The trials and tribulations of Best Buy in the US this year demonstrate exactly how tough it is to be a bricks-and-mortar electronics retailer. Chinese peers know how it feels.
Revenues at Suning Appliance, the country’s biggest electronics retailer by sales, grew only 7 per cent in the first half – one-third of its average growth rate during the past five years. For smaller Gome, the situation is likely to be worse. They both know they have to improve their competitiveness online, but it is going be a vicious fight.
Online retailers have recently waged a classic price war, making it difficult for even the biggest players, such as 360Buy, to turn market share in internet electronics retail into profits. Yet Suning, with total annual revenues of Rmb96bn, is making a go of it. It managed to grow its online revenues by 130 per cent from a year earlier in the first half. That effort, however, has boosted its share of the online retail market to only 3 per cent, according to Analysys data. And, as a result of the push, profitability fell by almost a third over the period as operating margins dropped 2 percentage points to 5 per cent.