Dell Wins the China Retailer Triple Crown

Posted on April 9, 2008
Filed Under China Business, China Distribution |

Chinese electrical appliance retailer Five Star Appliance will sign a cooperation agreement with Dell (DELL) to sell the latter’s products at its retail stores.

With the signing of the agreement, Five Star will become one of the most important partners of Dell in China.

Liu Li, general manager of Five Star’s Digital IT Department, says that starting in May, Five Star will start selling Dell’s desktop and laptop PCs at their core stores in major Chinese cities and they will bring the products to more of their stores in the coming months. Liu says that Dell will send staff to Five Star’ stores to facilitate consumers’ purchase of the products.

Five Star targets the Chinese white collar class for its electronics appliance. The company’s PC sales increased by up to 300% in 2007 compared with that of the previous year and it plans to increase the proportion of international brand digital products at its selling venues this year.

Five Star is owned by US big box retailer Best Buy and has big plans for the future. Reuters:

Top U.S. electronics retailer Best Buy Co, facing stagnant sales at home, said on Friday it would ramp up its expansion in China but would not grow through partnerships with local rivals.

Best Buy will invest substantially and open a large number of stores in China in the next five years, and will launch online sales in the country in the next 24 months, Bob Willett, chief executive officer of Best Buy International, said in an interview. He declined to give specific figures.

Willett denied Chinese media reports that Best Buy was in talks on a possible share swap with GOME Electrical Appliances Holdings Ltd, China’s top electronics retailer.

…The new stores planned in China include 20 to 25 Five Star stores and five to eight self-branded stores. All new Best Buy-branded stores will be based in or around Shanghai, where the company opened its first and only such store in China in early 2007.

Best Buy, which bought a majority stake in Jiangsu Five Star Appliance Co in 2006, will boost its ownership of the company to 100 percent by the end of 2010 as part of the purchase agreement, Willett said.

Dell now has its PCs in the three biggest appliance/electronics retailers in China: Gome, Suning, and now Five Star.

Dell is certainly trying to cover all the bases. The big box retailers are great for reaching wealthier customers in tier 1-2 cities. Dell has a partner program for smaller vendors in the rest of China while maintaining its online sales presence.