Best Buy Makes China Comeback

Best Buy Co Inc (NYSE: BBY), the world's largest electronics retailer that halted its business in China 16 months ago, said it will introduce its Best Buy Mobile brand in China this year by opening stores at Five Star malls, a Chinese appliance and electronics chain.

Best Buy will launch 14 stores at Five Star locations in Nanjing, Jiangsu's provincial capital, with the first two to debut by the end of June. Should all go according to plan, Best Buy will expand this high-profile program to the rest of Jiangsu before establishing freestanding stores, each covering 300 to 800 square meters, across the rest of China.

Best Buy cracked the Chinese market in May 2006 when it acquired Five Star. It later opened nine own-brand stores in the country.

In February 2011, it shut down all of the nine stores and said it would incorporate its China businesses into Five Star.

Best Buy suffered by trying to transplant its American business practices in China, where retailers usually do not buy goods from manufacturers for resale. Instead, its Chinese peers operate by renting space in their stores to manufacturers while also taking commissions from sale profits, which actually makes them more like commercial property developers than retailers.

Most market watchers did not expect a successful comeback for Best Buy as China's household appliance market is weak and last year's closures have severely damaged its reputation. However, some argued that lackluster markets almost have the potential to be lucrative growth markets.

Best Buy's footprints in China:

2006: Purchased a 75% stake in Five Star for $180 million; opened its first China store in Shanghai.

2008: Opened its second China stores in Shanghai, 22 months after from the first.

2009: Acquired the remaining 25% stake in Five Star for $185 million.

2010: Moved out of Shanghai by opening stores in Suzhou, Jiangsu province, and Hangzhou, Zhejiang province.

2011: Closed its nine stores in China.