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Suning Appliance on expansion spree
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09:28, December 05, 2008

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Suning Appliance, a major electric and white goods retailer in China, said yesterday it will open 200-odd stores and set up five more logistics bases nationwide next year.

The aggressive expansion move amid an economic downturn and dwindling domestic demand, is seen as part of Suning's efforts to erode the dominance of its troubled arch-rival Gome Electrical Appliances Holding Ltd, whose Founder and Chairman Huang Guangyu is now under a probe into alleged trading irregularities in the stock market.

In a statement, Suning said it will enter into 70 more Chinese cities to expand the number of its stores and employ 36,000 people next year. The company will also build five new logistics centers in Beijing, Shenyang, Chengdu, Xuzhou and Nanjing.

By the end of the third quarter, Suning had 784 stores nationwide, and the figure will reach 850 by the end of this year, said Min Juanqing, a spokesperson for Suning.

Suning's expansion drive could be a prelude to the intensifying competition with Gome since Huang was investigated.

Gome, known as China's Best Buy, is the country's largest electronics retailer with 1,300 stores across the country.

Last December, Gome elbowed out Suning in a bid to take over management of Beijing-based rival Dazhong Electrical Appliances. The deal, worth 3.6 billion yuan, enabled Gome to grab a dominant position in key domestic markets.

The China Securities Regulatory Commission probes in March and April found Beijing Pengrun Real Estate Development, controlled by Huang, was allegedly involved in irregularities in asset restructuring and swaps of two listed companies.

Huang, and Gome Chief Financial Officer Zhou Yafei, are both under investigation "in connection with a certain suspected economic crime", the company said.

Chen Xiao, Gome's CEO appointed last week to replace Huang, has said the company is losing its edge in price negotiation with the suppliers, according to some media reports.

That is opening the door for Suning to move into Gome's turf. "It will take time for Gome to recover, and its focus is not on expansion," said Tian Huilan, a retail researcher at Shenzhen-based consultancy First Capital Securities Co Ltd.

Gome spokesperson Wei Xin, in an interview with China Daily yesterday, insisted that the company will not slow down its expansion next year.

The economic slowdown will help big players such as Suning to expand at a lower cost.

Now "opening a new store is less costly", Min said. "That is why we are still aggressive (in expansion)."

The expansion of a government rebate plan, announced on Sunday, is also fuelling home appliance retailers' expansion.

Under the scheme, rural purchasers will receive a 13 percent rebate on the price of televisions up to the value of 2,000 yuan, fridges up to 2,500 yuan, washing machines up to 2,000 yuan, and mobile phones up to 1,000 yuan.

The 4-year plan could spur sales of 480 million such items, equal to 920 billion yuan.

Source: China Daily

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