Media Markt throws in the towel under pressure from domestic rivals

Electronics retailer Media Markt China closed all its stores on the Chinese mainland Monday and said it would keep processing after-sales work until the end of April, when it will officially leave the market as a result of overheated competition and unsatisfactory performance.

Currently, the company is only offering aid to customers who have questions "regarding warranty, service and gift cards," which will end on April 30, Media Markt China told the Global Times Monday via e-mail.

Media Markt China is a home appliance retail chain jointly ventured between the German retail company Metro AG, holding a 75 percent stake, and the Taiwan contract manufacturer Foxconn Technology Group, holding the other 25 percent. It opened its first store in 2010 and had expanded to seven stores in total, far short of its initial target of 100.

After the agreed two-year investment period, Metro decided to "discontinue its involvement in the (mainland) business activities of Media Markt" in January because the mainland operation was not performing well against powerful domestic rivals, a Media Markt China public relations representative told the Global Times Monday.

She said Metro has already liquidated its shares in the JV, while Foxconn, unfamiliar with electronic retailing, still owns its 25 percent stake.

It is not easy for overseas latecomers to compete with domestic electronics retailers such as Gome Electrical Appliances Holdings and Suning Appliance Co, which have already established solid customer bases in good locations around the country, Liu Buchen, an analyst from the home appliance consulting firm Jiachunqiu Media Institute, told the Global Times Monday.

Gome had 1,737 stores in 416 cities in China by the end of 2011, according to the company's official website.

With richer selling channels and more influential brands, Gome and Suning can save operating capital by deferring supplier payments until after goods are sold, but Media Markt's small scale prevents it from doing so, Liu told the Global Times.

"For now, Media Markt does not have a specific plan to return to China," the PR representative said.

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