Saturday, April 7, 2012

Not Just Best Buy, It’s Big Box Stores in General

The problems at Best Buy are part of a pattern of difficulties at big box stores.

Best Buy will shut down 50 of its large stores after disappointing winter results. It will try some new things, including smaller locations and expanding the Geek Squad.

Margo D. Beller writing at CNBC suggests that the crux of the problem for big box stores is the competition from the largest online sellers.

If people shop in the store, then buy online, it cuts into sales for the store. Or, if people shop online, then go to buy in the store, the store’s layout, selection, and pricing can help or hinder customers who arrive having already decided what they came to get.

A starkly limited selection of consumer electronics has always been part of the strategy at Best Buy. Another big box store, Home Depot, takes this approach to the extreme in the area of home improvement. It is a strategy that worked better when consumers could not easily find out what other products were available.

Demographics may also be working against the big box stores, as Sears’ CEO explained in a CNBC interview. Shoppers born since 1980 haven’t showed any sign of warming up to the big box store layout or business model. Meanwhile, shoppers over about 50 years old may be shopped out: they own everything already and are skeptical about the ultimate value of the latest product design gimmicks, like 3-D TV. This leaves big box stores selling to a limited demographic window, the age group currently 32 to 50 years old, but shrinking every year.