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This may seem strange to outsiders: why do suppliers want to share costs, but retailers decline the offer? The reason is that China's electronics sales are driven by functions of products, not brands. A function-based model needs sales representatives to explain the function in great detail to customers and how bad the products from competitors are. They usually tend to add too much false information in the explanation.

After the representatives are dismissed, consumers are on their own, free from false information.

At this time, if your brand is not good, consumers do not even want to take a look at the functions. This is a big disadvantage for local brands and will hurt their sales, so domestic manufacturers are especially dissatisfied.

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Suning, which usually has a better relationship with suppliers, seems to be lagging behind Gome this time, as it put more resources in building new stores and the logistics center.

China's electronics retail market is more and more like a trio-play - Gome, Suning and BestBuy, but while Gome and Suning made some significant steps, BestBuy seems to be in an embarrassing position.

In the electronics retail business, foreign companies do not have much say. In this market, resources are the biggest edge to competitiveness, namely whoever has the most stores has the leadership. Gome and Suning both have more than 800 shops, but BestBuy has just one directly operated store, so how can it compete against Gome and Suning?

The shortcomings of BestBuy are also highlighted by a varying China strategy: it used to say no to price wars, but some suppliers have stopped doing business with the United States firm due to very low procurement prices. BestBuy took a controlling stake in the Chinese firm Five Stars in March, 2006, but we did not see any significant changes in the fate of Five Stars. Actually, its steps toward expansion even slowed in 2006.