Best Buy continues to report horrendous comparable store sales and negative financial results with no clear end in sight. The only two bright spots are mobile phones and appliances. Consumer electronics sales are in the tank and headed further south along with services and content revenue.
At a time like this one would expect Best Buy to be experimenting wildly all across its hundreds of stores, desperate to solve the marketing and merchandising riddle that has riddled its results with parentheses, the corporate code for negative comparisons. What is unfolding instead is an apparent stay the course mentality sure to doom the chain to the kind of accelerating decline that has already claimed Circuit City, CompUSA and a growing roster of other once-great retailers.
I wrote a blog more than a year ago (http://bit.ly/hN2p7D - Best Buy Rewiring OEM-Retail Relationships with Sync, Focus, OnStar Deals) speculating that Best Buy had a unique opportunity to leverage a budding outreach to Detroit with its mobile electronics and installation capabilities to make a bold statement around vehicle connectivity. The chain maintains on-site installation facilities to support its mobile electronics business and mobile phones remain a bright spot in sales results.
Little has changed since I wrote that blog. Best Buy has not spruced up the mobile electronics department and the mobile phone department remains in the front of the store. Yet, while Best Buy’s merchandise presentation has changed little, the market has moved along and Best Buy faces new threats.
At the core of the new challenge facing Best Buy is the retailer’s insistence on resisting classic merchandising strategy. With mobile phones and related wireless devices as the main draw, it’s time to shift this department to the rear of the store – where a grocery might stock eggs, milk and butter.
The mobile phone department is not more than 20-30 feet from the entrance to the typical Best Buy store. By shoving the most popular department category in the store to the very front, the opportunity to pitch digital cameras, notebook computers and, dare I say it, mobile electronics, to mobile phone shoppers has been lost.
But the new threat lies in the fact that Apple Stores are beginning to get into the in-vehicle connectivity business. Here is where Best Buy has been caught flat-footed. While Best Buy has bumped up its assortment in the mobile electronics department – based on recent store visits – to nearly three dozen head units ranging in price from <$199 to nearly $1,000, the department is still undermanned.
But a greater sin than having this department undermanned is the fact that low-volume mobile electronics have been hidden in the back of the store where one would expect to find the high traffic milk and eggs. Despite renewed investment in mobile electronics, the average customer faces a huge challenge simply finding the department.
This is a sorry state of affairs when aftermarket companies are rushing to market a wide range of mobile phone connectivity products that probably belong in mobile electronics and might stimulate otherwise lackluster sales. Instead, companies with innovative aftermarket offerings are insisting on merchandising their products in the mobile phone department – especially since that department is planted squarely in front of the store entrance.
Best Buy has made no secret of the fact that it sees connectivity as the key to its future. If that is so, it is probably time to ditch the huge portion of in-store space devoted to content – ie. shiny discs – and give that space over to mobile phones and other connectivity offerings.
Bring the mobile electronics out of the shadows in the rear of the store and properly merchandise in-vehicle connectivity alongside the mobile devices consumers want to connect in their cars – from distracted driving mitigation products and insurance telematics offerings (Get your Progressive module from Best Buy? Why not?) to rearseat entertainment integrations for tablet computers and in-vehicle Wi-Fi solutions.
How about aftermarket safety systems from MobileEye, stolen vehicle recovery systems from Guidepoint and LoJack, or backup cameras and social network enhanced radar detectors (where legal). It is worth noting that even Escort now offers a radar detector in the Apple Store.
Best Buy has a new competitor in the mobile electronics business in the Apple Store. As if the department didn’t have enough challenges with the decline of aftermarket rearseat entertainment systems and portable navigation devices and the evaporation of the satellite radio retail business, now Apple’s retail juggernaut has the car stereo business in its sights.
It’s not too late for Best Buy to strike back and defend its legitimate claim to mobile electronics market leadership. But to do so, Best Buy needs to shove the mobile phone department into the center and perhaps toward the rear of the store. This high volume department needs to perform its critical task of leading customers deeper into the store where a wider array of impulse purchases await.
Simultaneously, Best Buy needs to bring the mobile electronics department into direct proximity with the mobile phone department. The synergies between these two departments are manifest and Best Buy needs to capitalize especially given the fact that – as a destiny retailer – Best Buy customers have to DRIVE to the store in the first place.
By merchandising mobile electronics in the rear of the store, Best Buy is leaving fabulous marketing opportunities and money on the table. At the same time, the store is telling consumers that mobile electronics simply are not a major priority. It’s not too late for Best Buy to put things right in its mobile department. Who knows, it might save the company.