beyondbrics

Multinational companies are salivating at the thought of 1.3bn Chinese consumers unburdened by credit card debt. And the latest to bite is Media Markt, the German electronic goods retailer, which on Thursday was due to open its first store in China – a 13,000 square metre flagship (pictured) on Shanghai’s high street, Huai Hai road.

Except the store didn’t open, because Media Markt couldn’t train the staff in time. So the company went ahead with all the lion dancing and firecrackers anyway – just without the manic crowds common at most Chinese store openings.

Media Markt will use Shanghai to test the Chinese market, opening ten more stores in the city by 2012. If they’re successful, the company plans to open at least another 100 in the rest of China by 2015.

“Chinese consumers’ purchasing power is soaring, making this an ideal time to enter the market,” says Roland Weise, CEO of Media-Saturn-Holding, of which Media Markt is part. Weise and his colleagues seem confident that the business model that has worked in Europe – including Russia – will work in China too: wide product range, bolstered by a best-price guarantee; and strongly localised management, rewarded with up to 10-per-cent equity ownership of each store.

Media Markt may need China – where else can the company find consumer spending growing at 8 per cent a year? – but does China need Media Markt?

The company says its strength is its core belief that “all business is local”. But China already has strong electronics retailers like Suning and Gome: Media Market can hardly hope to out-localise the locals.

And it is hard to see how Media Markt’s best-price guarantee will work in Shanghai, where there is always someone willing to undercut legitimate sellers with a laptop stuffed with pirated software and knockoff batteries (backed up by a fake receipt).

Torsten Stocker, retail analyst at Monitor Group, says:

It is one thing to compete in Germany, where they had to beat mainly staid department stores and local electronics retailers and competing in China, where they are the challenger to the large and well-established local players.

Shaun Rein of China Market Research in Shanghai agrees that Media Markt is in for a challenge:

It will be extremely difficult for them to differentiate from the local competition… which is on almost every street corner. How are they going to get products that Suning and Gome don’t have, at a good price?

And Media Markt has chosen an unlikely partner to help it understand the China market: Foxconn. Media Markt officials say they chose Foxconn in part because of its wide experience of human resourcing in China – though it is hard to see why a company plagued by staff suicides is the ideal adviser on personnel matters.

Media Markt’s global rival, Best Buy, the world’s largest electronics retailer, has struggled to compete in China. The German giant has set itself a deadline of about 18 months to 2 years to see whether it can do any better.

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Foxconn: no change to workers’ rights, beyondbrics