Sohu IT, 6/01/11
Chinese consumer electronics and home appliances retailer Suning's (002024.SZ) first self-built store in Beijing will open for business in the Liujiayao neighborhood of the city this weekend. A spokesperson for Suning said that the Liujiayao store would just be the beginning for the chain in Beijing, and that the company would change its operating model, which had previously relied on leasing retail locations, in the future.
The Liujiayao Suning has 12,000 square meters of floor space over four floors. Suning will launch a grand opening sale on June 3 with more than RMB 10 mln in discounts of more than 20% on home appliances, and discounts of RMB 100 to more than RMB 1,000 on consumer electronics products. As Suning purchased the store relatively early, the cost for the location was likely less than RMB 100 mln.
The Suning spokesperson said that the completion of Suning's first self-built store would change the existing chain structure of the stores. Previously, the majority of Suning's retail outlets had been rented, but as rent for commercial spaces has increased, costs for appliance retailers have increased accordingly. Purchasing real estate on which to build stores, on the other hand, allows Suning to amortize the cost of the real estate over a long period of time. Considerations of rent stability, business stability, and logistics management, among others, will make self-built stores the major trend for Suning in the future.
In addition to the Liujiayao store, Suning has also purchased plots in the Balizhuang neighborhood of Beijing's Chaoyang district, and in the Fang Shan district. Preliminary work is currently underway at both future stores. Suning has also set up self-built stores in a number of other cities, including Shanghai, Chongqing, and Guangdong. Suning says it will not move too quickly with its self-built stores at first, and that as the company currently has sufficient cash funds, it will not make major use of loans from suppliers.