Sun­ing pow­ers up profit-build­ing plan

China Daily (Canada) - - BUSINESS - ByWANG ZHUOQIONG wangzhuo­qiong@chi­nadaily.

Sun­ing Com­merce Group Co, a ma­jor elec­tron­ics re­tailer that is turn­ing to on­line sales, has vowed to lift prof­its by fo­cus­ing on con­sumer-cen­tric sup­ply chains; a more open on­line plat­form through col­lab­o­rat­ing with third par­ties; and a fast and re­spon­sive de­liv­ery sys­tem by build­ing one of the coun­try’s largest lo­gis­tic net­works.

In a con­ver­sa­tion on Thurs­day with more than 200 in­vestors at com­pany head­quar­ters at Nan­jing, Jiangsu prov­ince, Sun­ing Chair­man Zhang Jin­dong com­pared the com­pany’s tran­si­tion from tra­di­tional re­tailer to e-com­merce com­pany to the process of con­struct­ing the out­side and then fin­ish­ing the in­te­rior of a house.

“It is clear that people can see some­thing built from scratch, but it is hard to see how the build­ing is ren­o­vated,” Zhang said, speak­ing about the chal­lenges the re­tailer faced af­ter chang­ing its name last year to show­case its emer­gence as an e-com­merce player and its strat­egy of of­fer­ing prod­ucts at same price on­line and off­line.

In2013, Sun­ing re­ported rev­enue in­creased 7.05 per­cent to 105.2 bil­lion yuan ($16.9 bil­lion), but that prof­its and net prof­its plum­meted 95.5 per­cent and 86.1 per­cent, re­spec­tively.

Ben Caven­der, a se­nior an­a­lyst for Chi­naMar­ket Re­search Group, said Sun­ing was late to ar­rive to the fast-de­vel­op­ing e-com­merce tran­si­tion in China.

More­over, Sun­ing has lacked clear brand iden­ti­fi­ca­tion with con­sumers, he said.

Zhang laid out plans to get the ve­hi­cle back on track this year, in­clud­ing build­ing a sup­ply chain that is ori­ented to­ward con­sumer needs and work­ing with sup­pli­ers to de­velop prod­ucts with bet­ter mar­ket­ing fo­cus.

Their brick-and-mor­tar stores will serve as a chan­nel to strengthen their elec­tronic ap­pli­ances businesses, es­pe­cially in com­mu­ni­ca­tion prod­ucts and in­tel­li­gent house­wares, he said.

A more open on­line plat­form through col­lab­o­ra­tion with third-party sup­pli­ers will im­prove Sun­ing’s on­line value and re­sources, he said.

Zhang men­tioned the pos­si­bil­ity of uti­liz­ing the coun­try’s widely used in­stant mes­sag­ing toolWeChat, a ser­vice pro­vided by Ten­cent Hold­ings Ltd.

The com­pany also aims to build a lo­gis­tics cen­ter with ware­house ar­eas reach­ing 2.07 mil­lion square me­ters by the end of this year, in hopes of de­liv­er­ing items within half a day in Bei­jing, Shang­hai, Guangzhou and Shen­zhen, and sec­ond-day de­liv­ery in 12 other first-tier cities.

Caven­der said the key to Sun­ing’s per­for­mance this year will be its abil­ity to ex­e­cute those plans. “They could do very well, but they could also do poorly, and then it will be very dif­fi­cult to take back mar­ket share.”

Ja­son Yu, gen­eral man­ager at Kan­tar World­panel China, said it is worth dis­cussing whether Sun­ing re­ally needs so many phys­i­cal stores or such large stores when it is try­ing to be­come an e-com­merce com­pany.

The com­pany’s strat­egy could vary by re­gion, Yu said.

For ex­am­ple, it could in­sti­tute more on­line in­no­va­tion for top-tier cities and stay fo­cused on tra­di­tional stores in third- and fourth-tier cities, Yu said.

Last year, Sun­ing opened more stores in sec­ond- and third-tier mar­kets with 97 new stores. By the end of 2013, it had 1,585 stores on the Chi­nese main­land, 29 stores in Hong Kong and 12 in Ja­pan.

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