Chinese drive appliance growth

China’s home appliance store industry has posted revenue growth of more than 10 per cent during the last five years.

Ibisworld says rising incomes, the expansion of chain retailers, growing retail power of suppliers, wider product ranges and government assistance have all fuelled the growth of the industry.

Profit levels vary significantly among different product segments – kitchen and bathroom appliances are the most profitable, electronics the least. However, increased industry competition in recent years has resulted in overall profit declines as companies reduced prices to increase market share.

The four largest companies operating in this industry, including Gome and Suning, account for just under a quarter of total revenue, which indicates low market share concentration.

In many large cities, such as Beijing and Shanghai, industry concentration is much higher, with major companies forming oligopolies.

Ibisworld further said home appliances stores in China are currently struggling due to the expiration of the government’s 2009 stimulus package.

Moreover, employment and logistics costs are on the rise. Future revenue growth will be slow, says Ibisworld, driven by the expansion of the industry into China’s less developed rural areas.

The industry currently stands at $140.9 billion.

GB

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