apple copying or not they really do need to rethink their need for such large stores. At all three of the Best Buys near me there are plenty of people looking at computers, phones, TVs and cameras, and then there's the other half of the store, with music and especially appliances. I think if you walk through appliances your footprints will show in the dust built up on the aisles.
The CEO calls the store "experimental". Now that's real leadership. Maybe this will work, maybe? It is what makes Apple so sucessful, right?
That a major retail chain considers customer service to be an experiment tells you everything you need to know about the corporation and why it is at its core a fundamentally bad idea.
In practice, corporations despise their customers the same way politicians loathe their constituents. We like to pretend that capitalism consists of a network of mutually beneficial contracts, when in practice it's an infinite variety of diseased prostitutes rolling their stupid, greedy, mean clients. This is why advertising is such shameful profession: the only thing nastier than a hooker or a john is a pimp.
Is it just me or does the new store layout look even more like Buy More off of The defunct series "Chuck"? They had the same geek bar staffed by the techs set as front-center in this layout. The home theater room was also just to the left like this photo.
Best Buy sells and offers far too much junk. When you walk around the store and see what's on the shelves, you notice that they have no standards at all. They'll accept any product it seems, which is probably why there are so many junky and cheap Android devices there. And most of them don't even work.
Yeah... it's like the old routine of saving all your receipts for tax purposes and throwing them randomly in a shoe box. When audited, the auditor gets to dig through the shoe box.
Now, I once lived in ChicagoLand. In Cook County you did not pay your county taxes -- you bribed the assessor. In McHenry County (where I lived) the the tax forms had printed on them something like: "Unlike other Illinois Counties, McHenry County residents are required to pay their taxes".
Just to be clear, we have never been audited by any governmental agency. We have our own private auditors as well as auditors for workman's comp. We pay our sales tax religiously so they never question anything we report.
I always love your posts, however I have to disagree here because of 2 missing ingredients, that you humbly forgot to mention, probably because it's ingrained in you as much as it was in SJ.... and that is:
1) Passion
2) Perfection
Neither of those ingredients can be taught, nor can they easily be acquired in a mega-corporate atmosphere... UNLESS they were there from the beginning.
That is why you were successful, as is Apple to this day.
Hands-on entrepreneurial zeal, energy, and passion will beat widely held stock and performance-based corporations EVERY time!
Who at BB with a PASSIONATE stake in it's success, is going to "hand-pick" to PERFECTION, the locations, furniture, wall colors, staircases, shelves, employee attire, etc. etc.... and the list is VERY long!
That's why other companies are finding it difficult-to-impossible to implement anything even close to, or resembling Apple. It's all "just an experiment" and a facade, because that's all they see.
As with great food and wine... it's the "special ingredients" that you don't necessarily taste or see, that make them GREAT!
I don't see BB being able to turn around their retail operations as it stands, just as I didn't when JCP hired Ron Johnson to do a retail turn-around for them. Retail at this level is dying a slow death across all industries and product categories. Thank the Internet and of course Amazon for that. In fact, I actually do.
However, there is one way... but it would mean completely changing their business model from big-box to boutique. It would basically entail exactly the points DA listed earlier... plus some of course. How to do that? Go to a franchise-styled business.
We have something similar here in Germany in many retail categories, however my experience is with 2 clients: electronics (Euronics) and food markets (Edeka).
Without going into massive detail, both of those retailers leave a lot of the marketing, service, specialty expertise to their franchisees... and provide simply the buying power. Both of my clients have original store designs, their own promotions, areas of expertise, even selling products outside of the corporate catalog.
They equally excel at offering top-notch customer service, hand-picked and thoroughly trained employees, assorted additional services and local products and produce. Many incentives for shopping with them rather than at the mega-store competition to say the least.
In the case of BB, I suppose they would be bumping up against Radio Shack or Fry's if they tried to do this. The question is: could they do it better? And, would it not be better to take Michael Dell's advice, and "shut it down and give the money back to the shareholders", and start over?
This time MD's advice just might be the best solution, unless there's a shunted/fired retail genius lurking around in their history.
I always love your posts, however I have to disagree here because of 2 missing ingredients, that you humbly forgot to mention, probably because it's ingrained in you as much as it was in SJ.... and that is:
1) Passion
2) Perfection
Neither of those ingredients can be taught, nor can they easily be acquired in a mega-corporate atmosphere... UNLESS they were there from the beginning.
