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Description: Is it plausible to expect that Best Buy’s sales clerks will offer better advice than the many expert reviews on the Internet, augmented by the hundreds or thousands of customer reviews for Best Buy’s bread and butter products?

Source: Forbes .com.

Date: Sept 15, 2011

My friend, Paul Carroll, is peeved at Best Buy.  It stems from the time his daughter’s puppy chewed up her laptop’s printer cord. Paul knew he could get the really simple cord for $2.50 on Amazon, but he had to buy it at Best Buy for $30 because she needed the cord immediately.  Best Buy extracted a tremendous premium that day, and lost Paul’s good will forever.

So, for Paul and many other observers, it came as no surprise when Best Buy announced that sales had dropped for a fifth-consecutive quarter.  Profits took an even bigger hit, as they dropped 30 percent.  It was a surprise for many investors, however, who had the audacity to hope for a trend reversal.  But that hope vaporized, and investors drove shares to their lowest level since 2008.   Read rest of story

Questions for discussion:

  1. Is Best Buy doomed? Why? Or  Why Not?
  2. How might Best Buy survive and win in this industry?

16 Responses to “Best Buy Gets Amazoned: Is It Doomed?”

  1. Meagan

    I don’t think best buy is truly doomed, because every business goes through ups and downs once in a while and can usually make it out alive. It will be hard a hard process but I think that best buy will make it through it. A few ways that is can get out of this hole is by first becoming serious about what has happened and to look into its mistakes and try to think of some solutions. It need to stop taking for granted the advice of others and see if it really makes that much of a difference. Next is to acknowledge that is can only get worse because of customers using the web to shop. Also the word of mouth can cause problems. One bad experience will cause that customer to tell nine other people where as a positive experience will cause the customer to only tell four. This can cause eve more problems than it needs. To fix this Best Buy should work on its customer relations and try to give every customer a positive experience. The major problem will be competition from other stores. Best buy must focus on looking around and seeing what other stores prices are and try to break even by selling everything for as cheap as they possibly can. This might help them to come out alive.

  2. IveS

    Best buy isn’t doomed yet. There has to be a reason as to why many customers still prefer to shop in-store and why it is still considered convenient. It is in a very risky position though. The company has to realize that market trends change and that the business strategies that worked for them a few years ago are not necessarily going to work today. Products have to be made available to consumers in the most convenient ways and they also have to be competitive in price. It is true that online shopping increases everyday and people with busy lifestyles (the vast majority) often want a fast and satisfactory shopping experience. Best buy can’t rely on the facts that the advice given by their sales clerks is better than any other review made by the critical public nor it can assume that customers want to feel and touch the product before buying it. It is vital for the company to re-evaluate its business strategy while they still have the possibility to stay and be successful in the market. They have to come up with new ways of marketing themselves and in order to do so they will have to find new real competitive advantages that will make them positively different than its competitors. Whatever course of action they decide to take,however,has to be done soon before its too late.

  3. Jason

    I don’t believe there is a simple black and white answer for this question. I think we all agree that continuing down this road in the end will mean the death of best buy, but the reality is that they are still a massive company that has time to turn things around. I think that the best way for them to do this is to rethink they market competitive advantage.

    Unfortunately their old attraction of having, non commission based, knowledgeable sales staff doesn’t mean anything when matched up against online competitors. The internet offers a powerful tool to consumers, where they can see countless evaluations and reviews of every technological product on the market.

    If best buy can change this, and give people a reason to shop there, then the business can become as strong as ever, and if not they’ll go the way of blockbuster.

