Best Buy to shrink big boxes, add wireless stores
NEW YORK (AP) – Best Buy plans to open hundreds of smaller mobile stores and expand online and in China in an effort to be more competitive as consumers increasingly shop online.
The largest U.S. electronics retailer plans to shrink square footage at big-box stores by 10 percent over the next three to five years, a move that Best Buy said will eventually save it $70 million to $80 million annually.
Meanwhile, it plans to have 200 Best Buy Mobile standalone stores open in the U.S. by July 4 and 600 to 800 within five years, executives said at an analyst conference on Thursday.
Big-box stores are increasingly being seen as outmoded as more shoppers research and buy electronics online and competition from discounters like Target and Wal-Mart Stores increases.
Best Buy has been revamping its strategy to improve results and avoid the fate of its one-time chief competitor Circuit City, which went out of business in 2009.
Best Buy's net income fell 16 percent during the most recent quarter, which included the crucial holiday season, while revenue dropped 2 percent to $16.26 billion. Revenue in stores open at least a year, a key measure of a retailer's financial health, fell 4.6 percent during the quarter.
Best Buy is betting the mobile stores will help reverse falling net income. They have proven more profitable than traditional Best Buy stores because of the popularity of smartphones and sales of add-ons like phone plans and accessories.
The Minneapolis company also plans to expand its online-only selection and aims to double its $2 billion in online revenue in three to five years.
But Best Buy CEO Brian Dunn says physical stores remain a cornerstone of Best Buy's strategy.
"Physical retailing still matters," he said. "It is an important part of our strategy, because service matters."
In stores, Best Buy is expanding its appliance and video game selections, including taking orders for new games before they are released and buying and selling used games. It is consolidating tablet computers like the iPad in one part of the store.
Best Buy has also been testing what it calls "connected stores," where employees put more of an emphasis on the services and connections they can offer shoppers – for example, hooking up an Internet connection with a TV or upgrading a computer user to faster broadband.
Best Buy sees China as another growth area, and it is expanding its Five Star brand in that country, adding 400 to 500 stores in the next five years with the goal of doubling revenue in China to $4 billion within five years.
Addressing analysts, Dunn said the company plans to be competitive on prices and us different pricing strategies depending on the item and where it's being sold.
"The name of our enterprise is 'Best Buy' and we fully intend to live up to that name," he said.
Shares fell 76 cents, or 2.5 percent, to $29.49 during midday trading.