Evolution of Retail: How Online Can Improve Physical Stores
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The early to mid-2000s were a fantastic time to be Best Buy (NYSE: BBY). These were the years that Best Buy enjoyed being the alpha dog of bricks-and-mortar technology retail. From 2003 to 2010, Best Buy stores exploded from 548 to 4172 internationally. While that was impressive growth, the net profit has leveled off since 2006.
As days pass, the news from Best Buy keeps on getting worse and with statistics like -91% quarterly earnings growth, Best Buy needs help. To say Hubert Joly, the new Best Buy CEO, has an uphill battle is an understatement. But, I will give Joly a nod. Joly is leaving Carlson (a private company) with strong brands such as restaurant TGI Friday’s and Country Inn & Suites. Even with his past success, the future of physical retail stores is bleak and something radical needs to occur to save the Best Buy dinosaur.
The Pitch
The retail market is undergoing a digital revolution. Video game retail giant GameStop is running -32% quarterly earnings growth, in part, due to the digitizing of video games. Over the years, we have seen Apple responsible for dealing death blows to music and books stores. The retail market of 2020 will likely look drastically different than what we have right now. So, how can Best Buy evolve?
A partnership with Amazon.com (NASDAQ: AMZN). I hear the shock…
Woah! You Crazy?! Amazon is the reason why Best Buy is hurting! Best Buy is the Amazon showroom!
If you can’t beat them, join them. Best Buy needs to evolve into something radical to survive the transformation of the retail market and partnering with Amazon would be a great place to start.
Three Swings
Here are three quick concepts that would benefit both from an Amazon and Best Buy partnership.
- Same Day Delivery: Amazon wants to get to the spot where they can get day-one delivery for items. By utilizing the 1,000+ Best Buys, located in America, as showrooms and mini-warehouses the dream of day-one delivery could be easily realized. Melding the online cheap prices with showroom test-driving.
- Professional Installation: Evolve the Geek Squad brand to focus on customer satisfaction and installation of their new products. Image ordering a new 52 inch HDTV and accompanying 7.1 surround sound system. Greek Squad comes in, quickly installs the entertainment system for optimal performance and sound. Then, before they leave, they show the family some of the features of the system. An educating moment so the consumers know how to fully use their new toys.
Similar to becoming mini-warehouses for day-one delivery, each Best Buy store now becomes a center for customers to get their computers, tablets, phones, and HDTV fixed. The Geek Squad can do those things now; however, the Geek Squad is priced outrageously and aimed towards turning a “quick dollar” compared to customer satisfaction and service.
- Growth in buying New and Used: Best Buy has started to dabble into the used market with used video games. By partnering with Amazon, the process of selling your used gadgets become streamlined and quicker. This is where Best Buy takes used, refurbishes the gadget and sells the item at a used price. Giving used hardware a “stamp of approval” will remove the stigma of purchasing used gadgets. Similar to what has happened in the used car market.
Three strikes or a homerun, the game goes on…
There it is; some general ideas on how to meld the worlds of digital and physical retail together. Admittedly, there are hundreds of hours of logistics, planning, retooling, and finance required to make this, or any other idea, to work effectively. Plus, would Amazon really want to partner with a dying dinosaur and competitor? On the flip side, does Best Buy really want to take direction from the company who has been “eating Best Buy’s lunch” for the last half decade?
Nonetheless, the retail market is going to evolve in the coming years. How each retailer evolves will determine if we still see those companies in a decade. Hubert Joly, let’s see these ideas you have for Best Buy!
SpokenLegacy has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Best Buy. Motley Fool newsletter services recommend Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