That is why you were successful, as is Apple to this day.
Hands-on entrepreneurial zeal, energy, and passion will beat widely held stock and performance-based corporations EVERY time!
Who at BB with a PASSIONATE stake in it's success, is going to "hand-pick" to PERFECTION, the locations, furniture, wall colors, staircases, shelves, employee attire, etc. etc.... and the list is VERY long!
That's why other companies are finding it difficult-to-impossible to implement anything even close to, or resembling Apple. It's all "just an experiment" and a facade, because that's all they see.
As with great food and wine... it's the "special ingredients" that you don't necessarily taste or see, that make them GREAT!
I don't see BB being able to turn around their retail operations as it stands, just as I didn't when JCP hired Ron Johnson to do a retail turn-around for them. Retail at this level is dying a slow death across all industries and product categories. Thank the Internet and of course Amazon for that. In fact, I actually do.
However, there is one way... but it would mean completely changing their business model from big-box to boutique. It would basically entail exactly the points DA listed earlier... plus some of course. How to do that? Go to a franchise-styled business.
We have something similar here in Germany in many retail categories, however my experience is with 2 clients: electronics (Euronics) and food markets (Edeka).
Without going into massive detail, both of those retailers leave a lot of the marketing, service, specialty expertise to their franchisees... and provide simply the buying power. Both of my clients have original store designs, their own promotions, areas of expertise, even selling products outside of the corporate catalog.
They equally excel at offering top-notch customer service, hand-picked and thoroughly trained employees, assorted additional services and local products and produce. Many incentives for shopping with them rather than at the mega-store competition to say the least.
In the case of BB, I suppose they would be bumping up against Radio Shack or Fry's if they tried to do this. The question is: could they do it better? And, would it not be better to take Michael Dell's advice, and "shut it down and give the money back to the shareholders", and start over?
This time MD's advice just might be the best solution, unless there's a shunted/fired retail genius lurking around in their history.
Ohh… Boutique franchises… Entrepreneurs… I like the implications of that!
I don't see BB being able to turn around their retail operations as it stands, just as I didn't when JCP hired Ron Johnson to do a retail turn-around for them. Retail at this level is dying a slow death across all industries and product categories. Thank the Internet and of course Amazon for that. In fact, I actually do.
I don't think it's as hopeless as all that.
Best Buy is not making tons of money, but they're not yet in 'death' mode. They're plugging along and managing to stay afloat. And that's with Amazon having a huge advantage in that their customers don't pay sales taxes. In some states, sales taxes are well over 10%. If the government ever decides to force national companies like Amazon to collect sales taxes, that advantage would disappear overnight, making Best Buy significantly more competitive in states that collect tax. A 5-10% price swing could be enough to restore Best Buy to reasonable profitability. And if they improve their customer service and emphasize the things that you need a local store for (service, etc), it could make a big difference, as well.
I've lived in states that bordered states with no sales tax. People will drive quite a way to buy things in the no sales tax states. In fact, I've watched people drive 40 or 50 miles to buy something that cost $20 or so - when the sales tax savings clearly didn't pay for all the extra mileage. Amazon's sales tax advantage is hard to overestimate.
apple copying or not they really do need to rethink their need for such large stores. At all three of the Best Buys near me there are plenty of people looking at computers, phones, TVs and cameras, and then there's the other half of the store, with music and especially appliances. I think if you walk through appliances your footprints will show in the dust built up on the aisles.
You are certainly correct on that! But in my area, getting help in the appliance department is next impossible. There is no one there. At all. I found one BB that had very helpful and cheerful folks in the appliance department. But problem? The freezer I wanted was not in stock and not in the warehouse. Great price, though...
I went over the Lowe's. They had a good price on what I wanted? "Got one in stock?" "Yes Mr Grizzly, we do. What is the delivery address?" Upon hearing the address, the clerk responded "How's tomorrow between 4 and 6?"
apple copying or not they really do need to rethink their need for such large stores. At all three of the Best Buys near me there are plenty of people looking at computers, phones, TVs and cameras, and then there's the other half of the store, with music and especially appliances. I think if you walk through appliances your footprints will show in the dust built up on the aisles.
