Best Buy’s Fate Lies With Boutique Mobile Tech, Not Big-Box Stores

Best Buy is shuttering 50 of its big warehouse-style stores and is going to remodel the remaining ones. It’s all because the retail landscape is changing, shaped by the power of mobile technology.

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Instead of concentrating on traditional giant warehouse-style stores, which it’s perhaps best associated with, Best Buy has said it’s going to open 100 smaller stores instead and plans to have as many as 800 open by 2016. That’s almost 500 more than it has today. So by no means is the retailer shutting down, nor is it going to kill its operations as it did with its U.K. arm last year. What we’re looking at here is something rather surprising: A giant retail name quickly evolving to meet a changed market.

As well as reshaping its store design, it’s also said to plan to “significantly improve the customer experience,” which sounds promising for U.S. consumers, and will train its employees more as well as offering significant “financial incentives” for delivering on “customer service and business goals.” That sounds both good, and bad–employees could be tempted to push sales onto consumers, but will be held back by potential bad customer service reports.

But it’s what these staff will be selling that’s actually the interesting part. Mobile phone sales are going to be a huge part of the new stores, alongside video tech and broadband services. That’s a shift away from PCs, DVDs, and kitchen appliances…all strong businesses, but not offering as high margins as mobile devices can and definitely not at the cutting edge of consumer technology.

The change is begin forced by a number of things. Firstly it’s financial, with Best Buy reporting a net loss of $1.7 billion for the last quarter–meaning something dramatic has to change in its business model. And then it’s evident that Best Buy’s executives have taken a long hard look at the consumer goods that are driving change now, and will certainly be cognizant of the fact nearly as many iPhones get sold through Best Buy’s stores as through Apple’s own retail outlets. The fact that smartphones, a very dynamic and potentially profitable market, now make up 50% of U.S. phones will also have played into their calculations. And Best Buy will also have looked at how other retailers–like Britain’s recently failed computer gaming effort Game–are faring, and decided to skirt these markets.

It’s certainly a bold decision. But we expect Best Buy will have to make several more like it, probably sooner rather than later. That’s because the entire shopping experience is changing. Apple, for example, would never open a “warehouse” retail venue, and its stores are both high-tech and also designed to offer almost a non-shopping experience…something consumers are getting used to, and which vendors are beginning to copy. Meanwhile e-commerce is rocketing ever upwards around the world, so brick and mortar stores, especially ones centered on electronics, will have to find something to really deliver to consumers in terms of an in-store shopping experience. Over-eager salespersons trying to push the latest (irrelevantly) high-megapixel smartphone camera onto shoppers just isn’t going to cut it.

[Image: Flickr user Dave Dugdale ]


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