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Best Buy to shutter 50 stores as Apple's iPad strains margins

post #1 of 111
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Electronics retailer Best Buy plans to close 50 stores and cut $800 million in costs, in response to low margins in the mobile computing space from devices like Apple's iPad.

Best Buy's plans also call for the company to cut about 400 positions in its corporate and support structure, allowing it to reach $250 million in reductions this fiscal year, The Wall Street Journal. The company currently has about 1,100 full-fledged retail stores, but about 50 of those will close as part of the reductions.

The report noted that the popularity of Apple's iPad has contributed to Best Buy's struggles, as the device carries "relatively low margins" for the retailer. As a result, its mobile computing sales business has seen "strained margins" of late.

Best Buy reported a loss of $1.7 billion for the quarter that concluded on March 3. It plans to remodel some of its key stores in what it calls a "Connected" format designed to sell smartphones and push video and broadband services.

The company also plans to reduce the footprint of its "big box" stores by 10 percent in the coming years. It has also increased its online offerings in an effort to better compete with retailers like Amazon.com.

Last week it was revealed that Best Buy sells nearly as many iPhones in America as Apple's own direct sales. A poll of iPhone buyers conducted recently found that Apple's retail stores and online store accounted for 15 percent of all U.S. iPhone sales, while Best Buy represented 13 percent of sales.




Best Buy's iPhone sales are significantly higher than Apple's other retail partners, which are Walmart, Target, Radio Shack, and Sam's Club. Together, they were found to account for just 3 percent of iPhone sales in the U.S.

Many Best Buy locations have dedicated Apple sections where other products like the iPad, Macs, and the Apple TV are sold. The "store within a store" concept is found at over 600 Best Buy locations, representing more than half of its retail outlets in the U.S.

[ View article on AppleInsider ]
post #2 of 111
As usual, blame Apple. Why not blame the rest of the computing industry for constantly coming out with complete garbage that no one wants to buy?
post #3 of 111
If Apple's isn't allowing enough of a markup for Best Buy to realize an appropriate profit, then they should shutter the dedicated Apple area. I don't think Apple is too concerned whether they have a large retailer presence outside of their own company stores and on-line anyway.

Best Buy isn't going to be successful, at least in the near-term, in convincing Apple to share more of the device profits so why fight it? Really no advantage to Apple in allowing a larger discount as they'll sell everything they planned to anyway.
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post #4 of 111
IPad is a tiny fraction of Best Buy's sales. There is no way that the iPad is "straining" anything.

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post #5 of 111
Quote:
Originally Posted by jd_in_sb View Post

IPad is a tiny fraction of Best Buy's sales. There is no way that the iPad is "straining" anything.

Furthermore, people who come in to buy an iPad have, on average, more money than the average shopper. Apple is attracting well-heeled customers to Best Buy.

I agree that it's ridiculous to blame the iPad. If they can't make money on the iPad, then just don't sell it. They would still have the other 999,999 products in their store to sell.

Furthermore, even the 'facts' presented here are distorted. While it may be true that Best Buy sells nearly as many phones as Apple Stores, there are something like 8 times as many Best Buy stores, so it's not that many phones per store.

Finally, if you go to the original article, it's clear that many other factors are getting the blame:
http://www.reuters.com/article/2012/...9?feedType=RSS
- Total sales are down across the board. Forget margins, their sales are off - which will hurt profits
- Best Buy stores are increasingly serving as free showrooms for online retailers. That is, customers view the product at Best Buy and then buy it online.
- Best Buy offered deep discounts across the board last quarter - presumably to try to bring in additional sales to address the previous point
- Best Buy big box stores are too large and expensive. Plans are to close 50 large stores and open 100 small ones.

Note that in the Reuters article, the iPad isn't mentioned at all.
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post #6 of 111
LOL Really?
This is a nice joke, at least the iPad fly out of the shelf compared to the android product they have to put on sale. If their mobile division sucks then they can get rid of it and just sell Apple products and will have a small profit.

post #7 of 111
The iPad might not offer BestBuy great margins but the killer is online competition. Why go to a BestBuy store when Amazon is usually cheaper?
post #8 of 111
Best Buy's sales have been steadily decreasing for a while now. This is not at all the iPads fault. In fact, the fact Best Buy can sell the iPad, and other Apple products and accessories for that matter, has probably increased revenue.
post #9 of 111
The problem is store saturation. There are just too many in close proximity. Do I really need 4-5 within 10 miles of me?

