Best Buy (BBY) may turn out to be just that in the retailing sector.
Sure, the Minneapolis-based electronics vendor has seen some of the troubles facing other retailers. Sales and the stock are falling as consumers slow their spending, especially on pricey electronics. But the long-term outlook for Best Buy looks more rosy as one of its competitors shut its doors yesterday and another is in bankruptcy reorganization.
It's biggest electronics retail competitor, Circuit City, filed for chapter 11 bankruptcy protection on November 10th. The company has secured financing to keep operating under reorganization, but as the CEO of General Motors has referenced, Americans generally do not like to buy big ticket items, especially when there is a warranty involved. Time will tell if that holds true with Circuit City's sales.
Another Best Buy competitor, Tweeter, went under yesterday. The company decided against chapter 11 and trying to restructure it's balance sheet, instead choosing to simply close its doors and lay off its entire staff. Even Tweeter's website seems to already be down.
One competitor gone, another trying to reorganize. From Marketwatch.com:
"This is a major positive" for Best Buy (BBY), Wal-Mart (WMT), Costco(COST) and others, Credit Suisse analyst Gary Balter said in a note. "We have not seen a consumer electronic retailer successfully reorganize in Chapter 11 in our 24 years in this space. Should (Circuit City) ultimately close all of its operations, we assume there's roughly $10.5 billion of annual domestic sales up for grabs. Best Buy should take a disproportionate share of that business."
The big risk to Best Buy, as it is to all retailers now, is Wal-Mart. The Bentonville giant is taking share across numerous product lines and electronics are no exception. Same store sales rose 3.5% in November. This increased competiton has Pali Research analyst Stacey Widlitz concerned (subscription required):
The competitive pressure on Best Buy will only heat up – and it should have real effects on comps and margins. WMT has said that they will announce more rollbacks in electronics on Saturday and next week. We expect that Best Buy will have to lower their prices in response, putting further pressure on margins. As a reminder, Best Buy is price protected against price declines at the manufacturer’s level, but not against the moves of their competitors. We also expect BBY to get more promotional throughout December, as they will need to clear excess inventory due to greater than anticipated sales weakness.
She recommends avoiding Best Buy shares.
Wal-Mart, along with online retailers such as Amazon.com and others, will pick up some of the slack from Tweeter's demise and the negative press around Circuit City. Best Buy should as well. High-end electronics are a hands-on purchase for most. Shoppers want to see and visually compare the 50" flat panel and laptops they buy. Moreover, even with the overall downturn in consumer spending, electronics are only becoming more common in our lives. No longer are computers and cell phones "discretionary" for most; they have become core holdings, part of our lives. And there is always going to be a part of the population for whom shopping at Wal-Mart is simply not available, convenient or desired.
There is a Best Buy, a Circuit City and (until yesterday) a Tweeter all within five miles of my home. Three has become two, and as history has shown it is not kind to retailers entering chapter 11, possibly just one. That could be a big win in certain markets for Best Buy.
Well ... unfortunately ... my customer service experience with both are terrible.
I feel like I'm being stalked and harrassed at Best Buy ... you want to give good customer service ... fine .. but let the customers finish a thought or two between rabid rapid fire help solicitations.
Ya'll need to learn to better recognize a customer who needs help...
Next time i think we will make the rounds and find every employee we can find before we start shopping and tell them all to leave us the F alone ... we will ask for help when we need it. .. if we need it.
CC is no better on customer service ... we were told the "optimizing" of our new laptop included DL the updates ... for which they wanted to charge us $35. That flew like a lead ballon. He said .. we have two left .. one is optimized and one is not.. oh and we charge $35 for that. To which we immediately asked him if he was willing to risk a $2400 sale over the $35 .... oddly enough it seems they don't "have" to charge that fee. Then we get home ... I get the "optimized" lappy ... only to get it online and discover that not one update had ever been downloaded. tsk tsk ... and they thought i was going to pay $35 for it?
December 11, 2008 at 2:57 pm
Tyler
Jimmy work at the Plymouth store? before i started working at circuit i would walk into best buy looking for something and no one was near. so i went to circuit and always someone to help. store is all ways clean and neat. thats why i decided to work there.
December 11, 2008 at 7:26 am
Jimmy
I work at Circuit City and the customer care here is top notch. I should know, because I work here. There is never a time when I do not know the answer to a question about products in my department. My store is one of the 10 most profitable in the states. However, I, as well as the other guy who works at circuit city went through the same training. Somehow I manage to flourish at my job? Coincidence?
