Foxconn uses ex-workers in major retail push

HONG KONG Mon Dec 6, 2010 7:43am EST

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HONG KONG (Reuters) - Electronics giant Foxconn is planning a major push for its retail business in China, drawing on former employees to set up thousands of stores in smaller third- and fourth-tier cities, a senior executive said on Monday.

The parent company of Hon Hai (2317.TW) and Foxconn International (2038.HK) will encourage long-time employees who want to return to their hometowns to open up shops selling electronics by investing over 300,000 yuan ($45,000) in each shop, Louis Woo, special assistant to the chairman told Reuters in an interview.

"Most of our employees who have worked for us will be comfortable with electronics," Woo said. "This will apply to those who've been with us for more than five years, and our intent is to help them have a good livelihood when they return."

All employees who have worked at the company for over five years will be eligible, but will have to fork out about 80,000 yuan as seed money for the shop, Woo said.

A key supplier to top tech brands such as HP (HPQ.N) and Apple (AAPL.O), Foxconn's labor practices have been under the spotlight after more than 10 suicides at its south China plants, prompting it to double salaries earlier this year.

It is already one of the biggest private sector employers in China with more than a million workers, and has more than 1.1 million employees worldwide with factories from the Czech Republic to Mexico.

Best known for being the faceless manufacturer of some of the world's best-known electronics products such as the iPhone, Foxconn broke into the retail scene this year when it opened the first Media Markt-branded store in Shanghai with retail group Metro (MEOG.DE).

"When you look at the entire supply chain from component manufacturing to post-sale service, the only place where Foxconn is missing is the direct consumer selling," said Woo, a former Apple (AAPL.O) executive who joined Foxconn in 2008.

However, the retail business currently accounts for only a small percentage of the company's total revenue, and Woo said he does not expect direct consumer sales to have a direct impact on Foxconn's total revenue for the next 5-10 years.

Woo also said the company plans to open up to 100 stores in first- and second-tier cities such as Shanghai and Beijing within five years, amid a broader push in China to boost domestic spending to keep the economy growing.

This is more bullish than Metro's previously announced target of having 10 stores in Shanghai first before re-examining the China venture in 2012.

China's electronics retailing scene is fiercely competitive. Suning 002024.SZ, the country's largest electronics store by market value, has said it plans to add 520 stores this year while rival GOME (0493.HK) has announced plans to push into rural areas.

(Additional reporting by Clare Jim; Editing by Jon Loades-Carter)

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