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Best Buy founder seeks to stop "2.0" plan to shrink chain down to Apple's size

post #1 of 56
Thread Starter 
A decade after observers doubted that Apple could take on efficient big box retailers with its own retail stores, Best Buy is seeking to survive by scaling down its store sizes. Its founder thinks that plan might be fatal.

In July, Best Buy announced plans to close 50 big box stores in its global chain of more than 1,150, scale back floor space in remaining locations and slash $800 million in expenses over the next three years, while also remaking the chain to look more like Apple's stores.

The chain's interim chief executive, Mike Mikan, has called its experimental new Apple-like store "Best Buy 2.0," with a new focus on ensuring customers can speak with employees who assist them, rather than displaying as many gadgets as possible.

Best Buy
Best Buy's new "Solution Central" has been compared to Apple's Genius Bars. Photo via The Wall Street Journal.


Best Buy's founder Richard Schulze believes the company's current cost cutting plans will put it out of business, however.

According to a report by the Wall Street Journal, Schulze has floated plans to take the retailing giant private in a $10 billion buyout in order to focus on aggressively cutting prices to enable it to compete with Amazon, while also upgrading the chain's reputation for customer service to make it as attractive as Apple's own retail outlets.

Schulze's plan would reverse parts of the "Best Buy 2.0" plans, but would also reduce profit margins, resulting in a "substantial run up in costs in the first couple of years that would be difficult for a public company to justify," the report stated.

Large electronics retail chains have struggled to remain profitable, with CompUSA closing more than 90 percent of its 126 US stores in 2007 and Circuit City liquidating its last of its 155 US stores in early 2009.

Apple's smaller format of stores, coupled with a limited selection of desirable products and personalized service, have grown to 373 stores in 13 countries, 250 of which are in the US. Apple has also partnered with larger conventional retailers, including Best Buy, Target and WalMart, to develop "store within a store" locations as dedicated retail areas.
post #2 of 56
Yeah, cause remodeling and shrinking the sizes of the stores worked so well for Circuit City.

Hears an idea. If I could get knowledgeable help that wasn't trying to hard sell me on a product I don't want because some district manager is pushing the metric of the week I might be willing to shop there.

On their current path I think they will be following Circuit City into oblivion.
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post #3 of 56

More than likely, BB will go under regardless of what they do.

post #4 of 56
Grandpa can you tell me the story about when people went to a store to rent DVDs or buy a computer?
Edited by polar315 - 8/9/12 at 4:51pm

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post #5 of 56
Quote:
Originally Posted by polar315 View Post

Grandpa can you tell me the story about when people went to a store to rent DVDs or buy a computer?

 

Next thing you know, you're going to want me to tell you about the time when all of the phones had wires. Go look it up on your iPad.

post #6 of 56
Quote:
Originally Posted by Eriamjh View Post

More than likely, BB will go under regardless of what they do.

Maybe they could buy Dell and RiM and make their store into an exclusive company like Apple. "We carry all the shit you don't give a **** about."

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post #7 of 56
Originally Posted by SolipsismX View Post
Maybe they could buy Dell and RiM and make their store into an exclusive company like Apple. "We carry all the shit you don't give a **** about."

 

And then Microsoft sues them for copying their store idea.

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post #8 of 56
Quote:
Originally Posted by Tallest Skil View Post

And then Microsoft sues them for copying their store idea.

If I were to buy a Win PC* and I lived close to an MS store I'd probably buy one there. They come with none of the crapware that other stores sell. Sure, I can format the drive and install a non-OEM copy, or methodically remove it all but I'd rather just buy it from the store hassle free*.



* I recently had to drive to several stores to locate floppy disks for sale for a very unusual job I was doing. I had an external floppy drive and Win7 loaded on my MBP. But couldn't find any floppy disks.Stores still sell VHS tapes, but not floppy disks***.
** Save for in being Windows and some WinPC HW. :D
*** But, hey, Apple should put them in their iMac and Mac Pro because they don't take up much space¡

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post #9 of 56
The main problem with Best Buy is that they treat their customers like crap. Rude sales staff who can't be bothered, onerous return policies (and return lines), it's just not a pleasant experience.

