retail news in context, analysis with attitude

The Wall Street Journal reports that Best Buy, long a proponent of the big-box approach to electronics retailing, “plans to shrink its U.S. big-box square footage by 10% as it seeks to reassure skeptical investors that it is adapting to swift changes in store retailing and positioning itself to aggressively compete online against Amazon.com Inc.”

According to the story, Best Buy also plans to “rapidly escalate opening smaller stores focused on smartphones. Its goal is to have a total of 600 to 800 Best Buy Mobile stores within the next five years, aiming to evolve in a world of ever-smaller, more-versatile gadgets.”

The Journal frames the changes this way: “Retailers such as Amazon now feature even greater selections online. Music and movie disc sales have been evaporating due to digital downloads. Specialty gadgets that Best Buy once spotlighted, such as global positioning systems and digital cameras, are being usurped by the utility of smartphones. And electronics categories such as computers are becoming commoditized, with the singular exception of Apple Inc. products, which Apple sells in its own stores in addition to retailers including Best Buy.”
KC's View:
Essentially, Best Buy is coming to the same conclusion as Walmart and Target and Tesco, all of which realized that big box stores may not be as relevant as they have been in the past because of the changing competitive landscape that is being reshaped by Amazon. Interestingly, this is something that best Buy has been fiddling with for years; it wasn’t that long ago that Best Buy tested small stores in the Chicago area that were targeted at specific demographic groups, such as women and young men.

This is still a work in progress. In all likelihood, as these small store formats roll out, some versions will be more successful than others, and there will be some missteps. But the movement to change the shape of brick-and-mortar retailing seems to be inevitable, because of virtual influences that cannot be denied.