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post #10 of 111
Quote:
Originally Posted by sflocal View Post

As usual, blame Apple. Why not blame the rest of the computing industry for constantly coming out with complete garbage that no one wants to buy?

Because the truth doesn't get hits.

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post #11 of 111
Welcome to Circuit City.

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post #12 of 111
What an atrocious headline that's almost an outright lie.

Best Buy took a few one time charges this quarter leading to the loss (otherwise it was positive) and intends on restructuring and opening 100 small mobile focused stores, in addition to closing the 50 underperforming stores. Best Buy's own report attributed the fortune change to the shift of buying big electronics online and a consumer shift to mobile devices. Apple was barely a footnote in the whole thing.
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post #13 of 111
Quote:
Originally Posted by jragosta View Post

I agree that it's ridiculous to blame the iPad. If they can't make money on the iPad, then just don't sell it.

They need it to bring folks into the store to get them to buy other things

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post #14 of 111
Quote:
Originally Posted by ardrilling View Post

Best Buy's sales have been steadily decreasing for a while now. This is not at all the iPads fault. In fact, the fact Best Buy can sell the iPad, and other Apple products and accessories for that matter, has probably increased revenue.

The bolded part is not true:
http://retailsails.com/monthly-sales...ry/bby/annual/

Best Buy's total sales have increased every year for the last 5 years. Same store sales were down last year, but that was only the second time in 5 years.
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post #15 of 111
Quote:
Originally Posted by charlituna View Post

They need it to bring folks into the store to get them to buy other things

Then they should stop blaming the iPad for their problems and cite it as part of the solution -- which, if you ignore the flamebait AI headlines, is closer to the truth.

There's nothing in their official release which blames the iPad. In fact, they're building 100 smaller stores with an emphasis on mobile devices, so they clearly see mobile devices like the iPhone and iPad as part of the solution rather than the problem.
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post #16 of 111
Quote:
Originally Posted by AppleInsider View Post

[...] in response to low margins in the mobile computing space from devices like Apple's iPad.

perhaps it's also in response to the fact that they have no idea how to deal with customers. their policies and their customer service is abysmal.

as others have said, i do hope they keep their stores open ... i like to look at stuff before i buy it elsewhere.
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post #17 of 111
Quote:
Originally Posted by jd_in_sb View Post

IPad is a tiny fraction of Best Buy's sales. There is no way that the iPad is "straining" anything.

yes... but.

The iPad ecosystem, which includes AppleCare, AppStore, iTunes, iBooks, NewsStand, all the rest of these directly compete with the other shelves in Best Buy, including their Warranty, SW sales, Music Sales, Movie Sales, Monitor Sales, etc, etc etc.

In short, iPads don't feed the rest of the store, like PCs do, or even TVs do.

There are very low margins on PCs/TVs, but the fact that you buy the software, the printer, as well as buy the music (CDs), Movies (DVDs), accessories, powerstrips, et al. iPads do not drive that level of 'upsell' purchase.

Heck, I'm thinking the biggest ticket items you buy for an iPad would be an AppleTV and/or a smart cover. Both of which are likely having Apple controlling the same margins as the iPad. In short, you're not making it up on Margin.

But I agree, BestBuy is competing poorly online, and on their own brands, which drive profits now. I worked for BestBuy.com at one point, and it's was argued at the time, as a 'loss leader' or a 'very expensive ad site' for driving price comparisons against amazon. The issue is Amazon is a 'buy anything site, and with free shipping, and it's competitive pricing with it's virtual storefronts, Best Buy is trying to subsidize the big-box stores to no avail.
post #18 of 111
I'd think online shopping is the reason for B&M stores are struggling. Now Best Buy did start to offer better customer service a couple years ago as a way to offset their inability to compete with online prices, and while a slid effort, was bound to fail. The stores are simply too large to offer the intimate shopping experience needed to make it work.