  4. Aleigha Hopkins

    The position that Best Buy is in is indeed a precarious one, but I think that to call the business doomed is a bit of an overstatement. There are adjustments that it needs to make in order to keep pace with its competitors; however, these necessary modifications are entirely achievable. Best Buy will likely need to change its focus from product differentiation through expert advice and ‘touch and feel’ products to price competition. With e-commerce opening the market wide open, the supply of all types of goods is going to increase, and in order for Best Buy to remain in the game, it will need to use price competitiveness to attract customers.
    I do believe, however, that even if Best Buy takes a while to implement these changes, or does nothing to adapt to the changing marketplace, that it will still be moderately successful for the time being. There are many customers who have not invested the time or the trust in the internet as a source of retail. Many people are still much more comfortable going into a store and seeing a physical product in an environment where they can pick it up, play around with it, and feel it out, and subsequently pay a higher price for this physical interaction with the good. People are stubborn and getting them to change from one medium of shopping to anther is likely going to take a while, so I believe that, for the time being at least, Best Buy is not doomed.

  5. Jillian Kruschell

    I think that BestBuy might be doomed. It probably won’t happen immediately but instead be a slow and painful loss of profits. We are currently watching video rental stores go out of business all over the place, because they were doing something that could be done so much more easily online. I think that is just one of the first of many industries that will be faced with the choice to either change their strategies drastically or face losses. BestBuy will need to offer something significant to make it worthwhile for clients to make the drive to their stores and trust the advice of their sales associates. Every generation is growing up with increased knowledge of technology, accompanied with the wealth of information available online we no longer require someone in a blue shirt to take our hands and walk us through the laptop aisle. We know what we want and if we can order it online for less, than what is their appeal?

  6. Jake Thorogood

    Best Buy faces significant challenges facing online retailers in the near future. Online retailers are often able to offer lower pricing strategies and significantly more access to a variety of accurate information regarding their products. The lack of physical facilities and staff required to market and sell products means less overhead, leading to lower prices. The emergence of informed consumers willing to research the products they are interested in rather than seeking advice of employees at retail locations has diminished the necessity of hands-on interaction with new products. For these reasons it may be very difficult for Best Buy to continue to compete with it’s current business model.

    In order to counteract these new market forces, Best Buy must learn to acknowledge and adapt these new systems. Moving many items to an online Best Buy store should increase efficiencies and reduce costs on certain products that require little interaction when making a purchasing decision. Using their physical locations to push interactive products, including TV’s and new technologies, would be in their best interest. This allows employees to focus knowledge in areas that are less well known, and retail space can be used more efficiently to market the products people prefer to see before making purchases. For example, most consumer’s have a difficult time determining which they prefer, plasma, LCD, or LED displays (for TV’s or computers) without seeing each performing next to each other.

  7. Raj Clair

    We live in an information based society now. As mentioned already, you can over the internet, in about 15 minutes, know more about a specific product than any of the employees working Best Buy on a given day. Circuit City was huge in the US, Best Buy’s biggest competition, and when they left, Best Buy lost even more of the market share; when you would think they would gain at least some with their number one competitor gone.

    I think it is naïve to think improving customer relations, or word of mouth will mean anything. For the people who go out and buy, the Wal-Mart Super centers now have electronic sections that rival best buy and undercut their prices. Then against the online stores such as amazon, they have no chance.

    Too big to fail no longer exists. If Best Buy is smart they will completely revamp, instead of just hoping and praying like blockbuster. I think their future is in expanding the geek squad and support aspect and the installation business for the more complicated electronics, than as a traditional big box electronics store.

  8. Hassan

    I think that we can’t say Best Buy is doomed yet. However, with the continually drop on their sales is a huge sign to say so. Also, the opinion of their CEO about consumers still in the need to feel and touch whatever they are about to purchase, is accurate but will not reflect positively on the predicted sales they are budgeting for when we compare it to what is happing out their in the real world and how people are increasingly moving towards the shopping online sources. It is obvious that customers from different backgrounds, ages and genders would have another prospective when deciding to buy products in terms of on store purchase or on line. Nevertheless, more and more people learn and enjoy the ease of online shopping and tend to avoid the struggle to go to stores which puts Best Buy in a really bad position where many of their competitors would gain the loyalty of most of Best Buy customers.
    Therefore, I would suggest for Best Buy in order to lead and continue in the industry, to consider the online services and start applying a new sales plan in that regard and direct at least half of their plan towards online users segment. They could also join an expert companies whom already had a long experience in the online shopping and let them share and facilitate this operation for them.

