Suning expands to Vietnam border, to open 900 furniture stores in China in Q3
By Celine Chen
CHINA, NNA - In May last year, Liao Quanxing and wife took a calculated risk to open the first Suning Retail Cloud store in Dongxing, a bustling China-Vietnam border city, after their past rubber importing business flopped and Liao's subsequent job in border control didn't bring the security they yearned for.
The gamble paid off. Offering home appliances, furniture and other household goods, their business was an immediate triumph, generating sales of 600,000 yuan (about $92,500) within the first month.
Flushed with success, the couple decided to open their second store the following month in the same city located in the south of China's Guangxi Zhuang autonomous region.
The expansion of the franchise-based Suning Retail Cloud chain to Dongxing, a port city bordering Vietnam's Mong Cai city, marks the dramatic progress of its strategy to support small family-run rural shops in lower-tier cities and counties by offering their consumers a more convenient, one-stop integrated shopping experience.
The Retail Cloud model was started in 2017 by Suning.com Co., China's leading omnichannel retail player which runs about 70 shopping complexes in the country. A Fortune Global 500 company, it is owned by conglomerate Suning Group.
Suning.com (Suning) announced earlier this month that it plans to open another 900 Retail Cloud stores in the next three months. They will focus on home furnishing as the main draw, which has been identified as a new growth area as the business model diversifies from electronics and gadgets.
There are over 8,000 stores as of March 2021. Although still scarred by pandemic losses, the company has targeted a total of 10,000 stores within the current quarter, and 12,000 by the end of 2021.
A key strategy is to go local in each area by offering a variety of products that suit the needs of their consumers and also adjusting to their preferences.
One clear example is Dongxing, where a vibrant trading scene has been supported by a melting pot of Chinese, Vietnamese and residents of mixed parentage. Divided by a river with a crossing-bridge, the border area also serves as a gateway for China to carry out trade with neighboring Southeast Asian countries.
Liao and his wife Tang Danfeng, who is of Chinese-Vietnamese descent and also speaks Vietnamese, saw business advantage in the local diversity.
Suning said in a recent press release, "What's unique about Suning retail sales is that it often offers local consumers with exclusive goods, which just meet the diversified demands in Dongxing."
Sales of exclusive items at the couple's two stores accounted for a quarter of their total sales. Such products helped ensure their profitability, boosting their annual sales to 6.3 million yuan, said Suning.
Liao said, "When I started my own importing business right after graduation, I couldn't sleep at night due to the risky nature of the business. Now with Suning Retail Cloud, I can just steadily make money."
Tang said home appliances by the Midea and Supor brands at her stores have become quite popular with Vietnamese shoppers whose word of mouth about their satisfying buys and shopping experience helped push sales.
Contributing 30 percent to her business are another group, the local Gin or Jing people, an ethnic minority in China. Descended from Vietnamese who immigrated from Hai Phong long ago, the Gin people make their wealth today from fishing and tourism.
They tend to go for global brands such as Panasonic and Siemens, Tang added.
Suning sees its Retail Cloud as an important strategy to help micro and small business merchants thrive with the support of the company's vast retail capabilities and industry know-how especially in logistics, warehouse, supply chain and technology innovations.
In China’s counties and lower-tier cities, the furniture sector has been earmarked as a growth opportunity since the market centering around the home is rapidly growing. However, the industry is backward and fragmented, and needs help to address weaknesses in digital transformation as well as marketing and sales.
Suning Retail Cloud is now empowering top furniture brands to tap new markets as it ropes in more small business owners to operate stores. Suning's partnership with furniture manufacturers have seen the launch of customized products appropriate for the local market.
At the same time, store franchisees receive support with standardized store displays, operation systems, training, logistics and post-sales service, all of which enhance their store’s professional appearance, said Suning, adding that such support also helps newcomers get started even if they have no prior experience in the industry.
Suning said, "Unlike home appliances, China’s furniture industry remains small and fragmented, and purchasing furniture from top brands is a costly endeavor. Small workshops and self-employed individuals remain the driving force of the market, and, as a result, traditional furniture retail requires extensive digital transformation."
"Backed by the mature resources and capabilities of Suning, franchise partners can tap into the Retail Cloud model to transform their business and increase revenue," added Suning.
The first Suning Retail Cloud furniture and household goods shop was opened in March this year in Jintan district in Changzhou city in eastern China’s Jiangsu province.
Within the first week, franchise holder Chen Yun was overwhelmed by overall sales exceeding 500,000 yuan, with almost half from furniture and household goods.
He made enough profits to cover rent for six months, said Suning, adding that Chen's business reflects a current Retail Cloud model which offers more extensive online and offline services.
According to data from Retail Cloud stores, China’s mid-year shopping festival “618” saw a surge in sales this year.
Sales of refrigerators and washing machines products from domestic brands such as Meling and Little Swan jumped by more than 100 percent from a year ago.
High-end home-appliance brand Panasonic enjoyed a 130 percent increase in sales, while domestic maker of kitchen appliances VATTI recorded a massive 260 percent growth.
These much-needed cheerful results came at a time when Suning was trying to cope with losses and a liquidity crisis in a pandemic-driven fallout.
A new state-backed fund under a $1.36 billion deal, which sees the participation of provincial and city governments and investors like Alibaba Group, Xiaomi, Haier, Midea and TCL has enabled restructuring to be carried out.
On July 19, Suning and the Bank of Jiangsu reached an agreement on credit increment. It hopes that by restoring liquidity, profitability will be improved in the long term.
In 2019, Suning acquired 37 Wanda department stores and bought a huge stake in Carrefour's China operations.
Suning maintained its position in Fortune Global 500 and topped the 2020 List of China's 500 most valuable brands with a value of 296.815 billion yuan.