Readers of HomeTheaterReview.com likely were not shocked to see big box retailer Best Buy (BBY: NYSE) post more disappointing results right before the all-important Black Friday holiday shopping season. The company's stock, according to Forbes.com, is down 50 percent for the year and at millennium lows overall. Forbes.com is warning of a possible failure of their 401k program, which would only make one messy situation for the nation's biggest consumer electronics retail store even uglier.
To respond to the bad ink, Best Buy's P.R. and investor relations firm caught the attention of the likes of CNN, the Los Angeles Times, CBS News and others with the issue of "showrooming" and how the company plans to address the issue. Showrooming is the term for what happens when a consumer goes to a retail chain and plays with a product, only to use his or her hand-held device (smart phone, tablet, etc.) to cross-shop prices at other local stores and/or on the Internet. Simple barcode scanners make showrooming amazingly easy (and free) for mainstream consumers looking to eke out the most value for their holiday tech-shopping budgets. The problem for Best Buy is that a check of the prices on the Internet or local warehouse stores like Wal-Mart, Target, Costco and/or Sears - not to mention Amazon.com or other online stores with low overhead - shows that Best Buy is often the worst buy. Yes, you can sometimes have the component that you want right then and there, but up until now, Best Buy had refused to price match with the likes of Amazon. Now, after failing again in the third quarter, the company is changing its tune.
Although there have been impassioned pleas from as high up as Best Buy's CEO for the company to "embrace showrooming," showrooming respectfully isn't Best Buy's real problem. The issue is what I call affectionately call "commissioning." Best Buy stores are filled with Blue Shirt employees who are trained to be clerks, not salespeople. They move from department to department with little to no training. More importantly, they are not incentivized to close deals with the vast volumes of consumers that are in a Best Buy location at any given hour at any given location. The lesson of the failure of Best Buy's former competitor Circuit City is being lost, as it was Circuit's bean counters who decided it was better to take a quarterly stock bump by firing their small number of top-producing commissioned salespeople, which resulted in a long-term death spiral that cost the company everything and the U.S. economy 33,000 jobs. Best Buy employs over 100,000 people, and they look to have one foot on a banana peel and the other one in the grave.
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