It used to be a common joke in publishing: if your publication is floundering, launch a redesign. Then it wasn't funny anymore; publications either went online or shut down entirely. Is there a corollary in retail?
Best Buy has launched a redesign: the electronics retailer has reconfigured its outlets to look more like... Apple Stores. Best Buy is floundering: For its fiscal quarter ended in May, the company reported net earnings of $161 million, down from $255 million in the comparable year-ago period. Its CEO Brian Dunn resigned in April, but reportedly not for financial reasons.
The Apple Store concept is a proven success -- but it only sells Apple products. What does the Best Buy do-over mean for the other dozen-or-so direct Apple competitors it carries?
It might mean nothing. Consumer electronics companies should be used to partners becoming competitors. Samsung supplies to Apple through one business but competes with Apple in another. Google is competing with its ODMs by launching its own tablet, as is Microsoft. And that's only in tablets: Best Buy sells phones, software, music, video, gaming systems, white goods, GPS systems, TVs, printers, routers, and lots of other stuff, and it provides installation and repair services. If any of its other brands had storefronts with identities as unique as Apple's, it might be an issue. As it stands, there hasn't been any outcry from non-Apple vendors over the Best Buy Apple-like makeover.
There's a second reason why the storefront ultimately might not matter: it's called showrooming. Consumers interested in big-ticket electronics items go to a retailer to test-drive the products and then go online to buy them. Ironically, many of those purchases are made on Amazon.com -- which makes the Kindle tablet, which competes with every other tablet in the market.
Best Buy's makeover could also signal a sea change for retailing in general. Target is beginning to host boutique stores within its vast retail locations. The idea of a limited-brand, high-service store apparently resonates with consumers. Microsoft reportedly is also going to try branded storefronts. But if this is the model for success, Best Buy still isn't getting it right. Until Best Buy -- or any other retail outlet -- can provide a high-service boutique experience for all the brands it carries, it's just another struggling retailer. And a redesign isn't going to save it if shoppers continue to buy online.
Consumers interested in big-ticket electronics items go to a retailer to test-drive the products and then go online to buy them.
@Barbara, I totally agree with your observation. Consumers these days are very smart. They visit the electronic store to check the product and buy online because they have discount coupon available. So this re-design may not help Best Buy.
Even for popular products like Apple's, people will simply order online without pretty much visiting the store. In fact one can just go online to search for reviews before making any buying decision. 'when in doubt go online' :)
I often seem to figure out when a review is paid and when it is neutral. I am sure many can do. However, a smart paid review can deceive the best of us. The best way is to read reviews at websites that deal in all products and to corroborate that, ask your friend who has used the product or if you are going for a buy that is significant in terms of cost to you, go to the outlet and take a hands-on review for that.
t.alex, A visit to the store gives a potential buyer the opportunity to try out a product but with the mouth watering "online-only" discounts customers are offered, the purchase is made on the web rather than in the store.
Bolaji, since online sales are happening through virtual store, maintenance and other related running costs are very minimal. So they can sell the products at a dam cheap price. From customer point of view, they are able to get the product at a discounted price, but for servicing and replacing the product which got damaged in transit are cumulative process.
I guess one other advantage on online store is that there is little or no room to bargain or negotiate especially when you are buying more than average consumer.
I also buy the idea of online stores having a kind of showroom where buyers can have the opportunity to test and also repair at the same time.
The ability to negotiate, and also return your purchase for a refund or exchange, is pretty much exclusive to brick-and-mortar retail. Another way retailers can keep the storefront value proposition is to serve food (although that didn't help Borders much...)
How can brick and mortar stores continue to sell? Well, the first thing is to have an online store. But mainly, provide a service that online you can't get. Like what? Help you decide which one is better (discount if you buy right there), maybe have a "try it yourself" system and borrow the devices for a few days.
And a redesign isn't going to save it if shoppers continue to buy online.