But, it will probably be tough on a lot of computer and electronics manufacturers if Best Buy does go out of business, since in some areas, there aren't a lot of alternatives, which makes it all the more surprising that they are doing so poorly. Although, the current state of the economy probably isn't helping them.
post #10 of 56

What other chain sells TVs? If I was in the market for a TV the first place I would go is to BB. I did buy my last big TV there. I bought the smaller TVs online.

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post #11 of 56
Schulze is about to get a quick education as to why Best Buy has been in decline for years. He's throwing his money down the drain for his ego's sake. I predict his misguided efforts will fail and BB will declare bankruptcy within 5 years.
post #12 of 56
Quote:
Originally Posted by mstone View Post

What other chain sells TVs? If I was in the market for a TV the first place I would go is to BB. I did buy my last big TV there. I bought the smaller TVs online.

When I was in the market for a TV I went to check them out at Best Buy. Then, like most people, I bought the one I liked online and saved a bundle. And I didn't have to deal with some BB drone pressuring me to buy overpriced crappy cables or worthless "Geek Squad" support.
post #13 of 56
Quote:
Originally Posted by mstone View Post

What other chain sells TVs? If I was in the market for a TV the first place I would go is to BB. I did buy my last big TV there. I bought the smaller TVs online.

I would do all that online. In fact, I know of a couple non-technical people that hate using a traditional PC but do love their iPads that have bought new HDTVs that way in the last year. I think Amazon's free shipping and consumer reviews make for a very compelling case. That's certainly where I would look first.

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post #14 of 56
Originally Posted by mstone View Post
What other chain sells TVs?

 

ABC Warehouse, H.H. Gregg, Micro Center… 

 

Speaking of seeing TV's in stores, why do Samsung TVs light up the logo on the front when they're on? It's frigging distracting, is what it is. I'll never buy another Samsung product for a variety of reasons (a boycott which started long before Android), but were I in the market for a TV, every one of them would be out of the running because of that.

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post #15 of 56
Quote:
Originally Posted by Tallest Skil View Post

 

ABC Warehouse, H.H. Gregg, Micro Center… 

 

Speaking of seeing TV's in stores, why do Samsung TVs light up the logo on the front when they're on? It's frigging distracting, is what it is. I'll never buy another Samsung product for a variety of reasons (a boycott which started long before Android), but were I in the market for a TV, every one of them would be out of the running because of that.

They're like that so they catch your eye on a sales floor. It's a setting that can be turned off. Regardless, I bought a 55" LG a number of months back and have been extremely satisfied with it. LG makes very solid products. I just wish there was a good American TV maker (and don't give me Vizio, with their TV's made from recycled parts)

post #16 of 56

Store size is irrelevant, when you have clueless staff & the worst customer experience in the business.

 

Ask Radio Shack.

post #17 of 56
Quote:
Originally Posted by mstone View Post

What other chain sells TVs? If I was in the market for a TV the first place I would go is to BB. I did buy my last big TV there. I bought the smaller TVs online.

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post #18 of 56

Why not let us place our order online, and then pick it up at the store?

 

I know Circuit City did that right before the end, but it seems like this might be a reason for me to shop there.

 

We all hate their sales people, and it takes a while to find exactly what you want sometimes.

 

I know that wouldn't work for everyone, but I would certainly like to pick out a few items online, and place an order instead of having to search all over the store, and explain my choices to the sales people if I need to ask them...

post #19 of 56
Quote:
Originally Posted by aross99 View Post

Why not let us place our order online, and then pick it up at the store?

I know Circuit City did that right before the end, but it seems like this might be a reason for me to shop there.

That might be the issue. If you are comfortable with buying it online then why not have it delivered for free instead of then going to the store, picking it up yourself, and bringing it home. Unless there is an urgency it just doesn't seem like a great plan. On top of that, the amount of product you can hold in a Circuit City store if you didn't have retail space would be immense which means that Amazon wins in their efficiency. Then there is rent for CC store over wherever in BFE Amazon puts their warehouses. There seems to be too many cons and not enough pros to make that work when your retail business has already dropped past the point of sustainability.

