Does Best Buy live up to it’s name?
Can Best-Buy ever compete with the 5-star rankings and reviews that the online world give us?
Clearly, not.
Best Buy has a great and rich history. One of the best. It was ranked “company of the year” by Forbes (2004), and is considered one of America’s cultural assets, as well as a massive employer all across the country. Best-Buy is a landmark. When I was little, every visit to the US included at least half a day at Best Buy. I remember running around the store with my two sisters, looking for entertainment, while my father was spending hours with all these cool new inventions: Look at these great cameras! And laptops and here is a printer that can also scan and even has a fax machine…
Best-b uy had changed many faces since its foundation in 1966 as an audio specialty store. Best-Buy was forever known for its competitive prices, the large stores where you have everything from everything. Even today, when I make a purchase of electronics, I go to Best Buy first. I want to touch the different laptops, see how heavy they are, how sleek. What does the keyboard feel like? Which one will suit me best for school? Oh, and it comes with colors, can I see them please?
And then I go on-line. Why? I have more information there than I’ll ever have in any store. No sales rep will be able to consolidate thousands of user reviews into a 5-star ranking, and give me an exact summary of it. Reading an objective opinion of someone who bought and used the product has a thousand times more value of the opinion of a sales person that has never used the product and has a clear incentive to offload whatever inventory that is currently in the store. All the goods and bad in a product, even those that you never thought about, even those that appear only after time – they all come out in on-line research.
From a place that has everything to offer you, Best Buy turned to a single-purpose visit store: Can I just feel this camera one last time before I decide to buy it?
The “Amazon era” is killing it, and something has to be done, fast. The numbers speak for themselves: in the past 5 years Best-Buy delivered 20% decrease in revenues and 30% decrease in the gross income. All the efforts to cut expenses might show not-so-fatal results in the bottom line, but the real bottom line is clear: Best Buy doesn’t sell as it used to.
So what is next? That’s a good question. The future is similar to what I believe will happen to the traditional retail industry. It will slowly die, and replace itself with small showrooms in central locations (no one wants to drive all the way out of the city just to look at the Bose new speaker), extreme customer loyalty programs and promotions to keep the pricing competitive, and in the longer run – I would even assume there is no place for both Best-Buy and Amazon in this world. One will have to go and I have a fair guess on which one. I hope the economy is ready to absorb all these past-retail job seekers that are no longer needed.
Interesting perspective. Your point about going to Best-Buy to experience the product made me think that maybe it’s not too late for Best-Buy. If they can find a way to combine the online and physical world and deliver a great customer experience they might still be able to compete in the digital age.
“Showrooming” has been a major concern for most retailers whose products are offered cheaply and quickly online. Nevertheless, I still believe there is opportunity for brick and mortar stores like Best Buy to leverage the one asset they have over online retailers: physical products customers can try. No reviews or pictures can replace the experience of using the product yourself (which is why so many people still go to the stores before purchasing). This implies that significant foot traffic will continue to make it into the store, especially for more expensive electronic products. The key is converting that foot traffic into sales and limiting the amount of people that will then turn to buy it online. Best Buy continues to create value for customers, now they just have to capture it.
Its interesting to consider the impact that showrooming at Best Buy has on Amazon sales. Would Amazon electronic sales suffer if Best Buy ceased to exist and consumers were unable to experience the products in person to decide which ones they liked? It seems like if Amazon continues to have no physical presence that it would be in everyone’s best interest–Amazon, Best Buy, consumers, and electronic manufacturer–to figure out a way to allow Best Buy and Amazon to coexist. Best Buy also has an opportunity to diversify its revenues by charging manufacturers for prime retail space within the physical store. This model is similar to what grocery stores do and has been successful for Best Buy to date. While I agree that Best Buy needs to re-think their business and try to adapt with consumer preferences of showrooming then purchasing online, I also agree with Erika that it might not be too late.
I think Best Buy has a few things going for it, namely scale and dominant market position (implies importance to vendors and customers) as well as the omni channel consumer experience (brick and mortar and online) as mentioned in comments above.
Interestingly, the company has been doing quite well over the last two years under new management. They have been able to do a few things:
1) invest substantially in price to maintain market share
2) begin a mix shift of products to things like home appliances which aren’t as easily sold online
3) development of store-within-a-store concepts with companies like Samsung
4) improving their supply chain / rationalizing costs and figuring out where they may have a competitive edge
also, who would have guessed that they’d still be selling so many TVs??
In terms of long term sustainability, I think Best Buy will have to change the consumer’s mindset from a single transaction focus to a more long-term relationship. Not sure how they do it.