Efforts to extend into the retail field by Hon Hai Group (鴻海集團) are expected to strengthen the group’s vertical integration, an analyst said yesterday.
Hon Hai announced on Wednesday that its Shanghai MediaMart (萬得城) flagship store that will sell computer, communications and consumer electronics products would open on Nov. 17. The store is a joint venture with Germany-based Metro Group.
After the inauguration of the flagship store, the two partners have plans for at least another 10 stores in the Shanghai area.
In addition to the MediaMart expansion project, Hon Hai plans to work with Chinese hypermarket operators to open 200 consumer electronics retail stores, while 40 to 50 Cybermarket stores, similar to retail outlets, are also in the pipeline.
“Hon Hai’s founder Terry Gou (郭台銘) is a farsighted entrepreneur, envisioning rising consumption in the fast growing Chinese economy,” Taiwan International Securities (金鼎證券) analyst Michael Chiang said.
Chiang said efforts by the group to expand its presence in the Chinese retail market would help the firm counter squeezed gross margins amid fierce competition and rising labor costs.
Gou has encouraged his Chinese employees to return to their hometowns to start their own retail businesses with Hon Hai’s financial assistance, Chiang said.
“If Hon Hai’s retail business efforts extend to inland Chinese cities, the gains will be more significant,” Chiang said.
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