Best Buy, the world's largest electronics and home appliance retailer, declared that it would open "lab stores" in China next year during the opening ceremony of its new office in Shanghai on Wednesday.

Besides offering products and services, these stores will gain additional market information from consumers, which will then serve as the foundation of Best Buy's decision-making to better meet the needs of customers in the future.

The decision has been taken after more than two years of research, according to sources from the company.

Best Buy currently has three offices in China, in Beijing, Shenzhen of Guangdong Province and Shanghai, but no store in the country to date.

"The new office marks another significant step in Best Buy's partnership with China," said Weimin Lu, vice-president of Best Buy Asia. "Recognizing the endless win-win opportunities between China and Best Buy, we started operations in Shanghai in 2003 and we have not looked back since."

However he did not disclose more details regarding the opening of lab stores in the country.

According to a story published on April 29 by Xinhua news agency, Shanghai will be the location of the first Best Buy store.

China's consumer electronics retail market, with annual sales revenues exceeding 500 billion yuan (US$61.65 billion), represents a huge market for any retailer. Since last year, when China instituted a comprehensive "Three Opening-ups" to foreign retail enterprises, Best Buy has seized the attention of the media with its China development strategy.

"The arrival of the giant, in the short term, will increase competition in the local electronics and household appliance market," said Han Jianhua, secretary-general of the Shanghai Commercial Trade Association of Household Electric and Electronic Appliances. "But in the long term, it will be a win-win situation."

He described the competition in the field as already extremely cutthroat.

During the past National Day holiday, the two local giant retailers Suning and Gome triggered a price war between their outlets in the Zhongshan Park area. About 250,000 consumers visited the two stores on October 1 and sales at Suning's outlet hit 40 million yuan (US$4.93 million) breaking the sales record for local household appliance stores, local media reported.

"Price is still the key competitive factor in the business nowadays," Han said. "After operating in the market for years, local retailers will not be as vulnerable as some people expect since they have roots in the market."

The result of the fierce competition is to deter new entrants from the market. "I guess that is also one reason for Best Buy's cautious strategy in opening stores in China," Han said.

Ranked 77th among the Global Fortune Top 500 in 2005, Best Buy Co now has over 890 stores in the North American region.

The business operates a number of brands, including Best Buy, Future Shop, Geek Squad and Magnolia Audio Video, it has annual sales revenues reaching US$24 billion.

(China Daily November 17, 2005)