Best Buy's Owners Feud as Chain Fails

Israeli electronics suppliers have stopped selling to the chain.

It might not be immediately obvious on walking into an Israeli retail store, but the Best Buy applicance and electronics chain is in deep financial trouble.

A little probing offers hints. If you ask one of the salespeople to see some major brands, you will find them missing. This is because Israeli electronics suppliers such as Electra, Brimag, Tadiran and Newpan have stopped working with the chain.

Best Buy is jointly owned by Israeli investor Eliezer Fishman's Fishman Group, and Israel's biggest electronics supplier, Newpan. It has 14 retail locations, as well as big box stores in Israel and runs the P1000 Hebrew-language electronics website. The privately-held firm's annual revenues are estimated at NIS 200 million, but it has been losing money.

Fishman blames Newpan and the other suppliers for the situation, and has asked them to let Best Buy put off payments, but they have refused. While Newpan claims the cause of the problems is poor management, Fishman blames Newpan for pushing its own brands over others.

The electrical and electronic appliance business is known for being risky and problematic – more so than other industries – reports the business analysis firm Dun and Bradstreet. In Israel, sales for the industry fell by 5 percent in the first half of 2012.

The general economic slowdown combined with exchange rate movements have made the business particularly dicey here. In addition, the industry is highly decentralized and competition is fierce. Frequent technological improvements make holding inventory an expensive proposition, as do the long-term warranties and service agreements required by law.