December 9, 2008 at 9:42 am
Mike
Best Buy is a pain. Love shopping at circuit city because the staff is helpful and knowledgable. I can't say the same to be true at Best Buy
December 8, 2008 at 8:33 pm
bob
Hey mike,
You should probably focus on learning how to spell before critcizing how people do business. You can actually consult a dictionary for reference. Also, wishing bad things on people is just horrible. You do not know these people or their lives or their situations. Wishing away peoples' livelihoods just because you feel mistreated. Try not whining. Nobody owes you anything sir.
December 8, 2008 at 4:46 pm
Milton Herring
I have cheered enthusiastically the last few years as Circuit City sank beneath the waves, after an infuriating experience with after-sale service at the local (Maryland) store -- since closed! The contrast in customer care, both before and after purchase, provided by the nearby Best Buy could not be more striking.
The bad news is that executive and middle management at so very many enterprises is populated by spreadsheet readers with little knowledge of, feel for, or concern about the business activities which underlie the numbers they read from the latest computer reports.
December 5, 2008 at 11:34 am
Ronald
I currently work at Circuit City as a seasonal employee and I agree with Mike (one of our manager's named Mike by the way :D). I'm telling you, even on my end, customer service is horrible. I want to do much better, but what can I do when I'm poorly trained, lots of our displays happen to be out of stock, and management seems to be scattered everywhere? I'm so sick of saying "I'm not sure" or "I don't know" to the customers when they ask something because, well, I really don't know some of the stuff that's in that store. And I don't want to lie because that will probably just make things worse. I've been seeing testimonials on the Internet about Best Buy's reputation for excellent customer service and employee treatment and I wish they had given me a call when I applied for a job there. I only worked at Circuit City to gain experience on sales and customer service. I'm getting my experience on sales, but I don't know about customer service, or at least a great customer service. And the store's pretty far from where I live and I don't have a car, so it's kind of a pain in the butt to keep taking the bus.
December 4, 2008 at 10:20 pm
Mike
I have a circuit city by my house .. i've been in about 5 times just to make sure my first few experiences were not anomolies ... the worst service i ahve ever seen ... idiot kids running the place and no one is ever in the department you are seeking help in .. i dont think i ever saw a manager in sight ... horrible ... good ridence to bad rubish ... fire all of them ... by the way the location is in houston ... san felipe and the 610 south ... absolutely atrrcious staff all around
December 4, 2008 at 5:04 pm
Umpire
Circuit City made a big mistake when they decided to stop selling major appliances. Just having some on the show floor was pulling in people/customers even if it was just to compare prices and models.
Dell will be the stock to watch. What will happen with the loss of shelf space for other brands of computers or Walmart decides to have a go at selling less expensive brands? The times they are a-changing.
December 4, 2008 at 4:56 pm
Kim Poulos
Hi, I just wanted to comment on this. I worked for HD for 8 year's until Bob Nardelli can in and mess it up. We were about service and he didn't care. Get rid of people making money and replace them with people who didn't know anything. I went from making a good raise for my hard work, to 2 cents a year. They had to pay him to leave because he mess up the company. Then I went to CC. (I'm batting a 1000 now.) I worked for them for 3 year's and was layed off for making to much. My father always told me to give it a 110% and you would be taken care of, WRONG!!! I went to work for BBY a year ago. They are the type of company I like to work for. They are concerned about their employee's and the customer. They are all about taking care of the customer and that makes me proud. I really enjoy working for them and I try to give my customer's the best customer service I can. Company's that take care of their employee's and customer's are a good reason to invest in BBY. I wish someone would comment on the service that company's are giving now and have alway's gave in the past. That's who we all should stick with. Thank you, Kim
December 4, 2008 at 2:44 pm
movers
Best buy will have to compete with Walmart on the more generalized core electronics and will hopefully (hopefully for best buy) grow more in high end home theater space (more of "Tweeter and Hi Fi buys) that Walmart does not offer.
December 4, 2008 at 2:31 pm
aboutthis blog
Brian Sullivan joined FOX Business Network (FBN) in April 2008 as an anchor. He co-anchors the 10am-12pm ET hours of the FOX Business block.
Prior to joining FBN, Sullivan served as an anchor for Bloomberg Television where he hosted the programs Morning Call and In Focus.
