Good Bye Best Buy

January 11, 2012 by Dave Michels

Best Buy has been dead to me for years, and I feel really bad about it.

I bought a new TV on this last Black Friday from Best Buy. It was an exceptional deal. They had advertised it in advance so I had time to plot my strategy. I hit a few other online sites and Costco and none could come close to matching the deal. I went to Best Buy on Wednesday night (before Thanksgiving) to see the unit in question… it wasn’t on display and no one there new anything about it.

Outside the store, people were already lining up to camp-out. The store would be closing soon, and be closed all day on Thanksgiving, opening at Midnight Friday morning. The campers had about 32 hours to go. I didn’t need to camp. The TV I wanted would be available online during Thanksgiving day. No camping, no crowds, and a great deal. I bought the TV in a few clicks, got free delivery, and went back to my feast wondering how Best Buy could stay in business.

Evidently, I wasn’t alone. This month, Forbes ran a feature called Why Best Buy is Going out of Business… Gradually by Larry Downess. The article talks about the pressure from online retailers, but puts the majority of the blame on management. I’d say its more 50-50. Retailers have it tough – limited floor space, expensive locations, expensive labor, and a tax disadvantage are pretty tough obstacles. They are expected to provide a great local experience, yet it isn’t uncommon for customers to evaluate in-store products only to buy items online elsewhere.

It puts the retailers in a very difficult position as they have to compete as a local retailer and an online retailer. My TV experience above was effectively an online sale. I bought it sight unseen at a low price – no sales assistance. But had I bought it at Amazon, it would have had reviews, shipment tracking, and a better return policy. Also, more incentive to buy other items since I was getting free shipping already. Best Buy had hoped I would by a mounting kit and/or installation assistance, but I didn’t.

The Forbes article hits the issue that Best Buy failed to deliver product in time for Christmas as promised and offered a weak aplology – unacceptable behavior.

But Best Buy is not alone in its stuggle to survive- CompUSA, Circuit City, and local retailer Ultimate Electronics are also all gone – was it all because of bad service and management? I don’t think so – we are moving to an online econony and the retailers are struggling – outside of consumer electronics there’s Sears, Borders, and many more.

The fact is we do need local retail and we will lament the day Best Buy is gone – if nothing else it keeps Amazon honest.

I’ve noticed Costco does a good job of skirting the issue – Costco somehow gets exclusive model numbers with minor nuances that make comparison shopping harder. Costco also offers a better warranty and return policy as well as rebates to their AMEX customers.

I was an early adopter of Internet sales. I remember telling people about buying books on Amazon was preferable to … oh Borders. When I remodeled my house I bought the vast majority of the building supplies online – rock siding, bathroom fans, appliances, even closets. I saved a fortune in product and tax.

But today I am more concerned about retail. I see the empty malls, the sales tax shortfall damages, the higher unemployment, and the loss of competition. I cancelled my Amazon Prime, but it won’t be enough to save Best Buy or retail. In fact, I think I will go take a photo of the local mall for my grandchildren – I’ll tell them it was a Kodak Moment.

Poor Retail

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By Dave Michels

Dave is an independent analyst and founder of TalkingPointz which is focused on enterprise communications. In addition to this (free and paid) content on TalkingPointz, he contributes to industry sites, can be found at major industry events, and provides advisory services to vendors and financial analysts.

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Discussion

Fred Posner January 11, 2012

As much as I hate Amazon, I did get a Prime account. The video streaming to the Roku was nice, but the main reason was the included 2 day shipping. For me, it’s the selection. I’m not in a big city– Gainesville’s a small town. Selection here simply does not exist. By the time I factor in the travel costs of driving to Jacksonville or Orlando, it’s done. Even the time needed to go into a store here in town raises the price additionally. But you said Best Buy…

Best Buy will die because of service. People like me (and I assume you) will pay somewhat higher fees if there’s a value added; such as great customer service. I do this all the time with my business. We buy not the lowest price, but the best deal. if that includes knowledgeable staff that can make *good* recommendations, that knowledge is worth a price.

Best Buy does not provide a friendly or knowledgeable staff. So with that, unless I need something RIGHT NOW, I’ll get it online. Circuit City (I feel) lost to Best Buy because their staff was even worse.

Experience counts… people will pay more if they feel they get something out of it. Until Best Buy does that, there’s no reason to exist. Amazon for me isn’t the better price (a lot of times they’re more expensive than Buy.com or Overstock). For me, Prime makes a great process. Return is simple, easy. They make the shopping a good experience. Best Buy can do the same in retail… they just don’t.

Your example above is perfect. You have an ad. They don’t know anything about it… and the impression I got was that they didn’t care. You were annoying them.

Reply
Kris Kozamchak January 11, 2012

Your analysis of Best Buy and the store-front retail is very accurate and as time progresses, online will become even more relevant with the ability to purchase using a mobile device.

I found myself doing the same thing: going to a retail store to look at the product then purchasing online because the deal/price/selection is much better. Some retailers are able to balance the online and store-front sales and others are not.

I also agree with Fred that service does matter and some people will pay a little more for knowledgeable sales people or for guarantees which you may not get online. It will be interesting to see which businesses are able to stay in business and maximize trends while not losing too much on the bottom line.

Reply
1. Fred Posner January 11, 2012
  
  =)
  
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Michael Graves January 11, 2012

Dave,

Five or six years ago (!) I bought our first HDTV from Circuit City. It was a 42″ Sharp Aquos. It was at that point the first LCD of its size that could actually resolve 1080i. Circuit City had a policy that you could place your order online, and their best price, then pick up the item at a nearby store within a couple of hours….which is exactly what we did.

With such terms there’s little surprise that there’s no margin left in big items. However, they’ve been making large $$ on accessories. It kills me when they upsell someone to a $99 HDMI cable on the basis of “it ensures a better picture.”

Michael

Reply
1. Fred Posner January 11, 2012
  
  Exactly my point– no knowledge, or non-trustworthy sales “associates.” When someone at Circuit City (funny enough) told me I should get gold connectors for a HDMI cable, I asked him why. He told me gold was better. I told him, with the digital signal, there’s no better signal handling… you either get a signal or not. He told me again, gold was better.
  
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Michael Graves January 11, 2012

Fred,

He was kinda right. Gold connectors don’t oxidize, which means a better connection over time. But you were correct also, because that whole process has a lot more meaning in the analog world, especially at very low signal levels…like from a moving coil cartridge on an old skool turntable.

The really stupid part is that early HDMI chipset implementations were flaky. Some devises simply would not talk to some TV sets. Or they would for a while, then simply stop working one day. A friendly sales associate would happily sell you a better cable, like that’s going to help. If the chipset if faulty no manner of interconnection is going to overcome that fact.

Parts Express has HDMI cables for <$5 whereas you may not be able to find them <$30 and any common retailer.

And don't even get me started on jitter in digital audio signals where optical interconnects are concerned! Or fancy gold plated AC outlets for power amplifiers. Makes my blood boil!

Reply
Dave Michels January 12, 2012

I am not convinced raising the education of the employees is the right answer. It’s retail. Most of us do the research before going to the store. If we don’t value or benefit from the research, we don’t want to pay for it. Many that do value and benefit won’t pay for it either. Not when you can get it somewhere else for less.

It is a tough spot – retail won’t go away completely, but will continue to a smaller force. I think the the most powerful tool retail has easy returns. I think this is a bit part of why Costco does so well.

Reply