Thursday, March 29, 2012

Best Buy Problems Signal Need for New Retail Formats

Best Buy StorefrontThe lower than expected earnings news announced by Best Buy March 29, 2012, show that the retailer is having trouble.  It said it would lay off 400 workers and close up to 50 stores.  On-line retailers, like Amazon, are eating into its sales; certainly, the continuing recession isn’t helping. The company chief executive, Brian Dunn,  conveyed growing frustration with consumers using Best Buy to merely touch and feel and learn about products, then turn and shop for the product on-line for better pricing.  Will Best Buy go the way of Circuit City and Comp USA - not to mention earlier closings of Crazy Eddie and Nobody Beats the Wiz?

Best Buy,the last standing electronics giant, competes in a declining market against on-line retailers with service and product knowledge.  Consumers complain that Best Buy is not doing great in these areas.  But non tech-savvy consumers do want to learn about products and handle them before buying.  It stands to reason that without brick and mortar retailers to provide this service, Amazon would suffer as well.

Another particular issue is that women generally do not shop at Best Buy. Only 16% of Best Buy shoppers are women, and 31% of its workers are female according to an earlier article in the Wall Street Journal.  While this is likely true of other electronic stores, it is not true for competitors, Amazon and Walmart. 

Is it time for another format for Best Buy?  Should retailing become “show-rooming” with retailers operating engaging product show rooms for consumers to touch and feel products and then allow low price shipping out of centralized warehouses to compete with Amazon pricing? I love how Apple, Sony and Bose storefronts work with greater emphasis on the customer experience.

It’s time for a new model for retailers like Best Buy.  I personally hope they can stay strong – where else will I kill an hour shopping (or should I say browsing) on the weekend?

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