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #20 of 56

Best Buy was always where I turned to for things I don't want to wait on for delivery. But I've had many occasions where they are simply out of stock of what I want now. Now, I tend to go to Target first for things like games and movies and if they don't have it head to BB. But if BB is out of stock, there's no way I'm going to wait for them to get it in. They've lost my business to Amazon on many occasions, not due to price (I'm willing to pay a bit extra to have it now in some circumstances), but because they can't seem to keep their inventory stocked properly.

post #21 of 56
Quote:
Originally Posted by hittrj01 View Post

They're like that so they catch your eye on a sales floor. It's a setting that can be turned off. Regardless, I bought a 55" LG a number of months back and have been extremely satisfied with it. LG makes very solid products. I just wish there was a good American TV maker (and don't give me Vizio, with their TV's made from recycled parts)

Pioneer makes great TVs, but unfortunately they tend to be a bit pricey. AFAIK, they are the only viable American option.

post #22 of 56
Quote:
Originally Posted by ahmlco View Post

 

Next thing you know, you're going to want me to tell you about the time when all of the phones had wires. Go look it up on your iPad.

Ah yesss... the good old days... Back when I was a kid there was only one phone in the house and it was wired to the wall in the kitchen. We all used the same phone and it had only one ringtone that no one got to pick. Sometimes you'd pick up the phone to make a call and total strangers would be talking on it. We had to wait until they got done so we could then make a call.

 

There was also this bald-headed guy that was certain people in THIS century would want to use computers with keyboards that were designed for typewriters that were part of the 1800s when people rode around on horses and debated the pros and cons of installing one of those new-fangled bath tubs inside the house. 

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post #23 of 56
Quote:
Originally Posted by 4fx View Post

Pioneer makes great TVs, but unfortunately they tend to be a bit pricey. AFAIK, they are the only viable American option.

Pioneer is a Japanese corporation and no longer makes TVs. They were the best when they did make plasmas but that is several years ago now.
post #24 of 56
Well...BB needs an identity, and their current setup does not do that. Their proposed setup sounds like a loser on identity too. They are becoming almost as bad as Fry's at merchandising to make matters worse.

I can't think of a formula that makes sense for a big box store, unless you have a large inventory on consignment. Target seems to work, but buying electronics there still seems very out of place. (That said, I have spent a few grand on Sonos boxes there this year with their store credit card.) Quality range needs to improve for them to take on BB.
post #25 of 56
Best Buy can stay in business successfully if they just implement a cover charge for all men, ladies get in for free. After all, most of us are just using them as showrooms.
post #26 of 56
Quote:
Originally Posted by Eriamjh View Post

More than likely, BB will go under regardless of what they do.

Yep! BB is an ice cube...as is RIM, Nokia, Yahoo.

 

This reminds me of Blockbuster circling the drain a few years ago. Also, compusa, ciruitCity and Montgomery Wards.


Edited by christopher126 - 8/9/12 at 8:43pm
post #27 of 56
Originally Posted by AppleInsider View Post

Best Buy's founder Richard Schulze believes the company's current cost cutting plans will put it out of business, however.

 

Best Buy will probably go out of business either way.  Sooner if they do nothing.  Later if they cut costs now.

 

It's happened over and over.  Pacific Stereo, The Good Guys, etc. all had their day in the sun, when they were

perceived as being novel, hip and trendy.  But just like pop music and hair styles, the previous generation's

"hip" is the next generation's "uncool."  Even if they have all the latest merchandise and decent prices, few 

consumer electronics chains last more than 2 decades.

 

 

 

Originally Posted by AppleInsider View Post

Large electronics retail chains have struggled to remain profitable, with CompUSA closing more than 90 percent of its 126 US stores in 2007 and Circuit City liquidating its last of its 155 US stores in early 2009.

