Why does the retail giant Best Buy not survive in China?

December 4, global household appliances and electronics retail giant Best Buy announced that its five-star electrical appliances sold to Zhejiang Real estate business Jia Yuan Group. At this point, Best Buy in China 8 years of retail business officially announced the end.

Jiangsu Five-Star Electrical Appliance Co., Ltd. was founded in 1998, in May 2006 by Best Buy 180 million U.S. dollars holding 75%, 2009 became Best Buy wholly-owned subsidiary.

In June this year, the Wall Street Journal disclosed that Best buy pulled out of the Chinese market by selling assets valued at $300 million trillion, at that time, the five-star electrical response will be launched in the second half of the Big Blue flagship store upgrade plan, in the 3 based on an additional 8 stores, and in 2015 to achieve the Jiangsu-Anhui region in each city at least 1 stores.

September, "Best Buy is determined to sell five-star appliances, Gome, a grand three cell may be taken to the" news again, five-star electrical workers to pull banners protest the acquisition of the interbank capital of the photos also circulated online. This time, Best Buy's chief communications officer, Matt Furman, gave the official response that "Best Buy did not transfer five-star appliances to any third party, including the Chinese retailer Gome." Former five-star Electric chief executive, Best Buy China Region President Zhou Mei also said that this is in the National Day Gold Big promotion rumor seriously interfered with the normal operation of five-star electrical appliances.

However, just two months later, Jia Yuan announced the acquisition of five-star electrical appliances, and appointed the incumbent chief Operating Officer Pan Yiqing as the new CEO. Zhou Mei will continue docking and five-star electrical business as Best Buy Senior advisor.

Jingxing, vice president of five-star electrical appliances, said to the media, "in household appliances and electronic products retailers, five-star electrical appliances, although relatively small, but have a good performance, received a lot of acquisitions is understandable." But because this operation is best Buy group, five-star electrical appliances No more information. ”

Five-star electric appliance will stick to the line position

Tencent technology from the five-star electronics, the acquisition will not affect the former parent company Best Buy this year, the proposed reform plan. Recently, five-star electrical appliances held in the 三、四级 market O2O investment will, and said that the customer and profit as the center of gravity continue to vigorously develop offline business. As of last week, five-star electrical appliances in the second half of Changzhou, Suzhou and Wuxi to establish 3 blue flagship stores, the national retail outlets a total of 184.

According to the China Chain Management Association published 2013 China Chain Hundred data, ranked 21st five-star electrical appliances 2013 sales of 26.6 billion yuan, an increase of 10%, the number of stores for 189, the year-on-year decrease of 25%. Jingxing told Tencent technology, nearly two years of five-star electrical appliances have a greater independent right to operate, the current sales performance in Jiangsu Province and Anhui Province to maintain regional leadership. Talking about the future development strategy, he said that five-star electrical appliances at least 3 years will not change the positioning of regional enterprises, and will be committed to the stability of Jiangsu and Anhui region Market, do a good job offline services.

According to Tencent Science and technology, although Best Buy closed all the retail business in China, but still retain its most advanced in China's global sourcing sourcing team, the future in OEM (Original equipment manufacturer, foundry) product customization, Procurement and services will continue to work closely with the five-star electrical appliances.

Public data show that Zhejiang Jiayuan Group is the top 50 real estate enterprises in China, and currently has developed a variety of commercial and residential projects including the new Town business complex, 97, distributed in Jiangsu, Zhejiang, Anhui, Shanghai and other 14 provinces, autonomous regions, municipalities of more than 40 cities.

Jingxing said the change is not bad for the five-star technology. "Jia Yuan Group has worked with the five-star electrical appliances, familiar with our business, in the future in some projects, we will have more money, action will be more positive." ”

A December 4 announcement said the deal was subject to regulatory approval and was expected to be completed in the first quarter of fiscal year 2016. Neither side disclosed the amount of the transaction.

Best Buy China 8 year-end break

As the world's largest consumer electronics chain retailer, Best Buy has been in the Chinese market for five-star appliances since 2006, setting up the first Best Buy store in Xujiahui, Shanghai. In February 2009, Best Buy wholly-owned five-star electrical appliances, but the subsequent development is not satisfactory.

In February 2011, Best Buy, which entered the Chinese market for 5 years, closed all 9 stores and handed over its remaining assets and operations in China to five-star appliances. According to insiders, Best Buy from 3 years ago closed in China's wholly owned brand stores began, the basic no longer into China business. On the other hand, U.S.-appointed executives are unfamiliar with the rules of the Chinese household appliance retailing industry and cannot establish authority within the company, thus restricting the development of five-star electrical appliances.

Until December 4 announced the sale of five-star appliances, Best Buy officially withdrew from the Chinese retail market, focusing on North American business. It is understood that it will also sell its located in Shanghai Xujiahui area of the physical store property.

Pan Yiqing in the previous media interview that the five-star electrical appliances in the fierce competition to maintain a leading edge, especially in the East China market. In and Best Buy 8 years of cooperation, five-star electronics learned advanced, rich in Europe and the United States retail technology and philosophy. Keith Nelsen, Global executive vice president of Best Buy, also believes it is a good time to give five-star appliances to the local team.

