Retail insights boost Samsung in China

22 May 2012

BEIJING: Samsung, the electronics group, is aiming to strengthen its branded retail presence across China as a means of driving growth in the country.

The firm first entered China in 1992, but during the last two years has rapidly built up its retail network, from Xinhui in the south to Mianyang in the west.

Kim Youngha, CEO of Samsung Electronics China, revealed it was trying to act "more like a Chinese company than a Korean" one to fuel sales of TV sets, mobile phones and similar devices.

He also told the Financial Times that China currently provides 9% of the revenues from Samsung's $9.6bn worldwide branded business, a figure that should hit 20% by 2020.

Samsung had previously relied on local firms Gome and Suning to manage its distribution network, but controlling its own stores has yielded greater insights into diverse consumer needs throughout the country.

Kim further suggested this model would allow it to expand at a faster pace outside major urban centres like Guangdong and Shanghai, where market saturation is increasingly prevalent.

Equally, depending on domestic partners meant Samsung was "late to the midsized cities", Kim said. Running its own stores will help avoid this. "[We can now move into] fourth, fifth and sixth tier cities. Large retailers are not yet in there," he added.

Among the other tactics adopted by the company has been localising its leadership, with 70% of its departmental heads drawn directly from China today, measured against only 20% two years ago.

One potential obstacle to its progress is the rise of Chinese rivals like Huawei and Lenovo, but Kim stated that indigenous brands "are afraid of Samsung's plans."

Samsung has proved especially successful in the smartphone sector, where it held 30% of the market in 2011, versus Apple's 10%, according to Song Jong-ho, an analyst at Daewoo Securities.

A key advantage possessed by Samsung is that it makes electrical components, and thus created chips for the TD-SCDMA network standard of China Mobile, by far the country's largest mobile operator.

Kim predicted China's electronics market would expand by around 7% this year. Samsung, however, is seeking to achieve growth of between 30% and 40%, although the end of official subsidies on some appliances has been noticeable.

"A bigger impact comes from lowered consumer sentiment. The Chinese government has been implementing austerity measures targeted at the real estate market and that has had an impact," he said. "It is a concern. The situation is not ideal."

Data sourced from Financial Times; additional content by Warc staff