Another consumer brand has challenged the Chinese market…. and failed.

German retail brand Media- Saturn, part of European retail group Metro AG, is closing all stores in China. Metro’s Media-Saturn consumer-electronics business operated seven stores in Shanghai under the Media Markt brand. And, less than two years after US consumer electronics shop Best Buy left China, I am not surprised.

Gone are the days when just setting up a shop on a Chinese high street was enough to guarantee a steady stream of sales for foreign brands – as Germany’s Metro learned this week when it confirmed the failure of its experiment in electronics retailing in Shanghai. Metro said it would abandon its plan to establish more than 100 Media Markt electronics stores in China by mid-decade.

Retailers cannot expect to enter the Chinese market with the same offer and western business model as in their home regions. Specifically, the consumer electronics market, which is constantly moving and heavily e-commerce based. Online sales of consumer electronics are highly competitive in China, and retail chains such as Media Markt and Best Buy have a smaller range of products and higher prices than their online competitors. But by maintaining the western business model anyway, it is clear that some foreign operators don’t understand the dynamics of the China market and the wider transformation of the country’s retail sector.

This is a universal issue with brands in all industries. Being a “foreign” brand is no longer enough to dominate all competition in China, brands need to re-think their entire strategy. And many of them are:

Daimler is to peddle its Smart cars through the Chinese equivalent of Twitter while Apple will sell iPhones on an installment plan: both signs that foreign retailers in China are scrambling for new ways to entice mainland consumers who are no longer such a pushover for foreign products.

Until recently in China… if you had stuff to sell the demand was so overwhelming that you did not need a competitive product. But today we are facing a very different consumer, she is more sophisticated, she is taking her time to weigh her options, the consumer is not shopping in a way that is comparable with a year ago,” says Jacques Roizen, of Alvarez and Marsal, the turnround specialists, in Hong Kong. 

media markt

An article about Metro’s China experience here, from the Wall Street Journal.

More on how foreign brands are taking a new path in China here, from CNBC.

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