That's because the appliance section at BB looks like an afterthought. They don't contain enough models and no one in the store knows the difference between them.
Music is used to get people into the store. It's of the, "Hey honey, let's get that Adele CD." "OK, and it would be really nice to get a new TV for the den." I agree that BB probably doesn't sell a lot of music, partially because industry sales (including downloading) are half of what they were in 1999 and partially because of the decline of physical media. As BB starts to decrease the size of their stores, I bet the music department gets a lot smaller. If they went to selling just the top hits, it probably wouldn't decrease their music sales by more than 5-10%.
Meanwhile, Home Depot has decided to expand their major appliance departments. From TWICE magazine:
Quote:
Atlanta - No. 3 majap chain The Home Depot is adding Whirlpool, Electrolux and Frigidaire to its brand roster and will expand its appliance departments in select stores in a major bid to grow market share.
The new brands, and the expanded 2,400-square-foot majap showrooms, will roll out to 120 locations nationwide by mid-fourth quarter. According to Bob Baird, Home Depot's appliances and kitchens merchandising VP, the first department remodels will begin appearing this summer.
...
Whirlpool joins sister brands Maytag and Amana at Home Depot, while Electrolux's Frigidaire, step-up Frigidaire Gallery and premium Electrolux badges are new to the chain. The new additions are presently available at home improvement rival Lowe's.
So BB has to either step up its game or get rid of the department. (Although I wonder if the 2400 square foot number above is correct. That seems awfully small for major appliances for a big-box store.)
Best Buy is not making tons of money, but they're not yet in 'death' mode. They're plugging along and managing to stay afloat. And that's with Amazon having a huge advantage in that their customers don't pay sales taxes. In some states, sales taxes are well over 10%. If the government ever decides to force national companies like Amazon to collect sales taxes, that advantage would disappear overnight, making Best Buy significantly more competitive in states that collect tax. A 5-10% price swing could be enough to restore Best Buy to reasonable profitability. And if they improve their customer service and emphasize the things that you need a local store for (service, etc), it could make a big difference, as well.
I've lived in states that bordered states with no sales tax. People will drive quite a way to buy things in the no sales tax states. In fact, I've watched people drive 40 or 50 miles to buy something that cost $20 or so - when the sales tax savings clearly didn't pay for all the extra mileage. Amazon's sales tax advantage is hard to overestimate.
Yes, but even without a national law, their sales tax advantage is slowly disappearing. Most states now consider affiliate sales to constitute tax nexus even when the consumer doesn't buy through the affiliate (which I disagree with, but the states are getting away with it). In some states, Amazon has killed the affiliate programs. In others, they've bitten the bullet and now charge sales tax. In addition, there is no question or debate that Amazon HAS to charge sales tax in any state where they have a physical facility, like a warehouse, and they've been increasing the number of warehouses they have across the country. Amazon does charge sales tax in New York and I believe they finally worked out a deal in California to start charging sales tax next year.
According to Wikipedia, Amazon has warehouses in Arizona, Delaware, Indiana, Kansas, Kentucky, Nevada, New Hampshire, Pennsylvania, South Carolina, Texas, Virginia and Washington. I think I heard they were opening a warehouse in New Jersey as well. Of these states, only Delaware and New Hampshire don't have a sales tax. As I mentioned, they're already charging in New York and will be in California. They have nexus in Texas and Pennsylvania due to the warehouses. So that leaves Florida as the only really populous state where they're not charging tax. But I think Congress will finally address this issue after the 2012 elections anyway. The states need the sales tax money too badly to let this go on much longer.
As far as BB is concerned, operating income for the 1Q (ending May) was down 43%, although diluted earnings-per-share was up 11%. Operating income per square foot was down 13%. They've had a series of executive resignations. The stock is at 21.58 with a 52 week high of 32.65. Its five-year low was about 18 and its five year high was about 53. So yes, they're not going out of business tomorrow, but the future doesn't look great. They're closing lots of stores, which should increase profitability, but there's also no viable plan for growth, IMO. TV sales have peaked and are not expected to improve until the next generation of technology comes along in about three years. Audio system sales have been in the dumper across the industry for years. In 2010, CD sales were at 24% of their 1999 peak and it's gone down since. Physical home video sales have been slowly declining. YTD (across the industry), they're down 5.4%, calendar 2011 came in almost 13.5% below 2010 and 2010 came in over 9% below 2009. They sell the iPhone and iPad, but since those products sell at list price, there's no reason to buy them from BB. So what is it that BB is going to be selling profitably over the next few years, especially since manufacturers have been cutting retail margins? Wholesale price on Nikon cameras is now only 10% below list.
