The Gradual Death of the Brick and Mortar Tech Store

Cutting_Crew writes "As we all know brick and mortar stores have been closing left and right recently. We had CompUSA, Borders and Circuit City all close their doors within the last 4 years. According to an article on Forbes.com, it is spelled out pretty clearly why Best Buy is next in line to shut its doors for good. Some of the reasons highlighted include a 40% drop is Best Buy stock in 2011, lack of vision regarding their online services, management too concerned with store sales instead of margins and blatant disregard for quality customer service."

Stock Price is an Effect, not a Cause

[afabbro]

I thought this looked familiar...this article was published on the Forbes web site on January 2nd. It's also a bit ranty rather than well-researched, though there's no doubt that Best Buy is not doing well.

Cutting_Crew...because Best Buy is doing poorly, its stock is down 40%. Its stock price is not one of "the reasons highlighted" for why it's doing poorly. Stock price is an effect, not a cause.

On a related note...is Fry's having problems?

I used to work for best buy

[assemblerex]

They have no concept of the competition that Amazon represents. They think in store purchases will keep them alive. They need to:
1. Fire half the staff, and only hire professional sales people (Not 30 seventeen year olds)
2. Reduce the store size by half or more.
3. Reduce prices by having less selection but enjoy the bulk purchase price point.
4. Stop high pressure pushing of accessories and service plans on people.
5. Work with vendors to have exclusive items made for them not found online (like a white or pink dyson)
Still doomed by their horrible reputation.

Re:Apple

[LWATCDR]

Because you can not go online and buy an apple product for 60% price of buying it in the store.
It is that apple control thing working for them.

They've got longer than that

[damn_registrars]

Brick & Mortar will still serve a purpose for a while yet. There will always be times when you need some widget that day, and no amount of money will solve that problem through Amazon. It might not be Best Buy, but it certainly won't be WalMart either; we will have a large nationwide chain carrying electronics for people who need something now and don't mind paying a little more for it than they would online.

That said the complaints listed in the (over 1 month old) article are very similar to what was happening at CompUSA when they were in their death spiral; young kids were being hired with no knowledge of anything, and corporate suits with decision making power were being promoted who knew even less.

Why should I buy stuff from Best Buy?

[Peter Simpson]

When there's Newegg? I mean, honestly: $25 USB cables and re-boxed returns vs easy return, no tax and better prices (even including shipping).

Re:Thank god we still have Radio Shack

[twotacocombo]

Radio Shack these days is a shadow of it's former self. I went there with my dad as a kid, and remember shelves full of electrical and radio crap that I couldn't even comprehend. I went in there for the first time in ages about 3 years ago.. holy crap. It looked more like an AT&T store than the Radio Shack of old. People were lined up to pay their phone bills, and the walls were lined with cell phones and MP3 players and whatnot. Only in the back corner were any sort of electrical components, and nobody could really help me find what I was looking for. It's almost as if someone bought the Radio Shack name, and slapped it on a completely different store...

Re:Why should I buy stuff from Best Buy?

[Sorthum]

The sole reason to go to a BestBuy is "I need this item today." That's about it.

Re:Forgot to add older stores

[SJHillman]

They're nice for when you need it NOW. A few times I've had a fan, PSU or video card die and for one reason or another, I couldn't wait for 3 day shipping (2 day and overnight shipping usually costs twice as much as the component is worth) so I headed down to Best Buy or Circuit City and grabbed it.

Re:I used to work for best buy

[wanzeo]

As someone who has spent time as an electronics sales rep, I say good riddance.

I was always as honest and informative as I could be (much more so than my coworkers), but you really can't give meaningful advice in a 10 minute sales pitch. Half of the people are coming cold to the technology, they are not going to be educated in time to make a good decision. The other half have made up their minds because of marketing, and nothing you say will convince them otherwise. And then add to that the fact that most technology purchasing is rather subjective. Just look at the heated discussions on any tech website about which products are the right choice, they go on for pages and pages. And that is between people who are already very well informed about the basic principles.

