Best Buy bet its big-box US format on China — and closed all 9 stores in 5 years

In 2006, Best Buy, the American electronics retailer, brought its big-box formula to China, opening large flagship stores modelled on the ones it ran at home. The plan was to win Chinese shoppers with service, selection and a polished shopping experience. Five years later, in 2011, it shuttered all nine of its branded Chinese stores and said it would focus instead on Five Star, a local appliance chain it had acquired. The American format had not travelled.

The mismatch was basic. Best Buy was seen as too expensive: customers could buy the same Sony or Nokia product for less at a local shop. Its stores were big flagships, but Chinese shoppers, hemmed in by traffic and a shortage of parking, preferred smaller stores close to home — a habit reinforced by a ban on free shopping bags that made people shop more often and buy less each trip. Best Buy also refused to haggle, in a market where negotiating the price was normal.

Local rivals had structural advantages Best Buy could not match: they paid less in rent, salaries and benefits, so they could undercut on price, and some were willing to load devices with pirated software, which made them more attractive to cost-conscious buyers. The irony was that fixed prices were not the real problem — a local chain that adopted them saw sales soar among wealthier shoppers who disliked haggling. Best Buy's error was not its pricing policy but everything around it: the format, the locations and the cost base.