 

See what I mean?  Survivability of large consumer electronics retail chains drops after 20 years.

 

CompUSA: 1984 - 2007 (still operating about a dozen stores in the US under new ownership)

Circuit City: 1949 - 2009 (founded as "Wards," then changed to "Circuit City" in 1984)

 

 

 

Originally Posted by AppleInsider View Post

Apple's smaller format of stores, coupled with a limited selection of desirable products and personalized service, have grown to 373 stores in 13 countries ...

 

Mark Parker, CEO of Nike, once asked Steve Jobs for advice.  Here's what Steve said:

 

"Well, just one thing.  Nike makes some of the best products in the world.  Products that you lust after.  

But you also make a lot of crap.  Just get rid of the crappy stuff and focus on the good stuff."

 

Maybe Best Buy could do something similar.  Get rid of all the crappy stuff they sell.  Downsize a little.

 

Oh, and when's the last time you actually got some real help at Best Buy?  From one of their employees?

Yeah, me too.

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post #28 of 56

I definitely see BB on the way out.  Not because there's no room for retail, there's just no room for crappy retail.

 

I've gone into their stores less and less over the years as there are fewer reasons to go.  Too many other/better options, while they continue to run the store like its 1997.  They are truly living in the 90's, the lack of modernization will kill them.  And so will their inability to compete on a big scale, shrinking to survive is the worst thing they can do.

 

I went in to the BB near me the other week because I needed a scanner.  Fry's is a bit further away so I tried BB first.  Went over to the PC section, no scanners were obvious.  PC section pretty pathetic looking, and shrunken/discarded looking.

 

Found an employee I could get answers from, some of them looked like they just wanted to duck customers.  Asked the employee where the scanners are, she looked at me and said "we don't carry those in the store anymore.  We just have those printer/scanner/fax combination devices."  I was surprised!  This is how you can tell a big box retailer won't last, they aren't catering to the wide swath of PC needs.  As I'm walking away they offered to have it delivered to the store for pickup... ridiculous!  Would I be in a retail store if I weren't already willing to pay your markup for the convenience of buying something now?  Everyone knows how to use Amazon.

 

Pop over to Fry's, get what I need from a big selection of models and price points, in and out pretty quick.

 

There are so many things wrong with BB today, but going into one you really do feel like you're in a CompUSA or FutureShop.  Their business is crumbling.

post #29 of 56

IMHO:

Changing the business model to compete with Amazon and the likes is the WRONG solution and it quite possibly be impossible to do in a brick-and-mortar store.

Providing only High quality staff and products, reducing and/or eliminating crap and accessories IS a solid plan.

post #30 of 56

Best Buy is going the same direction as Circuit City. Their lack of customer service and poor product knowledge has destroyed their image beyond repair.(not that they had any sort of reliable image)

 

Sounds as though BB founder has an alterior motive up his sleeve. All the years he couldn't get it right and now all of a sudden he woke up one morning and decided he has the magic answer to save the company.

post #31 of 56

@ Bushman4 - Seriously.  The only Best Buy employee who even acts happy to see you is the guy at the door.  And he's basically there to help prevent the more advanced shoplifting when people leave.  (The employees on the floor are there to prevent the more basic, amateur level shoplifting.)

 

Same thing with Circuit City.  The "help" stood around gossiping and pretending to not see customers who obviously needed help.  I saw an employee sitting in an easy chair watching NASCAR, and when one of his "co-workers" said "Hey man, we got customers," he just said "I'm busy" and kept watching.

 

Maybe Amazon can break into the brick-and-mortar store business.  Just showrooms, not retail stores.  You'd see the goods you're shopping for, then order them online from the store.  Free 2-day shipping to your home.   The Amazon stores could focus on things that need to be seen side-by-side in real life, like TVs.  But there would be no stock in the store, no loading dock, nothing.  Far fewer square feet.  Many small stores.  All promoting Amazon in places where traditional brick-and-mortar stores are still operating, like in malls.