Spending a few hours reading user reviews on amazon or newegg, and being able to google unfamiliar terms, is more valuable than the most tech savy and personable sales rep. And because most sales reps are subpar, internet shopping wins by a landslide.

try to think like a Forbes reader

[decora]

you are probably a hedge fund guy, or friends with a hedge fund guy, or some other type of person who makes money by buying and selling big chunks of other people.

you see a story about an electronics retailer.

they see a story about an opportunity to short sell or buy credit default swaps against a company's debt. imagine if you are sitting at a poker table and instead of chips you are playing with coins that each say '1 million dollars'. you can start to get an inkling of the mindset here. you dont care if the other people at the table are nurses, waiters, hairdressers, authors, poets, politicians, soldiers, etc. all you care about is what is in their hand, and which way the game is going to go, because you can get rich off of it, but more importantly, you can get the high you get from winning. thats what the "their stock price is down" thing means. it doesnt pretend to have any intelligent commentary on cause and effect. its poker information for poker players.

Re:They've got longer than that

[Doctor_Jest]

I think people will pay a little more if they have a better experience. Stores have forgotten that, and like the failure of all those who tried to compete with Wal Mart on price, they lost. Retailers can't compete on price with the online retailers, even with sales tax (which is a nightmare of logistical nonsense just waiting in the wings)..

Retailers need to stop focusing on price and margins and wonder if there is still such a thing as customer loyalty. I don't know if there is, but companies like Best Buy don't seem to give a shit about trying. If it doesn't work, it doesn't work... but for fuck's sake, how can these companies make the SAME EXACT mistakes that their dead competitors make and expect to come out on top, or even alive for that matter? It's like watching monkeys throw shit at each other. It's funny, but you don't want to get any on you.

Re:Microcenter?

[russotto]

Ummm.... doesn't Microcenter count? Guess not according to Forbes, because in 2006 they had 19 stores, 20 in 2007, 21 in 2008, and in 2012 Microcenter has 23 stores. Sure that's slow growth, but still growth none-the-less, and they're much better than CompUSA, Circuit City (is Circuit City "tech"?) and Best Buy because Microcenter actually has competitive prices.

They also tend to have stuff in stock, and for many items (printers, monitors) working items you can examine. Why would you go to a store when you could order online for much less? Three good reasons
1) You want it now
2) Shipping cost overwhelms the price difference
3) You'd like to take a look at it before buying it

But most brick and mortar retailers mess up _all three_. They won't carry much and what they carry they won't keep in stock, so you have a good chance of not finding what you want. For things where shipping cost is significant (e.g. cables), they'll carry only ridiculously-priced brands so they're STILL more expensive than ordering online + shipping (even for one lousy cable). And if they have any samples out, they're often obviously broken, and usually not actually working.

Re:Thank god we still have Radio Shack

[lymond01]

Reality is that people don't need to build cool gadgets anymore. Cool gadgets are mainstream. And fixing digital circuit boards no longer requires colored resistors. You just toss it out and buy a new product.

Re:Why should I buy stuff from Best Buy?

[lymond01]

And Best Buy needs to consider that. Drop its online prices. Up its in-store service and knowledge. Work to maintain its employees for more than 6 months. Hire people at reasonable salaries, train them regularly, don't mess with their schedules without telling them. As it stands now, most of the employees in Best Buy are high school kids who stand around and chat with each other, don't know the answer to your questions, and will be gone in 3 months. This is no way to sustain a business where knowledge is useful. Let the transitive staff wait tables. Hire real employees and pay them real money and treat them like real company employees.

The only problem with Best Buy is that management doesn't see the company's role in the new age. And since they're lost, they feel their company is lost, so they treat all their employees like a 4 year old's goldfish.

Re:Apple

[greg1104]

TFA talks about loss of control over margins at Best Buy. Apple Stores are known to have some of the highest margins in retail [seekingalpha.com]. Their success demonstrate that people are willing to pay high margins for products if they feel they're getting good service for it--which is certainly not the Best Buy experience.

Also, it's rarely the case that there is a large advantage to purchasing an Apple product outside of their stores, due to their extensive price controls at all retailers. As you can also see from that chart, Apple makes an ever higher margin for the products they sell online. They could adjust their price to match the lower overhead and sell them cheaper direct. The fact that they don't is an interesting component to their overall strategy.

Re:Thank god we still have Radio Shack

[Sorthum]

I really don't think that selling $3 packs of capacitors to hobbyists is sustainable in 2012...

Re:Apple

[atriusofbricia]

Yet Apple can't seem to open stores up fast enough. Go figure.

That's because Apple stores are not electronics stores. They're fashion stores that happen to sell electronics.

