LONDON BRIEFING:IT STARTED with a single store - Sound of Music - which opened in the American Midwest in 1966. Now, just over 40 years on, Sound of Music has become Best Buy, the world's biggest electrical goods retailer, trading from a chain of 1,300 vast retail warehouse stores in the US and Canada and boasting an annual turnover of $40 billion.

News that the giant American retailer is joining forces with Britain's Carphone Warehouse for a two-pronged assault on the European market sent a chill wind through the electrical retail industry last week. And nowhere was the icy blast felt more keenly than at the headquarters of DSG International, the ailing PC World/Currys group formerly known as Dixons.

Under the £1.1 billion deal Best Buy will take a 50 per cent stake in Carphone's retail operation, which stretches to 2,400 stores across nine European countries. The new joint venture company will open hundreds of huge Best Buy stores across Britain, Ireland and the continent, creating "a retail experience such that you will never have seen before in Europe", promises Carphone chief executive Charles Dunstone.

Dunstone was jubilant as he unveiled the Best Buy venture last Friday, although some analysts were concerned that the deal will dilute Carphone's current-year earnings by up to 15 per cent. Others complained that the announcement was long on ambition and short on detail.

Despite that, however, the combination of the two companies is a bold step and one that will certainly shake up the electrical retailing industry on this side of the Atlantic. The Best Buy stores, which will also stock Carphone's range of phones and accessories, will offer a "category killer" range hitherto unavailable to European shoppers.

Apart from the impact its massive buying power will have on the market, there are also a number of lessons the world's largest electrical goods retailer will be able to teach its somewhat sleepy European rivals. Its high level of customer service will be welcomed by shoppers who have all but resigned themselves to being served by staff who know little or nothing about the products they sell.

The two companies have known each other for some time - Dunstone is a long-standing fan of the Best Buy model and two years ago the American company took a 3 per cent stake in Carphone. The UK company also sells phones in Best Buy's US stores.

Both companies have been swift to rebut speculation that the joint venture is just the first step towards a full-blown merger - in the short term at least. But consolidation moves in the European market must be a distinct possibility, with DSG and Kesa, which owns the Comet chain in the UK and has a sizeable operation on the continent, both potential acquisition targets

Best Buy's entry into the UK market could hardly have come at a worse time for DSG. Crumbling sales have forced the group to issue two profit warnings this year so far and the market is braced for more bad news from the group when it gives an update on current trading tomorrow.

It is expected to announce a number of new cost-cutting measures, including heavy job cuts at its headquarters, where it employs 1,700 people. Some reports suggest as many as one in four HQ posts will go.

Along with the latest trading figures, which will not make attractive reading, new chief executive John Browett, who joined from Tesco in December, is also set to reveal his eagerly-awaited turnaround plan for the group. He is expected to focus on improvements in customer service, but store closures are also a possibility. Analysts are also hoping for news of a revamp of the group's poorly-regarded internet offering, particularly as Browett was responsible for building up Tesco's successful online operation.

DSG's new chief executive has not had an easy time since he arrived - within weeks he found himself presiding over the first of the group's 2008 profit warnings as well as having to watch his new employer relegated from the FTSE 100 index. The arrival of Best Buy on European shores - the first outlets are expected early next year - will certainly not make his turnaround task any easier.

In short, it has been a baptism of fire. His arrival at the company coincided with a downturn in consumer spending, and DSG is far from being the only retailer to suffer. But, as he puts the finishing touches to his strategy statement today, the DSG boss knows he must come up with a plan radical enough to convince the City that his company can survive the coming US invasion.

Fiona Walsh writes for the Guardian newspaper in London