Wednesday, February 23, 2011

Low profit margins force BestBuy out - Paul French

Best Buy ShanghaiFormer flagship in Xujiahui, Shanghai
The decision by US electronics retailer BestBuy to close its outlets in China hardly comes as a surprise, says retail analyst Paul French in USA-Today. "They were ahead of the consumer."
Unlike the warehouse style of top Chinese electronic chains Gome and Suning, where sales personnel push particular brands to earn commission, Best Buy provided "a much nicer retail environment," said French, at prices no higher than its competitors.
But the perception of the customers was different, they still feared they were paying a price for the better store, used it for window-shopping and rushed to the competitor when they went for a purchase.
French wonders whether switching to Five Star, an electronic retailer from Nanjing, purchased by BestBuy, will help:
paulfrenchPaul French by Fantake via Flickr
As independent shops and plazas, not chains, still dominate electronics sales, "the pie is going to get cut very thinly," French cautioned. "Profit margins are great if you are Apple," he said. Elsewhere, "There are too many brands and not enough people buying the high-margin items."
Paul French is a speaker at the China Speakers Bureau. When you need him at your conference or meeting, do get in touch.
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