This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Best Buy Seeks Return to China

By the Financial Times ( Financial Times) -- Best Buy (BBY), the U.S. electronics retailer, is exploring a way to reintroduce its brand in China and says it has learned from errors that forced it to close its eponymous stores earlier this year.

Brian Dunn, Best Buy's chief executive, told the Financial Times it was testing ways to attach the Best Buy brand to the mobile phone sections of its Five Star stores, which were acquired in 2006 and survived this year's cull.

Best Buy is one of the U.S.'s best known retail marques and its February decision to close nine own-branded stores, which had failed to catch on, highlighted the difficulties western retailers can face in China. While others have stumbled by not modifying products to suit Chinese tastes, Dunn said Best Buy's poor performance stemmed from imposing a U.S. model of staffing and store organization.

"The lesson we learned from last time is we got too far ahead of the Chinese consumer in how business is done there," he said on a tour of Best Buy's flagship store in New York.

He said Best Buy's mistake had been to open big box stores with fixed prices that were staffed entirely by Best Buy's blue-shirted employees.

This turned off Chinese shoppers, who are accustomed to subsections of electronics stores staffed by manufacturers' own employees, who can offer specialist knowledge and negotiate discounts.

"The truth of the matter was we weren't able to get the right connection with the customer," said Dunn.

Torsten Stocker, head of the China consumer goods practice at Monitor Group, a strategy consultancy, said Best Buy had tried to provide "a premium shopping experience that consumers were ultimately not willing to pay for". The brand it is testing within its Five Star stores -- which were originally Chinese-owned and are organised as a traditional Chinese retailer -- is Best Buy Mobile, which it has used in the U.S. for standalone mobile phone shops as well as specialized stores-within-a-store.

But Dunn said it was an exaggeration to present this as a possible "rebirth" of Best Buy in China.

"To be fully candid, we are still testing whether to call it Best Buy Mobile or Star Mobile, and we are going back and forth on that, and likely we'll test both and see how they play out and what matters most to the consumer," he said.

At Best Buy's 178 Five Star stores, just 20 per cent of staff are employed by Five Star and work across the store.

"The customer likes the Samsung specialized labourer, the Sony specialized laborer, and the negotiating. So we think, over time, the model will evolve, but we were too far out in front. Excuse us," Dunn said.

But Shaun Rein, author of upcoming book The End of Cheap China, said: "I'm scared they haven't learned their lesson ... It has nothing to do with being able to haggle: consumers told us they liked the fact that Best Buy had set prices.

"But Best Buy was perceived as being more expensive than the competition, and they had the wrong product mix," he said.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.24 0.00%
FB $117.81 0.00%
GOOG $701.43 0.00%
TSLA $211.53 0.00%
YHOO $36.94 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs