How Best Buy is Surviving the Holiday Season
For Black Friday, the nation’s largest shopping day of the year, the manager of a Manhattan Best Buy set up amenities for both employees and customers: a new Red Bull vending machine for exhausted employees, and an in-store dog sitting service for stressed out customers.
The retail electronics industry has been struggling for the past year to remain profitable, and Best Buy may be one of the last standing major players. An article from Sunday’s New York Times writes,
[Best Buys'] chief rival, Circuit City, recently filed for bankruptcy protection and is closing 155 stores. Tweeter, a high-end rival, shut down this week, and Sharper Image’s stores, which sold more exotic electronics, are liquidating. CompUSA closed most of its stores last year.
But no retailer is immune from the drop in consumer confidence and spending, especially one that specializes in gadgets, not groceries. Sales at Best Buy stores open more than a year were down 7.8 percent in October, compared with the same month last year. The company will not release November figures until Dec. 16, but it’s already clear that November was a brutal month for electronics retailers.
After several prosperous quarters, Best Buy president Brian Dunn was a little surprised on how quickly sales in their company changed. Other stores were closing stores, and with a few less competitors out there, customers would naturally start flocking to Best Buy, right?
Best Buy’s president, Brian Dunn, discussed the challenges the company faced. “The depth and speed with which the economy stumbled was extraordinary,” said Mr. Dunn, who started as a salesman at the chain 23 years ago. “I’ve never seen anything like it. Our business was growing really nicely and then, all of a sudden, boom!”
Best Buy is responding to the change in revenue by cutting their inventory and advertising budgets. They are also pushing a few exclusive products designed to increase traffic to the chain’s stores. Apple, HP, Sony and Samsung are recognizing the challenges and modifying their contracts to change inventory levels. Plus, like every retailer pushing high-ticket items, Best Buy is promoting their financing options.
MaximumCEO published an article recently on how companies may need to revisit their business model and ask if their way of doing business is still relevant to their industry. During the peak of the retail industry’s year, we should recognize that Best Buy is making a few gambles, but their decisions on how to change seem justified.