Top appliance retailer Gome's bid for rival Dazhong is unlikely to create a monopoly or push up prices, according to industry watchers.
Pricing is not decided by retailers alone - manufacturers and the market also influence the prices paid by consumers, said Lu Renbo, deputy director of the China Electronic Chamber of Commerce.
Gome's move to take over all 81 Dazhong outlets in North China could give the chain a more dominant position when bargaining with manufacturers, which could actually drive down appliance prices, said experts.
Gome is also trying to ease consumer worries. "Gome is still very far from being a monopoly," said Chen Xiao, president of Gome, at a news conference in Beijing over the weekend.
"The top five retailers in China account for less than 20 percent of the market," Chen said.
Industry experts said the merger amounts to a regional deal, as Dazhong has a strong presence in Beijing with 61 outlets and another 20 stores across Tianjin, Hebei and Shandong.
Gome said over the weekend it would finance a third party of 3.6 billion yuan to acquire Dazhong, which has annual sales of about 6 billion yuan.
Beijing Zhansheng Investment Co will purchase Dazhong, and Gome will manage it from its Beijing headquarters. The Dazhong brand name will remain on the stores, but the two brands' funding, sourcing and logistics will be merged, the company said.
Gome has an exclusive option to buy out Dazhong later, said He Yangqing, Gome's spokesman. "We needed time to get regulatory approval, and there are uncertainties involved, so we adopted this transition approach."
He said Dazhong was eager to close the transaction as soon as possible.
After the deal, Gome's network will grow to around 1,100 stores nationwide, occupying almost 70 percent of the market share in Beijing and Shanghai.
Dazhong is the fourth-largest appliance retail chain in China after Gome, Suning Alliance Co and Jiangsu Five Star Appliance Co, which is majority-owned by Best Buy, the largest US electronics retailer.
Gome's rival Suning Appliance Co withdrew from the race to acquire Dazhong last Thursday.
Dazhong was not represented at the news conference over the weekend and could not be reached for comment. Dazhong stores were not open for business yesterday.
(China Daily December 18, 2007)