After pursuing cautious expansion in China since opening its first eponymous superstore there in 2006, Best Buy is planning to ramp up expansion in the market next year.

The news highlights the world’s largest consumer electronics retailer’s commitment to a market that holds huge potential but has struggled this year as consumer confidence has been dented. That said, a government-backed ‘old-for-new’ subsidy initiative, which enabled consumers to trade in their old appliances for new ones, has helped boost sales in the sector – particularly for the leading local electricals retailers.

Local player Suning, for example, announced last week that it recorded sales revenue of Yn3.1bn (£300,000) from China’s ‘old-for-new’ programme. Suning’s Beijing branch alone sold more than 120,000 home appliances under the programme. China’s Ministry of Commerce said in mid-November that 2 million new appliances or electronic products had been sold for roughly Yn8.02bn (£700,000) under the programme.

Next year, Suning plans to focus on improving and expanding its private-label ranges. The short-term target is for private labels to account for 5% to 8% of sales, rising to 15% to 20% in the long term. The company also wants to sign deals with foreign manufacturers to develop a range of low-priced offerings – hence the recent tie-up struck with Pioneer. At the same time, Suning will continue to open outlets in China at a rate of 200 stores a year. By 2020, it will have a network of 3,000.

Meanwhile, major rival Gome has been pursuing a policy of closing down unprofitable stores and instead focusing on improving and upgrading its remaining stores, including a number of huge flagships in key cities. The new flagship in Wuhan, which officially opened last week, is spread over 193,755 sq ft and offers more than 30,000 products.

2010 is therefore set to be a dynamic year for the leading electricals retailers in China. Best Buy has so far had only a limited impact on the market, so it will be interesting to see what it can achieve if it is able to increase its rate of expansion and move outside of Shanghai for the first time.

That said, the leading local players are already building and improving their presence across the country – particularly in second- and third-tier cities – and their development and knowledge of the market and Chinese consumers means they will provide tough competition for even Best Buy.

➤ Robert Gregory, research director, Planet Retail. For more information contact us on:

Tel: +44 (0)20 7728 5600

Email: info@planetretail.net

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