  9. Bubba_3

    I believe that in some sense Best Buy is doomed. The reason why I say this is because there is a chance that Best Buy can rebuild the bad reputation that it has, if they do a few changes, because everyone these days needs some sort of technology. Some changes might be giving better customer service. I know from experience that Best Buy has some of the worst customer service I have ever seen. Nobody wants to stand around looking every isle just for a small thing. And one thing what keeps people coming back to a store is how well there customer service is. Another thing they could do better is have some sort of discount card or some sort or even if they drop there price by a certain percentage then people will be more motivated to go into there, because everyone tries to get the best product at the best price. In today’s market if you want to be able to do business in the long term then you have to be able to manage the companies financial statements. An example of this is Best buy owns future shop. So don’t open right across from each other and compete with yourself. If they do some of the suggestions above they are more likely to survive.

  10. Jason Hamlyn

    Best Buy is fighting in a very competitive market that is changing as much as the movie rental business that Blockbuster just recently failed in. Best Buy can survive because as opposed to the rental market its not hampered by returning the product on a strict timeline, as well it’s a purchase to own side of retail. Although the online retail industry is large and will take a bite out of their sales, if they can adapt and expand integration with its online store with the in store sector of its business that will allow them to be in a stronger advantage then places like Amazon. A position they need to end is the “Online Only” and “In-Store Only” promotions and products, this is forcing customers into positions that they don’t want to be in, by forcing them online or to come into a store and thus getting them to be just a little bit less likely to care what that special deal actually is. Lastly one advantage they can create is selling used items like Amazon does, this will lower the cost of items and allow them to fight toe to toe with Amazon’s special deals. One way that this can work is if they allow people to sell their products to the store, that store carries it in their store alongside the rest of their product, the online store posts the item online and users can purchase it for shipment to their local store, or have it shipped to their house for a fee.

  11. Destiny S

    Whilst it is interesting to read that the giant electronic retailer Best Buy has lost profit for five consecutive quarters, it is not at all surprising. With the same products available online for (generally) a fraction of the cost, the consumer market has also naturally shifted to online sales. Big box- and chain- type stores such as Best Buy will very unlikely boast the staggering profit they reported pre-online shopping due to the simple fact that society likes saving money and is becoming wiser with spending habits (sale items, flyers, and of course – online shopping). Nevertheless, there will always be the individuals who need a specific product immediately and cannot wait for the item to be shipped to them and Best Buy will willingly collect their nearly preposterous mark-up. A company such as Wal-Mart exists and is arguably successful based simply on the notion, among many others, that they purchase large quantities of stock. Do not expect to see a marked drop in pricing at Best Buy any time soon, but perhaps internal investments in overall purchasing power and revised merchandising tactics.

  12. Austen Murray

    I don’t believe best buy is truly doomed. They are going through a tougher time than usual and must adjust to a new competitor in the market. Similar companies have come back from much worse. Best Buy obviously has to do some price adjusting and figure out how to beat amazon or potentially join forces with them. People want more convenience to their lives all the time. This is simply that notice from consumers to Best Buy that they must adjust to changing times. Anytime someone as the chance of not leaving the comfort of their own home they will take it. People are becoming more and more like this and this is a sign. Best Buy must either cooperate with amazon to set up a sufficient online retailer or just create their own which is just as easily accessible like Amazon’s website. In order to win in this industry they must be proactive and listen to consumers, not just react and watch another consecutive quarter loss. Best Buy hopefully will not go under, they have lots of time to adjust and fix the problems with their business. In order to succeed let’s hope they have a well-educated board of highly paid professionals that are on breakthrough ideas for consumers in offering them lower prices and more convenience while shopping a Best Buy.

