Best Buy announced Thursday that it will close 50 big-box locations while increasing its Best Buy Mobile and small-box store count by 100 locations.
This comes on the heels of a fourth-quarter loss of $1.7 billion, after charges related to closing, downsizing and restructuring the business throughout a variety of segments.
In addition to the store openings and closings, Best Buy will lay off 400 employees from its corporate headquarters and trim $800 million in costs.
Best Buy Becoming a Wireless Reseller In the Retail Market and in E-Commerce Business
Best Buy is heavily investing in all of its markets in getting into wireless sales and service, as witnessed by the expansion of the Best Buy Mobile stores within the United States and its purchase of Carphone Warehouse’s interest in their mobile store business.
One of the initiatives that CEO Brian Dunn announced is to increase revenues from its online business by 15 percent.
Dunn stated Best Buy will “provide a better shopping environment for our customers across multiple channels while increasing points of presence.”
New Initiatives To Try To Retain Business
All stores open at least a year suffered a 2.4 percent decline in sales this quarter, which comes off a 4.7 percent decline in the previous year’s quarter.
In addition to increasing mobile store count and an online presence, Best Buy will change its compensation model to revolve around business goals and customer service. This comes on the heels of recent criticism leveled by Larry Downes, a contributor to Fortune Magazine.
Loyalty programs and free shipping will drive other service initiatives, as targeting select customers and limiting store sizes are paramount if this strategy will work. Price matching, a free Geek Squad service call and exclusive sales are other major initiatives.
Avoiding the “Showroom Effect”
Best Buy faces a concept known as a showroom effect, where physical retailers face consumers who are able to use their stores as showrooms while they use digital devices to find better prices and information that informs their purchasing decisions.
“The company is gradually becoming a physical showroom for online retailers, and the prevalence of smartphones makes comparison shopping increasingly easy,” said Wedbush Securities analyst Michael Pachter.
Making retail space smaller and pushing a harder online presence may help Best Buy avoid the continuing showroom effect. The question remains whether Best Buy has lost its customer base for its bread-and-butter consumer electronics business.
