Best Buy to follow Circuit City's demise?

By on March 7, 2011, 7:31 PM
With former heavyweights like Circuit City out of the game, industry experts are questioning the future of remaining electronics superstores. Wall Street Journal reports that retailers like Best Buy have taken staggering losses as online rivals rise to dominance. Although there are less brick-and-mortar competitors than a few years ago, Best Buy's stock has plummeted some 19% on-year. By comparison, Amazon's shares increased 31% in the same period.

The transition from retail to etail consumption is especially apparent in electronics-related departments. Amazon's electronics and non-media revenue rose 66% to $18 billion last year, which included a substantial market share increase in segments including LCD TVs and portable audio devices. The shift is mostly attributed to the obvious: shopping online is often cheaper, easier to compare products, and it's simply more convenient to shop from your home or mobile device.


Despite its losses, Best Buy isn't exactly sinking -- or at least not yet. The store still represents a third of US consumer electronics sales and it's actively pursuing more competitive prices -- but lowering prices in itself could spell doom. The WSJ report notes that BJ's Wholesale Club also decided to cut prices in 2002 in an effort to maintain its market presence, and while sales improved, gross margins tumbled for eight consecutive quarters and shares fell more than 70% on-year.

Greg Melich of ISI Group made an amusing but accurate comment, noting that shoppers often use Best Buy as Amazon's "showroom." In other words, people frequently visit physical stores to test products before purchasing them online -- something the TechSpot staff is admittedly guilty of doing. Do you visit Best Buy solely to window-shop, or do you actually break out the credit card occasionally? Personally, I haven't been to a Best Buy in about five years, perhaps longer.

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