Hot expansion

Updated: 2011-04-22 10:03

By Hu Haiyan (China Daily European Weekly)

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 Hot expansion

Zhang Jindong, founder and president of Suning Appliance, says lack of staff with a global vision hinders the company's overseas growth. Shao Xian / For China Daily

China's largest electronic goods retailer grew from one small store selling air conditioners

Employees of China's largest electronic goods retail chain have to be on their toes virtually every day - just in case their boss walks in and pretends to be a customer.

Zhang Jindong, who founded Suning Appliance in 1990, will often walk into one of his many stores throughout China and test out its service level.

And it's unlikely that most of Suning's 120,000-plus employees - aside from the managers - will recognize him.

After all, Zhang has a quiet and unassuming manner, unlike his business persona that has been described as aggressive and far-sighted.

Zhang, the 48-year-old president of Suning, started with just one 200-square-meter air-conditioning retail store in Nanjing, capital of East China's Jiangsu province.

Today, Suning has 1,324 stories in more than 300 Chinese cities. Last year, Suning's operating revenue increased to 75.51 billion yuan (8 billion euros), a 29.51 percent increase over the previous year - and he still wants more.

Much of Zhang's ambition can be traced to his very strong determination to be successful, particularly after he lost his parents at an early age, with his mother dying when he was seven, and his father four years later.

Zhang was born to a poor family in Tianshui, East China's Anhui province, the youngest of four children.

"It was very tough and arduous," he says, especially after his parents died. He and his siblings had to work part-time after school to feed themselves.

And thanks to his eldest brother, 12 years older and working, Zhang completed high school and went to Nanjing Normal University in 1984.

On graduation, he began work as an administrative assistant at a State-owned clothing company in Nanjing where he spent six "boring and dull" years.

So in 1990, he quit and with money he had saved and loans from his brother, amounting to 100,000 yuan, opened the first Suning store, selling only air conditioners.

Since then, Zhang has only looked to the future and continues planning to expand the chain.

On the cards are plans to set up 370 more stores - and enter 32 more cities - on the Chinese mainland this year as part of its plan to establish another 1,000 stores over the next three years. And another 60 logistic centers are planned for the Chinese mainland.

Zhang's success comes not only from his determination, but from innovative ideas and his vision.

In the early 1990s, when Suning was only a one-store operation, he introduced the concept of free installation for anyone who bought an air-conditioner from him.

He also recognized early on that as living standards were improving, appliances such as air conditioners - hitherto regarded as luxury items - would become more accessible and popular.

This foresight laid a solid foundation for his success and in just one year, Suning's profit was 10 million yuan - and Zhang was just 28 years old.

But this success bred intense enmity from his rivals, which were from State-owned home appliance retailers.

In 1993, eight State-owned retailers in Nanjing got together to threaten manufacturers with a boycott, should they continue supplying Suning stores with their products.

However, this attempt failed as Suning by then had built very good relations with all the suppliers, Zhang says.

As a way to restore his relations with the other retailers, Zhang decided to host them to a lavish dinner.

But this failed. His guests came for the dinner, but in the middle of a welcoming speech by Zhang, abruptly left.

Indeed, the actions by the other retailers spurred Zhang on to beat them. Through sound cooperation with the manufacturers and providing specialized service, Suning won, and in 1993 his annual revenue reached 300 million yuan, a year-on-year increase of 182 percent.

Two years later, Zhang again adjusted his strategy and started adding other home appliances to his store.

In 1996, Zhang again changed tack by opening two more stores, one more in Nanjing and the other in nearby city of Yangzhou.

At the turn of the century, Zhang decided to expand further and began setting up stores in other cities and provinces - and became the first home appliance retailer to start the chain store concept.

Not everyone then thought Zhang's vision was viable. In fact, many associates and friends tried to persuade him to close his Nanjing store and rent out the multi-storey Suning Building, located in a top commercial area of the city, for at least 30 million yuan a year. But he refused.

"Even if we suffer a loss of 40 million yuan a year, Suning will follow the chain-store mode," Zhang says.

Time has proved him right. Suning's national chain store system is expanding quickly: On average, Suning opened one store every 40 days in 2001, increasing to one every 20 days in 2002, every 7 days in 2003, now almost every day.

Zhang says that in 2000, chain store management was a new concept. "Now, chain store management nationwide and all competitors are following this concept," he says.

Zhang is a workaholic, putting in at least 16 hours a day and attending about 200 meetings a year.

He also likes visiting his stores throughout the country to get first-hand reports, as well as to keep in touch with what's going on.

"I will answer my phone if my employees call me to discuss our business, even late at night," Zhang says.

"They know my habit and are not afraid to disturb me."

And despite the large number of professional managers in Suning, Zhang still likes to do a lot himself.

For example, during his visits, he would check out if staff were conforming to the company's regulations in such details as dress code and sales approach.

Zhang is now looking to tap the overseas market.

In August 2009, Suning took its first global step by becoming a shareholder of Laox, a Japanese retailer founded in 1930, which has 10 stores selling appliances, telecommunications products, computers, animated games, toys and musical instruments. Suning also operates 23 stores in Hong Kong.

Suning now is looking at expanding to Southeast Asia as well as in Europe and the United States, either by opening outlets or conducting mergers and acquisitions, he says.

Zhang is also looking at other sales platforms and early last year, launched Suning on the Internet, with a target of taking out more than 20 percent of the online market for home appliances within three years.

Suning's online business platform turned a profit of 2 billion yuan in 2010, something which Zhang hopes will increase to 8 billion yuan in 2011.

Zhang says although Suning is regarded as a large company, it is still young and is confronted by many challenges.

One problem is the lack of staff with a global vision, something which Zhang says hinders the company's overseas growth.

While Zhang appears to be adventurous in business, he prefers a low profile approach - even in business.

Zhang says his managers should maintain a low profile since the company is quite influential now.

For instance, when a rival company's CEO was jailed for stock exchange manipulation, Zhang did not say anything negative about the person. Moreover, Suning employees are also banned from publicly talking about the rival CEO.

But Zhang says he and his staff should always be prudent. "Even some trivial problems can make Suning fail in this competitive market."

Although Zhang is worth billions, he is very amiable and believes effective communications between leaders and employees are very important.

And he advises anyone wanting to set up a business to cultivate the team spirit. "Success cannot come just by relying on one's efforts," he says.

"As well, one needs to be both adventurous and prudent."

Zhang is obviously not afraid of competition. "In the home appliance market, competition will always exist," he says.

"Competition not only comes from domestic retailers, but also from foreign companies, department stores or the supermarket.

"We just want to focus on our business and execute our plans, and it is our competitors who should worry and catch up with us."


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