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post #19 of 111
Quote:
Originally Posted by Gatorguy View Post

If Apple's isn't allowing enough of a markup for Best Buy to realize an appropriate profit, then they should shutter the dedicated Apple area. I don't think Apple is too concerned whether they have a large retailer presence outside of their own company stores and on-line anyway.

Best Buy isn't going to be successful, at least in the near-term, in convincing Apple to share more of the device profits so why fight it? Really no advantage to Apple in allowing a larger discount as they'll sell everything they planned to anyway.

They just point out Apple because, as usual, they're so large and well known. Retail is a low margin business overall. It always has been, at least for the past 40 years or so. Long gone are the days when department stores could charge list prices and premium service charges. People now just go for the lowest price.

As we know, BB isn't exactly a place people love to shop in. It's more likely that their inefficiencies and the failure of other products to take off are causing this problem for them. That, and the growth of Amazon. Why go into a store when you can buy something from the comfort of your own home?

We look at the very low margin Tv business, the failing of the DVD and BlueRay business's, the disappearance of CD's, and the drop in HDD and memory pricing as being contributors to their problems.

Does anyone really think that companies like Samsung, Dell, HP and others give BB higher margins than Apple? If you do, then you're dreaming.
post #20 of 111
Best Buy does not need to make money on Apple products. The other day I was in a hurry to get a new screen protector for my iPhone and stopped at a Best Buy to pick one up. When I was told it costs $29.95 for a single protector, I told them no thanks and bought a 5 pack on Amazon for $5 and waited a few days to get it.
post #21 of 111
Maybe if BestBuy didn't pester people while browsing the store then they'd do better. You can't walk 2 feet without someone saying "Can I help you with something?". Then when you do ask a question they don't know their @ss from a hole in the ground. Also, if they didn't con people into their stupid overpriced services they may do a little better as well. I cannot stand blacktie protection and the other crap they pull with people with their antivirus services, etc, etc.

The only thing I go in Best Buy for is to look at a product and then I go buy it elsewhere.

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post #22 of 111
I don't feel sorry for them one bit. Instead of positioning themselves with a well educated staff to sell premium products, they sell computers at cost, including Apple and nickel and dime you out the door trying to sell you surge protectors and warranty plans.

Consumers are getting smarter and know how to research products on their own and purchase from the lower price available. Customers don't mind paying MSRP at a local store if they experience and quality of service is there, which is exactly why Apple has been so successful.

My girlfriend almost went to work for Best Buy corporate, she talks about all the time how she dodged a bullet. They are laying people off left and right and people are never getting raises. Poor corporate culture and it shows in their stores.
post #23 of 111
Best Buy to shutter 50 stores as Apple's iPad and 50,000 other pieces of low margin pc shit strain margins

There... fixed the title.
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post #24 of 111
If it weren't for all of the employees, I would love to see every single one closed down. Their customer service is one of the worst out there in the industry. I would rather pay more than have to go to a Best Buy. You know, now that I think about it, I don't care what happens to the employees. They are a good deal of the problem.
post #25 of 111
Quote:
Originally Posted by massconn72 View Post

If it weren't for all of the employees, I would love to see every single one closed down. Their customer service is one of the worst out there in the industry. I would rather pay more than have to go to a Best Buy. You know, now that I think about it, I don't care what happens to the employees. They are a good deal of the problem.

That's a blanket statement that doesn't apply everywhere. We have two Best Buy stores in my town. One of them is fantastic - well stocked, clean, great customer service, and no pestering from the sales people. It's always full of customers and they have several registers going all the time. The other one is the exact opposite.

It really comes down to the store manager. Best Buy's problem is at least partly failure to weed out the lackluster managers.
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post #26 of 111
If the Best Buy store in San Rafael, CA is any indication, Best Buy is losing revenue because their stores have gone seriously downhill in recent years, not because their iPad margins are too low. Much of their inventory is low-end or out-of-date, and their prices (which used to be very competitive) are nothing to write home about. My local Best Buy frequently advertises "midnight madness" sales that are a joke. Good Guys and Circuit City have already found out how hard it is to compete with the likes of Amazon unless you really stay on top of your game. Best Buy will almost certainly go down the tubes if they don't wake up soon.
post #27 of 111
Quote:
Originally Posted by sflocal View Post

As usual, blame Apple. Why not blame the rest of the computing industry for constantly coming out with complete garbage that no one wants to buy?

