What’s in a Name? Plenty for Best Buy in China

Best Buy (NYSE: BBY) has discovered there’s plenty in a name when it  comes to retailing in China. The company may be a household name in its home U.S. market, but that didn’t mean much in China, where Best Buy is ending its brief experiment with its own brand by shuttering about 10 “experimental” stores it had opened over the past few years. Was the competition from homegrown giants Gome (HKEx: 493) and Suning (ShenzhenEx: 002024) too much? To some extent the answer is yes, though Gome continues to struggle with issues related to its jailed founder Huang Guangyu. But the bigger picture may be that Best Buy has realized it may be easier to build off an existing brand, hence its decision to put its China growth plans into Five Star, a homegrown chain it acquired a few years back. Best Buy has said it plans to boost its Five Star store count by a third this year, opening 40-50 stores to bring its total count to 210 by the end of 2012. If the strategy works, which looks like a good bet, look for other late-coming western retailers to also contemplate similar strategy of entering China via m&a, which seems to be the more effective way of competing in the vast market.