The 3 REAL Reasons Best Buy Will Close China & Turkey Stores

I know. I know.  It seems like I am on a BBY rant, but it isn’t my fault that the folks in Richfield, MN are finally catching up.  Yesterday it was all about their (losing) battle with Apple.  Today, I opened the paper to learn that they are closing nine branded stores in China and two stores in Turkey.  Good for Best Buy to realize that their tests were not producing.  So they close the stores.  That’s a decisive move and for that alone we can applaud the management team who finally recognized a hemorrhage when they saw one. A November 2010 post here: How Retailers Succeed in Shanghai was really written after my trip there and seeing first hand the staggering difference between the Apple, Coach and City Super store successes and Best Buy’s obvious failure in that market.

Best Buy failed on all three items in the November 7th, 2010 blog post I wrote that indicated likely retail success in China:

  1. “The retailer is an international brand.  International brands like Apple, Tiffany and Victorinox who have worked to get placement in targeted European and International magazines and have a legacy of status are landing in Shanghai with a pre-built awareness and desire for their products.  Brands that are limited to just a domestic U.S. presence (no matter their desirability in the U.S) are having a tough time building credibility with the Asian market.
  2. The retailer either brings its own culture or adopts the Shanghai culture.  Stores with true international culture that transcend country boundaries (think Apple or Nike) are finding associates in the Shanghai market who already “get it” and are hiring folks who simply take the company culture and give it a Shanghai accent.  Other retailers who do not have a strong culture are getting confused once they open in Shanghai and their stores reflect that confusion.  Should the prices be EDLP or be the starting point in a bargaining negotiation?  Should customers be assertively greeted and engaged or given the freedom to look without interference from an employee?  Should advertising focus on Products? Retail Branding? Are in-store materials created in Mandarin or translated from English?
  3. The retailer learns quickly.  China will be an opportunity from now until my grandkids run stores.  But Shanghai is the first impression many retailers will make on the Asian market.  Opening a half dozen stores and then quickly making peace with China’s demands – both politically and commercially – to thrive will be important.  Retailers who accept that the Chinese market is like no other and learns how to adopt will succeed more quickly than the retailers who “are waiting for China to catch up” and behave like the western markets.  I truly heard a retailer tell me the reason they were not succeeding is that China needs 5-6 more years to mature into the kind of consumer that understands their value proposition.  REALLY?  This is the kind of slow learning organization that will not succeed in Shanghai.”

Guess which retailer I talked to in Shanghai made that last statement?  You got it: Best Buy.

Best Buy has yet to succeed in creating an original new brand such as Gap’s Old Navy or Limited’s Bath & Body Works.  They saddle all of their startup tests with an insurmountable amount of overhead that no concept can overcome.  While I am happy for their shareholders that the executive team made the decision to allow their successful Five Star brand to become their Chinese operation, I know that until Best Buy learns how to incubate ideas into successful operating models, the end of their growth phase is here.

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