Best Buy’s announcement that CEO and director Brian Dunn had resigned, amid “no disagreements” related to “operations, financial controls, policies or procedures” underscores just how much the big-box electronics giant is groping blindly around in an age of changing consumer shopping and spending habits.
Dunn’s resignation arrives a little under two weeks after Best Buy laid out its “Actions to Improve Business Performance,” which included the closure of 50 big box stores in the U.S., the launch of 100 Best Buy Mobile “small format stand-alone” stores and a $250 million cost reduction in 2013. The company also said it would eliminate 400 corporate and support staff jobs. These reductions, while unpleasant, make sense.
Best Buy says it plans to grow by opening stores in China, selling more mobile handsets and growing its e-commerce. Unfortunately, these measures aren’t enough, and Dunn’s resignation isn’t going to change that. Perhaps Dunn was part of the issue, but the fundamental problem with Best Buy is that it has no idea how to compete against online vendors offering better prices and greater convenience. It’s the easiest thing to walk into Best Buy, examine a product, and then search for a better price online. The company has essentially become “a showroom for Amazon.”
In its 2011 financial statement, Best Buy acknowledges its “strong competition from traditional store-based retailers, internet-based businesses, our vendors and other forms of retail commerce.” I would argue that since Circuit City shuttered, Best Buy faces no competition from brick-and-mortars and nearly all its competition comes from online retailers from Amazon to the iTunes Store.
Best Buy has tried to squeeze blood from a stone by “offering [their] customers packaged value propositions that take the complexity out of managing devices, content and connectivity.” Usually this entails selling services customers don’t need, understand or really want. While small brick-and-mortar outlets, like B&H in New York, can differentiate with in-store expertise, that’s logistically impossible for a national chain like Best Buy.
While Best Buy has certainly invested heavily in e-commerce—it has one of the best Spanish-language retail sites to tap into multicultural consumers—Best Buy needs to figure out what, exactly, its points of competitive differentiation are. Right now, it’s certainly not price, it’s not convenience and it’s not expertise.
Personally, I think one step Best Buy definitely needs to take is better integration of mobility with the in-store experience. Right now, the mobile channel is actively taking away business rather than bolstering it. Imagine customers entering the store, scanning their mobile devices over relevant products, and having immediate access not only to product specs, but user reviews and even price comparisons. While the company maintains a price-matching program, it needs to become a point of emphasis for mobile users instead of a giant point of confusion.
Obviously, Dunn was not thought of as the right man to push the company in the proper direction. Perhaps the next CEO will have a more focused vision.
