Brick and Mortar Can’t Float in the Amazon

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With the recent advancements in technology, electronics, and the internet, consumers have begun to take completely different approaches to browsing, shopping, and acting as consumers. What was once the largest, and considered most financially sound, consumer retail store of the 90’s and 2000’s, has now turned into a thing of the past.

Best Buy, a store where consumers go to purchase electronics (i.e computers, cell phones, tablets, CD’s, DVD’s) has recently become the subject of many discussions regarding whether the consumer giant can stay afloat. Amazon Inc, an online e-commerce retail website, where items can be found in minutes, purchases made in seconds, and products delivered in hours/days, has rapidly taken over the electronic/technology retail space that Best Buy had once almost monopolized.

Best Buy started as the only game in town, where people could visit, shop, receive helpful advice, and bring home their devices with protective warranties. However, internet retailers such as Amazon.com and Ebay have entered the same market as Best Buy, with lower overhead costs, more convenience, quicker purchases, and better warranties, and it has seriously put a dent in Best Buy’s future outlook.

Each of the Best Buy stores possess large overhead costs which include the likes of labor, utilities, product inventory, management, and building tax/mortgage. Not to mention, Best Buy has to deal with in-store and corporate operational management, budgeting, inventory forecasting across all of their brick and mortar stores, and labor hour allocation issues in each establishment. Amazon, which does not have any stores and ships only from warehouses, also possesses some operational management difficulties but certainly not on the scale that Best Buy does.

It might be the overhead that is making Best Buy have a hard time staying above water, or it might be the dwindling brick and mortar retail industry, but one thing is for sure, consumers are preferring online shopping over getting in their cars and driving to the store. In fact, Best Buy has recently reported that consumers now only use their store as a showroom, or in other words, a place to test the devices before they decide to purchase them on Amazon (Consumerist.com).

In their article “Amazon is Eating Best Buy’s Lunch”, CNN states, “The electronics retailer reported quarterly sales Tuesday morning that were lower than a year ago and below Wall Street’s expectations. The main culprit? Tough competition from online retailers”.

Perhaps there are some ways that Best Buy could improve their sales while still competing with the titans of the internet retail industry.

What are some ways you believe that Best Buy could bounce back from their poor 2014 performance and stay afloat?

Describe your experiences with Best Buy and explain why it may/may not be completely out of business?

What ways could Best Buy improve their operational management structure?

Why do you think that Best Buy remains in business despite the heavy consumer preference for online retail websites?

List some examples of operational management strategies that Best Buy could take advantage of but you believe are not being used properly.

 

http://money.cnn.com/2014/08/26/investing/best-buy-earnings/

http://consumerist.com/2013/11/04/best-buy-is-just-daring-you-to-use-stores-as-an-amazon-showroom/

 

 

11 thoughts on “Brick and Mortar Can’t Float in the Amazon

  1. I feel like I am in the minority that still likes to go to Best Buy and shop but I definitely do not shop there the way i used to. Before I would buy every single electronic item from there; cd’s, dvd’s, iPods etc. Now all i do is buy large or expensive products there for example a Apple Macbook. I know I can get the Macbook online, cheaper, but I choose not to because I do not trust the way that my mail is shipped to me. I would constantly be worrying if it got thrown onto my porch or left there while it was raining, or something else that could potentially damage the product. Maybe they use this as an advantage over buying from Amazon. The reassurance that your product was handled properly.

  2. Even though amazon and other online companies have entered Best Buys market it stays afloat because some people still like to see and feel the product that they want to buy. They have a better view of what the product is because they can test it in store. Another innovation at best buy is the online order and pick up in store which makes shopping even more convenient for consumers. They pick out what they want from home and then take a trip to Best Buy to pick up their product. Instead of having to wait days or weeks for their online product to be delivered. The last time i was at best buy i noticed that different brands such as Samsung and Apple have showrooms for highlighting only their products, this can be seen as an additional experience while in-store. From my experience i thought it was a good idea as it gives the store more definition. Best buy will probably still be around as it a place you can go to directly experiment with electronic products.

  3. Online shopping has become so popular with consumers I believe because of their cost leadership compared to in-store retailers. I often buy products online because they are cheaper than many stores and because you are able to see other competitors price without having to do much research. Retailers like Best Buy could bounce back by reducing their cost to consumers. I do not think that people have that much of a problem having to go to the physical location, but know that they can kill two birds with one stone by using Amazon. I also think that less people are willing to go to places like Best Buy because they target a smaller market. People like convenience where they can buy computers online while searching for other products or by going to other competitors like Walmart. They have to compete with consumers’ needs now and they have yet to master that.