I think BB will continue to do okay in places where there's no competition. In places where there is, they have to do a lot more than stick a desk in there and pretend it's a genius bar. They have to completely rethink the purpose of a retail store and create a new, compelling model that not only copies what Apple has done, but goes way beyond it, because BB sells far more products than Apple does. And they have to do that and prevent showrooming at the same time. That's a hard nut to crack.
It's getting pretty insane how massive a divide there is now between the looks of Apple and a lot of other businesses. Apple looks current while other companies look straight out of 20 years ago.
It really is. I helped open one of the Cincinnati Best Buys in 1995 and they talked about how the design they were using for our stores was the new 4th generation of their design, evolving from the caves like old Steinberg stores to the open and bright look Best Buy has had since 94 or 95 in all new stores. There have really only been small tweaks for where some items in the store are positioned (CDs take up much less room, more for movies, etc, the addition of the large mobile phone section) and it's certainly time they tried something new.
I really hope Best Buy figures out a way to survive. Yes, online ordering is convenient and cheaper, but nothing beats hands-on. And the ability to do a same-day buy, return, and exchange is priceless (e.g., trying different wireless routers). I dread the thought of only ordering online for all things.
I think the types of stores that BB needs to emulate are Whole Foods Market and REI (sporting goods store). These stores offer multiple brands and the people love to work there (they show up on best places to work lists). It's easy enough to imagine. organic foodies work at WFM and the outdoorsy ones work at REI. Employees come in already knowledgable and hungry to learn more, are passionate about the products, and likely get discounts on products that excite them. I don't know BB's hiring policy but they need to only hire people who really get into electronics...whether it's phones or PCs or TVs or gaming or appliances.
BB just needs to refocus, downsize, and implement some of the strategies suggested in these posts. I saw some good ideas. One that struck me as obvious was, when you go to a BB and they have an item out of stock, that they simply offer you free shipping - rather than just direct you to a store across town that will hold it for you.
What you say is true -- it is complicated. But online stores like Apple do it.
I do woodworking as a hobby, and own a ShopSmith. They have an online store and charge taxes for every state, although they are based in Ohio.
Shopsmith is a small company, SSMH (OTC) with a rudimentary web site and shopping cart -- yet they are able to deal with the complexity... So, I assume that AMZN can handle it.
Quote:
Originally Posted by jragosta
Exactly. It's not that hard. It's even built into a lot of modern software.
It's not collecting the tax that's hard. Sales tax is built into all e-commerce engines and there are companies who will inexpensively sell you a simple database subscription with all the rates by zip code (although the ones I'm familiar with don't break it down further than zip code, so I don't know how anyone's handling the case someone mentioned above where the same zip code had two different rates). I used such databases when I consulted for an infomercial company that had websites, although we only had nexus in two states, so we just used a small segment of the sales tax database.
It's PAYING the tax back to the taxing authorities that's hard, especially for a small online vendor, which is why the small vendors are opposed to having to charge tax outside of the state where their business is located. You have to pay back more than a thousand taxing authorities (assuming you get orders from all those places) and they all use different forms, etc. Amazon and BB can handle it, but it's definitely a problem for a small business. Congress should rectify this by having the IRS handle this for all the states (and possibly adopting one rate for all out of state sales taxes charged online). You would submit the amount you owe by zip code and you would send one check and one form to one place and the IRS would distribute the money back to the States.
Yes, I understand that, and stores have cameras too, that's not my point. Apple Stores have greeters to try to help you when you walk in the store(facing you). Best Buy has someone checking receipts who also says "hey" to you when you walk in the store with their back to you. You have to sometimes physically turn back around to reply back to them. Where as Apple store greeters face you the whole time. I know it's minor and probably stupid, but it kinda sets the tone for the whole shopping experience.
Comments
apple copying or not they really do need to rethink their need for such large stores. At all three of the Best Buys near me there are plenty of people looking at computers, phones, TVs and cameras, and then there's the other half of the store, with music and especially appliances. I think if you walk through appliances your footprints will show in the dust built up on the aisles.
