said.
Sun Luan, an industry analyst from China Securities, said that it might be easier for Gome to score success in Macao than Hong Kong, as the competition is less fierce.
Previously, Gome has said it plans to have a 20 to 30 percent share of the Macao market.
"The retailer is also expecting to learn from its Hong Kong and Macao operations for its future expansion into foreign markets," Sun said.
Gome's chairman Huang Guangyu has previously revealed his ambitions to expand into Southeast Asian markets, but as yet there are no specific plans.
"At present, the company will still focus on domestic business, as there is still growth potential and the competition is heating up," Sun said.
The retail giant plans to add 200 more outlets this year from its current 460-plus stores to compete with other big players like Suning and Paradise, and coming foreign rivals such as Best Buy.
(China Daily February 17, 2006)