Over the last 2+ years, Wall Street analysts have pounded BestBuy on the size of their big box store fronts. Best Buy recently announced another 42 store closures – bring to 50 the total stores that will shutter in 2012. Best Buy has also worked over the last year to shrink their footprints. In some instances they have sublet some of their store square footage and in other instances they have given space back to the landlord. In their announcement last week, they recommitted to build out the smaller-format Best Buy Mobile store concept and remodel existing stores with a new Connected Store format.
But are overall square footage and the footprint of their stores, the key issue? Wall Street’s motivation is driven by shifting dynamics within the consumer electronics space. Sales of large-format devices like televisions are declining while small-format devices like smartphones and tablets have driven overall industry growth for the last two years. As small-format devices dominate, Best Buy – as the Wall Street logic goes – should reduce square footage because smaller devices suggest less showroom space is necessary.
Beyond form-factor changes, the current (and temporary) decline in television sales and increase in sales of mobile-oriented devices have also had other impacts on consumer tech retailing. Importantly, more retailers are merchandising these mobile categories. While 5-6 retailers might offer traditional devices like televisions, mobile phones and tablets are being sold by these 5-6 traditional retailers and are additionally being sold by a host of “new” tech retailers. These new tech retailers include cellular carriers through their stores and websites. Manufacturers are also increasingly marketing devices directly to consumers. Apple iOS devices and Amazon with their suite of Kindle devices are only two examples of manufacturers going directly to consumers. In both of these cases, these companies have strong retailer ties. While Apple started as a manufacturer and has also transitioned into a retailer and Amazon went the other direction – the end-state is similar with the manufacturer of the underlying device having a strong and unique presence as a retailer. It is also commonly reported that margin differentials between devices like televisions and smartphones and tablets are pronounced.
The consumer tech landscape is ever-changing and at different times over the last 50 years, these changes have dictated a changing approach to consumer tech retailing. The current changes are surely pronounced, but it isn’t clear to me that less square footage will address the true underlying changes.