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post #32 of 56
Quote:
Originally Posted by mstone View Post

What other chain sells TVs? If I was in the market for a TV the first place I would go is to BB. I did buy my last big TV there. I bought the smaller TVs online.

NCIX.com (yes it has physical locations) and Tigerdirect.com (Also has physical locations) they just aren't national chains.

 

Where I live, BestBuy is right across from a mall from Futureshop (which is owned by BestBuy) , NCIX is one block from the mall. London Drugs also sells Televisions (it's actually more known for electronics than anything else.) Superstore (grocery store) sells televisions. Other parts of Canada have Canadian Tire and Walmart. If BestBuy were to close all it's locations, the slack would be picked up by London Drugs here.

 

I'm certain in most of the US, there are Walmarts and Costco's that sell televisions as well. At worst, you won't be able to get all the specialty 600% markup monster cables anymore. You'll have to buy all those online.

 

In small towns, however the national chains don't exist. The prices for electronics, games and appliances can be three times the cost, you may as well buy online. Oh but small towns down't have UPS/FedEX depots.

 

 

In my opinion BestBuy's been swirling the toilet ever since they bought Futureshop and started expanding in Canada. Futureshop here is known for pushy sales staff on commissions, scammy mail in rebates and the only way Bestbuy could differentiate itself from Futureshop was saying they don't have commissioned sales staff. Still doesn't get rid of the pushy extended warranty or mail in rebate garbage.

post #33 of 56
Fry's?

I thought we were in 2012, not 2002.
post #34 of 56
Quote:
Originally Posted by MacQuest View Post

Fry's?
I thought we were in 2012, not 2002.

And you don't like Fry's because.....?

I'll take Fry's over Best Buy any day.
post #35 of 56
Quote:
Originally Posted by Misa View Post

NCIX.com (yes it has physical locations) and Tigerdirect.com (Also has physical locations) they just aren't national chains.

Where I live, BestBuy is right across from a mall from Futureshop (which is owned by BestBuy) , NCIX is one block from the mall. London Drugs also sells Televisions (it's actually more known for electronics than anything else.) Superstore (grocery store) sells televisions. Other parts of Canada have Canadian Tire and Walmart. If BestBuy were to close all it's locations, the slack would be picked up by London Drugs here.

I'm certain in most of the US, there are Walmarts and Costco's that sell televisions as well. At worst, you won't be able to get all the specialty 600% markup monster cables anymore. You'll have to buy all those online.

In small towns, however the national chains don't exist. The prices for electronics, games and appliances can be three times the cost, you may as well buy online. Oh but small towns down't have UPS/FedEX depots.


In my opinion BestBuy's been swirling the toilet ever since they bought Futureshop and started expanding in Canada. Futureshop here is known for pushy sales staff on commissions, scammy mail in rebates and the only way Bestbuy could differentiate itself from Futureshop was saying they don't have commissioned sales staff. Still doesn't get rid of the pushy extended warranty or mail in rebate garbage.


Sounds like you live in the Metrotown area.

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post #36 of 56
Quote:
Originally Posted by anonymouse View Post

The main problem with Best Buy is that they treat their customers like crap. Rude sales staff who can't be bothered, onerous return policies (and return lines), it's just not a pleasant experience.
 

 

That is not my experience with Best Buy at all. All the people at the one I shop at are some of the most helpful and polite people I know. From the security yellow shirt guy at the front, to the customer service people, to the sales floor.....they all treat me as if I am the only customer in the store. In fact, I have gotten to know several of them by name. I have become a Silver Rewards member, and I can assure you that would never have happened if I had a lousy experience shopping at Best Buy. I hope that they do not go under. The benefits of shopping there far outweigh any other stores I shop at....except for Apple of course.

 

 

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post #37 of 56
Quote:
Originally Posted by SockRolid View Post

 
 

 

Mark Parker, CEO of Nike, once asked Steve Jobs for advice.  Here's what Steve said:

 

"Well, just one thing.  Nike makes some of the best products in the world.  Products that you lust after.  

But you also make a lot of crap.  Just get rid of the crappy stuff and focus on the good stuff."

