Daily Dose of iQ: Is Best Buy Doomed?

Jan 03, 2012 — Allan Pulga

Larry Downes of Forbes wrote a damning article yesterday predicting the eventual demise of retail electronics giant Best Buy.

The company's stock dropped 40% in 2011, Downes writes. With the lack of a must-have electronic device (e.g. 3D TVs have been a flop), the growth of Apple stores and increased online competition, things aren't looking much better for 2012.

Beyond the numbers, Downes argues that their in-store and online customer experiences are terrible. He describes in great detail a bad in-store experience he recently had. And while some will dismiss this as merely a biased rant, Downes believes big box retailers are going extinct. "Online giants, notably Amazon are the future," he writes.

"Online retailers are more efficient, because they lack physical locations, and so can offer better prices. Shopping online is also more convenient. On the web, consumers can shop anywhere they are, day or night."

Not only that. Amazon can undercut Best Buy and other traditional retailers because the site doesn't charge sales tax, and that Amazon customers use Best Buy as their showroom (see Price Check App).

Even so, Best Buy is failing as an online retailer too, Downes adds. Three days before Christmas, the company issued an apology that it would be unable to ship a number of customers' online orders "due to overwhelming demand of hot product offerings."

In the midst of this debacle, the company reportedly refused to answer any additional questions, such as: "How many customers were affected?" Downes asks. "What specific products were involved? How has the company failed so badly to perform to even the lowest standards imaginable for a retailer at Christmas? Did the company expect anyone would be fooled by the ridiculously obtuse statement of non-apology?"

Downes listed some things Best Buy could learn from Amazon:

  • Track all previous orders and use your database to make recommendations.
  • Instant, responsive and knowledgeable phone support.
  • Simple returns, unburdened by restocking fees and other "gotchas."
  • Precisely-managed inventory in a single system, spanning all distribution points and third-party partners.

Best Buy could (and should) have done all of these things years ago, Downes writes, and now it's too late. As a result, he says, the company will "gradually, then suddenly" go bankrupt.

But does Best Buy, or any other traditional retailer for that matter, necessarily have to be good at in-store and online separately?

Why can't they excel in both channels (and also in the mobile channel) simultaneously? Using XQ to manage the customer-facing interface, combined with RQ to manage inventory, product information and other back end details? This is the unified, "retail hub" solution we are currently working on at iQmetrix. It's also a concept we're excited to discuss with other retailers and technology experts at NRF 2012.

What are your thoughts? Please post your comments below.

Topics: Retail Operations, RQ, Wireless Trends, Mobile Industry, Customer Experience, e-Commerce

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