Best Buy Rethinks Square Footage

Logo of Best Buy, US-based retail chain

Big box giant Best Buy’s announcement of a $1.7 billion loss in its most recent quarter came with a planned wave of store closures.  50 stores are set to shutter and 400 jobs will be lost.  As grim as that news is, it comes with a bright spot: the chain plans to open 100 standalone Best Buy Mobile stores centered on its technology product offerings.

A chain devoting as much square footage as Best Buy has to CD and DVD media was a chain destined for an adjustment. Competing with downloadable titles was a losing proposition and had to have dragged down returns per square foot to the point that the “big” in “big box” began to look less like a selling point than an albatross around the neck.

“In order to help make technology work for every one of our customers and transform our business as the consumer electronics industry continues to evolve, we are taking major actions to improve our operating performance,” said Brian J. Dunn, CEO of Best Buy.

“As part of our multi-channel strategy, we intend to strengthen our portfolio of store formats and footprints — closing some big box stores, modifying others to our enhanced Connected Store format, and adding Best Buy Mobile stand-alone locations — all to provide a better shopping environment for our customers across multiple channels while increasing points of presence, and to improve performance and profitability.

“These changes will also help lower our overall cost structure. We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices — which will help drive revenue. And, over time, we expect some of the savings will fall to the bottom line. At the same time, we will continue to accelerate our key initiatives — growing connections and services, expanding our digital capabilities and growing our business in China.

“As a result, we believe these actions will position us to grow earnings, improve ROIC, and increase value to our shareholders in the years ahead.”

The move to focus on the devices rather than the content downloaded upon them is part of a wider, multi-dimensional trend pitting digital reality against tangible space. Brokers and reps are well-advised to understand that a business’s decline in raw physical space requirements carries with it new opportunity.  Small might be the new big.


Enhanced by Zemanta

One Comments

  • Ben Starr

    April 7, 2012

    Their recent announcement doesn’t say what is suggested here. Closing 2% of stores and growing a separate cell provider chain does not spell the end of bet buy’s commitment to big box.


Leave a Reply