Having established themselves as a household name for many middle class Americans, Best Buy is now expanding its market in China, particularly through its subsidiary company Five Star.
Best Buy believes that Five Star can make China its largest overseas market, rivaling even their U.S. operations. FiveStar currently consists of roughly 200 stores, but plans to add 50 new stores this year and up to 500 more stores by 2016, to market to the growing Chinese middle class. Best Buy is hoping to prosper from this growth, and participating in the Governor’s Trade Mission will be key to their success. On the trip, Governor Dayton has had the opportunity to meet Nicholas Wang, Five Star’s Chief Executive, whose rolein the relationship between China and Best Buy will be expanding in the years to come as Best Buy begins to focus their Chinese efforts exclusively on building the Five Star brand.
This new market investment has been a trial and error process for Best Buy. In 2001, only 3% of the Chinese population fit the middle class definition, whereas, in 2012, 18.2% are now considered middle class, with this expansion expected to continue. Additionally, Best Buy has faced challenges in determining Chinese priorities and realizing the differences that exist between American and Chinese consumer goods.
Read more about the Governor's trade mission here: http://mn.gov/governor/blog/the-office-of-the-governor-blog-entry-detail.jsp?id=102-42432
In light of the current growth, however, Best Buy is revamping their Five Star subsidiary. Because Chinese demand focuses primarily on basic appliances, Five Star has been targetinglesser-known cities in China where people are just beginning to develop consumer habits, giving them dedicated customer service and creating a web of loyal shoppers. As the Chinese middle class continues to grow and demand increases, Five Star is ready to upgrade their offerings, bringing higher-priced, newer products to China
You can read more on this here: http://online.wsj.com/article/SB10001424052702303444204577460693377819420.html