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NPD: Best Buy’s Demise a Fallacy

25 Apr, 2012 By: Erik Gruenwedel

No. 1 consumer electronics retailer Best Buy Co. has taken its share of hits recently, including a $1.7 billion fiscal loss and sudden departure of CEO Brian Dunn, but its market status is sound and growing, an analyst said.

Stephen Baker, VP of industry analysis with The NPD Group, said the challenges Best Buy is facing — the economy, changing consumer purchase habits, value propositions and ecommerce — are the same challenges facing any retailer in any market. Baker said consumer electronics and retail technology have evolved from luxury items to modern-day necessities where projected volume growth has been replaced with flat sales and declining categories such as television.

“[Best Buy’s] challenges today are not because they haven’t seen the change coming, or because they haven’t been preparing for it, but instead because of how dramatically and swiftly the changes happened over the past year,” Baker wrote in an April 25 blog.

Indeed, much of Best Buy's loss in its most recent fiscal period was due to write downs of overseas operations. And Dunn's resignation appeared tied more to personnel matters than fiscal results.

Baker said Best Buy and other big box retailers are making changes, including shuttering unprofitable stores and downsizing retail footprints in existing locations. Throughout the upheaval, Best Buy continues to maintain — and grow — market share, including generating 19% of consumer technology hardware sales in 2011, identical to 2010. Best Buy also is the most successful brick-and-mortar retailer online, gaining one point in revenue share (22.4%) among retailers on the Web, according to NPD.

Indeed, Best Buy’s market share in computers is 10 points higher than any other outlet that sells Windows notebooks and generates twice the revenue from those sales than any other retailer, according to Baker. Best Buy is the No. 1 non-manufacturer seller of Windows notebooks on the Web and gained almost two points in market share in 2011. Best Buy is the largest retailer of Apple notebooks, selling one in every four notebooks in the United States, a number that is six times larger than any other Apple reseller.

In the challenged TV market, Best Buy’s stores gained one point in market share in 2011. Best Buy grew revenue share as well and accounted for nearly one-in-three dollars spent on flat-panel TVs. In the fast-growing TV segment of screens 50 inches and larger, Best Buy’s market share was 31% and more than three times higher than any other retailer. On the Web, Best Buy gained 1.5 points of market share in TV sales in 2011.

Finally, Best Buy sold more tablets than any other retail store or website in 2011. Best Buy saw its unit share of the cellphone sales grow by 25% in 2011 and its share of smartphone sales increase by 50%. Best Buy sold one in four smartphones sold through multicarrier, multibrand stores in 2011, an increase of 50%. In addition they were the single-largest non-carrier outlet for smartphone sales.

“While there are challenges ahead, Best Buy remains the dominant retailer and in the best position to succeed in the coming years,” Baker wrote.



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