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Changes will come in next 3 to 5 years

The world of retail electronics has changed drastically over the years. It used to be that most people were going to retail stores to make a purchase. Today, many people go into a retail store to see how a device works and research an item, then go home to purchase it online. The reasons for this are many, but much lies with the lower price that many gadgets can be found for online.

The largest consumer electronics retailer left in the U.S. is Best Buy. Best Buy is still facing stiff competition on the market with Wal-Mart, Target and other discount chains selling more electronics than they did in years past. Best Buy currently operates a number of large stores that its calls “big boxes”. These stores range anywhere from 20,000 square feet to 58,000 square feet.

According to Best Buy, these stores have huge overhead and are "white elephants" in the industry. The retail chain is looking to cut the amount of space and overhead these stores have by about 10% over the next several years. This comes after three straight quarters of same-store sales decline and a forecast for more declines in sales. The blame is placed on the Best Buy’s ailing TV business.

Analyst Scot Ciccarelli said, "I do believe that a lot of their bigger box stores have to be downsized. If there was a disappointment, I was kind of hoping they would be even a little bit more aggressive than what they outlined." He continued saying, "It's [the size reduction] not that big for this company. What I think you really need to do is maybe downsize a little bit quicker."

Analyst David Strasser from Janney echoed Ciccarelli saying, "We believe the Street wants more. We look at this as a first step that shows us the company is looking at reductions."

While Best Buy is seeing same-store sales decline, it is trying to grow it online business significantly. Best Buy wants to double its online sales from the current $2 billion over the next three to five years. Best Buy CEO Brian Dunn said, "The online channel is our greatest growth opportunity."

Dunn did note that retail was a part of Best Buy and defended its retail brick and mortar presence. He said that stores augment online. While Best Buy is looking to shrink its big box stores, it plans to increase the number of small stand-alone stores like Best Buy Mobile offerings to between 600 and 800 within the next five years.

Best Buy also has plans to grow operations in China and is pressuring U.S. lawmakers to force the collection of sales tax to help "level the market".



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RE: Wow.
By Black1969ta on 4/15/2011 2:37:26 PM , Rating: 2
Sure the Margins on TV's are low, that is because consumers will shop around for a TV, but then they purchase the accessories where ever the TV sale was.

I am sure that when I can find an identical HDMI cable online for $5 but BestBuy charges $30. Heck, i found a clearance 6ft HDMI 1.3a cable a Walmart for $10, that was normally priced at $50, since they don't take a loss on clearance items, that pretty much tells me what their mark-up is.


RE: Wow.
By Jalek on 4/15/2011 2:56:33 PM , Rating: 2
Those cables have been an annoyance for customers for years, you'd think they would have stopped by now. Before HDMI, it was the parallel cable for your new inkjet printer that was $40, bi-directional you know.

When the gouging's that apparent, even a dullard will wonder where else they're getting screwed in the deal and probably shop around more next time.


"When an individual makes a copy of a song for himself, I suppose we can say he stole a song." -- Sony BMG attorney Jennifer Pariser

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