Quote:
Originally Posted by kent909
The CEO calls the store "experimental". Now that's real leadership. Maybe this will work, maybe? It is what makes Apple so sucessful, right?
That a major retail chain considers customer service to be an experiment tells you everything you need to know about the corporation and why it is at its core a fundamentally bad idea.
In practice, corporations despise their customers the same way politicians loathe their constituents. We like to pretend that capitalism consists of a network of mutually beneficial contracts, when in practice it's an infinite variety of diseased prostitutes rolling their stupid, greedy, mean clients. This is why advertising is such shameful profession: the only thing nastier than a hooker or a john is a pimp.
What the heck is wrong with the world? Why is everyone trying to copy Apple?
Quote:
Originally Posted by Apple ][
Best Buy sells and offers far too much junk. When you walk around the store and see what's on the shelves, you notice that they have no standards at all. They'll accept any product it seems, which is probably why there are so many junky and cheap Android devices there. And most of them don't even work.
Hey, that's called choice to some people...
Quote:
Originally Posted by Dick Applebaum
Yeah... it's like the old routine of saving all your receipts for tax purposes and throwing them randomly in a shoe box. When audited, the auditor gets to dig through the shoe box.
Now, I once lived in ChicagoLand. In Cook County you did not pay your county taxes -- you bribed the assessor. In McHenry County (where I lived) the the tax forms had printed on them something like: "Unlike other Illinois Counties, McHenry County residents are required to pay their taxes".
Just to be clear, we have never been audited by any governmental agency. We have our own private auditors as well as auditors for workman's comp. We pay our sales tax religiously so they never question anything we report.
Quote:
Originally Posted by Dick Applebaum
Ya' know...
<snip>
There may be some things that BB could implement.
I always love your posts, however I have to disagree here because of 2 missing ingredients, that you humbly forgot to mention, probably because it's ingrained in you as much as it was in SJ.... and that is:
1) Passion
2) Perfection
Neither of those ingredients can be taught, nor can they easily be acquired in a mega-corporate atmosphere... UNLESS they were there from the beginning.
That is why you were successful, as is Apple to this day.
Hands-on entrepreneurial zeal, energy, and passion will beat widely held stock and performance-based corporations EVERY time!
Who at BB with a PASSIONATE stake in it's success, is going to "hand-pick" to PERFECTION, the locations, furniture, wall colors, staircases, shelves, employee attire, etc. etc.... and the list is VERY long!
That's why other companies are finding it difficult-to-impossible to implement anything even close to, or resembling Apple. It's all "just an experiment" and a facade, because that's all they see.
As with great food and wine... it's the "special ingredients" that you don't necessarily taste or see, that make them GREAT!
I don't see BB being able to turn around their retail operations as it stands, just as I didn't when JCP hired Ron Johnson to do a retail turn-around for them. Retail at this level is dying a slow death across all industries and product categories. Thank the Internet and of course Amazon for that. In fact, I actually do.
However, there is one way... but it would mean completely changing their business model from big-box to boutique. It would basically entail exactly the points DA listed earlier... plus some of course. How to do that? Go to a franchise-styled business.
We have something similar here in Germany in many retail categories, however my experience is with 2 clients: electronics (Euronics) and food markets (Edeka).
Without going into massive detail, both of those retailers leave a lot of the marketing, service, specialty expertise to their franchisees... and provide simply the buying power. Both of my clients have original store designs, their own promotions, areas of expertise, even selling products outside of the corporate catalog.
They equally excel at offering top-notch customer service, hand-picked and thoroughly trained employees, assorted additional services and local products and produce. Many incentives for shopping with them rather than at the mega-store competition to say the least.
In the case of BB, I suppose they would be bumping up against Radio Shack or Fry's if they tried to do this. The question is: could they do it better? And, would it not be better to take Michael Dell's advice, and "shut it down and give the money back to the shareholders", and start over?
This time MD's advice just might be the best solution, unless there's a shunted/fired retail genius lurking around in their history.
Quote:
Originally Posted by ThePixelDoc
I always love your posts, however I have to disagree here because of 2 missing ingredients, that you humbly forgot to mention, probably because it's ingrained in you as much as it was in SJ.... and that is:
1) Passion
2) Perfection
Neither of those ingredients can be taught, nor can they easily be acquired in a mega-corporate atmosphere... UNLESS they were there from the beginning.
