A Better Best Buy: Will Its New Business Model Draw in More Shoppers?

Published
By Anne Marie D. Lee, dealnews contributor

Electronics superstore Best Buy has taken a hard tumble in sales and profits over the past year, casting major doubts and speculation over its future as a retail leader. Its problems stem from more and more consumers having become privy to cheaper online deals on electronics, and steadily over time, Best Buy has been losing sales and profitability. Its omipresent box stores have even become a showroom for online merchants. Meanwhile, fellow superstores like Target and Walmart are making it exceedingly difficult to rationalize a special trip to Best Buy, what with their competitive prices and similar omnipotence. But new changes in the company's business model, in addition to new leadership, aim to change shoppers' views of the superstore.

Expected Changes at Best Buy

Forbes reports that Best Buy is cutting costs and changing its business model in order to stay competitive this fiscal year. Since March, it has already closed 50 of its stores, and is shifting its product focus to mobile electronics. By 2016, Best Buy anticipates operating "some 600 to 800 mobile-only stores, up from 305 today."

Even more dramatic, Best Buy recently announced new CEO, Hubert Joly, to takeover in September. Joly is the former CEO of Carlson Companies, a leader in the travel and hospitality industry. Known as a turnaround expert, Joly has invigorated profit growth for two of Carlson's major brands: Raddison Hotels and TGI Friday restaurants. Whether he spin Best Buy's current dilemma remains to be seen, however one thing's for sure: Joly's background in hospitality may be a godsend in terms in improving Best Buy's most griped about inadequacy — poor customer service. Customer reviews for Best Buy customer service, either online or at a physical store fall far short of stellar and closer to irate. And don't even get people started on Best Buy's 24/7 tech support team aka the Geek Squad. Based on online reviews, if there's any continuity in terms of brand experience, Best Buy's is pure frustration.

Best Buy Still a Big Box Competitor?

Plummeting profits and customer service flaws notwithstanding, Best Buy is still one of the top five retail brands in the nation and can likely hold its own alongside Walmart and Target. Global brand agency Interbrand states that Best Buy's profit woes are mainly the result of a "soft consumer electronics market" and the brand is still "top-of-mind by 65% over competitors," as it claims more than 20% of the market share. What's more, Interbrand points to a recent buyout by Best Buy of its U.K. partner Carphone Warehouse as a major investment in the company's future growth in smartphone sales. This, along with consolidating its stores to 36,000 square feet, innovations, and new leadership, could save Best Buy from what some perceive as its inevitable demise.

Is Best Buy a lost cause? Or is it still the best place to find the in-store deals in electronics? Have you moved on to new retailers? Sound off in the comments below.

Photo credit: Interbrand

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11 comments
lophatjoe
I hope Best Buy goes down in flames and burns in the fiery pits of hell. I once bought an air conditioner from them and the rep tried to upsell the extended warranty. Stating that the a/c had "rechargeable gel packs" inside that usually go after about 2-3 years. I laughed in his face and told him he was full of shit. I still have the a/c 6+ years later with no problems.
September 1, 2012
hutuka
Unless I can get the cheapest stuff, I will never go there. Best Buy is just a place where I can try out stuff before I buy that's all. I think it's all like that to us deal-shoppers!
August 31, 2012
cigarbuff
Why is is that when retailers are struggling, they NEVER realize or admit that it might be because of service issues?  I avoid Best Buy because, like others have said, the service is typically TERRIBLE.  I, too, have had to practically tackle someone to try to get some help, only to find that they didn't know where an item (featured in their ad) was, or anything about it, nor did they care to find out.  This is lousy management, folks, and consumers today have too many other options.  If Best Buy is going to turn things around, they absolutely must fix this problem.
August 31, 2012
mr.ed
Their most important product is a service contract, which is mostly markup. Anything else in the store is a method toward the end of selling those contracts. Improving the customer experience that would make one more eager to buy the contract would be the best way toward profitability.
And that's why I never go there anymore. In our local BB, the "security" guy at checkout is actually a sales manager, there to try to persuade customers who already haven't done so to buy a contract.
August 31, 2012
shavashave
If they become competitive in their pricing, the old dog would quickly return to favor.  That said it is hard for physical stores to compete with websites that aren't required to collect taxes and that operate without the overhead.  I think people are willing to pay a little more to buy items in a store but like NYJ said above, anyone with a computer and a brain can find better deals online.  On a recent trip I noticed that their RAM was at or near p://newegg.com[/u prices where a few years ago I was shocked to find an $85 price difference (same RAM).
August 31, 2012
TiberiusX
I used to tell my wife I was going to Best Buy to visit all my stuff (stuff I hadn't bought from them yet), now I tell her I'm going to Best Buy to see what I'm going order next from Amazon, http://Buy.com.....etc.
August 30, 2012
skaets
Like to see them offer rebates again.But this time they should stand by The rebate and help the customer when they have rebate fulfillment house caused denials.
August 30, 2012
catski66
Rarely go to Best Buy anymore.... Every once in a while, I'll think that maybe I'll pay a bit more (than, say Amazon) and buy what I need at Best Buy.... They always disappoint me with their huge price differences... It's one thing if you charge 2, 3, even 5 bucks more for something, but $20 usb cables???? Come on, You can get these for $2 or $3 bucks online and they work fine...... It just seems like BB blatantly rips you off, if you're a smart shopper and know how much different electronic items go for...... I wanted a screen protector for my phone. One of the guys showed me what they have for my Thunderbolt..... I looked at the price..... $30?!?! So I asked the guy, how many do you get in the package...... Without any hesitation he says 1..... For a friggin piece of plastic? Come on.... If they go under, it's their own fault.....
August 30, 2012
Emily Dovi (DealNews)
You express a sentiment that a lot of consumers feel. But do you think you can teach an old dog new tricks, so to speak?
August 30, 2012
newyorkjew
Anyone with a computer and a few hours to do research can do much better than going to a physical Best Buy store to be ignored by store staff who know less about electronics than my eighty-eight year old mother.  Best Buy is an arrogant dinosaur whose time has come and gone.  
August 30, 2012
catfan
i just bought my new hp entertainment quad core laptop at best buy last week, its still loads better to get a laptop there than at target and walmart, cause they sell horrible sub-standard laptops. my laptop from best buy was $200 cheaper than online and has a review rating of 4.7 out of 5 from 70 reviewers, i love it and will probably buy my next one there too. 

4200
August 30, 2012