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Smurfy
Well ... unfortunately ... my customer service experience with both are terrible. I feel like I'm being stalked and harrassed at Best Buy ... you want to give good customer service ... fine .. but let the customers finish a thought or two between rabid rapid fire help solicitations. Ya'll need to learn to better recognize a customer who needs help... Next time i think we will make the rounds and find every employee we can find before we start shopping and tell them all to leave us the F alone ... we will ask for help when we need it. .. if we need it. CC is no better on customer service ... we were told the "optimizing" of our new laptop included DL the updates ... for which they wanted to charge us $35. That flew like a lead ballon. He said .. we have two left .. one is optimized and one is not.. oh and we charge $35 for that. To which we immediately asked him if he was willing to risk a $2400 sale over the $35 .... oddly enough it seems they don't "have" to charge that fee. Then we get home ... I get the "optimized" lappy ... only to get it online and discover that not one update had ever been downloaded. tsk tsk ... and they thought i was going to pay $35 for it?
Tyler
Jimmy work at the Plymouth store? before i started working at circuit i would walk into best buy looking for something and no one was near. so i went to circuit and always someone to help. store is all ways clean and neat. thats why i decided to work there.
Jimmy
I work at Circuit City and the customer care here is top notch. I should know, because I work here. There is never a time when I do not know the answer to a question about products in my department. My store is one of the 10 most profitable in the states. However, I, as well as the other guy who works at circuit city went through the same training. Somehow I manage to flourish at my job? Coincidence?
Mike
Best Buy is a pain. Love shopping at circuit city because the staff is helpful and knowledgable. I can't say the same to be true at Best Buy
bob
Hey mike, You should probably focus on learning how to spell before critcizing how people do business. You can actually consult a dictionary for reference. Also, wishing bad things on people is just horrible. You do not know these people or their lives or their situations. Wishing away peoples' livelihoods just because you feel mistreated. Try not whining. Nobody owes you anything sir.
Milton Herring
I have cheered enthusiastically the last few years as Circuit City sank beneath the waves, after an infuriating experience with after-sale service at the local (Maryland) store -- since closed! The contrast in customer care, both before and after purchase, provided by the nearby Best Buy could not be more striking. The bad news is that executive and middle management at so very many enterprises is populated by spreadsheet readers with little knowledge of, feel for, or concern about the business activities which underlie the numbers they read from the latest computer reports.
Ronald
I currently work at Circuit City as a seasonal employee and I agree with Mike (one of our manager's named Mike by the way :D). I'm telling you, even on my end, customer service is horrible. I want to do much better, but what can I do when I'm poorly trained, lots of our displays happen to be out of stock, and management seems to be scattered everywhere? I'm so sick of saying "I'm not sure" or "I don't know" to the customers when they ask something because, well, I really don't know some of the stuff that's in that store. And I don't want to lie because that will probably just make things worse. I've been seeing testimonials on the Internet about Best Buy's reputation for excellent customer service and employee treatment and I wish they had given me a call when I applied for a job there. I only worked at Circuit City to gain experience on sales and customer service. I'm getting my experience on sales, but I don't know about customer service, or at least a great customer service. And the store's pretty far from where I live and I don't have a car, so it's kind of a pain in the butt to keep taking the bus.
Mike
I have a circuit city by my house .. i've been in about 5 times just to make sure my first few experiences were not anomolies ... the worst service i ahve ever seen ... idiot kids running the place and no one is ever in the department you are seeking help in .. i dont think i ever saw a manager in sight ... horrible ... good ridence to bad rubish ... fire all of them ... by the way the location is in houston ... san felipe and the 610 south ... absolutely atrrcious staff all around
Umpire
Circuit City made a big mistake when they decided to stop selling major appliances. Just having some on the show floor was pulling in people/customers even if it was just to compare prices and models. Dell will be the stock to watch. What will happen with the loss of shelf space for other brands of computers or Walmart decides to have a go at selling less expensive brands? The times they are a-changing.
Kim Poulos
Hi, I just wanted to comment on this. I worked for HD for 8 year's until Bob Nardelli can in and mess it up. We were about service and he didn't care. Get rid of people making money and replace them with people who didn't know anything. I went from making a good raise for my hard work, to 2 cents a year. They had to pay him to leave because he mess up the company. Then I went to CC. (I'm batting a 1000 now.) I worked for them for 3 year's and was layed off for making to much. My father always told me to give it a 110% and you would be taken care of, WRONG!!! I went to work for BBY a year ago. They are the type of company I like to work for. They are concerned about their employee's and the customer. They are all about taking care of the customer and that makes me proud. I really enjoy working for them and I try to give my customer's the best customer service I can. Company's that take care of their employee's and customer's are a good reason to invest in BBY. I wish someone would comment on the service that company's are giving now and have alway's gave in the past. That's who we all should stick with. Thank you, Kim
movers
Best buy will have to compete with Walmart on the more generalized core electronics and will hopefully (hopefully for best buy) grow more in high end home theater space (more of "Tweeter and Hi Fi buys) that Walmart does not offer.