That is why you were successful, as is Apple to this day.
Hands-on entrepreneurial zeal, energy, and passion will beat widely held stock and performance-based corporations EVERY time!
Who at BB with a PASSIONATE stake in it's success, is going to "hand-pick" to PERFECTION, the locations, furniture, wall colors, staircases, shelves, employee attire, etc. etc.... and the list is VERY long!
That's why other companies are finding it difficult-to-impossible to implement anything even close to, or resembling Apple. It's all "just an experiment" and a facade, because that's all they see.
As with great food and wine... it's the "special ingredients" that you don't necessarily taste or see, that make them GREAT!
+++ Well said!
Quote:
Originally Posted by ThePixelDoc
I don't see BB being able to turn around their retail operations as it stands, just as I didn't when JCP hired Ron Johnson to do a retail turn-around for them. Retail at this level is dying a slow death across all industries and product categories. Thank the Internet and of course Amazon for that. In fact, I actually do.
However, there is one way... but it would mean completely changing their business model from big-box to boutique. It would basically entail exactly the points DA listed earlier... plus some of course. How to do that? Go to a franchise-styled business.
We have something similar here in Germany in many retail categories, however my experience is with 2 clients: electronics (Euronics) and food markets (Edeka).
Without going into massive detail, both of those retailers leave a lot of the marketing, service, specialty expertise to their franchisees... and provide simply the buying power. Both of my clients have original store designs, their own promotions, areas of expertise, even selling products outside of the corporate catalog.
They equally excel at offering top-notch customer service, hand-picked and thoroughly trained employees, assorted additional services and local products and produce. Many incentives for shopping with them rather than at the mega-store competition to say the least.
In the case of BB, I suppose they would be bumping up against Radio Shack or Fry's if they tried to do this. The question is: could they do it better? And, would it not be better to take Michael Dell's advice, and "shut it down and give the money back to the shareholders", and start over?
This time MD's advice just might be the best solution, unless there's a shunted/fired retail genius lurking around in their history.
Ohh… Boutique franchises… Entrepreneurs… I like the implications of that!
I don't think it's as hopeless as all that.
Best Buy is not making tons of money, but they're not yet in 'death' mode. They're plugging along and managing to stay afloat. And that's with Amazon having a huge advantage in that their customers don't pay sales taxes. In some states, sales taxes are well over 10%. If the government ever decides to force national companies like Amazon to collect sales taxes, that advantage would disappear overnight, making Best Buy significantly more competitive in states that collect tax. A 5-10% price swing could be enough to restore Best Buy to reasonable profitability. And if they improve their customer service and emphasize the things that you need a local store for (service, etc), it could make a big difference, as well.
I've lived in states that bordered states with no sales tax. People will drive quite a way to buy things in the no sales tax states. In fact, I've watched people drive 40 or 50 miles to buy something that cost $20 or so - when the sales tax savings clearly didn't pay for all the extra mileage. Amazon's sales tax advantage is hard to overestimate.
Quote:
Originally Posted by mavfan1
apple copying or not they really do need to rethink their need for such large stores. At all three of the Best Buys near me there are plenty of people looking at computers, phones, TVs and cameras, and then there's the other half of the store, with music and especially appliances. I think if you walk through appliances your footprints will show in the dust built up on the aisles.
You are certainly correct on that! But in my area, getting help in the appliance department is next impossible. There is no one there. At all. I found one BB that had very helpful and cheerful folks in the appliance department. But problem? The freezer I wanted was not in stock and not in the warehouse. Great price, though...
I went over the Lowe's. They had a good price on what I wanted? "Got one in stock?" "Yes Mr Grizzly, we do. What is the delivery address?" Upon hearing the address, the clerk responded "How's tomorrow between 4 and 6?"
Quote:
Originally Posted by mavfan1
apple copying or not they really do need to rethink their need for such large stores. At all three of the Best Buys near me there are plenty of people looking at computers, phones, TVs and cameras, and then there's the other half of the store, with music and especially appliances. I think if you walk through appliances your footprints will show in the dust built up on the aisles.
That's because the appliance section at BB looks like an afterthought. They don't contain enough models and no one in the store knows the difference between them.
