China's No 2 electrical appliance retailer Suning Appliance Co Ltd plans to move its headquarters from Nanjing to Shanghai and expand its regional base in a bid to compete with its rivals.

The firm has been under mounting pressure from competitors since the country's largest electrical appliance retailer GOME Electrical Appliances Holding merged with No 3 retailer China Paradise Electronics Retail Ltd (Yolo) last week.

As well as shifting its headquarters, Suning will establish seven new regional bases in major cities including Beijing, Nanjing and Chendu in the coming three to five years, according to a company official.

Sun Weimin, president of Suning, said in an interview yesterday that part of the company's four core departments now based in Nanjing including management, sales and marketing would be transferred to Shanghai soon.

"Many top marketing and sales staff will move to Shanghai, which will take the place of Nanjing to monitor Suning's nationwide business," said Sun.

Along with the relocation, Suning plans to build 100 new chain stores in the country by the end of this year.

It has raised 1.2 billion yuan (US$150 million) on the stock market and obtained 800 million yuan (US$100 million) in loans from the China Development Bank.

The changes come on the back of Suning's recent sluggish stock market performance under pressure from rival GOME's successful acquisition of Yolo on July 25.

Investors are concerned Suning may lose its market share as it is dwarfed by GOME, which has 670 China stores more than double Suning's number. Shares in Suning dropped to 47.05 yuan (US$5.8) yesterday from 50.05 yuan (US$6.2) on July 26, down by 7 percent.

Its shares closed at 47.05 yuan yesterday, down by 1.98 percent.

Suning has taken a steady development approach in the past decade compared to the aggressive acquisition tactics of its competitors. Its latest move has sparked speculation of further measures to counter GOME's dominance.

"Shanghai will become the battlefield of Suning and GOME soon," said Jin Zefei, an analyst with Shenyin&Wanguo Securities Co Ltd. "Suning does not want to lose Shanghai to GOME, who has had a strong presence there."

"Shanghai is not only a big market, but also the best choice for Suning to establish its headquarters to sharpen its brand and improve its management," said Jin.

Yolo has long focused on Shanghai over other cities. Before the acquisition it had 56 chain stores in Shanghai as well as dozens of small mobile phone chain stores, while GOME owned 42 stores in the city.

Suning's presence in Shanghai is not so strong in comparison. In the past five years it has opened 29 chain stores in the city.

But Ling Guosheng, the company's executive president based in Shanghai, said in a statement yesterday it is the number of talented and experienced staff rather than the number of stores that helps a retail company win out in the market.

And as GOME and Yolo are busy restructuring their business following the acquisition, Suning is moving in on their staff to support its future expansion.

Suning will launch a recruitment drive in Shanghai this week, offering 30 percent higher wages than its competitor GOME to attract experienced store managers and other managerial staff, according to Zhou Xiaoyu, the company's communications manager based in Shanghai.

She said the number of staff to be recruited would be large, but declined to disclose a specific figure.

"The size of Suning's recruitment in the city shows its ambition (there)," said Zhang Man. "Suning is attracting experienced staff from GOME and Yolo, which may spark conflict."

Over 40 staff from Yolo have applied to join Suning following the acquisition, according to a statement from Suning.

"GOME will get Yolo's shops," said a top official with Suning, while interviewing Yolo staff who applied for a job at Suning yesterday. "But we will obtain their most talented staff, who cannot be bought with money."

(China Daily August 1, 2006)