Old 03-09-2011, 12:07 AM
Best Buy - Troubled Waters Ahead...

Found out about the post this evening - was webbed yesterday via Yahoo.

Forecast For Best Buy: Worst Is Yet to Come
(provided by The Wall Street Journal)

Monday, March 7, 2011
by John Jannarone

Just two years after its arch rival was knocked out of the ring, Best Buy (NYSE: BBY - News) is itself on the ropes.

The company revealed a problem last December that has left investors scrambling for answers. Even with bankrupt Circuit City out of the picture, the retailer was losing market share, especially in the key television and computing categories. Best Buy shares have since tumbled 21% and now trade at a mere nine times this fiscal year's consensus earnings.

Investors shouldn't assume Best Buy simply needs time to recover. Rather, the threats it faces are likely only to worsen. Take Amazon.com (Nasdaq: AMZN - News), whose relentless growth has undercut the raison d'Ítre of specialty retailers. That is true both in books -- where Borders Group recently filed for bankruptcy protection -- and in electronics.

Indeed, Amazon's electronics and nonmedia revenue rose 66% to $18 billion last year, helping it lift market share in different segments. Its share of LCD TV sets, for instance, nearly tripled, to 3.7% at the end of 2010 from 1.3% in 2007, estimates research firm Traqline. Its share of portable audio devices rose to 11% from 4.6% in the same period.

A key to that success is that Amazon beats bricks-and-mortar retailers across the board on average electronics prices, a Wells Fargo study showed. Best Buy, on the other hand, traditionally hasn't tried to compete on price alone but has preferred to highlight its tech-savvy staff and wider selection.

Its selection, at least, probably meant more a few years ago, when manufacturers like Sony (NYSE: SNE - News) sold products to Best Buy but not to nonspecialty retailers. But that has changed. Sony now sells to Costco Wholesale (Nasdaq: COST - News), for instance.

And it has become much easier for consumers to compare prices -- ironically, using applications on the smartphones they can purchase in Best Buy. Shoppers can visit Best Buy stores to examine items before buying them elsewhere. Or, as Greg Melich of research firm ISI Group says, they are using Best Buy as Amazon's "showroom."

Best Buy's market share is still so big -- it accounts for nearly a third of U.S. consumer-electronics sales -- it is reasonable to assume many Best Buy shoppers make decisions primarily based on price.

That helps explain why Best Buy is exploring a switch to consistently competitive prices rather than strategically timed sales.

But history suggests changes in pricing strategies can be problematic. David Schick of Stifel Nicolaus points out that BJ's Wholesale Club (NYSE: BJ - News) decided to lower prices on some items in 2002 to defend market share. The result: Sales at stores open more than a year quickly improved. But gross margins fell for eight straight quarters. BJ's shares also fell more than 70% from April 2002 to April 2003, when rival Costco's fell just 20%. While BJ's stock has recovered somewhat since then, it hasn't caught up with Costco's.

And reducing prices might mean Best Buy has to cut costs, such as for its sales staff. That leaves the question of what a specialty retailer still has to offer.

Best Buy's edge has been apparent when shoppers wanted new technologies like LED TVs, which it sold with more success than rivals. But high hopes for 3-D television have faded, and there is nothing promising on the immediate horizon. Moreover, the major source of must-have electronics is Apple (Nasdaq: AAPL - News), whose own retail-store chain is increasingly a rival even as Best Buy stocks Apple products. Sales at Apple's U.S. stores rose 83% to $2.8 billion in the fourth quarter of 2010, estimates Mr. Melich, making it the third-biggest electronics retailer in the U.S.

Unless a new technology takes hold, the worst of times are likely to come for Best Buy investors.
If you haven't, you should read the comments to that post; upset customers and store staff. Interesting stuff.

My purchases at the store have been exclusively media, DVDs and CDs. Though I have had my share of problems. I had a Reward Zone voucher a couple years ago, brought it to the register and was told that I could not use it with sale items. WTF? She wouldn't listen to reason, ended not buying, leaving the certificate. It only happed once, but it still pisses me off.

Recently I had a DVD that was all scratched up. I wanted a refund, $13 bucks, since they didn't have another copy. I paid cash for it so I didn't expect any problems. Nope, they would issue store credit or pick up something else of the same value. No, I need my refund to buy it elsewhere. I walked away from Customer Service desk without that DVD or money, I was angry. The next day I called them up, I wanted my refund. I ended up getting it. But it shouldn't have been that difficult.

Okay. That been said, I don't want them to disappear. It does pain me, the reduction of media inventory is depressing. I used to go to them and spend a good hour or more just looking at what they had - making lists. As bad as my local store is, I've seen the Rancho Cucamonga (CA) one. They moved into the old location of Circuit City. The inventory was/is... insulting. I counted four rows; everything crammed together. It's a mess. It's a frakken cup - if they want to add new titles, something has to be removed. Their old location had an awesome selection... had.

