Best Buy Looks for China Model(1)

By Jiang Lei, China Business Post
Published: 2007-03-01

On December 28th 2006, North America's first big household appliance retailer opened shop in Shanghai. But despite the orange, spacious, corridors and curvey counters, the consistent store environment did not hide the stylistic differences between Guomei, Suning, and other appliances on sale.

Three days later, Chinese appliance retailer Five-Star's response, a high-end appliance retail location, opened in Nanjing. For a firm that just six months ago was bought by Best Buy, it is meticulously moving forward in the interestsof it's stakeholders.

Since first coming to China, Best Buy took three years to open its first store. As early as 2003, Best Buy had established an office in Shanghai. Buying up Chinese appliances was its most important task at the time.

Best Buy was thus able to advance its understanding of local suppliers. In 2005, Best Buy's China purchases stood at 72 percent of global purchases. Haixin, Haier, Changhong, Shahua, etc. are all important suppliers for Best Buy.

China's household appliance industry rakes in 500 billion yuan in sales a year, a figure that has made Best Buy determined to do business here.

One source at Five-Star says that in May of 2006, Best Buy bought the firm for $180 million. According to the an agreement by both parties, Five-Star would maintain its brand name. This signaled Best Buy's strategy of pursuing two brand-names in China.

The source also says that in the Five-Star headquarters of Zhejiang and Jiangsu provinces, Five-Star will maintain and increase its brand-name lead. In a string of other cities, Best Buy will seek to elevate it's brand-name prestige to the level of Guomei and Suning.

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