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Best Buy rejects store closure 'rumor'

2011-02-17 10:30

BEIJING - The consumer-electronics retailer Best Buy's own-brand outlets are suffering difficulties in China, and experts say it's because the US-based company has not tailored itself to the local market.

Beijing Business Today reported on Friday that Best Buy might consider closing its own-brand stores, because they cannot make a profit in the country.

However, Best Buy's public relations agency sent an e-mail to China Daily on Wednesday, saying that the report is "a rumor" and that the retailer would not comment further. The e-mail also said the exact business figures for the stores are unavailable.

Best Buy rejects store closure 'rumor'

Liu Ting, a spokeswoman for Best Buy, told China Daily that the company has been engaged in introducing a "customer-experience-focused" business model to the Chinese market through its stores.

In the past five years, Best Buy has opened eight branded stores in China and paid $180 million to acquire the Jiangsu-based Five Star Appliance store chain in 2008 to expand its reach in the country.

By the end of 2010, Best Buy operated some 170 stores in China under the two brand names.

The company has been focusing on its long-term development strategy in China and trying to help consumers adapt to new retail methods. "The consumption behavior of Chinese customers has been changing in recent years," said Liu. "Price is not the only factor that will affect their decision. They will also consider the value behind the brands, for example, services."

However, some experts said that Best Buy's model does not work well in China because it is unable to meet the demands of local consumers, who still prefer to purchase discounted goods.

Best Buy-branded stores were hit by price competition from local rivals such as Gome and Sunning which offer lower prices, although Best Buy offers better service.

"Products are sold at a higher price in Best Buy-branded stores," said Zhao Ru, a white-collar worker in Shanghai. "It is not worthwhile to pay more for the same product."

Liu said the performance of the Five Star Appliance stores was good because the business model was more suitable for Chinese customers and able to offer more discounts to customers.

"We are promoting a dual-brand strategy in China, so we will have different points of focus," said Liu. "People should not judge a retailer's performance by simply looking at how many stores the company is running."

"Retailers need to adjust their business model to better meet customer demand, that's why Best Buy acquired Five Star," Liu added.

Zhao Youzhen, an associate professor at Fudan University, said foreign companies should learn to utilize their knowledge of both foreign and domestic markets. "They may make some adjustments to the original model to attract more local customers," said Zhao.

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