Many of the world’s biggest retail names have been humbled when, bolstered by strength in domestic markets, they are emboldened to venture overseas.
Many of the world’s biggest retail names have been humbled when, bolstered by strength in domestic markets, they are emboldened to venture overseas. US electricals powerhouse Best Buy has become the latest addition to the list. At the start of this week, the retailer - which just a couple of years ago was making headlines on the back of its vaulting international ambition - was beating a retreat.
From the Far East to the shores of the Mediterranean, Best Buy is scaling back its plans. It will ship out of Turkey altogether - where, incidentally, rival Dixons has 12 shops - while in China the focus will be on developing the Five Star business in which it took a majority stake in 2006, rather than Best Buy-branded sheds. The nine big boxes in China will be shut, although two may eventually be reopened.
Best Buy’s overseas woes will inevitably prompt more speculation about how its branded operations in the UK are trading. The retailer insisted this week that the UK, along with Canada and Mexico, remains a “significant” opportunity. But how will that opportunity be realised? Yes, Best Buy has a transactional website here and six big boxes. Yes, there are more sheds in the pipeline. But, compared with the scale of openings originally talked about - 80 big boxes - Best Buy remains a minnow here. And its decision to focus openings in particular areas of the country prompts questions about whether there are now serious doubts about a big opening programme.
Market leader Dixons and rival Comet cannot afford a sigh of relief. They are locked in cut-throat competition over wafer-thin margins and Best Buy’s growth in the UK is likely to be powered now by Carphone and its Connected World strategy.
But Dixons in particular got into shape to repel the Best Buy invaders. Its store overhauls continue to boost profitability and much work is being done to improve service and consumer perception. Dixons’ top brass are likely to take some satisfaction from Best Buy’s overseas travails and step up the competition in the UK.
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