The Failure of Best Buy in Europe

Best Buy is a US company that specializes in consumer electronics, home office and entertainment services. It is the largest consumer electronics retailer in the United States. Best Buy in the United States is well known and successful. Best Buy produces about 40 billion dollars per year. Best Buy has over 1500 shops and hires more than 125000 people in North America.

Best Buy decided to expand to other places after its success in America, and the country was the most reasonable to start from Europe, but it fell horribly short. Best Buy was not as expected to prosper even in Europe. It is quite fascinating that such a successful company would fail terribly yet it knows all the logistics required in expanding overseas. It seems there was no keen analysis of the market among other factors. Best Buy had to close its stores in Europe after experiencing huge losses. However, if due diligence had been done, the company would have thrived. It seems a lot of aspects were overlooked. The managers believed that now that it has conquered the American market and quite successful there, the European market would certainly be a walkover. There was disregard of the differences in markets and consumer preferences.

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Introduction

With its increasing middle class and closeness to electronics manufacturers, Europe represented a large growth opportunity for best buy. The retailer, however, seem to have suffered bad timing and its shows that even the most successful companies may fail if they do not adapt to shifts in target markets. Moving to European markets In 2010 having purchased half of the stake in UK mobile phone company Carphone Warehouse, Best Buy had plans to open over 100 stores. It, however, failed terribly. There are many factors that can be attributed to its failure. The first is announcing its plans a little early. In any business, there is always a competition, and people are always looking for ways to eliminate that competition. Best Buy announced its plans gave its competitors time to react to it. This may have meant improving the quality of their products or even reducing their prices. By the time, Best Buy landed, their target market was already flooded.

There is a huge difference in American and European consumer behavior. Best Buy had planned to open big box stores; however, the British tend to prefer the small stores. Best Buy had initially planned to open 200 stores before scaling down to 100. However, it managed to open only 11 stores which were closed after 18 months. One of the major failures is not understanding the consumer behavior. Best Buy had studied the Europe market for a while and was planning to shake it however it could not adapt it.

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The option of large stores out of town was not ideal for many people. Remember this is a new entity; it needed a very strong advertising. There is no way customers would know of an existence of an out of town or be interested when there are stores that are closer home and are easily accessible. Vigorous marketing should have been done to inform the people of its existence and persuade them to shop there. It might have been ideal to invest in strategic locations in busy streets as a part of entry and introduction to the European consumers. It also failed in continuing to open other stores assuming things would get better.

One complaint received was that the brand was advertised as so American. The narrator had an American accent which did not resonate well with the UK consumers. It would have been wise to perhaps use a well known UK face or a celebrity. It would have been more appealing if they had used one of their own. Already UK has Dixon and Comet, and its market for electronic is quite small. Best Buy strategy to overtake these retailers was not well-thought.

I also believe that failure was also occasioned by a change in consumer behaviors. With the invention of online shopping, many people love shopping at the comfort of their homes. Majority of the UK shoppers spend time online and not interested in making long trips to stores to just purchase an item that can be easily delivered to them. Now combine that with out of time stores for best buy, certainly no one gets inspired to visit those stores. Perhaps if they had special deliveries like pizzas, they would have gotten clients. Shopping online offers convenience as it saves times and cost-effective on fuel.

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Also, spending on electrical has shifted following the invention of smartphones and tablets which people tend to purchase from small phone operators. Consumers also purchase electronic 2 or 3 times a year. Best Buy had very few stores. I believed if they had opened more stores, it might have made some profit. As stated Best Buy had only 11 stores compared to comet 250 and Dixon 600. Therefore it surely did not stand a chance with these giants. Best Buy may also have underestimated its competition. It thought that since it is successful in America, nothing is surely going to stop it here in UK market forgetting totally different market dynamics.

I believe the article articulate the issues that hindered Best Buy taking over UK market. There are many other brands that have attempted to conquer foreign market but failed in spite of being quite successful in their home markets. To conquer the new market, it requires a nice strategy that looks into all aspects of the market. Even though Best Buy failed, it did the right thing in closing its stores rather than trying to fix even more expensive problems. I believe it would have encountered even more losses.

In the UK market, one cannot combine out of town stores, electronics and megastores because they shall surely fail. Its UK partner, Carphone would have helped them in entering a new market by analyzing the market and giving them feedback. Even though Best Buy was smart enough to partner with a UK company, I fell that this company Carphone did not do much. It surely ought to have known about the UK consumer behavior.

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References

Groth, A. (2011). A Closer Look At Why Best Buy Failed In Europe. Business Insider. Retrieved 1 December 2017, from http://www.businessinsider.com/best-buy-europe-strategy-2011-11?IR=T