17 December 2012

More Best Buy

HBR | Maxwell Wessel | Best Buy Can't Match Amazon's Prices, and Shouldn't Try

To survive their disruption, Best Buy should be looking for opportunities to optimize their business model around the jobs that Amazon can't do for customers. Maybe, for example, Best Buy could offer exclusive products for the customer who fears buying a product without seeing it in person. Customers with this job-to-be-done would happily pay a premium to buy a product they saw in person if it weren't available through online retailers for less. For instance, Best Buy could be the perfect home for retail distribution of products launched and funded through Kickstarter, which has seen 2012 as the year of the crowdfunded consumer electronics.
This seems like the opposite of a good idea.

(1) Kickstarter, almost by definition, will be turning out products that have appealed to people who are comfortable online. These are not the people who want to drive to a store to check out products.

(2) Kickstarter projects can not, by their very nature, afford to build tons of inventory to have it sitting in show rooms.

(3) Kickstarter projects, again by nature, are niche goods. If they were mass market they wouldn't need crowd-funding.
It could offer incredible on-site service that required customers to have purchased at a premium at a Best Buy (in the same way customers flock to the Apple's Genius Bar for help when the littlest thing goes wrong with their hardware).
We've just come through one of those annual blogo-storms about "Why can't Walmart be more like CostCo?" and once again the answer is "because they're different companies, and it is extremely difficult to change corporate DNA that much." Why can't Best Buy have incredible on-site service?" is about as sensible as "Why can't Chrysler make a Camry?" Perhaps I'm being fatalist, but that's just not what they do.
It could even focus more of its operations on the last-minute needs customers have for which no delivery network is fast enough, growing its automatic kiosk network.
Amazon already has same day delivery trials underway. Who has the kind of life where they can't wait 24 hours for electronics? Or, how many people would rather spend 45 running an errand than wait for a next-day shipment? (Answer: people with little employment, and little expendable income.)

Even if this kiosk business worked, why would Best Buy be particularly good at it? Why should an investor give $$$ to Best Buy to build out a network of kiosks when they could give those same dollars to Amazon or Red Box or New Egg or some start-up or WaWa or Aramark Vending or literally anyone else to do the same thing?

PS I realize I'm being a little hard on the HBR bloggers lately who have been posting "Best Buy, etc. could do X to survive" ideas. I think Best Buy is pretty well doomed, if not to bankruptcy than to market irrelevance. This makes it easier for me to say "no, that won't work; no, not that either." If I had to go to work for Best Buy as a consultant I couldn't really say "you're screwed, fold up shop now."  I'd be stuck trying to pitch long-shot ideas about Kickstarter and kiosks, like these HBR bloggers.


  1. We are seeing the death of a lot of the "category killers" of the 80's and 90's. Office supplies, pet food, toys, etc. Amazon is crushing them. I would not want to be involved with Best Buy right now either, I think its death has already happened. We're now just staring at the rotting corpse.

    HD and Lowe's brought the warehouse to the neighborhood. Groceries still require, for the most part, a local store. (The person or group at Walmart that convinced the company to move into groceries looks like a genius in hindsight.)

    Since I work out of a retail storefront, I'm most interested in how the real estate will play out. Rents for small stores in the neighborhood, operated by specialists offering products and services that must be seen, are really high. It is my hope that Wall Street will exit more of the retail market, leaving small operators a better chance at survival.

    Stock Tip: Watch for the next operator that will occupy these huge stores that front the freeways. One will be successful, Wall Street will fund copies. There will be money to be made on the way up and down.

  2. I think you're right about putting those empty spaces to use. Whoever can figure out a good way to make them productive once Best Buy, etc. clear out will be in a good position.

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  4. "Or, how many people would rather spend 45 running an errand than wait for a next-day shipment? (Answer: people with little employment, and little expendable income.)"

    Or people who are really really excited about something and really really impatient. I have been exactly that on occasion, and I have plenty of employment and expendable income.

    I'm also big into instant gratification.

  5. "I think you're right about putting those empty spaces to use. Whoever can figure out a good way to make them productive once Best Buy, etc. clear out will be in a good position."

    Indoor playgrounds for preschoolers seems to have become a growing niche in the past five years or so. Take an empty bigbox space, fill it with inflatable bouncy castles, book birthday parties and playgroup playdates. It's gotta be a cash cow given how little capital is tied up and how few staffers are needed to run the place.

    A mall near me that used to be a premiere upscale location but has been slowly failing for two decades now has one of their anchor spots occupied by a low-end big retailer... that also has an air-soft arena inside the store.

    Playgrounds. The next big thing is playgrounds.

    Free idea for you: launch a franchise of indoor airsoft arenas, and secure the Call Of Duty brand license. Make money hand over fist.

    1. Also relevant: gun ranges are a kind of playground.