Maybe this AI author is blaming the iPad but other news outlets place online retailers like Amazon as the cause. People use Best Buy stores to try out, compare, touch... and then go and buy the product from Amazon. The question is what will people do if they find they have to buy online without having played with the product first. My gut feeling is that Amazon will see a giant leap in returns.
post #28 of 111
Quote:
Originally Posted by Pooch View Post

perhaps it's also in response to the fact that they have no idea how to deal with customers. their policies and their customer service is abysmal.

as others have said, i do hope they keep their stores open ... i like to look at stuff before i buy it elsewhere.

Exactly. Their customer service is horrendous, their salespeople are often snotty and patronizing, and their prices are usually beaten online. I've had enough of bad experiences with them, and I will not be returning to either their brick and mortar or online stores.
post #29 of 111
Apple is not mentioned once in Best Buy's earning release. It is only mentioned (in passing) in the WSJ article this post links to at the top

Apple is going to continue to have a huge negative impact on Best Buy. Not just iPad sales, but all kinds of merchandise including notebooks, point and shoot cameras, camcorders, GPS units. And, wait until iTV comes out. The downward spiral for BB is just starting

And, Best Buy continues to offer aisles and aisles of movie and music on optical... That is all going away in the next few years. Led by Apple iTunes

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post #30 of 111
Quote:
Originally Posted by jragosta View Post

Best Buy's problem is at least partly failure to weed out the lackluster managers.

You may be right, but that's a BIG problem.
post #31 of 111
Quote:
Originally Posted by melgross View Post

They just point out Apple because, as usual, they're so large and well known... Does anyone really think that companies like Samsung, Dell, HP and others give BB higher margins than Apple? If you do, then you're dreaming.

So who's idea was it to put the articles focus on Apple if it's outright false? AI? WSJ? Best Buy? That's a curious thing to do.
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post #32 of 111
Quote:
Originally Posted by mstone View Post

Welcome to Circuit City.

I think of CompUSA that folded before CC.

Why buy an iPad at BB when you can go to Wal-Mart or Sams Club and get an iPad with a 90 day return policy?

Have you ever tried to take anything back to BB?


IMHO it was the BB clueless purchase of a large stock of Android that never sold and had to be dumped at fire sale prices that killed their profit margin.

Now it remains to be seen if they will repeat it with Microsoft's Nokia Phone?

Compared to many mall Apple stores about the same size of a Radio Shack, BB is too large and unfocused. Also the most of the world now knows that the Geek Squad is a high tech joke meant to bleed the customer.
post #33 of 111
Quote:
Originally Posted by jragosta View Post

Furthermore, people who come in to buy an iPad have, on average, more money than the average shopper. Apple is attracting well-heeled customers to Best Buy.

I agree that it's ridiculous to blame the iPad. If they can't make money on the iPad, then just don't sell it. They would still have the other 999,999 products in their store to sell.

Furthermore, even the 'facts' presented here are distorted. While it may be true that Best Buy sells nearly as many phones as Apple Stores, there are something like 8 times as many Best Buy stores, so it's not that many phones per store.

Finally, if you go to the original article, it's clear that many other factors are getting the blame:
http://www.reuters.com/article/2012/...9?feedType=RSS
- Total sales are down across the board. Forget margins, their sales are off - which will hurt profits
- Best Buy stores are increasingly serving as free showrooms for online retailers. That is, customers view the product at Best Buy and then buy it online.
- Best Buy offered deep discounts across the board last quarter - presumably to try to bring in additional sales to address the previous point
- Best Buy big box stores are too large and expensive. Plans are to close 50 large stores and open 100 small ones.

Note that in the Reuters article, the iPad isn't mentioned at all.

Totally agree with you.

Their sales / profits are down partly as part of the 'post PC' and even post 'small digital camera' era thanks to iPhones and iPads.

I would also add anecdotally that on several occasions I've tried to buy Apple products in Best Buy and simply given up trying to get an assistant and walked out and gone home to order on line from Apple.

