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Is Best Buy About to Get Better?
In order to battle new top competitor Walmart, Best Buy indicates that it will create differentiation by elevating its shopping experience.
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April 21, 2009 by Tom LeBlanc

With Circuit City and Tweeter out of the picture, it appears that Walmart is throwing down the gauntlet to Best Buy.

Prolific Walmart, assuming its new role as the No. 2 electronics retailer in the United States, intends to come out swinging. It has “ratcheted up its once-tiny selection of big-brand television sets, video games and mobile phones to become a fierce contender,” according to a recent Wall Street Journal report.

Best Buy seems to have two options:

    1. It can battle Walmart on price. 2. It can attempt to create differentiation from Walmart by ramping up its product demonstrations.

Since Walmart has a track record of winning price battles, Best Buy told WSJ it’s choosing option No. 2.

To many who have shopped at Best Buy, this is an odd development. Instead of Best Buy playing the “big box” role to specialty competitors like Tweeter, Best Buy says it will assume a specialty role to combat an even bigger big-box store.

The result is a Bizzaro consumer electronics retail industry.

It’s not easy to picture Best Buy playing the specialty role. Meanwhile, recent reports by CE Pro, Electronic House and StarTribune.com make it even more difficult. Reportedly, Best Buy is slashing pay rates for thousands of sales people, including its Magnolia Home Theater specialty division.

The pay reduction doesn’t seem to gel with a goal to elevate the customer experience. Moves like that have a way of encouraging experienced sales people to leave the company, altering customers’ store experiences. Just ask Tweeter and Circuit City, both of which tinkered with lowering sales staff salaries before ultimately going out of business. 

Despite the WSJ report, it remains to be seen whether or not Best Buy truly intends to elevate its shopping experience. If it does, it will be a good thing for consumers interested in higher-end electronics, according to Home Entertainment Source (HES), a buying group of 500-plus specialty electronics dealers.

Best Buy taking on a more consultative, interactive model, would spur product innovation says HES executive director Jim Ristow. “If Best Buy can step into the mid- to upper-space, that will keep our space viable,” Ristow speculates.

On the other hand, Ristow worries that that if only a small sub-section — high-end custom dealers — promote specialty audio/video, “vendors will stop making those sorts of products.”

So the gauntlet has been laid. Let’s see how Best Buy responds.

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