Metro’s Media Markt consumer electronics business has said it will pull the plug on its two-year-old venture into China, due to lessons learnt from a “test phase” that ended in December.

Metro’s Media Markt entered the Chinese market in 2010

However, it is more likely that the company chose to withdraw after facing fierce competition from aggressive ecommerce competitors, which are increasingly dominating the retail landscape.

Media Markt had given no indication on entering the market in 2010 that the move was part of a pilot. In fact, it said that it intended to operate 100 sites by the end of 2015 as part of a 75:25 joint venture with Taiwan-based Foxconn Technology Group.

To date, the retailer had only opened seven stores in and around Shanghai.

China is a market that is shifting faster than any other towards ecommerce, driven by new technology and consumers’ desire for convenience, and it is likely that Media Markt underestimated the tough competition it would face.

Planet Retail’s shopper insight data reveals that Chinese consumers are very internet savvy. 11% of Chinese web users access the internet daily for shopping, and 61% go online to shop once per week or more - the same rate as in the UK and only slightly below the 66% of US consumers. Mobile is key - 49% of Chinese consumers say they regularly use mobile devices to shop online.

The shift to online spending favours retailers and aggregators such as Taobao, 360buy, Dangdang and, to a lesser extent Amazon, all of whom are investing heavily in aggressive expansion.

Electronics retailers Suning and Gome have had to put significant investment into their online strategies, however none are yet profitable and the investment does not justify the return at present - it is more about grabbing market share.

In the light of declining bricks-and-mortar sales in China and intense competition in the ecommerce market, it makes sense for Media Markt to acknowledge this and exit now. It also draws parallels with western markets such as the UK, where electronics retailer Comet recently fell into administration.

The decision does not mark the end for Metro in China, as the company expects to continue to invest in its Metro Cash & Carry format. Chief executive Olaf Koch said: “The country is key and a promising market with good future prospects for our wholesale business.”

  • Lisa Byfield-Green, retail analyst, Planet Retail.

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