Five Reasons Why Best Buy Could End Up Like Circuit City

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Five Reasons Why Best Buy Could End Up Like Circuit City

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Problem No. 3: Best Buy Can't Sell Audio Like Specialty Dealers
I have a running joke with a number of industry executives about the fact that each and every time (without exception) I go into the Magnolia in the back of my West Los Angeles Best Buy, that I never get spoken to. There is no greeter. There is nobody to qualify me. There is nobody to ask me what I am looking for today. You are crazy to think there is somebody to ask me if I was in the mood to see "the most amazing 3D demo in a $20,000 MartinLogan or B&W driven home theater."

Literally, there is nobody in the store inside of a store. And when there is, it's one person who won't engage me. I promise I shower before I go in to the store. I also have spent upwards of $500,000 (retail) on audiophile and videophile electronics. I love the stuff and I am just the kind of sucker who can buy what they have to sell. I also refer readers, associates and friends to retailers weekly who spend tens of thousands of dollars per sale. With exceptional brands on display like Panasonic, Bowers & Wilkins, MartinLogan, Definitive Technology, Denon and many others - what would it cost to train someone to try to speak with me? Not much, unless you have to pay the suits and bean counters who are killing off Best Buy.

If Best Buy doesn't learn how to sell audio better - this alone could be the end of them. If they did learn how to sell audio - they could radically improve their profitability as they have the customers under their roof - but they aren't good enough to close them. I am living proof and have proven my point with over a dozen trips to this Magnolia store.

Problem No. 4: 3D Doesn't Move The Needle Like Past "It" Technologies
Best Buy is so powerful a retailer that they can literary make or break a technology. They also can ride the coattails of a technology, which is what they are trying to do with 3D - except for the fact that consumers don't like 3D. Not everyone wants to watch HDTV with glasses. 3D has lower light output than 1080p HDTV in 2D. Not everyone has eyesight good enough to even see 3D. Some people get physically ill from 3D. And most importantly - 3D HDTVs cost significantly more than 2D sets, which affects today's value buyer more so than ever.

One analyst for Best Buy in a recent story suggested that Best Buy's HDTV sales are down 10 percent in a category that makes up over 20 percent of their 16 billion dollars in sales. It's time for Best Buy to invest in better demos - meaning HDMI, high speed Internet connections and professional video calibrations. They need to be excellent at selling HDTVs as well as the profitable attach sales that come with them. The experience of buying an HDTV at Best Buy is pathetic in the local store that I go to. If you want a Google TV demo - the Internet isn't fast enough to show you what that set top box can do on the Sony TV. If you want to see the edgeless Samsung HDTV - I had to ask three people.

I found the set installed behind the reception area in the TV section and blocked by five other clearance HDTVs on a table behind the set. Literally, if you weren't sitting in one of two seats in front of the Samsung - you couldn't see the set. And when you could see the set, some genius of a manager had put on Shrek in 3D but converted it to 2D so that you too can get half the light output without wearing glasses. This amazing set with game changing form factor was hard to find and looked downright awful. No wonder Best Buy's HDTV sales are off 10 percent. If people want a crappy demo of an HDTV, they can go under the sodium lights of Costco, Wal-Mart or Target and save some money. Best Buy needs to learn how to bring the "special" back to specialty AV, as they simply can't compete on price only. If they can't educate in the stores - the Internet can and will. The Internet will also take the sale and say "thank you" as Amazon has everything Best Buy has to sell along with free shipping.

Problem No. 5: Best Buy Stores Are Too Diverse In Terms of Products
My trip yesterday to Best Buy was to look for office appliances for the pending new office for Luxury Publishing Group. I do have to give my salesman from Pacific Sales, a local kitchen store that Best Buy bought, props for knowing about his product in ways the audio and video salespeople didn't. He also enthusiastically greeted my wife and I and helped with our education. He did try to mildly close us, which I appreciate. I told him that I needed this gear in about six weeks and he modified his pitch away from close-out items to other elements that I needed.

The people in the Apple section of the store are good too but then again - they are not Blue Shirts. They are Apple employees, as Steve Jobs isn't going to have clerks selling his sexy products. He'll train them while using Best Buy's distribution chain to Apple's advantage. Jobs is pretty damn smart.

But then there is audio, video, software, musical instruments, appliance, video games, computers (non-Apple) and so much more in the store. How does a company manage this many challenges? How do you become excellent at all of these topics when there are so many to improve on? It's a big challenge and one that likely would cost the chain sales as it worked on its core competencies. Will Best Buy do this type of a project as Apple did by whacking so many retailers when Steve Jobs came back? Not a chance. Would it be good for Best Buy? Hell, it might save them.

Best Buy has the market share to be truly dominant. You could argue that they already are dominant but they are losing their grip on their market share in key areas. They are selling consumer electronics like it's a pure commodity, which it's increasingly becoming - however the margin is in selling the good stuff. Think Apple, Bowers & Wilkins, MartinLogan, AV software and beyond. You need a team of people that know how to sell the good stuff to be able to land the big deals and/or make the most of the sales that you have every day. Noel Lee, the founder of Monster Cable is best known for being the king of the "attach sale" with his audio cables in the 1970s. Best Buy needs to get back to the basics and improve nearly every element of the way they promote, demonstrate and sell audio, video and other CE products because if they want to battle it out with the warehouse stores and the Internet - Best Buy will lose. Just like Circuit City, Tweeter, The Good Guys and so many others before them.

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