Best Buy's Failure in the United KIngdom

Topics: Retailing, The Carphone Warehouse, Big-box store Pages: 5 (1066 words) Published: May 2, 2014
Margaryta Rebezova
Professor Patrick Yanez
IN324 International Marketing Research
Term Project: International Marketing Blunders

Best Buy’s failure in the United Kingdom
Best Buy attempted to cross the Atlantic and deliver US-style retailing to British consumers and has failed miserably, with the retailer closing all of its big box stores in the UK. The timing might have been wrong, but its deviation shows that adapting to changes in the new target market is crucial. Even the most successful retail formats can fail if they do not consider those changes. Best Buy Europe is a joint venture between US group Best Buy and Carphone Warehouse, which was formed in 2008 when Best Buy paid £1.1bn to buy a 50% stake in Carphone Warehouse's retail division. Best Buy Europe launched its first store in May 2010, opening a total of 11 stores across the UK. The original plan was for 200 out-of-town "big box" shops around Europe by the end of 2013, selling everything from washing machines to laptops. The outlets were open in Liverpool, Derby, Bristol, Nottingham, Rotherham, Dudley, Thurrock, Southampton, and three places in London - Croydon, Hayes and Enfield (BBC News). Best Buy Europe was shuttered after just 18 months in business. In that short amount of time, it lost £80 million ($127 million), largely due to consumer belt-tightening and increased competition from cheaper online retailers. Up to 1,100 jobs was lost at the eleven UK stores (Engadget). Part of the problem was cultural: big box retail is not as widely accepted on the other side of the Atlantic. "Some things that work in the largest economy in the world don't work in smaller economies," says Mittelstaedt. "You can't scale down the same way." But Best Buy's timing was also badly judged. The margin in electronics is growing thinner and thinner. So much of the electronics retail business has moved online that consumers around the world use big box stores as mere "showrooms" for online rivals (HSBC Global Connections). There are several areas where Best Buy’s UK strategy went wrong. • Brand recognition

Best Buy is a major retailer in the United States. In the UK, some shoppers think it is a discount grocer, according to research by one rival retailer. Awareness has spread slowly, perhaps because while most people shop at supermarkets every week, they buy an electrical item only two or three times a year. The advertising may not have helped. The latest TV spot, narrated by an actor with a US accent, led to comments like "Why is it so American?" on the company's YouTube site (The Guardian). • Too few stores

Dixons Retail (the main competitor) operates more than 600 stores under brands including Currys and PC World. Comet (another competitor) has about 250. With just 11 shops in out-of-town locations with no passing trade, Best Buy was slow to make an impact (The Guardian). • Over-ambitious sales targets

When the grand plan was unveiled to investors in 2008, Carphone predicted the stores would eventually generate an average of £600 to £700 a square foot — significantly more than market leader Dixons, whose shops make on average £500 a square foot. The original target was that Best Buy Europe would be generating revenues of £6bn–£7bn by the end of 2013. Even with two years to go, the targets were unlikely to be met (The Guardian). • Location

Best Buy was Carphone's first major project off the high street. Securing planning permission for out-of-town locations can be a slow and tortuous process. Britain has the smallest number of such retail sites in Europe. France has twice the space per capita; Germany three times (The Guardian). • Underestimating the competition

Carphone's research conducted in 2003 showed electrical retailers had a reputation for dirty, disorganized shops staffed by rude, poorly trained "kids" who were under pressure to earn commission by selling extras such as insurance and who had no passion for the product. Such accusations were often presented...

Cited: “Carphone Warehouse to close all 11 Best Buy shops.” BBC News, 7 Nov. 2011, Web. 14 Apr. 2013
Cooper, Daniel. “Best Buy to close UK operations, 1,100 jobs in jeopardy.”, 7 Nov. 2011, Web. 17 Apr. 2014
Gallant, Paul. “10 biggest overseas blunders.” HSBC Global Connections, 27 Dec. 2012, Web. 17 Apr. 20114
Garside, Juliette. “Best Buy: five reasons Carphone had to hang up.” The Guardian, 7 Nov. 2011, Web. 14 Apr. 2014
O’Brien, Patrick. “Why Best Buy failed in the UK: Risks of Global Expansion.” RIS News, 14 Nov. 2011, Web. 14 Apr. 2014
Potter Mark and Skariachan Dhanya. “Analysis: Best Buy seen pulling plug on UK megastores.” Fox Business, 19 Sept. 2011, Web. 13 Apr. 2014
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