Best Buy Pushes All-In on Web Sales, Starts to Fold on Their Storefronts
posted Sunday Apr 10, 2011 by Nicholas DiMeo
Occasionally Best Buy will come up with a good idea but most of the time they will copy from other companies because the ideas they come up with internally usually produce poor results. This week, Best Buy has announced that they've ignored the success of their web sales for far too long and are going to restructure to a new business model that tailors to web sales, to compete with Amazon.com.
Additionally, Best Buy will also look to bring more selection to their web-only inventory and will lower the prices on those items, clearly to match the competition in order to not fail on another idea. The company has also said they will be shrinking the footprint of their storefronts as the leases expire, more than likely due to placing emphasis on the high dollar, low margin end-products like their Magnolia TV selection. Best Buy has also said they will be considering closing some of their larger stores completely.
Want to know more on how this will all play out? Click the break.
Best Buy America president Mike Vitelli said in a call that they will be offering "very aggressive" prices on a lot more of their web-only product as they have finally realized that web sales are driving a lot of their customers to the stores for in-store pickup. 40 percent of BestBuy.com sales are picked up in store, and over 80 percent are for TVs. He also said that this move is happening because of price-check applications on mobile devices, which make them look more expensive. He says those apps don't show the value-added (read: overly priced and unneeded) promotions like their bundled offers, loyalty program discounts and extended financing.
Their CEO still believes in having a presence, albeit a smaller one, in physical store locations to place themselves apart from the online-only companies. CEO Brian Dunn says that customers can feel a proper sales consultation and pickup online orders easier with physical locations. This may be true for some stores, but for Best Buy, their employees, from management down, are their downfall that will inevitably lead to their demise. This is why Dunn says they will "redefine" the big-box store footprint and "minimize square footage requirements".
There is a reason I doubt not only the success of this change, but doubt their reasons behind it, however. Best Buy claims to restructure their internal space to better suit newer products that customers want. While this may be true, they are going the route of everyone else and putting a lot of their money into the tablet PC business. That statement in itself leads me to believe that this move will not just fail, it is a move similar to that of Circuit City before the company ended up in Chapter 11, and eventually into bankruptcy, closing their storefronts for good and selling their brand off to Systemax. They are moving along with the pack, rather than setting themselves apart from it.
Will this work? Do you think Best Buy will end up lasting another five years with their slightly altered business model? Do you even shop at the big-box retailer? Tell us about it in the comments.