The Future Retail Wasteland
By Brad Stone and David Welch on April 12, 2012
Bloomberg Businessweek
Brian Dunn was practically ebullient. “The one critical thing we offer the world is choice,” the Best Buy (BBY) chief executive officer said in a March phone interview with Bloomberg Businessweek. He was trumpeting in particular his company’s role in guiding customers through the expanding smartphone universe.
“We provide the latest and greatest choice of all technology gear, from Apple (AAPL) products to Google (GOOG) products, and that brings more opportunity to help people put technology to use. That is a great place for us to be.”
A week later, reality intruded. The consumer electronics retailer posted a $1.7 billion quarterly loss and announced it would close 50 stores nationwide. On April 10, Dunn resigned.
Best Buy cited an unspecified “personal conduct” issue as the reason for Dunn’s abrupt departure, though the larger troubles plaguing the company haven’t changed.
Founded in 1966 in St. Paul, Minn., Best Buy has watched its business stagnate because of a mix of macroeconomic forces and shifts in consumer behavior that essentially boil down to that one word Dunn bragged about as an advantage: choice. Shoppers are finding more choices online—primarily at Amazon.com (AMZN)—where they can often find a better deal. At the same time choice has narrowed in product categories such as HDTVs and PCs. There’s hardly a reason anymore to line up various models in a showroom.
Best Buy’s decline reflects a cultural shift that’s reshaping the retail world. All big-box stores, and Best Buy in particular, thrived in an era when comparison shopping meant physically going from store to store. The effort required of consumers was a kind of transactional friction. With the advent of mobile technology, friction has all but disappeared.
Rather than ruminate with a salesperson before making a selection, tech-savvy consumers are more likely to walk into stores, eyeball products, scan barcodes with their smartphones, note cheaper prices online, and head for the exit. Shoppers can purchase virtually any product under the sun on Amazon or EBay (EBAY) while sipping a latte at Starbucks (SBUX). For traditional retailers, that spells trouble, if not death.
“So far nothing Best Buy is doing is fast enough or significant enough to get in front of these waves,” says Scot Wingo, CEO of e-commerce consulting firm ChannelAdvisor.
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