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Sundan enters Beijing

By Tu Lei (China Daily)
Updated: 2009-03-24 07:56

Shenzhen-based Sundan has added spice to the ongoing home appliance war between Gome and Suning, by entering the Beijing market with a new store in Sanlitun and has plan to open another outlet soon.

Set up in 1992, Sundan was once the largest home appliances retailer in Shenzhen with branches in Zhuhai, Guangzhou and Dongguan.

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The firm, however, lost ground when Gome and Suning entered the fray and decided to exit the Guangzhou market. At that time it had 16 stores on the mainland, of which 10 were in Shenzhen. Last year, it decided to spread wings to Beijing and Suzhou.

"The company's expansion is a risky one as Beijing has a high density of home appliances stores," said Liu Buchen, a veteran electronics retail consultant. Demand for home appliances is slowing in first and second-tier cities, he said.

Suning has nearly 51 stores in Beijing while its bigger rival Gome had 62 branches as of August 2008.

Luo Qingqi of Pully Brand Technology Consulting Company also feels that Sundan's expansion is a risky one when compared to Gome or Suning.

Compared with Gome's risk pattern which is shouldered by producers and retailers, Sundan adopts a buyout operation model, which means Sundan buys out one model and sells it via its own guides to gain more pricing power, similar to that of Best Buy, the top US consumer electronics retail chain.

"The competition between Sundan and Gome or Suning is like the one between the grass and trees," said Luo. "Sundan will face more pressure and may even succumb in the process," he said.

Ding Hongwen, Sundan's general manager for the Beijing market, however, feels that he has enough ammunition in 'differential marketing' to counter the bigger rivals.

"We target high-end consumers with middle- and high-end products and our approach is different from other chain stores as our products are not expensive at all," said Ding.

He said the Sanlitun store is performing as per the company's expectations. Sundan will soon open a second store in western Beijing with an area of 2,000 to 3,000 sq m.

Beijing is not the only area of hot competition between Sundan and Gome or Suning. In Shenzhen, Gome and Suning have 27 and 25 branches respectively, compared with Sundan's 11 stores. Sundan's market share is less than 50 percent of Suning's, said a report from China Business News.