I have only visited Best Buy Intergalactic HQ once, to meet Geek Squad Chief Inspector Robert Stephens, but it reminded me instantly of the time about 40 years ago when my girlfriend and I picked-up her father from work at Bethlehem Steel. Her dad was a salesman and paid sales commissions but — like every other Bethlehem Steel worker — he punched a time clock every day. I don’t think they punch time clocks at Best Buy, but it has that same 20th century industrial feel that told me in 1973 that Bethlehem Steel was doomed. And Best Buy may be doomed, too, announcing last week the token closure of 50 stores, hinting at a shift to selling only mobile devices, but telegraphing loudly that the company at this point really has little idea what the Hell it is doing.
Best Buy sales have stagnated. Some pundits feel they have held onto too much real estate for too long. Some feel they should drop most of their consumer electronics and focus on mobile products. This would make Best Buy exactly like Radio Shack without the advantage of the Shack’s franchise model. Radio Shack would not be in existence today if it didn’t sell cell phones. But with every mobile network having scores of retail locations, how does “focusing on mobile” help Best Buy make more money?
I can remember a time when Best Buy was a good place to get computer accessories, but no more. Best Buy will charge me $20 for a cable I can buy anywhere else for $5. I had to go to Best Buy recently looking for an Ethernet card. They had exactly one card in stock and it wasn’t cheap.
Appliances are cheaper at Lowes or Home Depot than at Best Buy. It’s the same story for TV’s at places like Walmart. Best Buy still has an excellent selection of music and videos, but their prices are not competitive. That’s why same store sales are falling.
Best Buy’s tumble started when CompUSA and Circuit City went out of business. Normally something like that should have been a good thing for business, but Best Buy totally blew it. Best Buy killed both of those other electronics retailers, but then they didn’t keep on doing what they had been doing so well. They replaced their mid range lines of consumer electronics with low cost, house brand junk. They kept their name brand lines, but only stocked the high end stuff and priced it at a premium, abandoning the middle market that had been their traditional strength.
Best Buy has a crappy Internet sales operation. Every competitor’s site is better than Best Buy’s. Best Buy still hasn’t mastered the concept of gift on their website. If I sent you a gift via bestbuy.com, you would not know who sent it. If I wanted it gift wrapped, or a card put on it, forget it. Amazon has had these features for how long, 10 years?
Part of Best Buy’s problem is Information Technology. In Minneapolis, Best Buy is known as a body shop. While they have something like 1000 IT workers, most of them are temporary contractors. They come and go. The number of IT people who are Best Buy employees is very small. Too few to effectively set direction or do things well. Best Buy depends on an army of consulting firms to do its IT planning and projects. They do what they are asked to. Unfortunately there is a big disconnect between what the business really needs and what IT is doing. It is not the army of contractors’ fault. They can only do what they are instructed to do. Their suggestions and opinions are not welcome. There are too few real Best Buy employees with a vested interest in the business to give direction and provide leadership.
Shopping at Best Buy last Christmas was a joke. Best Buy corporate was upset people were using their smart phones to do price comparisons in the stores. Think about that: Best Buy was upset that their customers were too smart, that they actually used the sort of technology Best Buy purported to sell. Worst of all, Best Buy completely missed the simple point that their prices were too high.
Best Buy’s ability to sell premium products at a premium price after CompUSA and Circuit City went under was a temporary thing, In technology prices always go down. You can’t plan on charging the same high price for something year after year.
Best Buy thought that with its main competitors on the ropes and the Geek Squad bringing in service business they could control the market through size alone. But you never control the market no matter how big you are. Even Walmart knows that.
That smug attitude is what killed Bethlehem Steel, too, where they thought the secret to employee productivity was time cards, not brain cells, competitive prices, and great new ideas.