Suning flips the switch on rural expansion plan
Suning Appliance, China's second largest consumer electronics retailer, is planning to open 500 new stores in China this year, including 200 in urban settings and 300 in rural areas, the company's chairman said.
Encouraged by China's efforts to stimulate consumption of household appliances, Suning is working to "expand its presence in China's rural areas in 2010", said Zhang Jindong, Suning Appliance Group's board chairman.
The Nanjing-based company, a retailer of household appliances, consumer electronics, plus office and telecom equipment, said in the long term it will have "a portfolio of 4,000 stores" tailored to the nation's low-income regions, said Zhang.
Rural outlets will range in size from 1,000 to 3,000 sq m, as opposed to their city-based sister stores, which will cover 3,000 to 5,000 sq m.
Top brass believe now is the best time to tap rural demand. "Suning will work quickly to expand its retail network into rural areas," said Zhang.
Last year, Suning opened 200 new stores around the country, increasing its portfolio to over 1,000 stores by the end of 2009. The majority of those outlets were in urban areas.
Suning began targeting rural markets late last year after the central government launched its household-appliance renewal program in August.
According to the Ministry of Commerce, Suning earned 3.09 billion yuan from the program at the end of November, making it its No 1 beneficiary.
During the third quarter of last year, the company's sales rose 6.32 percent from a year earlier.
Suning will reap an additional 20 to 25 billion yuan from the ongoing program, according to a recent report from Essence Securities.
While the company's 2009 financial report is yet to come out, Suning officials are upbeat. Zhang predicts sales will grow by 20 percent.
Following a national drop in export volume over the last few years, the government enacted programs to encourage domestic consumption, which added more than 50 percent to GDP growth, the ministry said.
Suning is forecasting China's consumer electronics' market will enjoy strong growth for the next 10 years, and market watchers envision a bright future for the company as well.
"Suning's estimated annual growth will be 25 percent over the next three years," said Essence Securities.
