Best Buy Brewing Expansion in China

US-based electronics retailer Best Buy Co., Inc. (NYSE: BBY) is looking to step out of Shanghai and broaden its reach in other cities across China as part of a planned business expansion.

Best Buy is poised to open four or five stores throughout the country next year, some of which in cities out of Shanghai, disclosed a senior executive for Best Buy China on October 31, declining to say where the new stores will be launched.

It will be the first time for the US electronics retail giant to make a presence out of the eastern Chinese metropolis, said a market observer. Currently, the Richfield, Minnesota-based company has six self-branded stores, all of which in Shanghai. "An overlong supply chain will make it difficult for us to get profits in the country, so the company will try to bring its operation in one city into a good shape before branching into another," said Yang Deming, vice president for Best Buy China, last October, when the retailing heavyweight drew up a plan to open five stores in the prosperous eastern city.

"The company has set up its own business model in China," said procurement director for Best Buy Asia-Pacific operation, "by providing services different from its rivals' in the country, Best Buy has met expectations from its investors." The company managed to achieve a 30% growth in the third quarter of the year, pushing the January-September growth up to 10%, according to the procurement director.

Jiangsu Five Star Appliance Co., Ltd., a consumer electronic appliances retailer that Best Buy acquired for USD 369 million, maintained a brisk growth in the first nine months of 2009, added the director. Best Buy purchased the remainder 25% holdings in Five Star Appliance earlier this February, nearly three years after taking a majority stake in the Nanjing-headquartered company. Once the fourth-biggest electronics retailer in China, Five Star Appliance has set up a sales network made up of nearly 170 stores all over the country.

The shining performance of Best Buy, pointed out a market observer, is attributable to the faster-than-expected revival of Chinese economy after the financial crisis. Suning Appliance Co., Ltd. (SZSE: 002024), one of the top-ranking electronic appliances retailers in the country, posted a 15.6% year-on-year growth in net profits and a 6.32% rise in operating revenue for the first three quarters of the year.

(USD 1 = CNY 6.83)

Source: www.enet.com.cn (November 03, 2009)

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