Blockbuster, Best Buy and retail’s nemesis – showrooming
January 24, 2013
Gary Schwartz is president/CEO of Impact Mobile
Video rental chain Blockbuster announced this week that it was shutting the doors on 300 big boxes in the United States. That is a whopping 35 percent of its footprint.
This is the inevitable and slippery slope of incumbent retail stores that cannot support business-as-usual. Showrooming is shutting leviathans such as Best Buy, Barnes & Noble, Blockbuster and other mall staples down.
The opportunity is tremendous for a company that can enter the mall with a pure showrooming business model. A company that can curate purchase into the cloud and capitalize on the original equipment manufacturer’s co-opt budgets.
Chains such as Best Buy cannot innovate-from-within for two fundamental reasons:
1. It has to continue to support its existing infrastructure to the bitter end and this is a costly distraction.
2. It cannot effectively connect and curate its legacy cloud store and bricks store and make the two a seamless experience for the shopper.
Best Buy shuttered 500 stores in February 2012. What is its future? In 1983, Best Buy opened its first superstore in Roseville, MN, offering a wide product selection and discounts on brand-name products that drew shoppers away from more expensive smaller electronics stores.
Best Buy was a retail innovator, cornering the electronics market across the U.S. and expanding globally. But somewhere this big-box retail giant too has lost its way.
Maybe Best Buy’s decline dates back to 2009, when Circuit City exited the mall. And then more measurably to 2010, when shoppers stopped hunting down the Best Buy sales representatives, the all-knowing “blue shirts,” and started using their phones as a product research resource.
As phones became more powerful, the busy blue shirts seemed less essential, almost dispensable. Clerks had less access to technology than the smartphone-toting shoppers.
When Best Buy CEO Hubert Joly said last year that the company is routinely evaluating its real estate portfolio, the market knew that Best Buy’s high-cost properties were just waiting patiently to survive their lease term and shutter.
The company has made a play at “going small” with a shift to more manageable mobile-phone sized -stores hoping that shedding 65-inch televisions inventory may help its revenue.
These “Connected Stores” would focus selling smaller “connected screens” including mobile phones, tablet computers and e-readers and try to differentiate themselves from its two nemeses, cloud-based Amazon and bricks-based Walmart. Will Best Buy’s geek squad win the day?
Best Buy, like many successful companies, has become disintermediated by technology.
As I wrote in my recent book, “Fast Shopper Slow Store,” it is not that Best Buy was asleep at the wheel. That is far too simple an analysis.
The company undoubtedly saw the writing on the wall years ago. The problem was that the writing said, “You’re in trouble!” It (unfortunately) didn’t say exactly what the megacompany should do about it.
Many businesses that are trying to reinvent themselves in 2013 need to look closely as to how this debacle plays out.
While Starbucks and grocery store maybe safe for the next few years, other retail tenants need to look carefully at their business model.
The new mall is going to be a challenging space for mall owners.
Best Buy represented a mall entertainment experience similar to a Barnes & Noble. Now that shoppers browse but do not buy, these stores cannot support their weight. The stores exiting will leave the mall a lonelier place.
The key ingredients of retail success are price, convenience and trust. The cloud is always going to win on price. Convenience cuts both ways: cloud or mall could say they are more shopper-friendly. It is on “trust” and relationship building that old and new retail models will differentiate themselves.
MALL OWNERS need to be a proactive. They need to innovate with their retail footprint. They need to look to partners that have a vested interest in the future of the mall and can provide new technology, such as Samsung. They need to innovate and fundamentally remodel the way consumers shop and, more importantly, “engage” in the mall.
Gary Schwartz is president/CEO of Impact Mobile, Toronto. Reach him at .
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