Music is used to get people into the store. It's of the, "Hey honey, let's get that Adele CD." "OK, and it would be really nice to get a new TV for the den." I agree that BB probably doesn't sell a lot of music, partially because industry sales (including downloading) are half of what they were in 1999 and partially because of the decline of physical media. As BB starts to decrease the size of their stores, I bet the music department gets a lot smaller. If they went to selling just the top hits, it probably wouldn't decrease their music sales by more than 5-10%.
Meanwhile, Home Depot has decided to expand their major appliance departments. From TWICE magazine:
Quote:
Atlanta - No. 3 majap chain The Home Depot is adding Whirlpool, Electrolux and Frigidaire to its brand roster and will expand its appliance departments in select stores in a major bid to grow market share.
The new brands, and the expanded 2,400-square-foot majap showrooms, will roll out to 120 locations nationwide by mid-fourth quarter. According to Bob Baird, Home Depot's appliances and kitchens merchandising VP, the first department remodels will begin appearing this summer.
...
Whirlpool joins sister brands Maytag and Amana at Home Depot, while Electrolux's Frigidaire, step-up Frigidaire Gallery and premium Electrolux badges are new to the chain. The new additions are presently available at home improvement rival Lowe's.
So BB has to either step up its game or get rid of the department. (Although I wonder if the 2400 square foot number above is correct. That seems awfully small for major appliances for a big-box store.)
Quote:
Originally Posted by jragosta
I don't think it's as hopeless as all that.
Best Buy is not making tons of money, but they're not yet in 'death' mode. They're plugging along and managing to stay afloat. And that's with Amazon having a huge advantage in that their customers don't pay sales taxes. In some states, sales taxes are well over 10%. If the government ever decides to force national companies like Amazon to collect sales taxes, that advantage would disappear overnight, making Best Buy significantly more competitive in states that collect tax. A 5-10% price swing could be enough to restore Best Buy to reasonable profitability. And if they improve their customer service and emphasize the things that you need a local store for (service, etc), it could make a big difference, as well.
I've lived in states that bordered states with no sales tax. People will drive quite a way to buy things in the no sales tax states. In fact, I've watched people drive 40 or 50 miles to buy something that cost $20 or so - when the sales tax savings clearly didn't pay for all the extra mileage. Amazon's sales tax advantage is hard to overestimate.
Yes, but even without a national law, their sales tax advantage is slowly disappearing. Most states now consider affiliate sales to constitute tax nexus even when the consumer doesn't buy through the affiliate (which I disagree with, but the states are getting away with it). In some states, Amazon has killed the affiliate programs. In others, they've bitten the bullet and now charge sales tax. In addition, there is no question or debate that Amazon HAS to charge sales tax in any state where they have a physical facility, like a warehouse, and they've been increasing the number of warehouses they have across the country. Amazon does charge sales tax in New York and I believe they finally worked out a deal in California to start charging sales tax next year.
According to Wikipedia, Amazon has warehouses in Arizona, Delaware, Indiana, Kansas, Kentucky, Nevada, New Hampshire, Pennsylvania, South Carolina, Texas, Virginia and Washington. I think I heard they were opening a warehouse in New Jersey as well. Of these states, only Delaware and New Hampshire don't have a sales tax. As I mentioned, they're already charging in New York and will be in California. They have nexus in Texas and Pennsylvania due to the warehouses. So that leaves Florida as the only really populous state where they're not charging tax. But I think Congress will finally address this issue after the 2012 elections anyway. The states need the sales tax money too badly to let this go on much longer.
As far as BB is concerned, operating income for the 1Q (ending May) was down 43%, although diluted earnings-per-share was up 11%. Operating income per square foot was down 13%. They've had a series of executive resignations. The stock is at 21.58 with a 52 week high of 32.65. Its five-year low was about 18 and its five year high was about 53. So yes, they're not going out of business tomorrow, but the future doesn't look great. They're closing lots of stores, which should increase profitability, but there's also no viable plan for growth, IMO. TV sales have peaked and are not expected to improve until the next generation of technology comes along in about three years. Audio system sales have been in the dumper across the industry for years. In 2010, CD sales were at 24% of their 1999 peak and it's gone down since. Physical home video sales have been slowly declining. YTD (across the industry), they're down 5.4%, calendar 2011 came in almost 13.5% below 2010 and 2010 came in over 9% below 2009. They sell the iPhone and iPad, but since those products sell at list price, there's no reason to buy them from BB. So what is it that BB is going to be selling profitably over the next few years, especially since manufacturers have been cutting retail margins? Wholesale price on Nikon cameras is now only 10% below list.