And as early as last March, five-star appliances broke the insider of executive turnover. As one of the four founding shareholders, Wang Jian, 50 years old, left the battlefield for 15 years. He was the main force to help Best Buy five-star appliances, and in 2011 he was promoted to Best Buy global vice president and five-star electronics president, the year after Best Buy Global senior vice president.

Wang Jian's successor to the former Yongle Electric appliance COO weeks, and the new Pan Yiqing. The latter is a five-star electrical old employees, both professional managers, entrepreneurs and investors, such as multiple identities, high prestige in five-star electrical appliances.

Analysts believe that domestic and foreign management opinion is the main reason for the frequent and handsome five-star electrical appliances. According to Tencent Science and technology, after this change in equity, Best Buy will withdraw from the United States in the Shanghai office of more than 10 senior staff and the resident Knowledge advisor.

Chinese problems of foreign appliance retailers

Best Buy by virtue of "Customer center strategy" swept North America's electronic products market, but its first "large home appliances store + chain operation" model in China has encountered acclimatized. China's consumption level is not mature, by domestic merchants spoiled consumers have been accustomed to shop assistants and goods of high cost, personality full of the best trading field let them a moment at a loss.

Take the "buyout" Route of Best Buy, through large-scale procurement will be low prices to buy goods, and in the store to implement their own decoration, self-employed promoters strategy, so that its own staff in the store price increase sales. And the United States and Suning as the representative of the local home appliance enterprises to take similar commercial real estate leasing model, will be sold to different parts of the distribution of household appliances manufacturers, by the manufacturer sent to sell sales in the store, chain stores from the collection of rents, and from the product sales of a certain proportion as a profit

In this way, Best Buy is closer to the essence of retailing, that is, to spend a large amount of money to buy goods first. But the occupation of funds leads to enterprises difficult in the short term to achieve the accumulation of capital, stores need to bear the risk of poor sales, stores are difficult to rapidly expand, and this has become a weakness in the market competition, forming a vicious circle. By contrast, Gome and Suning's operating methods save money and labor. They do not need to occupy the upstream capital chain, but use the funds of suppliers to achieve expansion, store advantages and attract more suppliers, so that consumers around, a virtuous circle.

According to Jingxing revealed, Best Buy five-star electrical appliances, "buyout" ratio has increased, but not all.

In a year of flagging Chinese market share, Best Buy has learned to "bow down" and follow local businesses to offer a low-cost strategy. In June 2012, Best Buy also announced the formal introduction of the "Best Buy mobile" brand, and in the five-star electrical stores in Nanjing, the first batch of 14 "store shop." But in the local home appliance retail industry prosperity and development of the background, but also limited to the business model of the mishap, for just enter the country to sit old position of best Buy, want to surpass Gome, Su Ning even become the same level of enterprise are not too realistic.

Also because of the "buyout" model of the Chinese market Waterloo and the European home appliance giant Wanda City, it announced in 2013 when the withdrawal of only 7 stores in China.

Local electrical Business breakthrough

August 15, 2012, Beijing east to the traditional household appliances retail giant Su Ning launched a price war. At that time Su Ning Vice Chairman Weimin also only to Jingdong as a child. May 22, 2014, the Beijing-East in the United States Nasdaq listing, more than 180 billion yuan market capitalisation enough to make less than 1/3 of the traditional Chinese retailers such as Su Ning shame.

As early as 2012, the distributor's distribution and profit impact on traditional offline retailers emerged and became apparent. With the increase in the sales of electric dealers and C2B mode of gradually mature, the first of the United States and suning have to seek transformation, the establishment of Gome online and suning easy to buy, and the Beijing-east to start the homogenization of competition.

March 2012, Best Buy its own brand Shadow Ya (Insignia), Swordfish (Rocketfish) and the new seven-day electrical network signed an exclusive authorized network sales on behalf of the operating agreement, began to expand E-commerce channels in the Chinese market. Five-star Electric online platform "five-star purchase" also began preparations in 2013, the same year November completed the closed, this August opened to the outside world.

With 2012 years began to vigorously develop E-commerce, gome and Suning compared to the slow action of five-star electric online business seems to be behind again. Jingxing to Tencent technology, electric dealers are all the traditional retailers need to face the problem, just completed the alternating-five-star electrical appliances will be further exploration of future development.

Best Buy prior to the use of headquarters resources for the five-star electrical appliances in high-end imports, fashion brand differentiated commodity strategy, the introduction of Beats, AKG, hui people, cool morning, such as more than 30 imported first-line electrical brand, seems to be interested in the development of five-star electrical appliances retailers. But in recent years, the growth of household electrical appliance market has slowed down, the operating cost of traditional retailer has increased greatly, and consumer's shopping habit is also undergoing the process of re culture by the electric trader. This may explain why Best Buy has failed to fend off competition from local companies such as Suning and Gome, not to take too big a market share and to be hampered by overseas expansion.

Industry Analysis, Best Buy this give up five-star electrical appliances on both sides are good. For the latter, the traditional real estate giants good source of strong strength can help five-star in Jiangsu and Anhui area to expand the business layout of the entity stores, do what it wants to do with the regional line business; for Best Buy, which is facing a global austerity strategy, it can devote more energy to the North American market without the burnout of China's retail business.

In any case, the competition in the Chinese market in the foreign-owned retail enterprises, but also brought to the industry opportunities to learn from each other, and the ultimate benefit will still be end consumers.