Saturday, October 20, 2012

What Killed Best Buy - Apple

A recent Bloomberg cover article is titled "Big Box Zombie" and it discusses all the issues that have stressed out Best Buy, and a potential offer to take the company private by its founder Richard Schulze.

For me, Best Buy brings back memories of when the stores first opened. We were on consulting engagements and the whole team would go into the store at once and just disperse to the various corners looking at gadgets, computers, CD's, movies and anything else they had in stock. It would take forever to gather everyone up and check out since they got lost in the nooks and crannies of that vast store full of electronic goodness. Everyone wanted to go there, and no one wanted to leave, and no one left empty handed.

Best Buy's problems today are often described as "showrooming", which occurs when potential buyers visit a physical store to touch and inspect a product but then purchase that same product online at a lower price (usually from Amazon) which usually includes no taxes and free shipping, an exact sequence that occurred for me when I bought my flat screen TV.

However, the REAL problem is something else - Apple has killed the DIY sense of the Win-Tel world of laptops, PC's and software and its innumerable combinations and permutations. We thought it was fun to look at all the myriad physical layouts and performance combinations you could have between processors, layout, memories, hard drive, etc... not to mention the balance of weight and size and screen for laptops. Not only did every vendor (Toshiba, Dell, IBM, etc...) have these combinations, but each vendor had its own strengths and weaknesses to boot. Since there aren't even competitors to the iPad for the most part, it is either the iPad or nothing, and you don't have to go to Best Buy for that.

There used to be multiple portable music devices and formats, and all sorts of different types of cameras and lenses and everything related to that. Now everyone has an iPod which is quickly being superseded by just using the phone, and while cameras are still interesting they too are being marginalized to "throw away" cameras being replaced by mobile phone and high end cameras for those that care (a much smaller group).

For software, Apple has moved to the online store. You don't have to go to the store anymore. Even Microsoft has started to move there, with "teaser" versions installed and then you download the rest. No need to buy a physical box and a CD anymore.

The TV is now tied very much into your cable or satellite provider and their DVR; sure you buy a TV, but it is from a few makers and you can pretty much figure it all out online. Buying a TV now can be complicated with wi-fi and internet connections and features but it is all laid out at Amazon or online in comparative guides and then you pick your Samsung and that's it. Your Blu Ray DVD player is a bit more complicated and often gets you online programming or you hook it to your Xbox and want to run it through your sound system so this perhaps is an area where gadgets can get a bit exciting but it is mostly hooking together these commodity devices not a DIY effort.

There is very little to get excited about in a Best Buy. Apple has the excitement, and their laptops and desktops set the standard. The college age kids I know all want an Apple - a PC is something you get on discount, perhaps as a throw away machine or if you don't have enough saved up for a Mac. Phones do have excitement with iPhones and Android phones, but most of that is tied up with particular carriers as well and can be easily done through their shops.

The death of physical media for CD's, DVD's (it's mostly coming), a lot of games (that's coming too), books (mostly dead), and software also makes the "big box" store format look crazy. I won't even bother to compare the Apple store to the vast Best Buy store - that is like shooting fish in a barrel.

I used to look forward so much to a Best Buy trip. I even braved the insane crowds and haphazard staff to try to purchase items during the holiday season. The last time I was in a Best Buy it seemed eerily empty, and no one was too excited to be there. Now it is just a nostalgia trip for me when it used to be exciting to find your own way in a big store full of DIY gadgets.

Good luck Schulze. You're gonna need it. You'd be better off trying something new then trying to resurrect a spark that's long since dead.

Cross posted at Chicago Boyz


Dan from Madison said...

It could be a real estate play. If they own valuable land in many big cities that is a viable asset. Not sure if they typically lease, own, or a combination.

Carl from Chicago said...

You could be right on that

But given that the founder is trying to buy it back and he probably has a giant ego I'd wager that he thinks he can run it better than the current guys

Carl from Chicago said...
This comment has been removed by the author.
Gerry from Valpo said...

The reports of Apple's death were greatly exaggerated.