China Paradise signed a co-operation agreement with Beijing-based Dazhong Group, which allowed it to acquire 78 per cent of the latter  within a year.

Dazhong, which owns 73 outlets in the nation's capital city, has a hold on more than 60 per cent of the local market.

A Dazhong statement last night said that it will reconsider its co-operation agreement with China Paradise in light of the Gome-China Paradise merger, and it is willing to seek "possible tie-up" with relevant  counterparts "at an appropriate time."

China's home appliance retailers have been expanding in recent years to achieve scale and squeeze better deals from manufacturers.

Gome, which held about 6 per cent of the market in March, was planning to open 120 to 150 new stores in 2006.

In comparison, Suning, the sector's second-largest player, is now on the way to opening 1,500 stores in 350 cities by 2010.

However, the explosion of the sector has created overcrowding as increasingly fierce competition squeezes the profit margin for retailers.

According to Gome's first-quarter fiscal report, its net profit grew 21.7 per cent, lagging far behind the growth of its sales income, which soared 67.8 per cent in the same period.

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