German company Metro Group has announced Media Markt, their electrical appliance and consumer electronics retailer, is set to exit the Chinese market. The group’s two-year attempt to break into the Chinese market ended at the close of December, and its decision to discontinue its Chinese business was based on the group’s experience in the country and predictions for the future. If the group cannot find new investors to take over its Chinese interests, Metro will close its Media Markt stores in China. They were also negotiating with Foxconn, which holds a 25 percent stake in Media Markt …
Media Markt, which operates in 16 countries and is touted as the largest consumer electronics retailer in Europe, launched in China in November 2010 with an initial investment of US$400 million. Its plan at the time was to open 10 outlets in Shanghai alone before 2012. However, the group has only eight outlets in China at present, which all are located in Shanghai city only. The company was expected to open more than 100 stores across China by 2015. Its revenue also lags far behind domestic electronics retailer. By September 2012, all stores only contributed 100 million euros ($133 million) in revenue to the group. The company set up its own online sales team in October last year – but it was targeted only at customers in Shanghai or neighboring provinces, which limited the company’s income.
Media Markt had failed to tap the Chinese market using the tactics that have made it a success in Europe, such as offering the lowest prices and a wide range of choices for any electronics product. The persistent price wars between local retailers in China had also eroded profit margins in the sector to the point that a retailer might make as little as 20 yuan (US$3.20) on the sale of a television set. The diverse range of consumer electronics products has made it difficult for any single store to display all of them, and Chinese customers prefer to shop at stores which specialize in individual products. Some experts have also suggested that Media Markt stores occupied too much space on some of the most expensive retail streets in Shanghai, an unworkable plan when selling cheap products.
The closure of Media Markt China would reresent the highest-profile retail failure since early 2011, when Best Buy, the US-based electronic products retailer, closed its nine branded stores in China along with its Shanghai headquarters. Media Markt quits China markets once again mark the failure of Western business model, it also shows that the foreign operators don’t understand the dynamics of the China market and the wider transformation of the country’s retail sector.
SOURCE: nandu.com (Chinese content)
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