Saturday, May 28, 2005

White Paper on Zhongguancun Electronics Markets

Electronics Markets Enter Era of “Modern Marketplace” May 27, 2005 6:15 pm Sina Science & Technology

((Translated from the Chinese by Tyler Rooker on May 28, 2005 for

May 26.

The Zhongguancun Consumer Electronics Trade Chamber of Commerce united with the Zhongguancun Science & Technology Zone Management Council and the Zhongguancun Science & Technology Zone?Haidian Park Management Council to publicize the 2005 Zhongguancun Consumer Electronics Trade Industry Development White Paper at the Jade Palace Hotel.

The Chamber of Commerce started to track the industry development situation in 2004. The 2005 White Paper summarizes the development trends in the consumer electronics trade industry for the Zhongguancun district. It also estimates future development for the industry and analyzes existing development problems.

There are five parts to this year’s White Paper: 1. Summary of the industry in 2004; 2. the development trends of the industry, including product development, brand competition, sales channels, business trends of electronics markets, and product distribution; 3. development trends in the electronics market; 4. main distribution channels for electronics in the China IT retail industry; and 5. crucial problems in the development of the consumer electronics industry. Data for the White Paper comes from the internationally renowned IDC Company and is authoritative and scientific. It is a key reference for the consumer electronics trade and IT industries.

2005 has been a splendid year for development in the Zhongguancun consumer electronics trade industry. Data from the industry has been shocking. As data from the White Paper has shown, total sales of consumer electronics in the Zhongguancun region reached 34.2 billion renminbi [yuan, 8.28 = 1 USD], while total trade hit 87.4 billion renminbi. These amounts increased 22.3% and 21.3% from 2003 respectively. In the same period, sales of IT products in China increased 11.7% so Zhongguancun was 10.6 percentage points higher. Studies have shown that Zhongguancun represents 69% of consumer electronics sales in the city of Beijing and 8% of the entire country. Zhongguancun is an important center for IT products in northern China. According to shipment measurements, 12.8% of the products went outside the province with sales of 4.3 billion yuan.

The White Paper indicated that consumer sales of electronics in IT markets of the Zhongguancun region reached 14.1 billion renminbi, while trade reached 27.7 renminbi. These reflect increased of 21% and 21.2% respectively from 2003. In the nine large markets of Zhongguancun, Hilon Electronics Mall has the highest average sales and trade. Among the nine electronics markets, Hilon has 10% of the area but a 27.5% share [of the market]. Dinghao [Top] Electronics Mall is next on the last after Hilon, occupying second place in total sales and trade.

The White Paper also tracked sales of various key products in Zhongguancun. Among the 20 types of product, sales and trade of desktop computers were the highest. Sales of notebook computers have increased at a rapid rate, replacing electronic parts as the second highest sold and traded product.

The White Paper predicts that from 2004 to 2009, trade in consumer electronics in the Zhongguancun region will increase at 13.8%. The trade of consumer electronics in the IT markets of Zhongguancun will increase at 14.9%. Products such as notebook computers, digital cameras, digital video recorders, memory cards, Mp3/Mp4’s, Pen drives, portable memory devices, multi-functional printers, ink cartridges, ink toner, projectors, and computer software will continue to increase rapidly. Meanwhile, the market for scanners and ribbons will follow a decreasing trend.

The White Paper pointed out: Zhongguancun electronics markets have already entered a fourth era ? the modern market era. Starting from the mid-80s, electronics markets originated in the first era -- the era of spontaneous formation. In 1992, the first specialized market appeared as representing the second era -- the specialized market era. In 1999, the third era of electronics markets appeared -- the electronics mall era. Finally, in 2005 electronics markets have entered the fourth era -- the modern market era. Reviewing development from this perspective, Zhongguancun electronics markets undergo fundamental breakthroughs every 6 to 7 years.

