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Don’t Count Best Buy Out Yet

26 Apr, 2012 By: Thomas K. Arnold

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I tend to agree with a recent blog posting by NPD Group analyst Stephen Baker that maintains Best Buy, despite it's recent troubles, isn't headed for the scrap heap just yet.

Sure, the consumer electronics chain's big-box stores have become something of a showroom for price-sensitive web shoppers. They visit a Best Buy store to get a close-up, hands-on look at the merchandise, and then head home to place their order from an online merchant with better prices and no sales tax. Maybe they even place their order on the spot from their smartphone, while they're still inside the Best Buy store.

Ouch. But as Baker points out, this isn't a unique challenge in the CE space. It's happening across the broad spectrum of retailing, from furniture stores to clothing boutiques. The same goes for other forces that are putting a dent in brick-and-mortar spending, from the still-troubled economy and sky-high unemployment to high gas prices, which are leading to a decline in car trips.

What Best Buy has working in its favor is a recognizable brand, reputation for quality and, quite, quite frankly, the fact it is the last major CE chain standing.

If you think about it, there are always pairs of brand leaders: Home Depot and Lowe's, Staples and Office Depot, CVS and Rite-Aid, Walmart and Kmart. In strong economies, both thrive; when things are bleak one invariably emerges as the victor. Walmart already pretty much has vanquished Kmart, and if our economic malaise continues much larger I would expect the other weaker-of-the-two links (Office Depot and Rite-Aid, especially) to stumble and perhaps fall/fail, as well.

As for Best Buy, it's already won, having triumphed over the weaker link in the CE world, Circuit City, right around a decade ago. Do I agree with recent decisions Best Buy has made, like redesigning stores to mimic Apple and Verizon storefronts, turning over software management to a third party (Anderson Merchandisers) and placing discs in the back of the store, where the chance of an impulse buy goes way down? Not at all.

But I'm not at all ready to write off Best Buy just yet. First of all, as Baker correctly notes, the situation at Best Buy isn't nearly as dire as it's been made out to be in the mainstream press. The stores are still moving an awful lot of merchandise, at healthy margins.

Moreover, many of the problems the chain is facing can be easily dealt with — including a marketing campaign in which low online prices are met and matched, and an overhaul of store layouts by some smart merchandising consultants with years of experience in the retail trade. Heck, hire Baker, hire some smart studio marketer like Mary Daily or Lexine Wong or Jeanne Hobson - get someone in there who knows consumers and their habits and listen and learn from them.

But act quickly. The clock is ticking — and the worst thing Best Buy can do at this point is stand by and do nothing.

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