Suning Appliance Co. (002004), China’s biggest electronics retailer, will spend 22 billion yuan ($3.52 billion) on logistics by the end of 2015 as it expands online operations and offers new products such as cosmetics.
The retailer is making the investments to be less reliant on its traditional electronics business, Vice Chairman Sun Weimin said in an interview in Nanjing, in eastern China, yesterday.
Suning is diversifying to tap online shoppers and add new products after reporting a 29 percent drop in profit for the six months ended in June. The company faced a weaker Chinese economy and price battles with rivals Gome Electrical Appliances Holding Ltd. (493) and 360buy Jingdong Inc. last year.
“We need to cater to and invest in where the future consumer spending channels will be,” Sun said, declining to specify how the new strategy will affect profit this year.
By adding new lines such as baby products and cosmetics the company is pushing toward a model similar to U.S. retailers Wal- Mart Stores Inc. (WMT:US) and Amazon.com Inc. (AMZN:US), a goal Chairman Zhang Jindong first talked about in March. The retailer is also looking to expand offerings to customer such as financing and after-sales services, he told reporters in Nanjing yesterday.
Gome and Suning are making a bigger push to draw web shoppers. China’s online-retail transactions are projected to more than double to 2.57 trillion yuan by 2015 from 1.22 trillion yuan last year, according to Analysys International, a Beijing-based researcher.
The two companies were hurt by intense competition after online retailer 360buy triggered a price war in August. Suning and Gome pledged to cut prices after Liu Qiangdong, chairman of 360buy, announced that all major appliances on its website would be at least 10 percent cheaper than those sold by the store operators.
Suning, which is changing its name to Suning Commerce Group Co., is in talks with the government over getting a license to lease wireless spectrum from existing carriers, Sun said yesterday. It may get the license as early as in the second half of the year, he said.
Obtaining the license would not only help sales of mobile handsets and electronics, it would also boost sales of its content offerings for mobile phones, Sun said.
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