Best Buy in China

     Best Buy is a well-known consumer electronics retailer in the U.S., which accounts 19% of the market. It also operates in countries outside U.S., such as Canada, Mexico, Turkey, and China. In the U.S. market, Best Buy wins the competition based on the successful customer oriented strategy and supply chain management. However, this operation mode failed in China. In Feb. 22, 2011, Best Buy announced closed all its 9 stores and the Chinese headquarter, integrating its retail business into Five Star Electronics(Chinese Brand)


    When the company established its headquarter in Shanghai to compete, there were 2 main players in the market: Gome and Suning. As one of the top 500 company, Best Buy owns a superior brand value and high quality services, which is its core competitive advantage, however, such advantages didn't prevent Best Buy  from losing the competition in China. Here are a couple of reasons.


     First, Best Buy failed to get the approval from the government to build its retail store at the primary stages. However, its main competitor grew at a fast speed and became the main player dominating the market.  In order to make up its previous mistakes on the expansion and gain the market share,  Best Buy chose to merge with a Chinese electronic retailer, Five Star, to continue its expansion. That is, Best Buy still managed its brand in the 1st tier city and co-operated with a local retailer in other cities, especially focusing on southeast China. Although this dual-mode operation helped the company attracts more customer, it still failed to grew at its competitors.


     Second, Best Buy failed to manage its lost its competitive advantage on the channel management. Unlike is wide spread store distribution in the U.S., Best Buy only had 9 stores in China and the distributed mainly in Jiangsu Province by Five Star. Moreover, Best Buy also take its supplier strategy: pay for the products from supplier first and then get the product. Thus, the supplier lost controls on the products and Best Buy sold those products by its sales staff, which is totally different from main local competitors. Since the poor performance on the distribution, and the supplier worried that the sales of Best Buy sold the products without any "bias", some of the suppliers also changed their cooperation strategy with Best Buy or provides limited variety of production or on a relatively high price.
    
     Third, Best Buy chose an unfit sells model in Chinese market. Best Best continuously applied its successful customer oriented strategy, providing product experience to its customer.  Unlike American consumer, Chinese consumers are more sensitive to the price. Although services is an important factor, the price is always the first priority to make the decision.  But  Best Buy can't sell the products at a competitive price  due to the supplier's reason (mentioned before). Therefore, most Chinese customers just consider Best Buy as an product experience place rather than the store. They enjoy the high quality service on products introduction, explanation and the experience,  but buy the products in another low price store. 


     Best Buy is not the only global company that lost its Chinese market. The main reason for such failure is because the unfit business model. If the company wants to run its business in China,  it must learn how to run business in Chinese environment rather than simply applying the original model to win Chinese market.