  4. Best Buy is really in trouble along with many other bricks and mortar retailers. The business model is simply old. I use Amazon for most of my shopping. However, I feel like best buy will exist in the future, but the prototype will be a much smaller floor plan that focuses on mobile electronics and services. It’s still a strong brand with a solid distribution network and great connections to manufacturers. There are still things I would prefer to buy in person rather than online, like televisions and other large purchases, where I would like to try the product before I buy it. Best Buy needs to figure out what to do with all of their dead weight. They have too much real estate and too much inventory, and it’s time to cut some fat. It will be interesting to see what their prototype store will become.

  5. Best Buy is one of the MANY brick and mortar retailers feeling the heat from online retailers. I believe that for brick and mortars to be successful, they really need to put an emphasis on customer service. That is one of the key components consumers are paying for when shopping in these stores. If there is little to no customer service, consumers would rather purchase items online to avoid the in store experience. Nice article!

  6. Amazon and other online stores have become a serious threat to Best Buy. So many people would rather shop online for many reasons. You can price check multiple places, don’t have to physically go to the store if its raining or snowing, and it’s usually cheaper. If Best Buy wants to stay competitive they need to really market and improve their website. If they can create more business online they could improve sales greatly. I think Best Buy stays in business because their still are many people who are not savvy with online shopping. This includes people like my parents and grand parents who would rather talk to a sales person and physically see what their buying. However I think as time goes on and our generation gets older, it will only get harder for Best Buy to keep sales up.

  7. As a former employee of Best Buy, this post appeals to me greatly. I definitely agree with the notion that Best Buy has turned into a showroom for customers. In many cases when I was helping a customer with a certain product, they would ask me to match Amazons price. When I would inform them that I couldn’t do that, they would simply go home and purchase it online through Amazon. However, I still believe that Best Buy has an advantage over Amazon in certain ways. To certain customers, it is valuable to have a salesman assist them and show them how to use certain technologies. As far as management goes, Best Buy has cut down labor hours and the amount of employees in each department. This is clearly due to their recent lack of sales since Amazon came into the picture. Best Buy is a very costly place to run due to how much real estate a Best Buy store would need and the costs of overhead. This is certainly making life difficult for the managers of Best Buy.

  8. Best Buy is in a lot of trouble right now. Amazon has slowly taken Best Buy business and with Alibaba coming to the United States it will be more difficult for Best Buy to stay in business. In order for Best Buy to keep up with the online companies, they will have to focus on how to get consumers to pick Best Buy instead of Amazon or Alibaba when purchasing online. If they get their prices to match Amazon’s and can get the products delivered to customer’s houses within hours from the local stores and wear houses, I think that will help Best Buy get more people to choose them.

  9. Hey there,

    I can tell you first hand what’s up with Best Buy because I am a current employee.

    So here’s how it goes. We don’t work commission. Customers come in and check out the product. If you’re trained properly, you will know what questions to ask and how to go about the sale. Here’s the best part. I have customers ALL THE TIME tell me, “ok, thank you for your help. I am going to do a little bit more research online” and guess what website they are going to go to? yes, Amazon!

    What I do next is ask more and more questions. Such as what questions or concerns did you have about the product and shortly after, once I’ve created a good relationship with the customer, they tell me that they have seen it cheaper on Amazon and the following information I provide to them is that we can price match competitors and Amazon happens to be on that list. So I can save you the trip back home, the time it takes to find it online, and best of all, I can save you the hours or days it takes to get your product because I have it in stock and you’ll pay AMAZON price.

    Boom!

    I must say that not a lot of customers know that we price match but you guys do now 🙂

  10. Honestly, I think that the company is going to need to cut cots substantially. It already has, if anyone walks into a bestbuy today it looks a lost empty compared to how the store looked 3 years ago. There will always be a market for people who want to but the product in the store but i don’t think that bestbuy will be as big as it once was. The golden age for a big box retailer like bestbuy is back in the 90’s and early 2000’s. can it survive? yes of course. will it be as big as it once was. No, we as consumers have moved on.

  11. This post reminds me of a time when my parents used to take me to Best Buy and I just remember not wanting to ever leave. As you mentioned I used to actually play the games that were advertised and just beg my parents to buy it for me. That was a great strategy but with all the new comers Best buy has had its fair share of trouble. But nonetheless they have survived while others have perished i.e circuit city. I believe Best Buy has a strong brand and knowledgeable staff that it could survive and compete with amazon.

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