Consumer electronics to boom

Consumer electronics to boom
 
CHINA'S consumer electronics market may double to 1 trillion yuan (US$126 billion) by 2010, or a quarter of the world's total, McKinsey & Co consultants told media briefing this week.

But many brands, especially those producing televisions and white goods, could disappear as retail shelf space becomes increasingly crowded, McKinsey said on Wednesday.

The Chinese electronics market will grow to 1.024 trillion yuan by 2010, up from 589 billion yuan last year and 464 billion yuan in 2003. The rate of growth works out to a compound annual increase of 12 percent, said McKinsey's Chris Shu.

As with many other industries in China, the home appliance sector is undergoing intensive market consolidation. Shu said that by 2010, retail chains should control more than 70 percent of total sales in first-tier cities such as Shanghai and Beijing, given the experience in mature markets. The figure for smaller cities should be about 30 percent.

Among the major new linkups is the combination of Gome Electrical Appliances Holdings Ltd and China Paradise Electronics Retail Ltd. The partnership dominates the TV market in first-tier cities, soaking up more than half of all sales.

As a result, the number of TV brands may be reduced to 10 to 15 over the next five years from the current 40 or so as consolidation plays out on store shelves.

Makers of computers and cell phones may have a better chance of survival as they rely less on retail chains, according to the research.

"This is a fight for the China market," said Ingo Beyer Von Morgenstern, McKinsey director. "If multinationals lose China, it will be difficult to be a global winner, while for local players, winning China is the first and most crucial step toward global expansion."

Consumer electronics product makers should integrate their multiple business lines as most are now negotiating prices with retailers separately, Shu said.

They should also consider setting up self-branded stores, such as Sony Corp and air-conditioner maker Zhuhai Gree Corp have done, Shu added.

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