China Consumer

Killer salesmen

Battle for air-con market share leads to a death in Anhui

Killer salesmen

Are you ready to fight over it?

Time to chill out? The struggle for market share is common enough in the world of retailing. But in the case of air-con makers Gree and Midea, the salespeople might do well to switch on their own products – and cool down a little.

National Business Daily reported on October 5 that an air-conditioner salesman from Midea was killed by a corporate rival from Gree after a commercial dispute at an electronics retailer in Anhui province got physical.

The incident took place during the Golden Week holiday, a peak shopping season. According to reports, the Midea salesman noticed that his rival from Gree had hung a banner for a sales promotion right in front of his own storefront. He tore the banner down, and the Gree rep retaliated by kicking the man from behind. The Midea employee then fell, hitting his head. Three days later, he was declared dead from a brain haemorrhage.

According to the Southern Metropolis Daily, there have been more than 50 cases of similar assaults in recent months, some of which have also led to deaths.

To understand why violence can sometimes occur, start with the rivalry between the two appliance manufacturers. Gree and Midea have been fighting for share of the air conditioner market – a segment Gree has traditionally dominated – for a while. But competition appears to have intensified after the competitors unveiled their financial reports for the first half of 2010.

Midea now seems to have caught up with Gree, reporting Rmb25.9 billion ($3.9 billion) in revenues from air conditioners (and their parts) for the first six months of the year, growing 40% from a year ago. Gree, on the other hand, generated revenues of Rmb23 billion from its own air conditioner and components division, jumping 25% from a year ago. Analysts say this is the first time in 10 years that Midea has beaten Gree in both revenue and sales growth terms.

In Anhui, competition between the two is particularly fierce. Figures published by Midea show that the manufacturer, which used to sell one air-con unit for every six units Gree sold in the province, has closed the gap to 1:1.5 in the last quarter. So Gree certainly seems to have reason to be concerned. Industry observers say the pressure to drive up top-line growth has led to aggression between the respective sales forces.

“These violent outbursts happen frequently not only among sales of air-conditioners but also in television and other white-goods segments,” a sales executive told the Southern Metropolis Daily. “During important sales seasons like Golden Weeks, everyone is anxious to make a sale, so people can turn violent easily.” Critics say the retailers themselves must share some of the blame. In contrast to the US custom, large Chinese firms like Suning and Gome sign deals directly with manufacturers, charging them rent and letting them manage the sale of their own brands in-store. This is critical for the retailers – which are rapidly rolling out new outlets – because they do not need to invest as much in training and human resources. That helps the appliance chains grow their footprint rapidly, but sometimes comes at the expense of having much less control over the conduct of the sales agents working on its shop floors.

Foreign retailers like Best Buy, on the other hand, have not faced similar trouble, says China Business News, because the salespeople at Best Buy do not represent any one brand manufacturer. Instead, every member of staff is responsible for sales of a single category, such as televisions and computers, and they have much less immediate incentive to favour the promotion of one brand over another.

That leads to a somewhat less dramatic salesfloor, mind you. Those in search of snuff-shopping should head to a local store in Anhui.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.