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Best Buy, the end of big box and the future of retail

Best Buy (S bby) said Thursday that it would close 50 stores, while also detailing plans to expand the number of stores with a different concept where customers can go to try out devices and talk to expert staff members; it will boost worker training by 40 percent. The shift in strategy is one that will echo across much of retail in the future, as the web and mobility change how consumers want to buy goods — especially tech goods in these early days.

But as Apple (s aapl) or Best Buy’s smaller store concepts show, even as big box stores may suffer, brick and mortar retail can succeed. Even Amazon is purportedly thinking about a retail strategy as it expands into making tablets with its Kindle(s amzn) device. As is the case elsewhere, retailers are finally seeing that the disruption of the web doesn’t have to put them out of business, it just means they need to change their business. Here is how our shopping experience may change:

Hands on devices and smart people to tell consumers about them: For consumers, buying everything from smartphones to a mattress can be complicated and expensive, so making sure the item is there so the consumers can touch it and also ask someone questions about it is part of the new model. The Apple store does this well, but so do the mattress stores dotting our strip malls or even high-end food markets.

Square footage devoted to education, not bulky inventory and displays: Real estate is just one of the required costs of doing business in the real world, so stores need to make their square footage count. Maybe it means that all clerks have the ability to check a customer out on a portable device as opposed to making room for checkout stands. Perhaps it’s stocking fewer items and relying on a just-in time inventory management or even sending a customer to the web and delivering the item the next day. The shift will be in thinking of a store not as a repository of goods for sale, but more as a place to win buyers over to your products.

Lower margins make retail’s future murky: Mobile shoppers that do comparison pricing mean that most retailers will have to lower their prices to compete with WalMart (s wmt) and the web. But that could mean margins of less than 4 percent, making ideas about a better trained workforce or an Apple-like experience hard to fathom. As retailers find themselves in this spot, there are several ways things could play out. There’s the Apple example of having stores become an extension of your brand as fashion houses and mobile phone retailers do. There are ways to play with exclusivity of certain items or to control your supply chain to boost margins, but that’s where a lot of the innovation will lie in the future.

As for those empty Big Box shells dotting the landscape. Maybe we can turn them into data centers.

13 Responses to “Best Buy, the end of big box and the future of retail”

  1. BL Frierson

    Per Jon/Rip/Nick/lolo… Mr. Dunn got canned for screwing the help. While you all may be correct on minor points. The fact remains. Management at all levels of this corporation need to be trimmed. You are defending a company that has serious problems and an uphill fight against both a more dollar savvy consumer and a changing retail landscape. Other companies can easily poach their customers while they are reeling.

  2. Eric Lindgren

    Best Buy employees are the most apathetic and least knowledgable of any retail store I’ve ever been to. If you disagree w/that, you sir, are a moron.

  3. John Proffitt

    Best Buy is following the well-worn path to extinction trampled by Circuit City, CompUSA, and others. The plan works like this:

    You build big stores and do a good job for a while, with good discounts and relatively good service and selection. But then Wall Street comes calling, asking for higher and higher profits. So you startup a high-pressure extended warranty game. You pay staff less or care less about the quality of staff you get, and when they arrive, you fill their heads with lies about competitors and encourage them to sell stuff with tiny cash bonuses for tricking you into buying stuff. Your prices, which used to be reasonably discounted, go up — sometimes even above MSRP. You create a tiered pricing system — you list it online at one price, a higher price in the store, and customers only get the lower price if they “catch” us in the act. You create crazy rebate games and tinker with return policies. You do everything that is good for Wall Street and nothing that is good for the customer.

    Then Wall Street figures out you’ve had a good run, they short you to make some money on your way down, then you’re out of business or sold for scrap.

    And all the while you can comfort yourself in the knowledge that it was all Amazon’s fault, that there was nothing you could do. You tell yourself that sure, Apple can make a killing in retail, but they’re just lucky — they didn’t really work at creating their retail experience, or their customers are all idiots anyway.

    Yep. CompUSA and Circuit City? Welcome your new cell mate. And check him for an extended warranty.

    • Jim Karras

      Completely, One Hundred Percent, agree.

      In retailing, or really any large successful business on the upswing, if Wall Street comes calling, either
      a. ignore them, and stay private, or,
      b. invite them in, but keep them at extreme arms length, ignore what their analysts tell you, and focus on running your business right.

  4. BL Frierson

    I’m having a really hard time feeling pity for this corporation. No price matching, limited knowledge of technology and trends, lack of synergy between retail and cyberspace and sales associates chasing after commission instead of getting you in and out the door with your product in hand and a smile on your face. Shall I start on Geek Squad? I make more money off working class referrals because some big box retailer sold them a service package that doesn’t include a service. I give them five years at most. I can’t wait personally because I buy all my hardware at a local wholesaler at typically 60% off MSRP. Their Management Team should be shot. Unfortunately, only their workers will suffer.

    • Wow, you might benefit from doing just a little research. 1. Best buy has a 30 day price match guaruntee far exceeding the limitations of their competitors
      2. The most knowledgeable staff you can find in retail, this can be argued of course (but aside from constantly seeking to improve the employee knowledge base the article clearly states that they are adding 40% to existing training protocols)
      3. Best buy abandoned commission well over 10 years ago
      4. And maybe you should get started on the geek squad

    • Three things I must point out:
      1. There is a price matching policy.
      2. As far as synergy goes, Best Buy just hired a former Starbucks executive as a SVP to assist in the deployment of a seamless user experience in the utilization of the current system applications. In fact, this week, some enhancements were already added to and their order management systems.
      3. Best Buy has been noncommissioned labor since 1988.

  5. Kevin Darty

    Oh hey, by the way, before Best Buy came around there were places like “Sound Advice” that had a more limited stock but designed to provide a good place to test out gadgets and they had “experts” on hand to answer any questions. Places like that all went out of business as the experience going there was good but the prices were high and people moved on to doing their business online. Best Buy appears to be wanting to adopt the same model. Somebody should give them a history book.

  6. Kevin Darty

    Maybe they should focus on being the “Best” Buy in town. Great place to browse around in but buying online will always get you the “best” price.