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Best Buy CEO Brian Dunn Resigns After $1.7 Billion Loss
An anonymous reader writes "Best Buy CEO Brian Dunn has resigned amid the big-box retailer's major financial problems. The announcement comes two weeks after Best Buy announced a $1.7 billion loss for its fiscal fourth quarter. Best Buy is trying to avoid the same fate as Circuit City, which went out of business in 2009, but the future looks grim." The article provides a reason not to trust middle-management: the company claims it had "no disagreements with Dunn about operations, financial controls, policies or procedures." Best Buy may not be Shangri La, but in many rural and semi-rural parts of the U.S., it's the nearest and best place to actually find a wide selection of electronics.
"Best Buy may not be Shangri La, but in many rural and semi-rural parts of the U.S., it's the nearest and best place to actually find a wide selection of electronics."
As Yoda says, "that is why you fail". The fact is, there's almost no middle anymore. Bottom of the barrel electronics have gotten good enough that low end buyer buy almost exclusively on price. High end buyers have the awareness and ability to comparison shop online for yet a wider selection at better prices. Best Buy loses the first group to Wal-Mart, and the second to the internet. And the in-between isn't big enough to make any money on.
Unfortunately, this seems to be the way things are going. There will be one or two "retailers" left on the Internet which will be in unassailable positions because of heavy discounting on freight and committments from suppliers. Buying anything locally will be an option fondly remembered by grandparents and a concept utterly foreign to the next generation.
Why will there be only two? Well, Amazon ships with UPS and UPS charges them so little based on volume that they can make money offering free 2-day shipping. Should some new player come along they aren't going to get discounts like that until they have a huge volume, which means their prices will be higher, meaning they aren't going to get that huge volume. Same thing with suppliers: if you buy 1,000 TVs from Samsung they give you a different price than if you buy 100. If you sell 1000 a week you are going to be buying a huge number - maybe more like 10,000 at a time - and get such a better price that they new start-up can't ever get that good a price.
So what do we have now? A monopoly. Mostly driven by the Internet and the way shipping works in the US. Best Buy had their own fleet of truck for distribution so their costs were quite different than using UPS or FedEx. The idea that some new startup can come along - as Best Buy did - is pretty much gone. The market is closed to new entrants. Would there be room for two such distributors? Maybe not - we might end up with only Amazon as the big retailer in the US and WalMart for low-end stuff. We can all see that the small independent seller is doomed if they haven't already closed up shop now. WalMart put those folks out of business a long time ago.
You can certainly say that Best Buy failed in providing customer service, but we are seeing a passing of a lifestyle. We are also seeing an interesting phenomenon whereby more and more things in people's daily lives are being supplied through a single source. Did you know there is only one factory in the US making glass bottles? If one can do it, why have more, right? Except it is a single point of failure and there are many substances that a glass bottle is required for. If that one factory has a fire or some other accident the entire US is without glass bottles for perhaps a very long time. With retailers being eliminated we are focusing more and more on online retailers and two shipping companies - of which there will only be one in the end. When it is only Amazon and FedEx (far more diversified then UPS and therefore the more likely one to survive), what happens if there is a strike against FedEx? Well, it means people stop getting stuff. When it is WalMart and Amazon alone and everyone is getting food, clothes and everything else through these channels what does it mean?
One big thing it means is that if the buyer at WalMart doesn't like some supplier, their stuff isn't getting sold in the US. It means decisions that consumers get to make today are then made by the buyers for the retailers that are left. If the buyer doesn't choose it, the consumer can't choose it. Period.
Oh, you think "the long tail" will solve this problem. Not really. There will be only a few retailers because the dynamics of an online store are quite different from opening a little shop on Main Street. It is already pretty much impossible for an upstart to compete with Amazon today and it isn't going to get any better. Which means if Amazon doesn't strike a deal with a supplier - on Amazon's terms - their stuff doesn't get sold. Manufacturers are ill-suited to sell things directly, so that isn't really an option. Neither is Amazon going to take on a new product that completes with an existing high-volume product unless they get a really good deal - why trade dollars for pennies? This puts Amazon in control of what brands of toothpase you get to choose from - you will not have the option of going to a different store.
Pretty sad, isn't it. At least it isn't the government making these decisions for us.
My problem with Best Buy is that it's such a painful experience to shop there.
The last time I was in the store, I was there on release day to buy a Kindle Fire. The saleskid made two strong attempts to persuade me to buy $200 beats headphones, like the ones he was wearing around the store, to compliment my $200 tablet. Then of course you have to contend with the hard sell on the warranty and any number of other add-ons. And heaven help you if you're buying a large electronic device, especially if you aren't all that tech savy. They sent my parents out of the store with $200 of tack on Monster nonsense. Basically, taking advantage of old people.
Best Buy needs to make their shopping experience not akin to a trip to the dentist. Stop with the aggressive push for add-ons. Stop with the gun to the head warranty pushes. (You can buy an extended warranty on a CD, did you know that?) Work on customer service. Fire the disinterested teenagers. Reward knowledgeable stales staff. Develop knowledgeable sales staff.
Basically, stop being what most people think Best Buy is. Start being what Amazon is - an easy, convenient, stress-free shopping experience.
Best Buy needs to make their shopping experience not akin to a trip to the dentist. Stop with the aggressive push for add-ons. Stop with the gun to the head warranty pushes ... Fire the disinterested teenagers. Reward knowledgeable stales staff ... Start being what Amazon is - an easy, convenient, stress-free shopping experience.
Not to defend Best Buy here, but these things are not necessarily compatible with cheap prices in a big-box physical retail environment. For example, all the stores I visit with cheap prices try to upsell the high-margin junk so they can make money. All the stores I shop that have knowledgeable sales people and good customer service - think Nordstrom's - aren't cheap. Amazon has cheap prices and no pushy come-ons but they also don't have to pay for retail space and sales employees. It seems that you can have physical stores, good customer experience or cheap prices but not all three.
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If you aren't willing to pay decent (commissioned) sales staff, why have a sales staff at all?
Why not just be like Target, and have few or no salespeople? It's not like the staff at Best Buy are helpful or knowledgeable, they are one of the primary reasons people avoid the store.
Tell their execs to go to an Apple store and ask themselves why many people like going there. The experience of dealing with store employees does not feel like I've walked onto a used car lot with a sales guy waiting to eat my lunch.