18 July, 2012

How Best Buy Can Turn Its Browsers Into Buyers

As investors already know, Best Buy (stock symbol BBY) is best known these days as "Best Browse" because people go to Best Buy to look at a product before they buy it through an online retailer. Some stock mavens predict that Best Buy won't survive. When Best Buy is mentioned on Mad Money With Jim Cramer, viewers always hear the "SELL, SELL, SELL" sound effects and see the Bear graphic.

But I don't think Best Buy has to die if they remember that there are certain types of manufacturers who cannot sell their products without a brick and mortar distribution network where knowledgeable brick and mortar employees demonstrate those products, answer questions and provide a little tech support.

Unfortunately, Best Buy isn't handling products from companies who need them. Best Buy is handling the products of companies who sell to all Best Buy's competitors and, in some cases, even directly compete with Best Buy via their own online stores. Bose, for example, is as much a direct competitor as they are a Best Buy vendor. I say drop Bose and replace their products with the products of a company that really needs Best Buy, a company that doesn't sell their products through an online store (or will agree to cease doing so), a company that absolutely can't sell their products unless customers can experience them in person at a brick and mortar retailer. 

Best Buy is squandering its chance to become the exclusive listening room and exclusive distributor for companies that have little or no brick and mortar dealers and desperately need exposure Best Buy can provide. Many of these manufacturers would gladly forsake all other forms of retailing for the chance to get their products into Best Buy stores nationwide and the chance to train Best Buy employees how to demonstrate, sell and service those products. Audio manufacturers like Cambridge Audio, Rotel, Bowers-Wilkins, Peachtree Audio, Creek Audio, MBL and others with little or no American distribution might jump at the chance to make Best Buy their listening rooms. 

But Best Buy would have to do some jumping, too. They would have to do a much better job at turning browsers into buyers. I was in the Charleston, WV yesterday. Some of the speakers weren't hooked up to the showroom demonstration console and some of the speakers were misnumbered so it was hard to compare speakers with the push of a button. No Best Buy employees offered to help or even seemed to notice that I was giving off buying signals. 

An entire generation of Americans have grown up listening to music on tiny earbuds from an MP3 device and they have no idea what their favorite music is supposed to sound like. Best Buy has the opportunity to introduce the iPod generation to true high fidelity sound and to sell that generation its first quality home sound system.

And after Best Buy gets its act together and learns how to leverage and monetize its clout as The Listening Room for serious audiophiles, they can do us all a favor and demand that manufacturers stop making components that are black and ugly. Did you ever notice that virtually every TV, every Blu Ray player, every CD player and all the home entertainment furniture is black? Who sent out that memo? When Best Buy gets their act together and become The Listening Room for mid-to-high-end audio manufacturers they can use their retail muscle to influence manufacturers to build components that look as good as they sound.
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