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A Call for Help

Best Buy’s problem? Consumers have other options and fewer needs.



A few weeks ago, I wrote in this space about how the mighty always seem to fall. There’s always a competitor with a better notion or better locations or a better, fresher store concept.

But one retail leader who has always seemed to bob with the tide, getting nothing but stronger, has been Best Buy. When people wanted price and lots of selection, Best Buy lined its stores with floor-to-ceiling racks and invited customers to pick it up and take it to the front. As electronics became more complicated, and people needed guidance and advice, the retailer replaced those racks with warm, domestic settings and filled the stores with eager, knowledgeable, well-trained staffers.

The problem confronting Best Buy now is not that consumers don’t know enough – it’s that they know too much. Last month, the sector leader announced some depressing third quarter news: sales down 1.1 percent, same-store sales down 5 percent, net income down 4.4 percent. And, as a result of that news, Best Buy stock dropped 18 percent in a single day, the biggest one-day decline in eight years. (It’s too early to report fourth quarter numbers – particularly those all-important holiday figures.)

And Best Buy isn’t losing market share to a sharp, new competitor. HH Gregg and RadioShack reported similar results.

No, Best Buy is apparently being hurt by the very thing that drove its success – an increasing consumer electronics technology that is fueling the sophistication and knowledge base of its users.

Today, people are doing their research online. The help and guidance of the Best Buy blue vests, or even the Geek Squad, are not as impactful as they once were. And Best Buy’s well-known selection and merchandise presentation have become a conduit for tire-kickers who go into the stores, assemble the information they need, and then – right there in the store! – surf the web on their smart phones for better deals.


There’s another thing going on, I believe. The next time you’re in someone’s home, ask how many digital flat-screen TVs there are. Four? Five? Six? Don’t be surprised if it’s more like a dozen! And ask how many family members are toting cell phones. Maybe not the baby in the crib, but most of the rest, I’ll bet, from fifth-grader to grandma.

The fact is, how many new items does anyone need? A few years ago, everyone felt the need for a digital TV, as the analog world was being cut off and a new cell phone that did all these amazing things. Frankly, I believe we’ve topped off. Even the fabled American consumer has maxed out his and her gadget needs.

None of which is good news for Best Buy.



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