Suning, Gome launch auto sales

A Maserati is displayed for sale at Suning's first car supermarket in Nanjing, Jiangsu province. [Photo by Fang Dongxu/For China Daily]

In addition to traditional dealerships, potential car buyers now have a new option, as home appliance retailers are making a foray into car sales, based on their nationwide networks.

Suning Holdings, after selling cars online for some time, opened its first brick-and-mortar car supermarket on July 15 in Nanjing, capital of East China's Jiangsu province.

In the supermarket, potential customers can choose from brands ranging from Buick and Trumpchi to BMW and Maserati, with more to join them soon.

Accessories including lubricants, safety seats and even financial services are also available at the store.

Liu Donghao, head of Suning's automotive business section, said the supermarket is functionally a combination of many traditional car dealerships, as well as automotive parts stores and maintenance service providers.

"The most prominent feature is that it offers customers a brand new purchase experience that is different from traditional dealerships that usually specialize in one brand," said Liu in an interview with car news website cheshi.

For customers, the supermarket spares them the trouble of visiting different dealerships to compare models from different brands and thus improves their purchase experience.

Customers are reacting positively to the new business model. Within two days of its opening, the supermarket sold more than 30 cars, including six from premium brands.

Liu said the Nanjing supermarket is just one aspect in Suning's wider car-related business.

"We will expand it across the country and about 100 such supermarkets will be built in the first stage."

Suning's car plan follows a new set of car sale regulations that took effect on July 1, which advocate building more economical sales channels.

It also replaced the decade-old policies that, among other things, demanded that a dealer who wants to sell cars must be authorized by a carmaker. The regulations state that a dealer can choose to be authorized or not, and even if it is authorized by a particular brand it is allowed to sell other models as well if it so wishes.

Suning is not the only company to take advantage of the new regulations. Gome Electric Appliances, Suning's arch-rival in China, has an even more ambitious plan.

According to news website huanqiu, Gome is planning to add a car section in most of its 1,700 stores, with the project expected to be finished within the year.

The stores benefit from good locations and record a large number of visits; such resources are not easily found, said Zhang Haifeng, head of Gome's car business, when he addressed potential investors in a promotional meeting on July 7.

Zhang said complete e-commerce is hard for car purchases, so brick-and-mortar stores are undoubtedly important, but he added that Gome's purpose is to help carmakers and dealers to sell cars.

"If you think we are going to replace car dealers, then you have misunderstood our business model."

He said Gome is building a system, and both car dealers and makers are welcome. It is up to them to decide what car they will offer and customers can decide what they buy, but if this approach gives customers a greater voice, car dealers and makers would naturally offer better-selling products and better prices, according to Zhang.

"So we are not going to fight against dealers. Instead, we would like to invite them over to huddle together for warmth," said Zhang.

Analysts are divided over the new models. Some question the profitability of Suning and Gome's car businesses, as one top profit source for dealers is after-sales services instead of car sales.

Li Jinyong, chairman of Zhonghai Tongchuang Group, with car sales one of its major businesses, said carmakers might not want an extensive sales network that has too strong bargaining power.

Cui Dongshu, secretary-general of the China Passenger Car Association, said: "Of course they are closer to people but in the short term they will not pose a grave threat to the long-established authorized 4S system," referring to the sales, spare parts, service and survey store model.