Business / Companies

Media Markt may shutter stores amid losses

By Wang Ying in Shanghai (China Daily) Updated: 2013-01-17 10:10

Gao Boxuan, a senior analyst at CI Consulting LLC, said Media Markt China was under huge competition from e-commerce rivals.

"By September 2012, the seven stores only contributed 100 million euros ($133 million) in revenue to the group," Gao said.

He said the company set up its own B2C sales team in October last year - but it was targeted only at customers in Shanghai or neighboring provinces, which limited the company's income.

Selling only electronics products also crippled revenue growth, Gao added.

Experts said the closure of Media Markt China would represent the highest-profile retail failure since early 2011, when Best Buy, the United States-based electronic products retailer, closed its nine branded stores in China along with its Shanghai headquarters.

Some experts have also suggested that Media Markt stores occupied too much space on some of the most expensive retail streets in China, an unworkable plan when selling cheap products

Ben Cavender, associate principal of China Market Research Group, said it would not mark the failure of a Western business model, but the failure to understand the dynamics of the China market and the wider transformation of the country's retail sector.

"Local competitors Gome and Suning have built strong brand presence and market share in China, and their huge store numbers guarantee a competitive advantage," said Cavender.

"Additionally, consumers are increasingly using brick-and-mortar stores as showrooms before buying their products online, where they can save both money and time."

Media Markt's announcement did not rule out the possibility of finding a potential purchaser, and analysts believed that was highly likely.

Chen Peng, an analyst with Great Wall Securities Co Ltd, added that Gome and Suning are both keen to expand their store networks in Shanghai, and it would be much cheaper to acquire existing stores than open new ones.

"But Media Markt could still be willing to continue operating, given the early-stage investment already made," added Chen.

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