Bestbuy's failure in China
42
-
Upload
leary-qianli -
Category
Business
-
view
3.669 -
download
0
description
An
Transcript of Bestbuy's failure in China
The MEMO of
Failure in
China
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
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
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
HOW IS ALL STARTED…………….
1966 in minnisota
two guys / started
a store called
“Sound of Music”
1970 they hit the
1million Dollar
mark in annual
revenue
1979 became the
1st
suppliers of
video and laser
equipment :
Panasonic
Magnavox
Sony
Sharp
THEN……………
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………………..
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.
Product
Behind the fiasco – 4Ps failure in a marketing sense
Price
Behind the fiasco – 4Ps failure in a marketing sense
• 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.
• 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.
Place
Behind the fiasco – 4Ps failure in a marketing sense
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
Promotion
Behind the fiasco – 4Ps failure in a marketing sense
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”
Internal
Environment – What happened besides 4P?
External
Environment – What happened besides 4P?
down-pass of international retailing chain approval rights
Get into 2nd and 3rd Tier Cities!
YES, SIR!! WHAT ?
YES, SIR!! WHAT ?
53 Outlets in 2009 Totaling 178 2.4 times of Carrefour
One in 2 years Shanghai ONLY Shutting down.
WRAP UP!
The conclusion
• 1. Offered High-quality service and shopping experience when Chinese consumers only want lower prices, not service.
• Chinese = Price, ≠ service.
WRAP UP!
The conclusion
• 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)
WRAP UP!
The conclusion
• 3. Trying to Compete on quality in a price sensitive market.
WRAP UP!
The conclusion
• 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.
WRAP UP!
The conclusion
• 5. Local retailers can undercut prices - they pay less in salaries, benefits, rent and electricity.
• Piracy in China.
WRAP UP!
The conclusion
• 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.
WRAP UP!
The conclusion
• 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.
