backtop


Print 88 comment(s) - last by namechamps.. on Apr 26 at 9:20 PM

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".



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

Best Buy is no longer competitive
By ClaytonT on 4/16/2011 6:43:02 PM , Rating: 2
The problem isn't the over priced cables. Best Buy has always had overpriced cables.
The problem is Best Buy's pricing strategy shift since the demise of Circuit City. The draw items (movies, pc's, tv's, printers, etc) -items that draw people to the store - went up significantly in price when compared to online sites when Circuit City closed.

Best Buy used to be a good place to buy movies, but now their "sale" items are often more expensive than amazon.

The same applies to everything Best Buy sells.

Of course the ubiquitous smart phone has hurt Best Buy's strategy shift. Now when a prospective buyer finds an item in a BB that they want they are easily able to do an internet search and find it cheaper somewhere else.

Just as an example of Best Buy's impending failure: 3 months ago I went to Best Buy in search of a decent ipod dock. I found the one that I liked - it was $225 or so in store. I searched Amazon for the same item right there in the store and it was $75!!! less. I like to have an item right away like some of you, but not enough to pay a $75 premium... buying online in that instance saved me 33%.

I tell all of my friends and family to not buy anything at Best Buy anymore because it is a total ripoff... regardless of any saved sales tax.

Best Buy could have remained dominant had it not significantly changed it's pricing strategy.




"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton

Related Articles













botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki