Friday night topic: The trouble with Best Buy


— 5:05 PM on February 10, 2012

While I was out traveling last week, someone remarked to me that Best Buy may be having some financial trouble, a fact they found somewhat puzzling. That thought prompted me to blather on way too long about the problems with the biggest of our big-box electronics retailers, which are legion. My take was that Best Buy is turning customers into victims, one transaction at a time. For instance, they stock video cards in a range of prices, only the actual products on offer aren't what you expect at each price point. Instead, the pricing policy looks something like this: cards that would sell online for $119 are marked at $249, and cards that would normally list for $249 are marked at $399. A little markup at retail is expected, but that's highway robbery. Best Buy only charges those prices in order to take advantage of folks who don't know any better.

I think the talk about Best Buy facing financial problems started with this article in Forbes, which comes from an analyst who is simply predicting doom for the company eventually. However, he has some penetrating insights in that article and the follow-up, in which he recounts the story of the first article going viral and provoking an avalanche of responses from Best Buy customers, many of them expressions of frustration with the company.

One of my favorite bits in the second article relates to my video card example:

If Best Buy still has a competitive advantage, it’s based on information superiority. Most customers who walk into the stores don’t know what other retailers are charging for the same goods. . . . Any information advantage the company maintains over its customers, however, is surely temporary. . . . Betting that you know more than your customers and using that knowledge to squeeze out a few more points of margin may have worked before the information revolution, but it doesn’t work anymore. As the head of a major automobile company told me at the dawn of Internet commerce, "Sooner or later, the last stupid customer will walk in the door."

In other words, Best Buy can't keep doing business like this forever. Folks will wise up and find other places to shop, whether online or not. That's probably one of the reasons the company has been losing market share even after its top rival, Circuit City, closed.

Most frustrating for me is how Best Buy's incompetence negatively affects the PC market in the U.S., a market it kind of owns by default in terms of local retail, yet one where... heck, I dunno. I feel safer pointing friends to the Apple store, shameful as that may be. I still think retail has an important place in the market for these sorts of products, but the experience needs to be very different from the one Best Buy is offering.

Do you have similar beefs with Best Buy? If so, what's your take on the problems there? (And if not there, what about the other big-box retailers who sell computers and electronics?) If you were installed as the company's CEO, what would you do in order to turn things around? What kind of shopping experience would you like to see? Discuss.

   
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