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Why I Think Best Buy Will Be Gone Within Two Years

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Best Buy is in a tough place.  They are in a very margin sensitive business and they are competing with the likes of Amazon and other online-only retailers while having to pay the overhead of B&M stores and the employees it takes to run those stores.  Indeed, many folks go to stores such as Best Buy to take a look at that gadget they are longing for before ordering it online.  That online would eventually bring Best Buy down in the absence of something new that could really distinguish them from the online folks.

In a bid to sell more high-margin merchandise, their sales people are heavily trained and esssentially required to try to get you to buy a new tv, switch to their cable provider, etc. Most of the time you will have a hard time asking for help to find an item without getting a long sales pitch for everything but what you came to buy.  Here is a great example from an article in Forbes magazine that I recently read:

A few days ago, I visited a Best Buy store in Pinole,CAwith a friend.  He’s a devoted consumer electronics and media shopper, and wanted to buy the 3D blu ray of “How to Train Your Dragon,” which Best Buy sells exclusively.  According to the company’s website, it’s backordered but available for pickup at the store we visited.  The item wasn’t there, however, and the sales staff had no information.But my friend decided to buy some other blu-ray discs.  Or at least he tried to, until we were “assisted” by a young, poorly groomed sales clerk from the TV department, who wandered over to interrogate us.  What kind of TV do you have?  Do you have a cable service, or a satellite service?  Do you have a triple play service plan?He was clearly—and clumsily–trying to sell some alternative.  (My guess is CinemaNow, Best Buy’s private label on-demand content service.)  My friend politely but firmly told him he was not interested in switching his service from Comcast.  I tried to change the subject by asking if there was a separate bin for 3D blu rays; he didn’t know.The used car style questions continued.  “I have just one last question for you,” he finally said to my friend.  “How much do you pay Comcast every month?”My friend is too polite.  “How is that any of your business?” I asked him.  “All right then,” he said, the fake smile unaffected, “You folks have a nice day.”  He slinked back to his pit. That example demonstrates two problems at once: Best Buy is desparate to make money somewhere, and, treating customers that way will likely prevent future business.  We saw very similar behavior by Circuit City in their death spiral.

Best Buy does not know how to deal with the Internet.  They tried to have an online presence that had different prices than the store (if you went online from within the store you used to get higher prices than if you went online from, say, your home).  They are not trying  or not doing well differentiatoing themselves or focusing on some segment not well-addressed by the Internet.  They could focus on high-end merchandise and greatly expand their cell phone departments.  I'm not a marketing genius but they are supposed to have a few on hand.  Their sales model seems stuck in the '80s.

While companies like Amazon (I know, I keep using them as an example but their are many, many others) seem to make a religion of seeing things from the customers point-of-view, Best Buy seems to see customers as an unfortunate side effect of conducting sales.

The fellow in the example, above, accidentally bought a DVD he already had.  When he went to Best Buy to return it they told him that DVD movies are "software" and software cannot be returned.  When he pointed out he had not opened it and already had that DVD they replied that they could not help him.  Amazon takes DVDs back with no questions asked and even wants to buy DVDs you are finished watching and no longer want.  One company is very customer-focused, the other company is clearly not.

I believe that Best Buy will bet heavily on the 2012 holiday season and if they do okay then they will try to make a go of it in 2013.  If they do not do well this November and December then I expect more store closings early next year.  Very, very few companies shrink their way to success.

I know some folks have a particularly good Best Buy store near them or have had good experiences with the staff.  I am convinced that these are expectations.  If this was widespread I wouldn't be writing this article.  I think we all lose when yet another big retailer goes out of business.  But, we are going through an incredible change in how retail is conducted and five years from now we may know what the model, going forward, will be for the foreseeable future.

I am very curious to hear what you think so please leave comments.  Don't be afraid to tell me you think I am as bright as box of rocks and I, and everyone that looks like me, should be hung.  I have pretty thick skin.


Best Buy Stock Price From 5/11 to 4/12
Not a good trend




erick99 posted Apr 30, 2012
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9 Comments
Jameson99
Sales people aren't helpfull at all. I just buy online.
Jameson99 (rep: 19) posted Apr 30, 2012
10
nthsll
I see them going the way of Circuit City. Kinda sad that my brother worked for CC and now works for BB.
nthsll (rep: 12.4k) posted Apr 30, 2012
10
rd995
i used to feel like i was walking to a car dealership every time i walk into best buy with the sales reps trying to make a commission in selling you something and no matter what you buy it can be a blank cd they offer you extended warranty
rd995 (rep: 104k) posted Apr 30, 2012
10
lilywow
I usually walk in there looking like I am homeless anyway, so no sales pitch for me LOL
lilywow (rep: 8.32k) posted Apr 30, 2012
10
encorez
The BB mobile will be all that is left....
encorez (rep: 9.96k) posted Apr 30, 2012
00
lancelot7562
I agree with the article, staff at Best Buy seems more interested in selling gaming computers to seniors or unsuspecting customers. I actually prefer not to be bothered when i'm browsing as i like to try and check on my own but the last two times , we were there and we actually wanted help, the staff was more interested in selling to other people than to help us so we havent bothered going back there. . Their technical service also sucks. A friend of mine paid about $700 for an average laptop and it stopped working a few weeks after he got it. He took it to the Geek Squad and they told him he needed to leave the laptop for 3-4 weeks as it needed to be shipped away for repair, he just walked out of the store after a very heated argument with the support team. He checked online at the library and all he needed to do was to restore the computer to an earlier restore point, this apparently was too much too handle for the support team. He hasnt even visited BB since then. It's sad because they give employment to a lot of people but if they dont change their ways, it might be the end of the road for them
lancelot7562 (rep: 559) posted Apr 30, 2012
10
VirginiaPeanuts
We have an ok bestbuy near us I suppose but I think our Walmart (which is smaller and has limited stock and few choices) makes the Best Buy look better than it really is. I can buy almost everything , if not everything, cheaper online though.
VirginiaPeanuts (rep: 11.2k) posted May 01, 2012
00
fluffy
Best Buy "service" is criminal. My former (non-Polish and not personally involved) dentist brought her desktop computer in for an estimate. They charged her over $100 to tell her that her CPU was blown, and that she needed a new computer. I looked at it and found the heat sink fan detached and banging around inside the case, the heat sink full of dust, and half the RAM missing. I blew out the dust, reattached the fan, and it booted right up ran reliably but slow until she got a RAM upgrade, not from Best Buy.
fluffy (rep: 2.17k) posted May 01, 2012
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taylorvessos
Because now the online store is more competive than the stores on the street. 21 century is internet time.
taylorvessos (rep: 6) posted 19 days ago
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