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Suning Goes for Growth to Take on Giant Gome
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The scene was set yesterday for a National Day battle between the country's top two home appliance retailers as Suning Appliance Co announced it would open 52 stores on the October 1 holiday.


Nanjing-based Suning, the country's second-largest electrical retailer, is opening the outlets in a bid to steal a march on larger rival Gome, whose shareholders yesterday approved a US$675 million deal to snap up smaller rival China Paradise Electronics.


Gome's acquisition will create a retail giant with sales worth around US$8 billion, helping its founder Huang Guangyu reach his goal of more than doubling the firm's market share to 15 percent by 2008.


Meanwhile, Suning President Sun Weimin believed "business integration between Gome and China Paradise will offer huge opportunities for Suning's network expansion."


Suning will add 30 new outlets and reopen 22 chain stores in 45 cities and regions including Beijing, Shanghai, Guangzhou, Nanjing, Shenzhen and Changsha, increasing its number of stores to a total of 430, said Sun.


The retailer plans to more than triple its stores to 1,500 in 350 to 400 cities by 2010.


It also plans to build 15 large logistics bases across the country within three years and invest 120 million yuan (US$15 million) in a database upgrade.


To achieve its goal, the retailer plans to open a new store every week, while also making efforts on staff training and store design and decoration.


All Chinese home appliance retailers have been opening new outlets in a bid to seize a greater slice of the market. They are also vying to fend off growing competition from overseas firms such as Best Buy, the biggest US electronics retailer.


While this rapid network expansion is squeezing the industry's profits, retailers are starting to tackle this problem.


Suning will upgrade some of its outlets, focusing more on better-off consumers.


Among the 52 new Suning stores to be opened on National Day, 10 will be flagship stores in 10 major cities, introducing more products and highlighting big brands.


It is expected each store will generate sales in excess of 600 million yuan (US$75 million) a year.


Gome also plans to slow its breakneck expansion to focus on improving the profitability of its stores.


"We'll look at the network and adjust store locations and sizes and improve their overall quality. It's no longer a matter of rapid-fire store expansion," Gome Chairman Huang Guangyu said earlier.


Gome's high-end brand Pengrun will open its second store in Beijing in the near future.


(China Daily September 19, 2006)


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