Profits: Big Box or Not?

Goodbye, Best Buy. Hello, specialty retail?

JP Mangalindan, 12/14/ 2010


Most times of the year, Best Buy's foot traffic tends to be healthy -- the chain plants its stores in areas where heavy volumes of customers are not hard to find. But during the holiday shopping seasons, all bets are off as throngs of people line up despite frigid temps at 4 a.m and limited parking. Customers wheel out of the store hours later with multiple flat screen TVs, PCs, games and other electronic paraphernalia. In fact, some families actually gear their holiday shopping towards the Best Buy Black Friday experience.


It was both magical and painful. The adrenaline rush and deals seemed worthwhile. But waking up at 4 a.m.  and parking hundreds of yards away on the grass -- the parking lot was always full -- only to race against irate, pumped-up soccer moms for an extremely limited supply of in-stock products? Not so much.


Since then, our shopping habits have changed, as it seems have those of many other families, too. Regardless of the time of year, Best Buy isn't a must-visit for us, anymore. If we want specific items -- a new phone, a tablet, ereader -- we go directly to the source: an Apple (AAPL) store for a MacBook, an AT&T (T) store for most phones, or Amazon (AMZN) for the Kindle. While Best Buy did say their sales of newer gadgets like smartphones and tablets were doing well, it was weak television and laptop sales that actually brought their figures down. One could argue that even so, consumers choosing to shop elsewhere for a new television also deprived Best Buy of knock-on revenue from additional tablet and phone sales.


In some cases, the deals for gadgets simply aren't as competitive as Best Buy's, but oftentimes, they are. (Best Buy doesn't offer discounts on any Apple products, for instance.) I actually prefer going to the Apple store to Best Buy because, unless you're subjecting yourself to the madness of Apple's Fifth Avenue New York City location, the customer service is oftentimes superior. Employees usually know more about the products they're talking about because they're not responsible for stocking and overseeing hundreds of thousands of electronics that may include televisions, stereos, computers, games, vacuums and smaller tchotchkes. In a more specialized retail store, employees have a smaller product catalog to learn about, which likely enables a better understanding of the products, and a better customer experience.


So does all this mean Best Buy's days of ruling the retail roost are over? Could it go the way of Circuit City, into bankruptcy and oblivion? Hardly. The business seems too well managed, and there are too many places in the country where specialty shops are scarce and big box stores are plentiful. But Best Buy's bad results do probably mean that consumers are getting a better idea of what tech gear they want, and a better idea of where and how they want to go about getting it.


With the big box consumer gadget chain's revenues down, it seems shoppers are heading to specialty stores or online to get their goods.