Performance slump million City exit

Absrtact: After two years, Metro AG and Foxconn (2038.HK) are determined to end the 200 million-dollar investment test to stop China's million-city business. It is now entangled in the choice of closing or looking for new buyers. Best Buy announces withdrawal from Chinese market

Two years later, Metro AG and Foxconn (2038.HK) are determined to end the 200 million-dollar "test" of the investment, stopping China's million-city business. It is now entangled in the choice of closing or looking for new buyers.

When Best Buy announced its exit from the Chinese market, Europe's biggest home appliance chain, the city that had just come in, had vowed that it would not be the second one. But two years later, the "death" reasons for the city and Best Buy are almost the same: the buyout model is not acclimatized;

The exit of the city, for the rush to get through the technology industry, "the last kilometer" of Foxconn, is undoubtedly the direction of its turn channel another serious setback. Its previous attempts at e-commerce or "steeds" channel projects have been unsuccessful. The "King of the Foundry" turned to the channel and seemed to stumble.

Performance slump million City exit

"After the end of the two-year market testing phase, Metro Group has decided to stop further expanding its strategic consideration of media Saturn's operations in China." "After careful analysis of all the options, we decided not to continue our business," Metro said in an e-mail to the China business newspaper January 16, 2013. ”

The email refers to a joint venture between Metro and Foxconn, the "Million City Electric" chain. At the end of 2010, the city of Vantaa opened its first store in the Chinese market in Shanghai Huaihai route. Metro Group and Media-saturn Holdings Limited, founder of Kellerhals and the Stiefel family, share a 75% stake in the city, while the Foxconn Technology Group holds another 25% per cent.

Tongwant, the first president of the city, told our correspondent that it planned to invest about 200 million U.S. dollars before 2012, opening 10 stores in Shanghai, and going out of Shanghai in 2013, and the number of stores in 2015 will reach 100.

However, Tongwant in the position for only 8 months. In July 2011, the city of China announced that Tongwant for "personal reasons" Ginvan China president, successor to the Media-saturn (Wan Cheng Chinese parent) Former procurement vice president Frank Bussalb. And the news that the reporter obtains is, Tongwant the real reason for the resignation is the store performance is too bad.

But bedrock did not add a bit of colour to the city's performance report. People close to the top of the city told reporters that all 7 outlets in the city were losing money, and that the dismal performance dragged down the city's open shop plan. The plan, originally intended to walk out of Shanghai in July 2012 and open its first store outside Shanghai, was eventually abandoned.

It is reported that in the three quarter of 2012 years ago, the revenue of the city of China's sales of 100 million euros, the year was expected to lose 40 million euros. The news has not been officially confirmed by the city of Vantaa.

Metro is now working with Foxconn to agree on the next steps to be taken. Metro said: "In addition to closing the other option is to look for potential investors." The discussions will be over in the next few weeks. ”

The second Best Buy

occasion, a marketing campaign for Best Buy, has left a deep impression on the industry. 2011 February 24, the Shanghai two mainstream urban media in the layout of the cross version of the city advertising, "after February 22, they quit, we give you reassurance." "On February 22, it was the day of Best Buy announcing the evacuation."

Tongwant in response to this newspaper "how the city did not become the next best buy" question, said compared to Best Buy, the city has two advantages: first, the store long responsibility system, will be fully delegated power to the store, another way through the bundle of shares to motivate the enthusiasm of the store, the other is that they work with Foxconn. These two aspects, is also the city of Wan high expectations of the localization of "sharp weapon."

But the media in the middle of the city of China told reporters that the city in the store long decentralization is indeed very strong, but also limited to store display, store promotions, commodity pricing and so on. Store goods purchase, the shop chief only has the suggestion right. This in the industry, and Gome (micro-bo), Suning compared to the city's shop long responsibility system is not too much of a substantial difference, "Gome Su Ning is now the store shop long incentive is also very big." ”

Home appliance Industry expert, Kua parent Enterprise Management Consulting Co., Ltd. Chief advisor Liu Buzhong that the low-cost advantage of some of the 3C products that are being worked out with Foxconn is only a small part of all products, which makes it difficult to fundamentally change the disadvantage of the city in terms of procurement costs. In the beginning, Best Buy also announced that it would mobilize the vast resources of its global sourcing to serve the Chinese market, but it proved that the road was not workable.

Liu Buzhong said that in the home appliance retail industry, the number of stores is the core competitiveness. The huge gap between the two sides, leading to the city in the procurement costs, than the Gome suning at least 5% higher. In addition, like Best Buy, the city's model is also "buyout", which means that if the city wants to open a new store, must be pressed on a very considerable amount of money, fast shop has become an extravagant hope.

"In China's home appliances retail market, aside from the size and price of the two decisive factors, other models and management are empty talk." "PAL Consulting Senior director Luo Qingxi (micro-bo) bluntly, Best Buy defeat in these two factors, Wan City is no exception."

Foxconn: Tough "last mile"

For the city project, Foxconn chairman Terry Gou had high hopes. On the day of the opening of Huai ' an city Huaihai route, Mr. Gou went to the scene and counted the process of getting close to Metro. Yang Chulen, the current chief strategy officer for the city of Wan, has also raised the past from the Foxconn Access Group's chief financial officer position.

"Getting through the last mile" was a knot in Gou's more than 10 years. I also often speak in the company, the channel is the technology industry's "last kilometer." Hon Hai is engaged in foundry manufacturing and has no brand, but after cutting into channels, Hon Hai can serve any brand.

Mr. Woo, chairman of Foxconn's Channel business group, disclosed to the newspaper that Foxconn's channels in the mainland would be divided into five parts: one is the city of cooperation with the Metro, to serve in the first-line cities and Gome, Suning PK The task of the second is to enter large supermarkets such as RT-Mart, Carrefour, in the supermarket open "shop shop"; BuyNow for the main body in the two or three-line city open it market, and the other is to cover the five or six-line city of "steeds" stores and shopping sites.

It now appears that Foxconn's attempts to move in all directions to the channel industry have met with no small resistance. The city of Vantaa has also declared its withdrawal; Shop "There is no real progress, its first investment in 3C Digital Plaza Bo Digital, still only more than 30 stores, and business conditions and sluggish;" Steeds "planned the 3-year million shop target frustrated, its launch of the online B 2C website" Flying Tiger Tesco ", is also suffering from operating crisis.

In Luo Qingxi's view, Foxconn's frustration in various channels is predictable, and its biggest problem is that it is unable to graft its own strong advantage of the foundry to the channel. First of all, there is no strong enough brand-help channel to build the advantage. Second, its online layout, has missed the domestic 3C chain rapid expansion of the golden period, leaving only high costs and brutal competition. Finally, both the development line and the offline, there is not enough talent and experience to reserve.

"Foxconn's huge advantage in the foundry industry has allowed many 3C brands to be wary of it and have no deep cooperation in the channel." "There is the head of household appliances industry said.