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Recently, Best Buy announced its lat- est development strategy in China, which is highlighted with the plan of introducing “Best Buy Mobile” into China. Wang Jian, Global Senior Vice President of Best Buy and CEO of Best Buy’s Chinese subsidiary company Five-Star Home Appliance, admitted that this is a step marking the return of Best Buy in China.
As for the return of the brand of Best Buy, Wang Jian said that no plan was available recently. “Best Buy will not return to China before finding a proper pattern of innovation.”
Conservative Ecommerce Strategy
It is known that Best Buy will set up its Best Buy Mobile stores in the existing shopping malls of Five-Star Home Appliance. When talking about the return of mobile device retail, Wang Jian said: “Best Buy attached importance to the fast growing market of mobile phones, pad computer other individual mobile products in China.”
As estimated by the market research institution GFK, about 303 million sets of mobile phones were sold in China in 2012. Among them, about 177 million smart cells were sold, up 106% from 2011.
However, Geng Yan, general manager of the China Cid Consulting’s Mobile Device Department, did not think highly of Best Buy Mobile’s outlook in China in consideration of the previous failures in China. In his opinion, Best Buy Mobile is facing a difficult problem when it comes to the way of localization and expansion under the stress from Chinese local retail giants, mobile phone stores and growing Apple’s franchised stores.
Presently, Best Buy Mobile’s retail strategy lightly touches the ecommerce. As Wang Jian said, Best Buy Mobile will spread itself with the help of Five-Star Home Appliance, initially in Jiangsu and then to the whole country. When its operating pattern is fully established, it will “set up independent mobile phone retail stores and online shopping malls.
Early in this March, Best Buy’s self-owned brands Insignia and Swordfish went into China’s ecommerce industry. An agreement was reached between the two brands and the New-7.com, giving the latter years’ exclusive rights of selling products of the two brands online. This is the first time that Best Buy made an attempt in China’s ecommerce market. The Swordfish brand is heavily relayed with mobile phones and accessories and the flagship store of this brand on Chinese largest online retailer Tmall was launched in July.
Tian Yuan, brand director of New-7.com, said that the cooperation was in accordance with Best Buy Mobile’s entery into China. The company has already got the general online dealership of Best Buy in China and is very likely to expand Best Buy’s online business in multiple platforms.
Though Best Buy did make some attempts in the online business, presently Chinese domestic giants Gome and Suning have already intensified their investment in ecommerce by even initiating the price war. In comparison with its competitors, Best Buy’s expansion in Internet is considered to be conservative. As an expert said,“when Gome and Suning take and consolidated their dominant places, Best Buy will have to spend double or even threefold time and money in having a share of this market and the stress is going to be quite big”.
No Return of Best Buy’s Physical Stores
Presently, Best Buy relies on its subsidiary brand when it comes to its business in China. When the Best Buy Mobile’s business was initiated in China, many people considered it as an auspice of the return of Best Buy’s major business – the physical store of selling home appliances.
“Presently Best Buy is mainly focused on the market with great potential and fast growth,”said Wang Jian. Presently, Best Buy Mobile will take the lead in returning to China compared with other departments. There is no plan of reopening stores in China, which is attributed to the unavailability of finding proper innovative pattern.
But in experts’ opinions, this is related with Best Buy’s trouble. Its financial report of H1, 2012 shows that the company’s revenue dropped 14% to 1.6 billion U.S. dollars in this quarter and the net profit dropped 25% to 158 million U.S. dollars.
Different from Best Buy’s global chain, FiveStar Home Appliance saw a better performance within these years. As its financial report showed, the subsidiary company in China had a 9% yearon-year increase in the first quarter of 2012.
“In the current phase Best Buy will only stick to developing the Chinese market with subsidiary brands,” said the IT analyst Zhang Leping. After all, Best Buy once ended with a failure in China and this return will not be accompanied with impressive actions. Therefore, at this moment Best Buy is more focused on expansion with Five-Star Home Appliance in China.
Hong Shibing, deputy director of the Chinese Home Appliance Marketing Committee, said that Gome and Suning have already extended their arms in the lesser cities and rural areas of China and they are increasing their presence in the ecommerce. This will undoubtedly impact the sales channels of Five-Star Home Appliance. When the sales in physical stores are decreasing, it is more and more unlikely for Best Buy to return to China with physical stores.