  13. Brad Christopoulos

    I don’t believe Best Buy is doomed at the moment, but if they do not change something drastically in the near future it will most likely cause Best Buy to shut down or to have a major downsize. The reason that Best Buy will not be completely doomed is because of their mass influence on their huge promotional days, which brings millions of dollars of revenue into their stores. On Black Friday in the US, their are always hundreds of individuals who are lined up outside the stores waiting to be the first ones to get their hands on the products that are on sale. Another reason that they will survive is because they have realized the need for an online market place to compete with retailers such as Amazon, and that they have provided a very easy to use Online store which has products that sometimes are not available at the closest Best Buy.

    The reason that Best Buy may be doomed is because they have so many store locations, and this has almost made it turn into an internal competition between Best Buy locations. If they chose to downsize a bit, and not have a store every couple of kilometers in bigger metropolitan areas, I believe their bottom line will show a major improvement because their expenses will not be so high.

  14. Breanne Marton

    I don’t believe that Best Buy is doomed right now, however I do believe that they might not be able to keep their business as high as it is right now. I think that half of the problem in this situation is from consumers that are not easily pleased anymore. Consumers today want what they want, when they want it, how they want it, regardless of what the “rules and regulations” of an organization might be. Because of the ease of the internet know and the manner in which it is so accessible to individuals at all hours, this will indeed hurt brick and mortar locations of any type of business. However, if a company is not going to be willing to price match to other companies including online companies, they will not be able to survive in this market. The market has become intensely competitive due to the ease of the internet. Although some individuals do still appreciate “feel and touch” it is no longer a necessity to most of the public, this will serve as a problem to any organization. If any business, Best Buy included, does not embrace this and map it into their marketing strategy, they will surely fail, perhaps not initially but over the long run they will not be able to sustain their profits.

  15. Wale Obateru

    I do not think bestbuy is doomed if they act fast to regain their competitive advantage. In a rapidly changing world where technology is seen as part of our everyday life, any business that does not have a way in which consumers can access and buy products online will be relegated to the background. Due to time constraints and convenience, consumers find it more rewarding to purchase products online which eliminates the need to go to a physical store to buy the product. Also consiidering the competitive nature of businesses, consumers are better able to compare prices of products before deciding on where to buy. In order for bestbuy to gain a competitive advantage, it will need to stop relying on only in-store selling and incorporate online marketing as well. This will help build a wider audience reach and depending on their price offerings when compared to other competitors, they could gain customer loyalty. Also, the value added services provided to customers can help build a competitive advantage over it’s competitors. They could incoporate things like after sales calls to customers to ask if they have any questions regarding the products bought, or even provide free maintenance on products bought if necessary. This will always bring customers back to purchase more items. Bestbuy should also make the online buying process easy as most consumers don’t want tideouus buying processes. Bestbuy should also ensure that the online payment method is very secured to protect the privacy of its customers.

  16. Pulkit Arora

    In my opinion Best Buy is not doomed yet, but they have a lot of work ahead of them in order for them to stay competitive in the market against sites like Amazon. Best Buy should quickly adapt to this change and figure out a plan to stay competitive in the market. If Best Buy continues to deny the fact that sites like Amazon are taking away their sales, then they could truly be doomed. In order for Best Buy to stay competitive, they have to lower costs close to its actual cost and provide exceptional customer service. Those are the two main differences from Amazon and Best Buy. Best Buy has the advantage of hands on experience and customer service whereas Amazon has low price and free shipping most of the time. In order for Best Buy to survive or ‘win’ in this industry, they must cut down their prices significantly and provide guarantees and installation of the product. For example, once the product is purchased, Best Buy could deliver and set up the product for their consumer and tell them to call for help whenever needed. This creates loyalty of the consumer towards Best Buy and they would continue to shop there and maybe even refer the store to others.

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