Retailers eye big chances in small cities

As China is keen to expand brick-and-mortar and virtual shopping infrastructure to further bolster the country's consumption potential, domestic players have begun to deploy resources in niche markets to maintain robust growth.

The government's combined measures to stimulate domestic consumption capacity, including creating new forms of brick-and-mortar and online shopping, and improving logistics facilities in the country's rural areas, are creating opportunities.

Gome Retail, a major retail chain operator in China, will partner with Germany-based kitchen retailer Ixina to open 200 stores in first-, second-and third-tier cities over the next three years.

Higher incomes have allowed many Chinese consumers to increase their purchases of high-end kitchen appliances such as smart cooking appliances, tea makers and other intelligent kitchen products to empower themselves by freeing up their time, said Wang Junzhou, president of Gome Retail.

He said China's ongoing consumption upgrade and the younger generation's strong purchasing power will continue to attract global companies to invest in product and services-related businesses in China in the long run.

The company has already opened stores in Beijing and Shanghai to sell such products and will open more stores in Wuxi, Zhejiang province, and Nanjing, Jiangsu province, in the second half of this year, assisted by its domestic retail networks.

Gome Retail selected 180 electric kitchen appliances from thousands of its supplier and partners for the initial run and the company said that the prices of kitchen cupboards are the same as those sold in Europe. Both sides have formed a team to provide after-sales service and measurement services for customers.

"Compared with consumers in other markets, we found that Chinese customers are incredibly inquisitive and hungry for information. They want to embrace new technologies and are fairly open to disruptive products," he said, stressing that with the rapid development of intelligent technology, the smart home has become an industry trend.

The home appliances market in China has already been reshaped by e-commerce, with shoppers spending 810.4 billion yuan ($117.8 billion) on goods in this category in 2018, up 1.9 percent year-on-year, according to a report released by the Beijing-based China Household Electric Appliance Research Institute in February.

Meanwhile, China's kitchen appliance sales outshone other segments in the household appliance market, which appeared gloomy in the past year as the real estate market has been reined in and prices of raw materials soared.

A number of measures were piloted in 11 commercial zones across the country late last year, including the areas around Chengdu's Chunxi Road and Beijing's Wangfujing Street. The annual visitors to these commercial zones are estimated to exceed 1 billion, according to the Ministry of Commerce.

"These moves are a practical response to the government's call to form a stronger domestic market and create a flexible environment for foreign investment," said Li Dongjin, a marketing professor at Tianjin-based Nankai University, adding that these pilot commercial zones will play a leading role in establishing a benchmark nationwide.

The Beijing-headquartered company currently operates more than 2,100 stores in over 630 Chinese cities and counties, and plans to open 500 New Retail stores and 200 stores in county-level markets, as well as 200 stores for selling home appliances to further enhance its supply chain throughout China.

New Retail refers to the integration, or interlinking, of online and offline shopping using modern technologies, data and customer engagement techniques.