Best Buy loses over £62m in the UK, thought to be reconsidering its big-store business plan

The high cost of establishing itself in the UK has hit US-based electricals/electronics chain Best Buy hard: joint venture partner Carphone Warehouse has announced that the company with the big blue stores lost £62.2m in its first year here, while Carphone Warehouse itself made just over that amount in group profit.

The group points out that by the end of the last financial year Best Buy had only six stores open in the UK, but had spent a lot setting up the infrastructure to support the much larger number in its development plans, and has also spent a lot on marketing and promotional activities to develop awareness of the brand.

The company currently has ten stores open here, with another soon to open in Enfield, but the company has put on hold plans to open up to 80 more stores. There's even the suggestion that it may cut back its 11 huge stores, and examine other store formats.

If stores are closed, the UK won't be the first market in which Best Buy bit the bullet: earlier this year it closed some stores in China and Turkey.

Partner Carphone Warehouse is already busy converting stores into a smaller Wireless World format, and expects to almost quadruple the number of these outlets to 400 by the end of the current financial year; meanwhile in the States Best Buy is also rethinking its business model.

It's expected to reduce the number of 'big-box' stores it has by 10% over the next three to five years while boosting the number of much smaller Best Buy Mobile outlets, and concentrate on the lucrative market for accessories, service subscriptions and content.

Those areas of the market are thought to be worth $420bn in the USA – rather more than the traditional consumer electronics business, at less than $200bn – and the company suggests that offering such services as well as TV, computer and mobile phone hardware could enable it to increase gross profit per transaction six-fold.

It also plans to double its online business, and will add more online-only items, open a 'Marketplace' facility for third-party online sellers, and launch loyalty programs.

Smaller stores are also being tried in the States, with interactive 'experience stations', a smaller number of iPad-toting staff, and touch-screen kiosks using large flatpanel displays. There'll be a greater emphasis on portable devices in all stores, too: almost 1100 Best Buy shops will gain a Tablet Central department in the near future.

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Andrew has written about audio and video products for the past 20+ years, and been a consumer journalist for more than 30 years, starting his career on camera magazines. Andrew has contributed to titles including What Hi-Fi?, GramophoneJazzwise and Hi-Fi CriticHi-Fi News & Record Review and Hi-Fi Choice. I’ve also written for a number of non-specialist and overseas magazines.