At this point, what can save big box retail?
Simple, making the big box store a smaller size, so said company can afford to keep the doors open.
I wrote a piece a while back in which I pointed out some of the issues and potential solutions to the dilemmas of both Best Buy and Radioshack.
Here is a little bit of what I had to say:
In a faltering business the best move may be consolidation. It appears that there are many options when it comes to buying electronics, this is true to a certain extent. Though, when it comes to quality electronic stores there are just a few and Best Buy presents itself as a giant in the space. Consolidation may be key here, because one of issues that has repeatedly surfaced pertains to Best Buys square footage. These huge box stores have large cost associated with them. Consumers electronics, computing, and mobile phones are the largest aspects of the Best Buy operation totaling almost 3/4 of revenue. The 3/4 of their revenue obviously does not take up 3/4 of their square footage. Through consolidation Best Buy could push their premium, large margin products in a smaller square footage store. With such a large portion of their revenues in such a specified aspect of their company, their large stores are just not doing them justice. Looking back at Circuit City, one can recall that the death of this electronics giant was due to square footage as well, making the Best Buy argument for smaller square footage very real. An acquisition of RadioShack could be just the move to smaller square footage that Best Buy needs.
Einhorn recently mentioned exiting his position in the electronics giant, citing the company for not having a solid strategy going forward. To compete with the online giants Best Buy will undoubtedly have to rethink its game plan, or it will fall by the wayside like Circuit City. The RadioShack footprint encompasses over 7300 stores and unlike Best Buy, RadioShack sits in many malls and smaller shopping centers. The RadioShack footprint is undoubtedly worth its weight in gold. The strategy should slap these execs in the face, take their giant status to that of a god. If Best Buy can go from being a mere big box store to a conglomerate of big and small box stores the opportunities are boundless. Radioshack has the ability to be in any small town or any neighborhood, an ability that Best Buy does not and will never be able to have. Taking the abilities of RadioShack and adding it to the arsenal of Best Buy could revolutionize Best Buy’s strategy and save their dying industry. The smaller stores could suggest margin compression, but when it comes to small stores closer to home, customers have and always will pay for convenience.
Read the full article here
Since the death of Circuit City Best Buy has stood as the premium retailer for consumer electronics. As competition has expanded in the online arena, many have questioned not only the potential of Best Buy, but the future profitability of electronic retail stores in general.
When analysts analyze technology oriented companies they often fail to realize that companies exist beside Apple. There are so many other great consumer electronics out there, that people love to buy and enjoy interacting with in a store setting. Everything from the GoPro Hero, to the Xbox, Nexus tablets, Chromebook, to giant televisions. Apple doesn’t even exist in the arenas I previously mentioned (though they may potentially enter the televisions space). Obviously there are other great and specialized electronics I failed to mention that need a home on a shelf. Just take a look at the Kindle products, Amazon saw the necessity of the consumer interaction. Why else do you think Amazon would have gotten Target to carry their product. Looking forward, into the great (Obamafull) future, Best Buy has a place.
I hear it day in and day out. Take a look at Apple, they are the prime example of a successful retail endeavor That holds some merit, Apple has done well with their retail ambitions. But guess what?! I walked by multiple Microsoft Surface tablet booths over the past few weeks and there was not even any space to see the product. This means that Americans love consumer electronics, love playing with them, and love buying them in person. Not only do they like buying Apple products in person, they like buying any high-end consumer electronic that can strike their interest. Best Buy can take many of the key aspects Apple has embodied, expand on them, and give Apple a run for its money. Why do you think Schulze remains so keen on taking over the company? He sees the potential! He sees potential in making Best Buy once again the home to electronics, a place where one can buy and become informed on products.
Consumers are concerned with Best Buy’s higher prices. If someone can change the perception of Best Buy (perhaps Schulze), to embody an experience and not only a product purchase, the game can change. Apple doesn’t just sell the product, they sell the Apple experience If I can go to Best Buy and purchase a Chromebook or a GoPro Hero and then take a course on these products, it can change the whole consumer retail game. If I can go and buy these products and see how they are utilized to change my life, I will continue to utilize Best Buy. There are great products in the retail arena that the mass public wants to purchase, wants to know more about, wants to talk to a specialist about, and Best Buy remains the place for all this to happen. If Best Buy could just successfully brand itself as offering the consumer more, the premium would no longer even worry consumers. Schulze sees the opportunity to muscle Best Buy into becoming what he wants it to be
The only way that RadioShack will have the best products is through Best Buy. The only way RadioShack will survive will be to have the best products. The only way that Best Buy will compete with the likes of Amazon is to try an approach besides big box stores.
Photo by osde8info
