The last big electronics retailer may be starting to crumble. Best Buy has reported a big loss of $1.7 billion during the first three months of 2012. This compares to $651 million in profit one year ago. To turn things around, and keep shareholders happy, it has announced some rather drastic new plans. The company will axe 50 of its “big box” large stores around the United States in the next year and open up 100 small Best Buy Mobile stores, which will only sell small items, mostly smartphones. In addition, it also plans increase online sales by 13 percent. But the real goal on its horizon is China.
Brian J. Dunn, CEO of Best Buy: “…we intend to strengthen our portfolio of store formats and footprints — closing some big box stores, modifying others to our enhanced Connected Store format, and adding Best Buy Mobile stand-alone locations — all to provide a better shopping environment for our customers across multiple channels while increasing points of presence, and to improve performance and profitability. These changes will also help lower our overall cost structure. We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices — which will help drive revenue. And, over time, we expect some of the savings will fall to the bottom line. At the same time, we will continue to accelerate our key initiatives — growing connections and services, expanding our digital capabilities and growing our business in China.
Best Buy’s goal is to increase its overall number of stores, but decrease its total square footage, as it just doesn’t need as much space as it did 10 years ago. Electronics keep getting smaller, after all, and sales of media like DVDs and CDs have been dropping steadily. It will also turn its stores into “Connected Stores,” which have a more inviting layout and focus on “connections, services, and multi-channel experience.” If you’re wondering exactly what a “multi-channel experience” is, you’re not alone. The only thing we do know is that by “connected,” the company means it will focus on mobile phone sales and other types of service activations like broadband Internet or video services like Best Buy CinemaNow. Instead of selling items, the retailer wants to start selling more subscriptions and services.
China also remains a largely untapped market. Like so many companies, Best Buy hopes it can open stores and make customers of the 1.3 billion potential electronics owners who live there.
The full year report can be read here, but we warn you, it’s quite lengthy. In any case, it looks like Best Buy has a tough road ahead. Have you or would you purchase your phone from Best Buy?
Update: Corrected a couple typos. Added line on China