- - -

I can't speak for others, but for myself - I want to see the item(s) I buy. Check to see if the case has a floater, the condition of the slipcover, if the movie came with one. Check to see if the security sticker overlaps onto the wrapaound (removing it will tear the paper). And be exposed to new titles. Look, I buy stuff from Amazon and Ebay. But I much prefer to see it face to face. I really don't understand those who only buy online. It's like going through life with blinders. Sure they give recommendation on what you might like, but its nowhere as good as looking in person.

Prices. I do have to agree with the commenters, they have increased their tags. Older stuff selling for more they they should. That and their sales of late suck. I remember when they would have tons of movies for ten bucks, now it's just a trickle.

As for customer service? I've always had problems, even when they were doing great - early '00. It's not much of a downgrade for me. Where it was, was at Circuit City. There used to be people who could help, then they downsized and were replaced by idiots. There was this old woman who know her stuff in media. If I needed something, she was the gal to go to. Fired.

- - -

I truely hope this does not happen. I WANT to see the products, period. If Best Buy dies, that leaves me with Wal-Mart and Target and the latter has been reducing their media inventory.

And yeah, I've been spending less at the store since there is LESS to buy there.

Last edited by JohnIan; 03-09-2011 at 12:10 AM..
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Old 03-09-2011, 12:54 AM
Good article.. and I cant lie when I say that this news makes me so insanely very happy!

Best Buy used to be my mecca, i could go in there and be lost for hours.

AND THEN I decided why not get paid to do what i was doing for free, so i got a job there and to say that working for that company was soul sucking is an under statement.

I understand that retail is the business of making money, but i was not prepared for the falsities that they taught you when working there.

I am a person who thinks that if a person has a problem, and I can give them that answer without them having to spend money, then that is what should be done, as a human being that is the right thing, but Best Buy conditions you to not give the person the simple and cost effective solution, they want you to shove as much shit as you can into their baskets to fix that problem.

One manager when training me kept saying "walk up to them and say "hey nice shoes, this camera would go nice with those shoes"... shit like that, and believe me, that is NO exaggeration! And that is how best Buy has brain washed their employees, they must think their clientele are a bunch of morons because anyone who would fall for "Nice shoes, buy this" is a fucking imbecile!

Then, I worked in the camera section mainly, so If i sold a camera to a person, and that person already had a memory card and didnt need any of the other accessories that go with said camera, about 30 minutes later, when the numbers came out (numbers were updated hourly) I would not get recognized for doing my job and selling the camera (And not just selling a camera, but being knowledgeable enough to actually do my job) but I would get talked down to because I did not sell any accessories with the camera. Why would i get yelled at for that, because in their terms "Accessories have a higher mark up than the cameras, so the cameras may make the store 5 bucks in Margin (Margin is profit) while an accessory may make us $13-20 to any number really worth of margin.

Best Buy treats their customers not like they are "Bobby and Sue, the good hard working americans who just want to buy a nice camera" but rather "DOllar Sign & Dollar Sign who need to be told that they need to buy everything that they probably dont need, not to improve their enjoyment of the initial product, but so that we can make as much money as is possible on that purchase"

Then there was the Credit Card... something that I got into many arguments with my managers over.

Now, due to my very own Negligence, while in college I accrued a shit load of Credit Card debt (Debt for which i just recently got out of). And because of my own idiocy, I have a disdain for Credit.

Now, if I was stupid enough to rack up a crucial amount of debt, and I am a reasonably smart person and pride myself on having excellent common sense, than imagine if someone who is completely ignorant to the concept of credit gets a CC. That can be a kid at 18, or a person at 20-30-40-50-60-70 and so on.

Best Buy requires that every employee should have at the very least ONE credit card application PER SHIFT. So if you work 5 days a week, you need to have 5 credit card applications in that week. If you don't, you got yelled at. That means that every person that comes in, you need to not only offer the credit card to, but you have to hit them over the head with it, be a car salesmen.

And I had a problem selling credit to people. Credit can ruin peoples lives (And the area of the store i worked at, trust me when I say these were not people that were fiscally responsible, believe me). So you offer credit, and if they are approved, they can rack up a shit load of debt and it will take them 30 years to pay it off, if ever... but as long as best buy makes the sell and gets that interest, who gives a shit, right?!

Now with the best buy cc, as is with most CC's i think, the way they sucker you in is with that 18 months no interest. So if you buy an SLR camera (the nice ones) for $1500, you get the CC and pay for it with that, you have 18 months to pay the thing off without accruing any interest, which sounds pretty bad ass, and if you are a responsible person, that is a good deal. But let's be honest here, most people arent that smart, especially when it comes to credit, and when they hear 18 months no interest, and the fact that they can have that bad ass camera (with accessories of course, because with that credit Card people will buy more accessories, best Buy counts on it, this is what i was flat out told) without having to dip into their checking right away.. well shit, sign me up. but what happens is, after 18 months, if you even have 5 cents that you still need to pay on that Camera, you will accrue the ENTIRE INTEREST OF THOSE 18 MONTHS! That means that a $1500 dollar purchase after those 18 months are up and you have not paid off the balance IN FULL, you will be charged $300 a month (thats a 20% interest rate!!!) for those 18 months... you just accrued in interest damn near 4 times what the initial cost of the camera was! This is what Best Buy (and all Creditors to be honest) count on.