Their spin on the blame is akin to the famous lines from Alice in Wonderland where it was explained that "To see what I eat isn't the same as I eat what I see!"

Quote:
Originally Posted by 4phun View Post

I think of CompUSA that folded before CC.

Why buy an iPad at BB when you can go to Wal-Mart or Sams Club and get an iPad with a 90 day return policy?

Have you ever tried to take anything back to BB?


IMHO it was the BB clueless purchase of a large stock of Android that never sold and had to be dumped at fire sale prices that killed their profit margin.

Now it remains to be seen if they will repeat it with Microsoft's Nokia Phone?

Compared to many mall Apple stores about the same size of a Radio Shack, BB is too large and unfocused. Also the most of the world now knows that the Geek Squad is a high tech joke meant to bleed the customer.

You might have something there on the Android tablets. Anyone have data on what that fiasco cost BB?

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post #34 of 111
Quote:
Originally Posted by Pooch View Post

perhaps it's also in response to the fact that they have no idea how to deal with customers. their policies and their customer service is abysmal.

as others have said, i do hope they keep their stores open ... i like to look at stuff before i buy it elsewhere.

You beat me to it. I stopped shopping there a long time ago for that same reason. And while I'll consider one bad experience an exception, multiple bad experiences at different stores is an indication of a bad habit/policy.

My only question is this, since carrying Apple products is such a problem is Best Buy better just off selling their remaining stock of iPads, iPhones, etc. or throwing them all in the dumpster out back?

Will they survive long enough to clear the shelves and go back to selling the ever popular $100 and up Monster Cable and accessories?
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post #35 of 111
I can't stand Best Buy, their BS sales tactics nor their insanely high prices. Let them crash and die, the world would be a better place.
post #36 of 111
Quote:
Originally Posted by AppleInsider View Post

Electronics retailer Best Buy plans to close 50 stores and cut $800 million in costs, in response to low margins in the mobile computing space from devices like Apple's iPad.

Best Buy's plans also call for the company to cut about 400 positions in its corporate and support structure, allowing it to reach $250 million in reductions this fiscal year, The Wall Street Journal. The company currently has about 1,100 full-fledged retail stores, but about 50 of those will close as part of the reductions.

The report noted that the popularity of Apple's iPad has contributed to Best Buy's struggles, as the device carries "relatively low margins" for the retailer. As a result, its mobile computing sales business has seen "strained margins" of late.

Let's see, if in fact it's the iPad that's "straining their resources", then the answer is simple...stop selling iPads. Then again, it's a draw into the store and you know the sales associated will offer "accessories" with higher profit margins.

And it's unclear what, if any, correlation exists between reducing corporate staff and the sale of Apple products at Best Buy. Work smarter and more efficiently, less complaining and finger pointing.

Is Best Buy an electronics store or a seafood resturant? I am confused with the wine and crab they're dishing out.
post #37 of 111
Quote:
Originally Posted by Gatorguy View Post

So who's idea was it to put the articles focus on Apple if it's outright false? AI? WSJ? Best Buy? That's a curious thing to do.

So you believe Best Buy? Come on... The only thing true is that they profit less from Apple but to blame a 1.7 billion lost on the only products they sell super well....
post #38 of 111
Quote:
So who's idea was it to put the articles focus on Apple if it's outright false? AI? WSJ? Best Buy?

AI. The WSJ article literally doesn't mention the iPad once, and only mentions mobile devices as a threat to their margins in terms of people checking prices on them while in the stores.
post #39 of 111
i couldn't believe the headline. They have to close 50 stores because they sell iPads???

Heres an idea then, stop selling them and keep your stores open.

Seriously!
post #40 of 111
Some words are too pretentiously fashionable. We have a plethora of multiple disparate bloggers shuttering things. I shudder to think of the stores that are shuttered. I think a Best Buy would look silly with shutters. It also needlessly increases their overhead. Most shutters these days are nonfunctional decorative items anyway.

Now I know why my thesaurus is missing. It broke its leash and jumped the fence, and a blogger ate it.

If the Good Humor man were a blogger, he would be selling a plethora of multiple disparate flavors of ice cream before he shuttered his truck for the night. Spare me.
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