Maybe Best Buy Doesn’t Need New Stores

Best Buy is going to slow down its store growth next year, executives announced as part of their third-quarter results, which also hinted at layoffs and corporate-employee buyouts.

But do they really need a lot of new stores anyway? The retailer is, after all, on track to have 1,000 US stores by the end of its fiscal year in February. That’s gotta hit most of our population, right?

CEO Brad Anderson blames the last 90 days of the economic slowdown for much of the electronics giant’s woes. The thing that amazes us about this economy, and how companies are reacting, is that business models that took years, and many millions of dollars, to build up are getting shot down after a matter of weeks.

It’s hard to believe that a concept that created the largest electronics specialty retailer in the country was flawed in the first place. But we’re pretty naïve around here, so a lot of things probably get by us…

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5 Responses to “Maybe Best Buy Doesn’t Need New Stores”


  1. 1 Guest December 17, 2008 at 11:09 am

    Best Buy came of age during the biggest consumer technology boom in history and now it’s slowing down (or going all online)… consider what they sold five/ten years ago that kept them on top:

    -CDs… now downloadable

    -DVDs… becoming “on-demand” or downloadable

    -Video Games… becoming downloadabe via Xbox Live et al

    -Flat-screen TVs… reaching market maturity — late adopters are the only ones left and they are seeking better bargains at places like Wal-Mart.

    -Ipods/MP3 players… now integrated into phones like the iPhone where most of the money is made through long-term contracts and not devise mark-ups at retail outlets.

    -Computers… technology has slowed, computers don’t need to be replaced every two years… Apple brand is growing at expense of PC… why shop in-store for second or third generation computer when online is easier?

    -Cameras… technology has slowed, they are as small as people want now and digital camera resolution is not getting any greater (are 10 megapixels really that much better than 8?)

    I don’t see another innovation that will save them and I certainly don’t see why they need such a large footprint considering the dying computer, CD, DVD, video game market that takes up so much space in their stores.

  2. 2 Ben December 17, 2008 at 4:19 pm

    How does Best Buy announcing that it will “slow down its store growth next year” equate to “business models … getting shot down after a matter of weeks”? BestBuy is STILL GROWING. They’ve cut back on GROWTH PLANS.

    And how do 1000 stores reach “all of us, right?” Do you mean the 300,000,000 people in the US?

    The reason that it’s “hard to believe that a concept that created the largest electronics specialty retailer in the country was flawed in the first place,” is because the statement isn’t true. It’s also oxymornic. And it affirms your final assertion about naivete. These are tough times, but don’t get hysterical.

  3. 3 iritter December 17, 2008 at 7:03 pm

    Ben-

    It seems to me that companies, many of them very successful, are changing the ways they’ve done business just over the last few months. Cutting back on aggressive growth plans, to me, is a major change.

    Ask some independent landlords baking on those plans, who are losing anchor tenants or seeing developments get put on hold, how they feel about that.

    As far as over-storing goes…how many stores do you think Best Buy needs? 2000? 3000? You tell me.

    I don’t know about being “oxymoronic,” but I do know that I was trying to assert how strange things are when one of the most historically super-solid tenants out there is posting steep same-store sales declines and rethinking the way they do things.

    I’ll leave it to you to tell the hundreds of people losing their jobs every day not to get hysterical.

  4. 4 Greg December 19, 2008 at 5:31 pm

    It should come as no surprise that as the consumer of electronics becomes a more efficient shopper and as more outlets offer the same products, the overriding criteria in making the decision when and where to buy is being based on price and convenience.Nowhere is this more true then in the sale of retail electronics where, except for the ultra sophisticated, the majority of the products that readily available will more than adequately satisfy the needs of most people. This is occuring in almost every one of Best Buy’s product categories.
    Since you can’t “out store” the Internet nor the rest of the brick and motar retail world which now sells so many of the same products, it would seem that Best Buy may need to focus on identifying the reasons that will compell the consumer of electronically based products to utilize their brick and mortar in the future to make their purchases there.
    It’s not the specialty store sales assistance because I’ve experiened very tech savy sales assistance in the wholesale concepts,in office supply and in discount stores. It’s not convenience because nothing beats point,click ,deliverd. Further, everbody usually meets a competitor’s price so they can’t do it it on that basis alone.
    So,while Best Buy still serves as a nice showroom for the consumer to survey what’s available,what will force the consumer to buy it there?
    They might just want to answer this question before they decide on their next location.

  5. 5 Ben December 23, 2008 at 8:07 pm

    Wow. Plenty of red herrings and even a straw man in your “surrebuttal”, but you really didn’t address the error of your original criticism of BestBuy’s plan as “flawed in the first place.”
    They didn’t get to the top on a flawed plan, and innovation in the business model doesn’t mean the old model was flawed. It means the business is smart enough to adapt and change the plan to meet changing conditions. The fact remains that BestBuy is growing, even though the economy is shrinking.

    I would not pretend that I am smart enough determine how many stores is enough to serve 300 Million people, or to second guess BestBuy’s current plan for store growth. And I certainly would not pretend to second guess the plan that got them to the top. To do so would be naïve, which was my original point.


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