@anandvy, that's true. I fall in this category of consumer who will visit the store to test the product and purchase the item online. It's simply cheaper to do your purchasing online. So will resign help Best Buy? It may have worked for Apple. Apple only deals with its own brand but in Best Buy's case I'm not sure how this will simplify things.
Now a days with most of the sales happenings online it is becoming more and more difficult for the shops selling electronic products. It's not same for clothes, even though online is picking up still the shops are the best place to purchase them.
Yes I also feel the same. When you get stuck re-designing the point whe you got stuck will help you to re-think the othe possibilities of what happens if this is not done o if something else jumps in.
Absolutely! However, the trend still indicates more electronic purchases are made online. I couldn't agree more, electronic goods are better sold in the store. Of course expert advices on purchases are sometimes required. Do you think redesign will favour Best Buy? What's your thought?
Elctrnx, The disadvantages piling up for retailers keep growing as online expands. The cost to a manufacturer is lower, they can better manage inventory, cut down on stocking and remove the mark-up retailers add to their products. They can also give buyers a wider range of offerings.
I once visited Best Buy store and was told the particular color of a camera I wanted to buy as a gift for a friend was available only online. They had two colors of the product available in the store but if you wanted something different you would have to order it online. That's another reason retailers are losing out to online.
@Anna, true. Its cheaper to purchase online. There are other advantages of purchasing online like you will get lot of offers from the vendors like (free memory card etc). Moreover you will get different models of products online which is sometimes not available in the stores.
@Anandvy/@Anna: it is an excellent point and I am convinced that way to sell could help a lot in increasing profit, possible issue is about how to make on-line shop more attractive, especially in the era of mini-screen as per the advent of smartphone for example; you have a limited area, in terms of pixel, for showing your goods and launching promototions and allowing any other buying features.
The challenges of a tiny screen for online purchasing are mitigated by the positive benefits of discounts (sellers can pass on retail savings cost to customers), wider choices and ease of access (you don't have to leave your house.) Both have advantages and disadvantages and customers will need to decide which is better.
At the end, that's right. In addition, exactly right now, I was thinking if mini-tiny screen could launch a new segment of digital activity, in terms of webdesigner one hundred percent focused on tiny-web science...it seems exciting...
Barbara, I totally agree with your point about showrooming at outlets and sales at online. Its really becoming a good concept since the doubts about credit card purchasing, after-sales service when online purchasing and realibility of websites, have disappeared. Nevertheless, there is a big part of the world where people arent benefiting from the ecommerce truly as there arent any e-suppliers (atleast reputable) that consumers can rely on. I think best buy, target, etc can all make a great market if they expand their operations to those countries. There shouldnt be any doubts regarding the potential in those markets.
I reckon for any items of $100 or more people will buy them on the net so for any company to do well it needs to have web prices. The company that can offer web prices and also boast a store front (so people can test drive) will win.
@Flyingscot A client of mine thought the same way. It sold industry-specific equipment online for years at competitive prices. Last year it opened a showroom to allow customers to try out the equipment in person. Of course their customers from across the country would not likely pop into NJ just to check things out, but those in and around that area may well do so, particularly for the high tech stuff that is priced in the thousands.
"Consumers interested in big-ticket electronics items go to a retailer to test-drive the products and then go online to buy them. Ironically, many of those purchases are made on Amazon.com"
Barbara, exactly. Most of the time I had followed the same pattern. Test the device in retailer showroom and order it through online shopping site. Most of the online websites re offering up to 25% discounts for promoting more sales and to attract more customers.
Here's another wrinkle in the retail vs. online debate. It appears that Amazon.com has been able to undercut prices of items that are supposed to be priced consistently no matter where they are purchased. There are contracts for such things, so Amazon is getting in trouble with the vendors. Just one more insult to, say, Apple, when you use your Kindle to buy an Ipad and it costs less than at the Apple Store.
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Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
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