Best Buy Analysis

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Although Best Buy is an electronic consumer’s dream, they are facing two major threats: 1) The increasing number of competitors and, 2) The strong emergence of online retailing. I recommend that to address these issues Best Buy should close several “Brick and Mortar” stores and move to more of an online based strategy.

Due to the low cost of online retailing, discount retailers such as Amazon, Wal-Mart and Target have been able to gain significant market share. Unlike Best Buy, Amazon does not have the overhead associated with “brick and mortar” stores, allowing them to significantly cut prices to challenge Best Buy in the consumer-electronics market. Best Buy has been called “Amazon’s showroom”, as consumers would often use Best Buy to sample products while ultimately buying them online.

Closing “brick and mortar” stores and using the resources to push a broad cost leadership strategy would make Best Buy competitive against online retailers once again. Best Buy is the leader in customer satisfaction and the retail leader of its class. Since Circuit City went under, there is not a large, solely electronic retailer with showrooms creating more visibility. Increasing its brand value over 18% in 2009 alone, the prices must become more competitive so consumers will not take advantage of this and still buy elsewhere.

Pushing an online based strategy to combat Amazon and Wal-Mart would lead to growth in the one facet of consumer electronics retailing in which Best Buy is lagging. Although human capital is a major asset for Best Buy, I recommend that expertise be moved to other areas of the company, such as Geek Squad, which has shown growth and profitability due to the increasing number of consumers who buy online and need assistance installing their electronics. In order for Best Buy to remain competitive in the future, allocating current resources effectively will be essential in cutting costs and developing a cost leadership strategy....
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