SHANGHAI: US-based consumer electronics retailer Best Buy is proceeding with
more caution than expected in entering the cut-throat China market.
"Our biggest challenge is ... to do this (enter the China market) at a pace
that we can absorb and learn carefully and then roll fast," said Robert Willett,
chief executive officer of Best Buy International.
Willett said Chinese consumers are discerning and have great aspirations.
"We have to be crystal clear of what those aspirations mean. If we get it
wrong, our consumers won't forgive us," he said.
The company postponed the opening date of its flagship store in Shanghai from
April to October and then shifted it to December this year. "We are not opening
the store to test the store," Willett said. "We are opening the store to test
our brand."
In May, Best Buy acquired Five Star, the fourth-largest consumer electronics
retailer based in East China's Jiangsu Province, for US$180 million. Within a
month, Best Buy closed six of Five Star's 160 stores.
Wang Jianguo, chairman of Five Star and senior vice-president of Best Buy
China, said the firm was being pragmatic.
"It's normal to close down those stores that cannot bring value to the
company," Wang said.
Best Buy's Five Star acquisition came as a big threat to the country's top
three consumer electronics retailers Gome, Suning and China Paradise.
Two months later, Gome announced a merger with China Paradise, causing
upheaval in the industry.
Willett denied rumours that it is negotiating with Sanlian Group, the
fifth-largest home appliance retailer based in East China's Shandong Province.
"We are not in active talks with anyone at present about an acquisition,"
Willett said. He did not exclude the possibility of future acquisitions.
"Once we are clear of what we want, we'll scale our business very fast," he
said.
Although Willett has not made clear the firm's business strategy in China, it
is understood that he will try to make a difference in a market plagued by tense
relations between retailers and suppliers.
In China, retailers charge various fees to suppliers. Many withhold payment
to suppliers until later and use the money to invest in other areas.
Wang Jianguo said Best Buy would work out a win-win situation by reducing
costs for both sides.
Best Buy's foray into the market has pushed local rivals to move faster.
Gome Chairman Huang Guangyu said Best Buy is not yet strong enough to be a
rival; but Gome's merger with China Paradise could be a sign it is feeling the
heat.
Sun Weimin, chairman of No 2 firm Suning, told media earlier that he would
earmark 1.2 billion yuan (US$150 million) channelled from the stock market to
open 100 stores in six to nine months.
He also plans to build 15 large logistics bases across
the country within three years and will invest 120 million yuan (US$15 million)
in a database upgrade.
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