Best Buy, a United States electronics retailing giant aggressively expanding in the mainland, has bought a further 20 per cent of Jiangsu Five Star as it seeks to expand in second and third-tier cities, according to sources.

The company increased its stake in Five Star, an electronics retailer with 136 outlets, to 70 per cent recently following its purchase of a 50 per cent interest for US$180 million last year, the sources said.

Best Buy China chairman Lu Weimin declined to confirm the deal, saying only that it had a controlling stake in the Nanjing-based retailer.

New York-listed Best Buy, which opened its first self-branded store in Shanghai in December last year, planned to open up to three more such stores in first-tier cities this year, including Beijing and Shanghai, Mr Lu said.

He said Best Buy would also expand the network of Five Star in second- and third-tier cities, including Yunnan and Xian.

Five Star will open up to 23 stores this year.

Mr Lu said that while Five Star looked like Best Buy's arm in second- and third-tier cities, he did not rule out opening Best Buy stores in those cities.

Sales at Best Buy's 80,000 square foot store in Shanghai's Xujiahui district had exceeded the company's expectations, said Mr Lu, who declined to give figures.

"Customers in our store show a tendency of buying more international brands than domestic brands," he said.

Mr Lu said Best Buy differentiated itself from local players such as Hong Kong-listed Gome Electrical Appliances and Shenzhen-listed Suning Appliance by offering solutions to suit customers' needs, instead of just selling products.

"For example, if a customer buys a digital camera, we will also recommend photo editing software to them."

Mr Lu said Best Buy staff were not paid through commission, which meant that they could be relied on to give costumers unbiased advice.

"Sales people of local players work on a commission basis so there is a tendency for them to recommend expensive products to customers," he said.

The company also had no acquisition plans at the moment, Mr Lu said, denying speculation it was in talks to buy Beijing Dazhong Electronics.

Suning, the mainland's second-biggest electronics retailer, this week said it was in talks to buy Dazhong but denied reports that an agreement had been reached.

Gome, the sector leader which bought third-ranked China Paradise Electronics Retail last year, said a Suning-Dazhong merger was not be possible if Dazhong did not return a 150 million yuan down payment given by Paradise in April last year.

Paradise had agreed to merge with Dazhong before reaching a deal with Gome. Dazhong later declared its agreement with Paradise invalid, arguing the firm had breached the terms and conditions by merging with Gome. The dispute is under arbitration.