In the “Five Years Ascend the Platform” policy of the Zhongguancun Science & Technology Park, the Chamber of Commerce and various government offices have encouraged others to use Hilon Electronics Mall as representative of a new type of experiment ? mobilize modern technology to remake and upgrade electronics markets. Summing up the general situation, Hilon’s “market upgrade” includes: “two upgrades and three faculties,” namely upgrading the hardware level and upgrading the software level; and strengthening sales faculty, management faculty, and service faculty. Among these, the main indicators that Zhongguancun electronics markets are entering the fourth era are the commercial design of market science, distribution regions for products, management of manufacturers’ brands, full-service IT, and promising “payment in advance” which exhibit the basic characteristics of a “modern market.”

The White Paper pointed out: the market sponsor is the most important guarantor of market upgrades and in promoting “market upgrades.” The most basic promise of the market sponsor is as “the most responsible person.” Electronics markets must innovate their business models so that upgrades of electronics markets will effectively conform to those in the market. Market sponsors must transform from renters of market space to resource and service providers. The key means to do this is mobilizing modern technology to transform and improve traditional attitudes. Whosoever cannot implement this change, in a market as fiercely competitive as this one, will be the loser.

The White Paper pointed out: Zhongguancun is similar to large cities throughout the country in that electronics markets are developing quickly and competition is fierce, while the threshold to entering the industry is rising. Competition will bring the inevitable exit of people from the industry. Currently, Zhongguancun electronics markets take up approximately 200,000 square meters. Next year, once Zhongguancun E-World opens, that amount will increase by 60,000 square meters. The national electronics markets industry has begun to enter a new round of re-shuffling as the days of peaceful competition have passed. Without the technical support and conceptual direction of modern mobilization, gaining a foothold would be excessively difficult. With a marketplace, there would be space to rent but the days of being able to make a lot of money from renting a space are over. Bringing together market choices with government and chambers of commerce is crucial to developing the electronics market industry. In the market economy, every aspect has blind spots so only if the three sides unite can the current situation and future trends be laid out clearly. The necessary planning and steering along with industry consulting and guidance can reduce or eliminate the waste of society’s resources.

The White Paper pointed out that the construction of Hilon Full Service IT Center and Zhongguancun Maintenance Mall represents the specialization, industrialization, and scale effects of maintenance in Zhongguancun’s IT industry. This will allow both consumers and industry users to enjoy more convenient, simpler, and more reliable maintenance services. At the same time, the maintenance industry will be more specialized and centralized to take advantage of the benefits of economies of scale.

The White Paper pointed out: electronics markets have the advantages of location, low-price, and complete stock of products. In the long-term, they will continue to be the main channels for retail sales of IT products in China. The various attitudes of those in the markets will continue coexisting in the long-term, competing, merging, and, as appropriate, retreating to the area of specialization that is most beneficial. These are the basic characteristics of the retail sales industry for China’s IT products.

The White Paper pointed out: the trade industry in Zhongguancun consumer electronics markets should pay attention to the following problems: one is how to strengthen theoretical research; two is how to set up the “11.5 development plan” to change the situation of the past 20 years wherein trade in Zhongguancun consumer electronics has had no development plan; three is how to bring into play the positive value that electronics markets give to Zhongguancun’s development.

This is the year to inspect the results of Zhongguancun Science & Technology Zone five years ascending the platform. Trade in Zhongguancun consumer electronics must cooperate with the work of the government to promote its own development. It must participate in all five years ascending the platform activities, be active in environmental repairs of Zhongguancun, and continue to bring into play the industry’s characteristics. The goal is to form a favorable and beneficial commercial environment for consumer electronics.

The Zhongguancun Consumer Electronics Trade Chamber of Commerce has been established for less than two years but has issued industry white papers for two time periods. These papers have positive guidance uses for industrial, regional, and IT development. This proves that organizing the industry is crucial to the market economy and is a force that cannot be overlooked.

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