Best Buy founder seeks to stop "2.0" plan to shrink chain down to Apple's size
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'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.
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'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.
Comments
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.
More than likely, BB will go under regardless of what they do.
Quote:
Originally Posted by polar315
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.
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."
Originally Posted by SolipsismX
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.
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¡
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.
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.
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.
Originally Posted by mstone
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.
Quote:
Originally Posted by Tallest Skil
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)
Store size is irrelevant, when you have clueless staff & the worst customer experience in the business.
Ask Radio Shack.
Quote:
Originally Posted by mstone
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.
Fry's
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...
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.
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.
Quote:
Originally Posted by hittrj01
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.