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Chinese customers balked at paying a premium for Best Buy's offer of a pleasant store experience and helpful service, including its Geek Squad computer troubleshooters, said Liu Hongjiao, a senior consultant with Analysys International Solution in Beijing. While its competitors like Suning Appliance and its archrival Gome Electrical Appliances Holdings have suppliers that take payments after their products are sold, in Shanghai Best Buy had no such advantage. Add to that costs for labor and for retail space and the overhead was just not competitive, Liu said. "Foreign companies are sometimes bolder than local ones, but the local companies know more about the local customers. They are better at controlling costs and keeping prices low," said Ding Wenjin, an analyst with Dongguan Securities in the southern city of Dongguan. "Especially in these days of serious inflation, people are more sensitive about prices," Ding said. In China, Best Buy has also been bested by local competitors in online sales in a market where, increasingly, purchases are done with the click of mouse. From towels and T-shirts to microwaves and cell phones -- Chinese go online to comparison shop and then wait for their purchases to be sent, cash-on-delivery, straight to their homes or offices. Online retail sales doubled in China last year from 2009, to 513.1 billion yuan ($77.7 billion), according to figures from the China E-commerce Research Center.
Of course, in a shopping-obsessed city like Shanghai, there is still plenty of retailing to be done: companies like Apple and Zara, which manufacture their own products, draw customers with their unique products, analysts say. "Their market positioning is high, because their products are different from local brands," said Ding. "However, if you want to buy something like a Nokia cell phone, that's different. It will be the same whether it's from Best Buy, Suning or online," he said.
[Associated
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