(Yicai) Nov. 20 -- Shares of Gome Retail Holdings, a cash-strapped Chinese home electronics retailer, plummeted after the company dismissed reports that said its supermarket unit plans to open 10,000 outlets within the next three years.

Gome Retail [HKG: 0493] closed 23 percent down at 4 Hong Kong cents (less than 1 US cent) a share in Hong Kong today, after swinging between a gain of 8.9 percent and a loss of 25 percent.

Gome is not a party to the proposed supermarket business, which it understands is operated by Wong Kwong Yu, a major shareholder, and his companies in cooperation with independent third parties, the Beijing-based firm said in a statement on Nov. 17. 

But Gome “does not rule out the possibility of exploring new opportunities to be involved in new retail operation in the future,” it added.

Gome Supermarket, owned by a unit of Gome, operates with brand authorization and not as a franchise, Luo Jianfeng, its president of marketing operations, told Yicai yesterday. As for whether the goal of opening 10,000 stores could be achieved within three years, Luo did not give a clear answer, only saying that it would depend on human effort.

Gome Supermarket's two-year brand royalties for a store of up to 40 square meters is CNY15,000 (USD2,082), CNY30,000 for a shop between 40 and 80 sqm, and CNY50,000 for one of 80 to 120 sqm, said Luo, who added that the management fee is 1 percent of turnover.

The market is saturated with small supermarket outlets, those with just a few dozen sqm, and with competition from the likes of JD Supermarket, community convenience stores, and instant e-commerce retail, Gome Supermarket needs to clarify its positioning, according to Zhang Yi, chief executive and chief analyst of iiMedia Research.

In this regard, Luo was not prepared to disclose Gome Supermarket's core competitiveness at the moment.

Editors: Shi Yi, Martin Kadiev