“Old soldiers never die; they just fade away.” – Douglas MacArthur
At the beginning of the new year I read what I felt was a great article in Forbes by Larry Downes called Why Best Buy is Going out of Business…Gradually“. For those who don’t want to read it, the article explains how despite losing some of its fiercest competitors such as Circuit City and having a electronics sales market share of close to 33% the company the company has a lower than average P/E ratio and has lost 40% of its value during 2011.
Mr Downes goes on to give several examples of Best Buy’s failings and how the company appears to find itself in a slow but ever increasing death spiral. What does this have to do with the optical industry? A lot if you take a step back and see the forest for the trees. He tells the story of how he accompanied a friend looking for a particular blu-ray disk. The clerk (and that truly describes what they are at Best Buy) was more interested in selling a Best Buy service (CinemaNow) than helping the customer find the blu-ray he was looking for, despite their questioning of the clerk as to the location of the particular blu-ray. When was the last time you went to buy a suit where the store spent more time showing you socks and belts than helping you select a suit?
The article goes on describing how retailers have found online shopping so difficult to deal with, while consumers saw the Internet as the next evolutionary step from catalogues and TV shopping networks. Best Buy who certainly has much more money than any of us reading this post has made online shopping worse than difficult, filling search pages with tons of add-ons before anyone has made a decision as to what they are actually buying. Looking up laptops and on the day I wrote this, one of the 1st three offerings is a tech support membership. Are they trying to tell me whatever laptop I purchase from them is going to have trouble? Or are they most concerned with add-on sales where the profit is highest? Why would anyone sell a warranty or service before selling the product first? Don’t I need to buy a new car before you offer me an extended warranty option?
Additionally, Best Buy is big on buying online while picking up in the store. How is that a convenience if A) the line to buy something is mixed in with the line to return something, B) the line to pick up what you already paid for is longer than just picking up the item in the store and walking up the next open register? The reason anyone buys online is convenience. Why would I buy movie tickets online if I have to wait in the same line at the theatre to pick them up?
His story goes on to point out other shortcomings to shopping at Best Buy, most of which I’ve certainly encountered over the years and he compares and contrasts the shopping experience with Amazon. Here is where I see the closest comparison to the complaints I’ve heard from many retailers in a variety of varying specialties. “Amazon doesn’t have high priced brick and mortar locations to have to staff with knowledgeable experienced professionals.” Those sorts of comments are only half true. Yes, they don’t have to pay Main street rents for their warehouses, but don’t think for a minute those thousands of programmers and logistic experts don’t cost a pretty penny.
Best Buy became successful because they offered a wide selection of quality name brand electronics products and accessories under one roof with fairly knowledgeable staff at very competitive prices. They were the big box store that put the mom and pop stereo and TV stores out to pasture. They concentrated on products and prices a tactic that online retailers could easily beat them at their time came. In retail you can compete in one of three ways. You can compete on price (not if you are paying Main Street rents), knowledge (you make sure your staff are truly up to date experts in what they sell), or shopping experience (make the store a joy to spend time in). Apple stores easily win on 2 of those three ingredients. Best Buy wins on none of the three. It is a rare experience to find a Best Buy sales person who is an expert in what they sell and walking around their stores are anything but exciting.
Amazon is successful because they are customer focused. You can stop by the website every day looking at laptops, DVD’s or of course books. You are not interrupting their day as so many retailers complain about people walking into their stores do. Instead, Amazon is watching what you look at so they can offer you more selection and opportunities to buy. When you have a problem with something you purchase at Best Buy, the answer is generally NO. When you have a problem with something your purchase at Amazon, they answer is generally YES….they will do just about anything they can to make you happy. What is the answer in your business?
Best Buy is fading away because they have lost focus. What is your focus in 2012?
Feature image General Douglas MacArthur originally from LIFE Magazine.