Re:Thank god we still have Radio Shack

[griffjon]

What Brick-and-mortar store can hope to compete with the internet for commodity-level components? It's not even fair to hope they would. I mean, cmon - Best Buy stocks even-further-overpriced Monster Cables as their entry-level cable. I don't fault the Shack for seeking higher rungs on the value chain. And I'm hardly a fan of either the Shack ("You have questions, we have blank stares") or Best Buy ("Best means most expensive!"). But, I do fear for the complete loss of generalist tech stores. A book is a book is a book, but when deciding between tablets or notebook PCs, or the like, actual interaction with the device answers a gazillion questions that don't seem to have answers on websites.

Best Buy? You mean....

[i_want_you_to_throw_]

"Amazon showroom" ?

Re:What about Apple?

[atriusofbricia]

The Apple Store should disprove this, though: At $4,032 per square foot per year, the NYC Apple Store is the most profitable retail store per square foot in the world, period.

As I said earlier... Apple Stores are not technology stores. They are fashion stores. Period.

This SHOULD NOT BE NEWS

[manual_tranny]

I guess I am one of the only ones that noticed the way Best Buy did business more than 15 years ago? As a child I remember them charging an exorbitant fee for diagnosing and repairing a radio, only to have replaced the batteries. Best Buy has always been a racket. In the early 00's, Monster Cables were apparently made out of Pixie dust and Myrrh, from the way their employees talked them up. The poor employees. They are hassled and forced to mess with customers, but they get no commission for being pushy salesman. Best Buy has an opportunity now to prevent failure. If they don't change, you can bet that someone is making money on their failure.

Best Buy is not dying! The article is WRONG!

[David_Hart]

The theory presented is that Best Buy is dying due to lower than normal sales and lower margins. This is presumed to be caused by poor customer service based on personal experience with the writer's local Best Buy store and some inventory issues for items that NO retailer had in stock during the Christmas season.

The truth is actually more boring. Best Buy sales are down because the economy has been in the toilet. Best Buy margins are down because margins are down for all electronics. In addition, the mad rush to 3D that electronics manufacturers were hoping for never happened. Very little of this has to do with customer service.

Personally, I have never had a problem with my local Best Buy. I've been able to return items without question and they have been very helpful when I am looking for a particular item. Anyone who knows me knows that I am a big proponent of Amazon. But there are many people like me who just don't feel comfortable buying appliances and expensive TVs over the Internet.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Thank god we still have Radio Shack

[TheLink]

Might be reflective of the USA's electronics manufacturing industry.

You want to see old school radio shack style stuff (and more), go to China (especially Shenzen). Of course there's a difference, in those places you may see people doing dubious stuff like assembling batteries in front of you and sticking the "original" holograms on them: http://www.bunniestudios.com/blog/?p=283 [bunniestudios.com] ;)

Re:What about Apple?

[atriusofbricia]

Repeating some silly assertion doesn't make it true. Neither does putting "Period." after it.

You can call it silly if you wish. It changes nothing. Apple stores are more about image and fashion than electronics.

Re:Thank god we still have Radio Shack

[DurendalMac]

I can see Best Buy going away. So many of those stores are run by inept morons and so much corporate policy is made by inept morons. If you're really lucky, you'll get an honest salesperson who actually knows what they're talking about. Otherwise it's brainless chunkheads throwing whatever they can at you. If you're really lucky, you'll get a Geek Squad tech who knows what he's doing and will fix it right. Otherwise, you get some idiot sales flunkie who can barely read the checklist of crap to do, a checklist that probably ends with "Just sell 'em a bunch of crap if you can't figure it out". Best Buy's reputation has been dwindling because they're bloody incompetent. People will go elsewhere for their goods if it continues and BB will tank. Any town big enough for a BB already has alternate stores.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Apple

[bennomatic]

Huh? Basically everyone there can check you out. What's impossible to find is cash registers because they don't have them. Or maybe they have one tucked away. But most transactions are done via credit card, and every employee has mobile devices which can help you check out.

Not to mention the fact that if you have an iTunes account and their store app, you can actually self-check-out without talking to anyone, except to maybe show the electronic receipt to someone on the way out the door.

It's easy to shit on Apple, and clearly it's fun, because lots of people do it. But to say something like "actual sales are secondary" in the face of outrageous success on their part is just pure silliness. It's not like people are just pointing to foot traffic and calling them a success for that--although that is one of the metrics getting played up--it's about dollars per square foot, and love them or hate them, they are indeed making more dollars per square foot than pretty much any other retail establishment.

If actual sales are secondary, then their success at whatever you think their primary goal is must be absolutely stellar.