Best Buy failed in the Chinese market for several reasons related to their marketing strategy. They offered higher prices and a focus on customer service rather than low prices, which did not align with Chinese consumer preferences who prioritize low prices over service. Additionally, Best Buy focused on large flagship stores rather than many smaller, convenient locations, and they struggled to compete with local retailers on price. To succeed in China, foreign retailers need to localize their offerings and strategies to the price-sensitive Chinese market.

2. The MEMO of
Failure in
China

3. The MEMO
Introduction – What about Best Buy?
The Failure – How was their lost?
Behind the fiasco – 4Ps failure in a marketing sense
Environment – What happened besides 4P?
The Conclusion

4. Introduction – What about Best Buy?
TODAY…………
 Is known as a speciality retailer or
consumer electronic in the U.S.
 Nationaly they acount for 19% of the
national market
 Also are operating in Mexico, Canada,
China, Turkey & the United Kingdom

5. SUCCESS……..
 2004 Gave 18.8 million or 1.1% of its
2004 earnings to charitable causes,
including youth programs, scholarships
and national organizations that serve
local communities.
 2005 Ranked top ten most Generous
Corporation
 2009 Became the primary electronic
store online and in its warehouses

6. HOW IS ALL STARTED…………….
 1966 in minnisota  1979 became the
two guys / started 1st suppliers of
a store called video and laser
“Sound of Music” equipment :
 1970 they hit the  Panasonic
1million Dollar  Magnavox
mark in annual  Sony
revenue
 Sharp
 THEN……………

7. 1981 there was
a Great
tornado that
hit the sound
of music store.
With what is
left of the
store and
merchandise,
they decide to
sell what was
salvageable!!!
And PROMOTED
the event on
June 14th
as………………..

8. The Failure – How was their lost?
• -Captured less than 1% of the market trying to
compete against the more agile and
aggressive Gome and Suning.
• -Stores similar to Best Buy in the way they
deal such as Home Depot and Kingfisher have
met similar dilemmas. Whereas price-sensitive
stores where the lowest price is the one that
dominates (i.e. Walmart and Tesco) have
flourished.

9. Behind the fiasco – 4Ps failure in a marketing sense
Product

12. Behind the fiasco – 4Ps failure in a marketing sense
Price
• The Best Buy model aims to please both
suppliers and consumers by reducing the price
competition between suppliers.
• Best Buy tried too hard to educate consumers
about high-end service value when lower
price is typically the only value that motivates
them to make quick decisions.

13. • Prices were higher than the Chinese preferred
to pay as the middle-market is very price
sensitive.
• Prices vary widely depending on the brand
name and product.
• Higher than that of local stores.

14. Behind the fiasco – 4Ps failure in a marketing sense
Place
9 Stores in China
6 in Shanghai
1 in Hangzhou
1 in Suzhou
1 in Beijing
 They place it in populated area
They open it near their competitors

15. Behind the fiasco – 4Ps failure in a marketing sense
Promotion
 They try to differentiate themselves from
competitors with their service.
 The Chinese name of Best Buy “百思买”
contains meaning of “To buy after thinking
100 times”

18. Environment – What happened besides 4P?
Internal

32. Environment – What happened besides 4P?
External
down-pass of international
retailing chain approval rights

33. Get into 2nd and
3rd Tier Cities!
YES, SIR!! WHAT ?

34. YES, SIR!! WHAT ?
53 Outlets in 2009 One in 2 years
Totaling 178 Shanghai ONLY
2.4 times of Carrefour Shutting down.

35. The conclusion
WRAP UP!
• 1. Offered High-quality service and shopping
experience when Chinese consumers only
want lower prices, not service.
• Chinese = Price, ≠ service.

36. The conclusion
WRAP UP!
• 2. Chinese retailers electronics and other
large-ticket items by leading brands, opposed
to category. Supported by sales staff work for
the manufacturers rather than for the retailer.
• Leading brands (Chinese) vs Category (US)
• Sales staff from Manufacturers (China) vs
Retailer (US)

37. The conclusion
WRAP UP!
• 3. Trying to Compete on quality in a price
sensitive market.

38. The conclusion
WRAP UP!
• 4. Best Buy seen as too expensive in China.
• Why pay more for something you can get
elsewhere? Consumers will only pay more if
they are buying something they cannot get
elsewhere.

39. The conclusion
WRAP UP!
• 5. Local retailers can undercut prices - they
pay less in salaries, benefits, rent and
electricity.
• Piracy in China.

40. The conclusion
WRAP UP!
• 6. Made the mistake of focusing on building
large flagship stores, rather than smaller,
conveniently located retail outlets.
• Traffic congestions and lack of parking mean
consumers often prefer to shop closer to their
homes.

41. The conclusion
WRAP UP!
• Musts in China:
– Foreign retailers need to localize their product
selection, sales formats, and be smarter in their
location choice in order to compete with
emerging, brand savvy local players.