Opinion | No buzz for Suning, Germany's Metro
Suning's plummeting profits and Metro's closure of its Chinese joint venture reflect the tough market for electronics retailers, which is likely to continue for the next 3-5 years
Anyone thinking of getting into China's consumer electronics retailing market might want to think again, following the latest downbeat news from homegrown giant Suning (Shenzhen: 002024) and a joint venture involving Germany's Metro Group (Frankfurt: MEO). In the former case, Suning has just reported 2012 results that will hardly encourage investors, including an accelerating decline in profits. In the latter, Metro has formally announced it will shutter its Media Markt stores, confirming buzz that has surrounded the troubled chain that was launched with fanfare two years ago.
Two interesting questions in all this are: When will China's electronics retailing market finally stabilise, and what will the market look like when that finally happens. I'll offer my own views on those questions shortly; but first let's have a look at the latest news, which has Suning's profits continuing to tumble as the company struggles with stiff competition in the electronics retailing space.
There's not too much to say about this, as it's common knowledge that China's electronics retailing sector is already ultra-competitive, with traditional names like Suning fighting with e-commerce newcomers like Jingdong Mall and Alibaba for a slice of the pie.
Metro and Taiwanese partner Foxconn Technology, had big plans for Media Markt when they launched the chain two years ago. Perhaps ironically, the pair launched the new joint venture just months before US-based Best Buy (NYSE: BBY), one of the world's largest electronics retailers, formally shuttered its own fledgling China operations that were also run out of Shanghai. Metro and Foxconn had originally planned to quickly expand their new venture, aiming to have 100 stores across China by 2015. But clearly they underestimated competition in the market, and also the rapid rise of e-commerce.