 

Maybe Best Buy could do something similar.  Get rid of all the crappy stuff they sell.  Downsize a little.

 

Oh, and when's the last time you actually got some real help at Best Buy?  From one of their employees?

Yeah, me too.

I agree with this wholeheartedly. I don't want to have to wade through tons of crap, just to get to the good stuff.  Best Buy is full of high profit (for them) crap that no one is buying and a large amount of low profit product that not enough people are buying.  That's just a recipe for death of a retailer.  After all these years they're still selling ungodly high priced hdmi cables because why?  Because they use them as an add-on when selling a new tv, as the cable probably is the only item they make profit on.  It takes the focus off of selling great tv's at low prices - focusing on volume, which is what they need in order to make up for low profit dollars.

 

It's been almost a year since I've been in a BB and the experience was forced by my son wanting a xbox headset.  The experience was not good and the example of their selling crap came out clearly.  The headset he bought was a model that should have been discontinued years ago as it was meant for an old xbox with all wired connections.  I understand it's not exactly BB's fault for this, but they didn't make it easy to understand what he should have been looking for.  I tried to do a search on Amazon to read reviews before he bought it, while standing in BB, but he was impatient and bought it anyway.

 

Maybe, in addition to focusing their sales, they should institute a bit of honesty into the buying process.  Make it easy for people to look at product reviews from Amazon or BB or wherever.  Or have the salespeople be honest and not just try to sell those things BB is deep on or what drives bonuses.

post #38 of 56

How come nobody mentioned "Nobody Beats The Wiz"? Great store!!! It only took them 3 tries to bring me a brand new phone instead of taking one off somebody's desk and putting it in the box while I waited in the pickup area.

post #39 of 56

I guess I'm the only one who is replying here in agreement with the founder.  His plan is to aggressively cut prices.  That's the main reason I don't go there or shop there often.  Their prices online are nearly always higher than Amazon's and, what's much worse, more than 50% of the time, when I buy something and it rings up, it rings up higher than the online price.  I catch it, they call a manager over to confirm and adjust the price.  They never give me a hard time about it, but it leaves me hating their business more, since they're clearly relying on the fact that a lot of their customers won't have checked the online prices and will just pay whatever it rings up at.

 

I use BB as a showroom, to get something I want/need right away and/or when I want to "test" it out at home (i.e., I know going into it that there's a good chance I'll want to return it).  On that point, their return policy used to suck, too, but they seem to have improved that significantly.

 

Getting back to price...another bad experience I had was when I tracked down an open-box item (I think it was a front projector).  If I recall, their open box item was priced the same as the current sale price they had on the projector brand new.  I asked to talk to a manager to see if they could knock the price down further, but they said they couldn't (or wouldn't?  Not sure how empowered the managers are there).  That particular store didn't have a brand new one in stock, so I left and ended up buying it at a different Best Buy much farther from my home.  But that was a great indicator of just how clueless their manager (or the store policy) was.  Why would anyone buy that open box item?

 

I'd say there are a couple of options for potential success:

Option 1) Go with the founder's plan and cut prices significantly.  Make 'beating Amazon's prices' the goal for every item.

Option 2) Put all your eggs in the Apple basket.  Right now, Apple is making obscene profits and their devices and computers are wildly popular.  Best Buy has more stores (certainly in my state of CT) than Apple.  So, they could focus on selling not only Apple computers and devices (ideally at a slight discount compared to Apple's prices), but also sell every conceivable 3rd party Apple accessory out there.  The Apple stores are a lot smaller, and they dedicate the majority of their floor space to the Apple computers and iPads.  Best Buy could display tons of different stereo docks and all manner of other accessories.  They could be the go-to spot for whenever you wanted a new case or some other accessory.  And, again, price these things well.

post #40 of 56

Matching or selling at a "slight discount" will not cut it after you factor in sales tax which is quite significant on big ticket items.
 

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AppleInsider › Forums › General › General Discussion › Best Buy founder seeks to stop "2.0" plan to shrink chain down to Apple's size