Next five years to see 200 stores

Pricerite Stores Limited, one of the largest home furnishing chain-stores in Hong Kong, said Wednesday it has entered into a franchising partnership agreement with OrientHome, the second-largest home improvement and construction materials retailer on the mainland, with the aim of opening at least 200 stores in the next five years.

According to Bankee Pak-hoo Kwan, chairman of Pricerite, the franchising agreement will allow OrientHome to open community stores under the Pricerite brand name in mainland cities outside of Guangdong province. This cooperative franchising model is the first of its kind among Hong Kong retail brands, he said.

Pricerite will receive consultancy fees from OrientHome based on the sales revenue and procurement volume of the Pricerite-brand community stores. However, the parties did not disclose the financial terms of the deal at the press briefing. And Pricerite declined to provide forecast about the potential earnings contribution from this deal.

Felix Feng-jiang Li, president and chief executive officer of OrientHome, told the press briefing that the first community store will open after the 2011 Spring Festival in Beijing, among a total of 20 next year. The size of these stores will range from 500 to 1,000 square meters and OrientHome will choose cities where it already has a presence, such as Beijing, Shenyang, Dalian and Chengdu.

Pricerite, owned by Hong Kong-listed Celestial Asia Securities Holdings Ltd, has been operating in the city for 24 years, with a total of 35 stores. OrientHome, headquartered in Beijing, runs 24 supermarkets and 11 warehouse stores in 14 cities on the mainland. OrientHome's Li said the company has mainly focused on city stores and warehouse stores with a size of more than 5,000 square meters, and the company is now seeking to ride on the mainland's urbanization wave through the opening of more small-sized community stores.

According to the Chinese Academy of Social Sciences, urbanization reached 46.6 percent in 2009 and is set to grow to 52 percent and 65 percent by 2015 and 2030 respectively.

"Other than first-time home buyers who need to decorate their homes, we see growth potential in the booming high-end home improvement market on the mainland, where people wish to buy decoration materials in their community rather than driving a long way to suburban warehouse stores," said Li.

Under the franchising agreement, Pricerite will provide retail management and consulting services, including merchandising assortment, customer service, operating platforms, shopping environment and store operations.

Pricerite's Kwan said, "OrientHome's local network and expertise will be of immense value in driving our business forward, building Pricerite into the most preferred home improvement brand on the mainland."

In Guangdong province, Pricerite will open its own stores. Kwan said the company aims to open 30 stores in the next three years, each requiring an investment of around 3 million yuan. He estimated that the first store, expected to open in mid 2011, will be profitable after operating for 12 to 18 months.

China Daily

(HK Edition 11/18/2010 page2)