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Slow growth strategy at foreign market player

AS a foreign retailer, Best Buy adopted a different business model by targeting mid and high-end consumers.

"It is hard for Best Buy to compete with Gome and Suning in scale as they had already extended their footprints across the nation before Best Buy entered the market," said Deng Hongguang, an analyst from Oriental Securities Co. "So Best Buy chose highly profitable digital products."

Small home appliances and digital products boasted a sales growth of 75 percent and 77 percent in the first half of 2008, much higher than household appliance sales due to short product life circles.

Experts said retailers should rely more on computers, communications and digital products to increase profitability.

Best Buy opened its first China store in Shanghai in 2006. It was not until October 2008 that the company began to expand. Best Buy now has eight stores in China.

"Developing the China market would not be a race for expansion," Robert Willett, chief executive officer of Best Buy International, said. "We will make efforts to be the No. 1 choice for customers, which we believe can help raise our market share."

At the opening ceremony of its second store in Shanghai, Willett said Best Buy was ready to accelerate growth.

However, expansion plans have been hampered after its net earnings fell 77 percent in the third quarter of 2008. Best Buy would scale down spending by 50 percent in 2009, which would involve a "substantial reduction in new store openings in China," the retailer said in a statement.


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