After a rough couple years, Best Buy is struggling to stay afloat like many other electronic stores. Other stores like Circuit City have closed there doors for good and it seems like Best Buy is struggling to be the company they once was. People like the convenience of shopping online and it is really affecting a lot of Best Buy’s business. To deal with this decrease in sales, Best Buy has had to close a few stores. Despite the decrease in sales this quarter, the company is very optimistic about their future as well as there current forecasts. In this first quarter of 2013, Best Buy announced that their sales were very close to their forecasts. Their stock is up over 126% this year and they rank 3rd on the S&P 500’s best stocks of 2013.
Can Best Buy survive unlike the other failing electronic stores? Online shopping keeps becoming a bigger phenomenon and I think that it is going to affect Best Buy in a negative way. People aren’t reluctant to go the store to buy electronics when it can be just a click away at home. I think that Best Buy’s customer service rating is also another reason why they are struggling. Their profit from continuing operations was down over 54% this past year. That being said, Best Buy is still open and are still doing over 10 billion dollars of sales every year. Best Buy has also been making a lot of operational changes in each one of their stores. They have continued to remove wasteful processes as well as trying to re-position their brand so that they can be more competitive with online shopping. They have also implemented a price-match guarantee so that they can stay competitive with companies like Amazon. Their forecasts have also been very accurate which is definitely a plus for the company. Their sales are down in the past few years but since there forecasts have been so spot on, there aren’t really any surprises in the sales numbers. Best Buy continues to fight and claw its way back up to the top where they sat for many years. I think the only way they will be successful again is if they improve the online shopping aspect of their company.
Is Best Buy a company you would feel comfortable investing in? Their stock price has been doing great so far in 2013, but do you think in the upcoming years they will continue to grow? Many other electronic companies have failed in the past, is Best Buy too big to fail at this point? Is online shopping going to completely take over all electronic stores? The future is very uncertain for Best Buy. However, they do seem like they are headed in the right direction.
10 thoughts on “Down But Not Out”
You bring out a good point. Personally, I think Best Buy will eventually run out of business. People come to Best Buy to “use” them as a source of information. They ask the sale associates questions and go on Amazon and click “submit your order.” It is much cheaper to buy electronics on Amazon, even though BB is price matching, you still have to pay the tax. I hope Best Buy will be able to stay in business, however, it will be very tough for them to do so.
I would disagree with the previous comment. Although I could use Amazon or Ebay to purchase goods, I feel a lot safer purchasing them from BestBuy in person. Sometimes the sellers on Amazon or Ebay do not provide the “real” product and instead a knock-off. This has happened to me a couple times before which has made me weary of online shopping. The ability to purchase my good and have it the same day is a lot better deal to me. Plus BestBuy has improved the quality of customer service overall, some issues still exist, and their policy changes have led to an improved image as well.
Your question has been on my mind for the past year. I believe the next 6 months to a year will be very critical to their longevity. To answer your question, at this point I believe the risk is too high to invest in Best Buy. The future can be very rocky for them, as you stated this is most notably due to online sales. The largest hurdle in my mind as to their success, is consumers continue to use Best Buy as a place to try out electronics before buying at an online retailer where price can be much less due to lower overhead costs. Best Buy is not alone in this issue, in Australia and China they are even starting to charge to browse the store [Inc.com, 2013]. It appears like Best Buy’s new CEO is actively looking at combating this issue with their partnership with Samsung to add a Samsung store inside the Best Buy store [CNBC.com, 2013]. I am also surprised to read in your post that they are the 3rd best performing stock in 2013. Maybe Best Buy will pull out of this issue but I still feel like the changes are too little too late
1] “Pay-to-Browse: Next Big Thing in Retail?” Inc.com. 27 Mar. 2013. 04 June 2013 .
2]”Best Buy CEO Sees Turnaround Within His Control.” CNBC.com. 04 June 2013 .
Even though Best Buy stock has been doing well in 2013, I would not invest in them. I feel that in the long run, their stock will not do so well. I feel that it will be really hard for them to stay competitive with Amazon and online shopping becoming more popular amongst customers. I feel that Best Buy would really have to improve on their online shopping because thats the only thing that can help them survive.
Very interesting post. I think I’m definitely in the minority here but I would still rather shop at Best Buy rather than online. I like being able to physically see what I’m buying, especially in the case of electronics, and I also like being able to pick it up and take it home with me and not have to worry about shipping. To me that instant gratification is worth enough to keep shopping at Best Buy. However, I know that my opinion is not shared by many, therefore I would be hesitant to invest in Best Buy. It will be sad to see it go, but I believe eventually they will just run out of steam and be unable to keep up with Amazon and Co.
I would not feel comfortable investing in Best Buy. They are definitely not in a position where they are too big to fail. Although they have started the year well, summertime is not usually a great time for electronics sales. I think we’ll have to wait for the fourth quarter earnings report before determining whether Best Buy is worth investing in. Also, I agree with the assertion that the electronics industry is shifting from in-store to online. If Best Buy cannot compete with Amazon’s pricing and convenience, they will most certainly fail.
I think Best Buy will not go out of business but they will definitely have to redesign their main business unit. In another class, it was mentioned how Best Buy struggles due to its huge inventory and expensive physical stores. Another complaint that is definitely hurting them is their customer service, but I believe Best Buy is aware of this and has hopefully learned from their fallen competitor Circuit City. I believe Best Buy will eventually eliminate many of its big stores as they have publicly stated earlier this year that they will do so. I think Best Buy realizes that there is an opportunity to increase their online presence and focus on competing online and becoming something like Amazon. I also feel they have taken strides to address their problems by using their smaller stores you can find inside shopping malls such as their Best Buy Mobile stores which seem to be competing against cell phone stores. I agree with the poster above that before judgment is made on Best Buy, we should wait till the end of the year to see if their efforts will have a positive effect on their business future.
I do agree that Best Buy has suffered the biggest hit from online shopping business. But apart from that what has hurt Best Buy the most is that companies like Microsoft, Apple and now even Google opening there own stores and selling their own products. This has future added to the worries of Best Buy. They will have to rethink their strategy if they want to stay in business for a longer time
Online shopping is definitely a challenge many big box stores are facing today. I think one of the biggest reasons why Best Buy is still around is because of the customer service interaction. For me, I feel much more comfortable talking to a person face to face about products than researching and reading customer comments on the web. Also the variety of brands is nice too. Being able to see and test out multiple cameras, phones or televisions help buyers feel more confident in their decision. However, with people becoming more tech savvy these days, Best Buy will need to rethink its business structure. What can customers not get by purchasing electronics online (if anything)? Once they figure that out, they could make a comeback. Though, I personally, would not invest in Best Buy, I think their glory days are over.
Very interesting post! While I personally am not an online shopper and do prefer to purchase products in person, I would not invest in Best Buy. I think that investing is too risky while they may be growing, I do not think they will continue to for much longer. Best Buy is struggling to be a company they once were. Unfortunately, I don’t think they will be able to. With all this new technology improving and stores like Target and Wal-Mart that are not only convenient but open late I wouldn’t be surprised if Best Buy were to go out of business. Circuit City and other electronic stores have gone out of business and I think Best Buy may be next. Online shopping has taken over many electronic stores and is continuing due to convenience and lower prices. I think that eventually it may take over all electronic stores because we do have stores like Wal-Mart and Target that do sell electronics too. I don’t fully agree that “the only way they will be successful again is if they improve the online shopping aspect of their company.” I do agree that improvement may help again but I don’t think that it will be enough for them to be as successful as they used to be due to the many big competitors out there.