Retailers rush to sign air conditioner deals

Retailers rush to sign air conditioner deals
Two of China's leading home appliance retailers were rushing to sign big air conditioner procurement deals with major domestic suppliers in a bid to grab a larger slice of a market boosted by rising demand, the Shenzhen Economic Daily reported Wednesday.

Gome Home Appliances Ltd., the country's largest home appliance retailer, inked an amazing 10.81 billion yuan (US$1.3 billion), 5.15 million-unit purchase deal with major air conditioner producers in Guangzhou on Tuesday.

Gome sold 2.21 million units of air conditioners for 5.2 billion yuan last year and the firm expected to more than double the figures to 5.3 million units and 12 billion yuan respectively this year, the newspaper quoted Li Juntao, general manager with Gome's procurement department, as saying.

Gome's move came two days after Suning Appliance Chains Group Co., the country's second-largest home appliance retailer, signed an 8 billion yuan purchase agreement with domestic makers for four million units.

Gome planned to open 360 new outlets across the country this year to take the firm's total number to 500. The firm also expected to boost its sales to 46.8 billion yuan this year. By the end of last year, Gome had only 200 outlets in the country with a sales output of 23.88 billion yuan, said Li.

Li said Gome planned to cut air conditioner prices by 10-30 percent this year through large purchase deals, which he said were cost-saving.

Rival Suning also planned to increase its market share to 16 percent this year from 12 percent last year and began to sell 40,000 units of air conditioners at very low prices, said Jin Ming, marketing executive of Suning.

Suning expected air conditioner's prices to rise by 10 percent this year, mainly because of a rise in raw materials such as copper, aluminum, iron and oil.

Smaller air conditioner makers are expected to be driven out of the competitive market this year because of slim profit margins and the implementation of the stricter energy efficiency standards that came into effect March 1, industry experts say.