I think BB will continue to do okay in places where there's no competition. In places where there is, they have to do a lot more than stick a desk in there and pretend it's a genius bar. They have to completely rethink the purpose of a retail store and create a new, compelling model that not only copies what Apple has done, but goes way beyond it, because BB sells far more products than Apple does. And they have to do that and prevent showrooming at the same time. That's a hard nut to crack.
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Originally Posted by franktinsley
It's getting pretty insane how massive a divide there is now between the looks of Apple and a lot of other businesses. Apple looks current while other companies look straight out of 20 years ago.
It really is. I helped open one of the Cincinnati Best Buys in 1995 and they talked about how the design they were using for our stores was the new 4th generation of their design, evolving from the caves like old Steinberg stores to the open and bright look Best Buy has had since 94 or 95 in all new stores. There have really only been small tweaks for where some items in the store are positioned (CDs take up much less room, more for movies, etc, the addition of the large mobile phone section) and it's certainly time they tried something new.
I really hope Best Buy figures out a way to survive. Yes, online ordering is convenient and cheaper, but nothing beats hands-on. And the ability to do a same-day buy, return, and exchange is priceless (e.g., trying different wireless routers). I dread the thought of only ordering online for all things.
I think the types of stores that BB needs to emulate are Whole Foods Market and REI (sporting goods store). These stores offer multiple brands and the people love to work there (they show up on best places to work lists). It's easy enough to imagine. organic foodies work at WFM and the outdoorsy ones work at REI. Employees come in already knowledgable and hungry to learn more, are passionate about the products, and likely get discounts on products that excite them. I don't know BB's hiring policy but they need to only hire people who really get into electronics...whether it's phones or PCs or TVs or gaming or appliances.
BB just needs to refocus, downsize, and implement some of the strategies suggested in these posts. I saw some good ideas. One that struck me as obvious was, when you go to a BB and they have an item out of stock, that they simply offer you free shipping - rather than just direct you to a store across town that will hold it for you.
And yes, lose the ties!
Yeah I was shocked when I walked into an Apple Store and was actually able to make a phone call from the iPhone that was on display lol
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Originally Posted by Dick Applebaum
What you say is true -- it is complicated. But online stores like Apple do it.
I do woodworking as a hobby, and own a ShopSmith. They have an online store and charge taxes for every state, although they are based in Ohio.
Shopsmith is a small company, SSMH (OTC) with a rudimentary web site and shopping cart -- yet they are able to deal with the complexity... So, I assume that AMZN can handle it.
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Originally Posted by jragosta
Exactly. It's not that hard. It's even built into a lot of modern software.
It's not collecting the tax that's hard. Sales tax is built into all e-commerce engines and there are companies who will inexpensively sell you a simple database subscription with all the rates by zip code (although the ones I'm familiar with don't break it down further than zip code, so I don't know how anyone's handling the case someone mentioned above where the same zip code had two different rates). I used such databases when I consulted for an infomercial company that had websites, although we only had nexus in two states, so we just used a small segment of the sales tax database.
It's PAYING the tax back to the taxing authorities that's hard, especially for a small online vendor, which is why the small vendors are opposed to having to charge tax outside of the state where their business is located. You have to pay back more than a thousand taxing authorities (assuming you get orders from all those places) and they all use different forms, etc. Amazon and BB can handle it, but it's definitely a problem for a small business. Congress should rectify this by having the IRS handle this for all the states (and possibly adopting one rate for all out of state sales taxes charged online). You would submit the amount you owe by zip code and you would send one check and one form to one place and the IRS would distribute the money back to the States.
But that's too logical, so we'll never do it.
Yes, I understand that, and stores have cameras too, that's not my point. Apple Stores have greeters to try to help you when you walk in the store(facing you). Best Buy has someone checking receipts who also says "hey" to you when you walk in the store with their back to you. You have to sometimes physically turn back around to reply back to them. Where as Apple store greeters face you the whole time. I know it's minor and probably stupid, but it kinda sets the tone for the whole shopping experience.