The only things i still buy at best Buy are on sale media titles.. because when a title is on sale, best Buy generally makes no money on that title. Media titles have a smaller margin than other items, and when it goes on sale, generally it dips to around the price the store originally paid for it, thus Best Buy is making no money off of me.

I would love to say that these thoughts are solely mine.. but everyone i worked with had the same mentality of the store (except the managers, who have all sipped the retail juice)... and if this soul less company were to go out of business it would be fine with me!

I do a lot of my shopping on Amazon now as well, they have the best customer service, if you get hosed by a 3rd party seller, they are fuckin awesome at correcting that. they ship fast, their shipping rates are reasonable and I have not once had a problem with their company. Perhaps it is because they don't deal in the brick and morter side of things that is what keeps them thriving and honest, but whatever it is, they are a company I enjoy using and will continue to use in the future.

(I realize that was long as fuck! But I just REALLY REALLY REALLY fucking hate Best Buy, it was my favorite store once upon a time, but once you get a glimpse at the inner workings, it just ruins it forever)!

edit: oh ya, i also forgot to mention, NEVER EVER buy Cables or Wires from there (Stay away from accessories in general, but cables ane wires in particular) the mark up on those things is RIDICULOUS! They will sell a $15 HDMI cable for close to $90! I get it, places have to make money, that is how you thrive.. but i think these companies going out of business may finally be saying that there is an honest way and an immoral way of making that money, and consumers are at a point where they would rather spend their time and money with companies that treat them like human beings and not just Dollar Signs being shepherded in and out of their store!

Last edited by SkyNet; 03-09-2011 at 01:05 AM..
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Old 03-09-2011, 04:51 AM
Best Buy's DVD selection seems to get worse and worse every time I go there. They are almost as bad as Wal-Mart when it comes to dvd's these days. At least Wal-Mart is cheaper though.
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Old 03-09-2011, 05:02 AM
Target tends to have the best prices. Best Buy and Wal-Mart duke it out for second place.

I use to think Best Buy lived up to it's name for camcorders, ect. But then we recently got an hhgregg store. I went inside, and their prices are definitely better.
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Old 03-09-2011, 04:06 PM
I enjoyed every word of the rant, Skynet. Honestly though this doesn't bother me much at all, since Circuit City went out of business I've bought probably 95% of my dvds and Blu Rays from Amazon, especially since I got a Rewards credit card. Years ago I couldnt wait week to week to see Circuit City's weekly ad, I must have built almost half my collection from their $5 dvd sales.
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Old 03-10-2011, 12:46 PM
The truth is that we are moving towards an online platform for shopping. I could not tell you the last time I was in a retail store. I go onto Amazon or Ebay for pretty much everything. The only shopping I do is basically for food at the local mom and pop grocery store.

I never had any issues with Best Buy when I shopped there. Reasonable prices, but compared to say online stores, they cannot compete. Plus, the selection online is something brick and mortar stores cannot compete with. B&M have only so much room, where a place like Amazon has a massive warehouse to put all excess. Yes, BB has a warehouse, but only so much shelf spacing.

The internet is a wonderful tool, but not good for employment numbers. You cannot stop evolution from happening, just hope for the best it has little negative effects on you.
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Old 03-10-2011, 12:57 PM
I would be sad if the day comes where there are no dvd stores out there. Yes, I've done my share of online buying too, but I still like to go to Wal-Mart, Target and Best Buy and actually look around their dvd selection (it consistently seems to be shrinking at my local wal-mart though sadly) and actually buy something there. There is still something about the physical action of actually going out and buying something that will always attract me.
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Old 03-10-2011, 12:59 PM
Originally Posted by shoe1985 View Post
The truth is that we are moving towards an online platform for shopping. I could not tell you the last time I was in a retail store. I go onto Amazon or Ebay for pretty much everything. The only shopping I do is basically for food at the local mom and pop grocery store.

I never had any issues with Best Buy when I shopped there. Reasonable prices, but compared to say online stores, they cannot compete. Plus, the selection online is something brick and mortar stores cannot compete with. B&M have only so much room, where a place like Amazon has a massive warehouse to put all excess. Yes, BB has a warehouse, but only so much shelf spacing.

The internet is a wonderful tool, but not good for employment numbers. You cannot stop evolution from happening, just hope for the best it has little negative effects on you.

It's funny because all of those stores (Best Buy, Target, Wal-Mart) you can actually buy from them online as well. It's not like you have to physically go to the store and buy stuff there.
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