The MEMOIntroduction – 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 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……………
1981 there wasa Greattornado thathit the soundof music store.With what isleft of thestore andmerchandise,they decide tosell what wassalvageable!!!And PROMOTEDthe event onJune 14thas………………..
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.
Behind the fiasco – 4Ps failure in a marketing sense Product
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.
• 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.
Behind the fiasco – 4Ps failure in a marketing sense Place9 Stores in China6 in Shanghai1 in Hangzhou1 in Suzhou1 in Beijing They place it in populated areaThey open it near their competitors
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”
Environment – What happened besides 4P? Internal
Environment – What happened besides 4P? External 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 One in 2 yearsTotaling 178 Shanghai ONLY2.4 times of Carrefour Shutting down.
The conclusion WRAP UP!• 1. Offered High-quality service and shopping experience when Chinese consumers only want lower prices, not service.• Chinese = Price, ≠ service.
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)
The conclusion WRAP UP!• 3. Trying to Compete on quality in a price sensitive market.
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.
The conclusion WRAP UP!• 5. Local retailers can undercut prices - they pay less in salaries, benefits, rent and electricity.• Piracy in China.
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.
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.