As for the return of the brand of Best Buy, Wang Jian said that no plan was available recently. “Best Buy will not return to China before finding a proper pattern of innovation.”
Conservative Ecommerce Strategy
It is known that Best Buy will set up its Best Buy Mobile stores in the existing shopping malls of Five-Star Home Appliance. When talking about the return of mobile device retail, Wang Jian said: “Best Buy attached importance to the fast growing market of mobile phones, pad computer other individual mobile products in China.”
As estimated by the market research institution GFK, about 303 million sets of mobile phones were sold in China in 2012. Among them, about 177 million smart cells were sold, up 106% from 2011.
However, Geng Yan, general manager of the China Cid Consulting’s Mobile Device Department, did not think highly of Best Buy Mobile’s outlook in China in consideration of the previous failures in China. In his opinion, Best Buy Mobile is facing a difficult problem when it comes to the way of localization and expansion under the stress from Chinese local retail giants, mobile phone stores and growing Apple’s franchised stores.
Presently, Best Buy Mobile’s retail strategy lightly touches the ecommerce. As Wang Jian said, Best Buy Mobile will spread itself with the help of Five-Star Home Appliance, initially in Jiangsu and then to the whole country. When its operating pattern is fully established, it will “set up independent mobile phone retail stores and online shopping malls.
Early in this March, Best Buy’s self-owned brands Insignia and Swordfish went into China’s ecommerce industry. An agreement was reached between the two brands and the New-7.com, giving the latter years’ exclusive rights of selling products of the two brands online. This is the first time that Best Buy made an attempt in China’s ecommerce market. The Swordfish brand is heavily relayed with mobile phones and accessories and the flagship store of this brand on Chinese largest online retailer Tmall was launched in July.
Tian Yuan, brand director of New-7.com, said that the cooperation was in accordance with Best Buy Mobile’s entery into China. The company has already got the general online dealership of Best Buy in China and is very likely to expand Best Buy’s online business in multiple platforms.
Though Best Buy did make some attempts in the online business, presently Chinese domestic giants Gome and Suning have already intensified their investment in ecommerce by even initiating the price war. In comparison with its competitors, Best Buy’s expansion in Internet is considered to be conservative. As an expert said,“when Gome and Suning take and consolidated their dominant places, Best Buy will have to spend double or even threefold time and money in having a share of this market and the stress is going to be quite big”.
No Return of Best Buy’s Physical Stores
Presently, Best Buy relies on its subsidiary brand when it comes to its business in China. When the Best Buy Mobile’s business was initiated in China, many people considered it as an auspice of the return of Best Buy’s major business – the physical store of selling home appliances.
“Presently Best Buy is mainly focused on the market with great potential and fast growth,”said Wang Jian. Presently, Best Buy Mobile will take the lead in returning to China compared with other departments. There is no plan of reopening stores in China, which is attributed to the unavailability of finding proper innovative pattern.
But in experts’ opinions, this is related with Best Buy’s trouble. Its financial report of H1, 2012 shows that the company’s revenue dropped 14% to 1.6 billion U.S. dollars in this quarter and the net profit dropped 25% to 158 million U.S. dollars.
Different from Best Buy’s global chain, FiveStar Home Appliance saw a better performance within these years. As its financial report showed, the subsidiary company in China had a 9% yearon-year increase in the first quarter of 2012.
“In the current phase Best Buy will only stick to developing the Chinese market with subsidiary brands,” said the IT analyst Zhang Leping. After all, Best Buy once ended with a failure in China and this return will not be accompanied with impressive actions. Therefore, at this moment Best Buy is more focused on expansion with Five-Star Home Appliance in China.
Hong Shibing, deputy director of the Chinese Home Appliance Marketing Committee, said that Gome and Suning have already extended their arms in the lesser cities and rural areas of China and they are increasing their presence in the ecommerce. This will undoubtedly impact the sales channels of Five-Star Home Appliance. When the sales in physical stores are decreasing, it is more and more unlikely for Best Buy to return to China with physical stores.