brand challenges

Best Buy Exits UK, Going Mobile

Posted by Mark J. Miller on November 7, 2011 04:01 PM

Best Buy has decided to pull a $1.3 billion wad out of its pocket and buy out British partner Carphone Warehouse Group Plc “from a profit share of their Best Buy Mobile venture in the United States and Canada, which has been benefiting from soaring demand for smartphones like Apple's iPhone,” according to Reuters.

With the move, it is shutting down its 11 pilot "big box" Best Buy stores in the U.K. to refocus its European strategy on 2,500 profitable small box stores, according to a press release.

As a result, some 1,100 "blue shirts" or employees are facing the dole, according to the Guardian — the same Brits who spent nine weeks training at Best Buy's UK academy and who were the focus of the company's "We Love What We Do" advertising campaign (starring a happy chap called Jack) in the market.

The Guardian attributes Carphone Warehouse's Best Buy flop in the U.K. to five factors: confusion in the market that the retailer is a discounter (also not helping: the American voiceover in its UK campaign, above); too few stores; over-ambitious sales targets; location; and understimating the competition. 

"For Best Buy to be able to no longer have to share 50 percent of the profits of a high-margin, fast-growing business with Carphone Warehouse, from my perspective, is a real positive," said BB&T Capital Markets analyst Anthony Chukumba to Reuters. "(But) it is not a game-changer. Best Buy still has the same challenges they did 24 hours ago — fairly weak product cycle particularly in flat-panel TVs, increasing competition from Amazon, probably too much retail square footage."

So Best Buy still has its work cut out for it, but this is yet another move by the company to focus its energies on the difficult American marketplace, the site notes. Best Buy had been planning to open stores in China and Turkey. Those plans were scrapped earlier this year.

Reuters notes that Carphone and Best Buy would now focus on China, where they would introduce new stores called Global Connect in the existing “200 or so” Best Buy partner Five Stars there and then standalone stores would follow. Global Connect is also talking to “potential partners for other markets, like Brazil, India and Indonesia,” the site notes.

The pair also still have a possible European relationship that still stands contractually for a few more years, Reuters reports.

Best Buy's other big priority: boosting its B2B revenue, as shown by today's agreement to acquire mindSHIFT Technologies, Inc., described in a BBY press release as America's leading managed service provider (MSP) for small and mid-sized businesses, for $167 million.

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