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FT.com
By Jonathan Birchall, Patti Waldmeir, Delphine Strauss in New York, in Shanghai, in Ankara
By Jonathan Birchall, Patti Waldmeir, Delphine Strauss in New York, in Shanghai, in Ankara
Best Buy, the world's largest electronics retailer by sales, is closing all of its branded stores in China, highlighting the resistance of Chinese shoppers to some western-style store experiences.
The retailer, which will continue to run 170 stores in China under the Five Star brand acquired five years ago, is also giving up an attempt to enter Turkey, with the closure of two trial-run stores opened in the past two years.
The company said in a statement that it would close all nine China stores that carry the Best Buy brand, one of the best known US retail marques, but one that has failed to catch on in China. It captured less than 1 per cent of the China market, analysts said, struggling to compete against the more agile and aggressive homegrown rivals Gome and Suning, which each have more than 1,000 branded stores in China.
Best Buy's business model in the US, where the brand markets itself as providing a better service than its competitors, has not gone down well in China. "Best Buy believed it could grab market share in China by offering high-quality service and a good shopping experience," says Torsten Stocker, retail analyst at Monitor Group. "But what determines Chinese consumers' purchasing decisions is price, not service."
Best Buy's store strategy was also at odds with local habits. Chinese retailers generally divide up electronics and other large- ticket items by leading brands, rather than category, supported by sales staff working for the manufacturers rather than for the retailer.
Home Depot and Kingfisher, the US and UK home improvement retailers, have also struggled with western- style sales models in China. In contrast, Chinese shoppers have enthusiastically embraced modern supermarkets and discount stores operated by leading international retailers including Walmart, Metro and Tesco.
Dora Sahintürk, from Istanbul retail specialist AVM Mfi Partners, said Best Buy had suffered in Turkey from trying to compete on quality in a price-sensitive market.