Earlier this year American electronics retailer Best Buy closed down all nine of its branded stores in China after being in the market for five years. Many critics have concluded that Best Buy's closure proves that Chinese consumers are "too cheap" to buy expensive products or pay extra for service, and prefer haggling over fixed prices. Are they right? In this commentary on CNBC.com, CMR Managing Director Shaun Rein analyzes what did - and what didn't - contribute to Best Buy's exit from the market, and how foreign retailers can stay competitive in China: Fixed prices in themselves are not an issue. Local competitors like Gome have adopted many of Best Buy's practices, including set prices and non-commissioned salespeople, and their sales have soared as a result. The success of Apple stores in China shows that Chinese consumers are willing to buy expensive items, just not when they can buy them for less elsewhere. Best Buy was perceived as selling identical products to Gome and Suning at higher prices. A key error Best Buy made was to focus on large flagship stores rather than smaller, conveniently located retail outlets. Although the Chinese are driving and more and more, parking remains an issue and most consumers prefer to do their shopping nearer their homes.
