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300 million yuan helps you rent it all

(China Daily)
Updated: 2008-11-26 15:47

While most corporations are cutting back in these tough times, rental company Bangjia in Guangdong province is seeing a golden opportunity to expand their business. Bangjia is planning to open a chain of rental supermarkets in China. The business can not only help relieve manufacturers of the inventory burden but also boost consumer demand, Jiang Hongwei, general manager of Bangjia, told Shenzhen-based Securities Times.

He said that Bangjia has already secured 300 million yuan of new capital from venture capitalists and is planning to complete two flagship stores in Guangzhou in December.

Next year, Bangjia is looking to extend their service to residents in Shenzhen as well. It is expected that Bangjia will have 50 franchise stores and another 50 service centers in various major mainland cities by 2012.

Pioneer in Chinese rental market

It's reported that Bangjia is the first company in China to offer this kind of rental service to consumers. Bangjia's rental service can help export-oriented manufacturers, hard hit by the global economic slowdown, generate cash income from their unsold stocks. The service, Jiang said, can also provide Chinese consumers an option to obtain the products they want to use, but are reluctant to buy.

Jiang explained that Bangjia will provide rental services in nine different categories, including home and office furniture, medical equipment, automobiles and luxury goods. Bangjia plans to offer various participation arrangements to meet the needs and requirements of suppliers. Jiang said he expected Bangjia's service to play an important role in increasing purchase on credit in China, and helping troubled manufacturers deal with their product stock.

Other than the 300 million yuan of new capital from investors in Guangzhou and Hong Kong, Bangjia has also caught the attention of worldwide rental leaders, including Home Essentials and Cort, the furniture rental subsidiary of Warren Buffet's Berkshire Hathaway. It's reported that Cort is planning to acquire a stake in Bangjia in the near future.

Rental offers a feasible solution

The global financial tsunami has delivered a huge blow to export oriented manufacturers in south China. "20 percent of companies with investment from Taiwan will go bankrupt in 2008," said Dou Linping, the vice secretary of CALI (China Association of Lighting Industry). The companies that are lucky enough to survive are facing enormous pressure from tightening cash flow and mounting inventory of unsold goods. Cooperating with rental companies like Bangjia can help ease this pressure.

Jiang dismissed suggestions that Bangjia's rental business will be directly competing with such retail giants as Gome and Suning, "We're running a rental business, while they're doing retail. There's really no competition between us," he said.