Top appliance retailer Gome's bid for rival Dazhong is unlikely
to create a monopoly or push up prices, according to industry
watchers.
Pricing is not decided by retailers alone - manufacturers and
the market also influence the prices paid by consumers, said Lu
Renbo, deputy director of the China Electronic Chamber of
Commerce.
Gome's move to take over all 81 Dazhong outlets in North China
could give the chain a more dominant position when bargaining with
manufacturers, which could actually drive down appliance prices,
said experts.
Gome is also trying to ease consumer worries. "Gome is still
very far from being a monopoly," said Chen Xiao, president of Gome,
at a news conference in Beijing over the weekend.
"The top five retailers in China account for less than 20
percent of the market," Chen said.
Industry experts said the merger amounts to a regional deal, as
Dazhong has a strong presence in Beijing with 61 outlets and
another 20 stores across Tianjin, Hebei and Shandong.
Gome said over the weekend it would finance a third party of 3.6
billion yuan to acquire Dazhong, which has annual sales of about 6
billion yuan.
Beijing Zhansheng Investment Co will purchase Dazhong, and Gome
will manage it from its Beijing headquarters. The Dazhong brand
name will remain on the stores, but the two brands' funding,
sourcing and logistics will be merged, the company said.
Gome has an exclusive option to buy out Dazhong later, said He
Yangqing, Gome's spokesman. "We needed time to get regulatory
approval, and there are uncertainties involved, so we adopted this
transition approach."
He said Dazhong was eager to close the transaction as soon as
possible.
After the deal, Gome's network will grow to around 1,100 stores
nationwide, occupying almost 70 percent of the market share in
Beijing and Shanghai.
Dazhong is the fourth-largest appliance retail chain in China
after Gome, Suning Alliance Co and Jiangsu Five Star Appliance Co,
which is majority-owned by Best Buy, the largest US electronics
retailer.
Gome's rival Suning Appliance Co withdrew from the race to
acquire Dazhong last Thursday.
Dazhong was not represented at the news conference over the
weekend and could not be reached for comment. Dazhong stores were
not open for business yesterday.
(China Daily December 18, 2007)
