Monday, June 30, 2008

Best Buy goes global

Best Buy opened its first foreign store in Shanghai in 2007, and plans more stores in the financial center.

The giant consumer electronics retailer has plans to push into new markets in Mexico, Europe and Turkey.

Bob Willett readily admits that for many retailers, the road to international growth is "littered with failure."

Yet Willett, the hard-charging CEO of Best Buy's international operations, is confidently leading the consumer electronics company on a massive global expansion that will take it into 11 new countries in the coming months.

"We see this as an opportunity to accelerate our growth in the U.S. and internationally," Willett said. "But we're going to do it very carefully."

To date, the Richfield-based company has taken a cautionary approach to international sales. All but one store is in North America, and even when it ventured into Canada, where it has nearly a third of the consumer electronics market, it did so by buying its way in through an existing company before expanding with its nameplate Best Buy stores.

And as its international plans unfold over the coming months, they're notable for their unusual approach. Turkey and Mexico are at the top of the list.

A partnership with London-based mobile phone giant Carphone Warehouse, which is expected to be clinched Monday, catapults Best Buy Co. Inc. into nine European cities and 2,400 stores. Willett said he's confident a Best Buy big-box store will open in the United Kingdom in the first part of next year.

The retailer also soon will reach into Mexico, with a store in Mexico City set to open in October and a second likely to follow in quick succession.

Turkey isn't far behind. Best Buy has signed a lease to build a smaller-footprint store in Istanbul, with the aim of opening in February or March.

"We did a ton of research across the world," said Willett, who commissioned a study of developed and developing nations to look at 57 attributes. Included were things such as the repatriation of profit, stability of the legal system, ease of entry and strength of such categories as consumer electronics and appliances. From that, Willett gave his boss, CEO Brad Anderson, his top-10 list.

"We won't be perfect. We'll make mistakes," he said. "But we now have a template of why retailers succeeded and why they failed, and we're trying to mitigate those things."

Wal-Mart Stores Inc. is one of many retailers whose international experience could provide a cautionary tale. In the late 1990s, it tried and failed in four overseas markets -- Hong Kong (1995 to 1997), Indonesia (1996 to 1998), Germany (1997 to 2005) and South Korea (1998 to 2006).

French-based grocer and discount giant Carrefour recently pulled up stakes in nine countries. And British retailer Marks & Spencer spent three decades trying to amass a presence in the United States, Europe and Asia, only to abandon plans in the early part of this decade.

Meanwhile, Target Corp. may be letting others make all the mistakes first. The Minneapolis-based retailer has yet to expand outside U.S. borders -- even into Canada.

Growing pains

University of St. Thomas Prof. David Brennan and his colleague at the Institute for Retailing Excellence, Lorman Lundsten, are in the process of publishing a case study about Wal-Mart's global international expansion, based on analysis of financial reports and their own observations.

The professors' conclusion: Wal-Mart's key strength -- highly controlled distribution centers where it could squeeze vendors and deliver predictable "everyday low prices" -- can't always be achieved on foreign soil.

"Wal-Mart had really good success in Canada and the [United Kingdom], and they thought they could go out and conquer the world," Brennan said. "Geographically, they were all over the place, with different cultures and different kinds of market-entry strategies. ... As a result, I think they overreached. They went too far too fast in too many areas. You can see some parallels potentially taking place here with Best Buy." continues @ startribune...

Jason Kiwaluk

Mower & Shoveller,

Ideation | Ecommerce | Fintech | Innovation | Strategy | Opinionated Agitator RevenueWire,FuturePay+PayMotion

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