It seems a lifetime ago, but is really only two or three years……Best Buy announcing that they were planning to open the first of their planned 200 out-of-town stores in the UK. And then last week…… came their announcement saying goodbye to Britain by closing their, still only, 11 stores before the end of the year.
Bad luck, bad timing or bad understanding of the market?
You can argue it all ways. After all, in the same week Kesa sold off Comet for the King’s Ransom of £2, and everyone seems to be predicting a rash of store closures as a consequence – and there is no doubt Scotland will feel this pain, as opposed to the English Best Buy exit. Another struggling electrical retailer possibly in its death throes? Add to that the previous trials of PC World/Currys and the movement of the purchase of such products onto the internet and into superstores (and they are suffering with non-food at the moment) and there would appear to be major structural change in the sector. Such substantive structural shifts such as on to the internet are tough to fight against.
But then, did Best Buy really understand the market here, and the particular costs and service pressures? A number of overseas retailers have tried ‘big box’ formats only to find the costs are more difficult to control than they thought, and often the space is not quite right, or as available as it might be. Given the nature of the UK population, might there have been both macro and micro locational issues? International expansion has as many failures as raging successes and there are big decisions to be made about adaptation or standardisation, let alone operational practice transferability. Wal-Mart and Germany is another illustration.
But for Best Buy you have to add into the mix the deep recession, the really tight squeeze on discretionary spending, which does include many of the products sold by Best Buy, the decline in the housing market and the rising cost of travel (making convenience a key driver). You need deep pockets and a strong nerve to survive such torrid times.
Yet, there’s one silver lining. One less competitor in the market might make it easier for the survivors to prosper, though this might depend on your views of the structure/timing/quality debate. If you can survive though, then when the upturn comes, there could be good business to be grabbed, but whether from the internet or fixed stores is another matter. There is also an issue for manufacturers of big electrical brands – with so few showcases for their products left, how are they going to connect with their customers? Might we see more Apple store type ventures (as Verdict seem to be predicting)?