Business Intelligence on Retailing, Franchising, and Consumerism in China

Gome Drops Entrance Fees To Suppliers

Chinese home appliances retailer Gome Electrical Appliances Holdings has announced that it has canceled the entrance fee for suppliers in all its stores.

Prior to this, it was common to charge entrance fees in Chinese electronics retail stores and these fees are a major part of the incomes of these retailers. In addition, manufacturers needed to pay for promotion and selection of a favorable placement on store shelves.

He Yangqing, vice president of Gome, told local media that Gome has cancelled the fees for entrance and selection of placements in all of its stores nationwide, including the 50 stores that will be renovated this year. The store renovation will be customer demand-oriented and products will be placed by category instead of the selection of manufacturers, directly leading to the cancellation of the entrance fee.

In regards to how the cancellation will affect Gome's profit, He said the company will make up the "losses" by increasing its sales.

According to Gome, its core strategy for 2009 is to optimize its network and enhance efficiency. On one hand, it will shut down unprofitable stores and open large flagship stores; on the other hand, it will upgrade and renovate existing stores to improve the performance of its individual stores.

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