Photo: IceNineJon on flickr
Best Buy had huge plans to move into Europe and China.So far, it’s failed in both markets — mainly because consumers don’t like mega stores.
After a few months of speculation, today Reuters reports that it’s likely Best Buy will abandon its stores in the UK altogether, blaming the move on the “economic downturn, low brand recognition and a stiff competition from British market.”
It moved into the UK market in 2010 by buying a 50% stake in UK mobile phone company Carphone Warehouse and had planned to open 100 “Big Box” stores in the next few years.
Analysts say that it failed in the UK because it announced its plans too early (two years ahead of time) and gave its competitors — primarily Dixons and Comet — a chance to respond. It also opened “Big Box” stores, when Europeans prefer smaller shops.
“It was the wrong format, at the wrong time, in the wrong market,” Robert Gregory, research director at Planet Retail told the Guardian.
It encountered similar problems in China. Last spring, it shut down nine of its stores in the region after being there for five years. CNBC contributor Shaun Rein, who’s the founder of China Market Research Group, pointed to a few things: the Chinese won’t pay for such expensive products unless they’re a brand like Apple; there’s too much piracy in the market which reduces demand for electronics products at a fair market price; and like Europeans, the Chinese don’t want huge, flagship stores.
But even so, Best Buy CEO Brian Dunn recently told the Financial Times that the company is going to try again in China by focusing on mobile sections of its Five Star chain, which sells cheaper products. “The lesson we learned from last time is we got too far ahead of the Chinese consumer in how business is done there,” he told the paper.
Best Buy is also botching expansion plans in Turkey.
Though the company determined its Europe plans before the recession hit — when things looked much differently, and the “Big Box” concept was thriving in the U.S. — Best Buy should have considered a new strategy as it approached its launch dates (even if that meant delaying them again). The retailer was smart to partner with a UK company, but it could have gotten more feedback from its UK business partners before aggressively moving into the new market. According to Yahoo, “closing the 11 British stores would be the biggest admission of failure so far in the U.S. retailer’s overseas expansion strategy.”
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