While mildly intoxicated during last year's super bowl, I bet one of my friends $1000 that within 5 years Best Buy would be out of business (terms define 'out of business' as either closing down and liquidating, like circuit city did, OR being acquired by another company and integrated in such a way that the Best Buy brand is no longer used).
The reasons are pretty basic - I do not believe their business model is sustainable as a brick and mortar model, and that they are incapable of adapting quick enough to another model (online retailer) to survive. This can be broken down according to their 5 major product categories:
Media Content:
Media content is increasingly shifting to digital formats; everything from movies and music to video games (game sales for the next generation of consoles will end up being done almost entirely online). These are major for getting people into the store - if you can get all of this from the comfort of your home there's really no reason to go somewhere physically.
Consumer electronics:
TVs, stereos, printers, laptops, cameras, etc. The more tech savvy of us have already been purchasing these things from NewEgg and TigerDirect for years, but as Amazon becomes a larger and larger part of the accepted American buying cycle, online sales of bigger ticket items are quickly trickling down into the "mid-market" of consumers. Furthermore, Best Buy has already been an "online showroom" for a while now for many of us, especially on these sorts of items. At least this gets you into the store, where you might give in and buy something... but as Amazon becomes more and more trusted, do you really even need to see the flatscreen TV in person, if the product has 538 ratings and is hovering around 4.5 stars? Keep in mind it's not just Amazon they're competing with - creeping in from the other side of the market is the one-stop-shop retailers: Walmart, Sam's Club, Costco, who can offer the same products as Best Buy, but at lower costs and with much higher product diversification floating their business and getting people into the store.
Phones:
I'm breaking this out of consumer electronics because the profit model is different. Phones are a surprisingly important part of the Best Buy business model today because of the profit-rich kicker they get from the cell network providers on the back end. This is also one of the only areas where I believe Best Buy actually provides a consumer benefit, because it allows you to get hands-on experience with phones from every network and make a more informed decision, which you don't get if you walk into a carrier-run store. I don't believe this can ultimately float best buy because it isn't a big enough piece of the pie to support a warehouse sized store, and because I think the profit model of cellular networks is due for a change in the US. Our cell service is grossly overpriced here compared to Europe and Asia, which is enabled because our model emphasizes locking customers into long term plans and selling phones tied to single carriers, which allows them to reap large profits by inflating the service cost to the consumer across a several year contract. The phones themselves are sold far below their real cost when bundled with the pricey service contract here in the states, whereas a more mature market would involve selling the phones at their real cost and allowing consumers to swap carriers at will. Such a system then applies actual market forces to the cost of the cell phone bill by breaking carrier lock-in, and in doing so destroys the profit of the kickback model Best Buy relies on today. At this point unlocked cell phones get lumped in with the other consumer electronics in point number 2. To put it in perspective, upon landing in Germany last September I walked into a local carrier shop, bought a 5 Euro SIM card which provided me 30 days of unlimited 3G data, no strings attached. They never even knew my name! This could really be a topic for a very large discussion on it's own, but ultimately I believe it's not sustainable long term and when it changes, so will Best Buy's usefulness in this market. Perhaps this won't happen within the span of our wager, but it is inevitable in the long term.
Big Box items / Appliances:
For whatever reason, customers still aren't used to the idea of buying physically large things over the internet. As this changes, so will Best Buy's ability to turn a profit here. These become subjected to all the same market forces as the items in point number 2, only more so because they take up physical space, which costs far more in a strip mall showroom than a shipping warehouse in the middle of nowhere.
Services:
Geek Squad. Serves a purpose, but is ridiculously overpriced. I have no doubt services like this will be a thing in the future, but I have my doubts that a company like Best Buy can hold onto a leader position.
Ultimately I believe they will fail because their brick and mortar business model cannot compete with online retailers in the long run, and because I do not believe they have the corporate culture or executive leadership to be able to develop an online presence capable of competing directly in that arena either.
On one hand, I feel bad for you that you showed up and the store was closed one day. On the other hand, the one constant with capitalist economies is change, and I think Best Buy is doomed on a much larger scale than your area alone because they will not be able to compete. I do not think tech sales floor positions similar those at Best Buy are going to be around for too long - better to figure out something new now.
TL; DR: I bet cash that Best Buy is on it's way down. I bet against a friend that's also a smart dude, with good arguments on his side as well. I could be wrong, but these are my reasons for putting my money down.
lucilletwo50 karma
At the risk of sounding like a big douche...
While mildly intoxicated during last year's super bowl, I bet one of my friends $1000 that within 5 years Best Buy would be out of business (terms define 'out of business' as either closing down and liquidating, like circuit city did, OR being acquired by another company and integrated in such a way that the Best Buy brand is no longer used).
The reasons are pretty basic - I do not believe their business model is sustainable as a brick and mortar model, and that they are incapable of adapting quick enough to another model (online retailer) to survive. This can be broken down according to their 5 major product categories:
Media Content:
Media content is increasingly shifting to digital formats; everything from movies and music to video games (game sales for the next generation of consoles will end up being done almost entirely online). These are major for getting people into the store - if you can get all of this from the comfort of your home there's really no reason to go somewhere physically.
Consumer electronics:
TVs, stereos, printers, laptops, cameras, etc. The more tech savvy of us have already been purchasing these things from NewEgg and TigerDirect for years, but as Amazon becomes a larger and larger part of the accepted American buying cycle, online sales of bigger ticket items are quickly trickling down into the "mid-market" of consumers. Furthermore, Best Buy has already been an "online showroom" for a while now for many of us, especially on these sorts of items. At least this gets you into the store, where you might give in and buy something... but as Amazon becomes more and more trusted, do you really even need to see the flatscreen TV in person, if the product has 538 ratings and is hovering around 4.5 stars? Keep in mind it's not just Amazon they're competing with - creeping in from the other side of the market is the one-stop-shop retailers: Walmart, Sam's Club, Costco, who can offer the same products as Best Buy, but at lower costs and with much higher product diversification floating their business and getting people into the store.
Phones:
I'm breaking this out of consumer electronics because the profit model is different. Phones are a surprisingly important part of the Best Buy business model today because of the profit-rich kicker they get from the cell network providers on the back end. This is also one of the only areas where I believe Best Buy actually provides a consumer benefit, because it allows you to get hands-on experience with phones from every network and make a more informed decision, which you don't get if you walk into a carrier-run store. I don't believe this can ultimately float best buy because it isn't a big enough piece of the pie to support a warehouse sized store, and because I think the profit model of cellular networks is due for a change in the US. Our cell service is grossly overpriced here compared to Europe and Asia, which is enabled because our model emphasizes locking customers into long term plans and selling phones tied to single carriers, which allows them to reap large profits by inflating the service cost to the consumer across a several year contract. The phones themselves are sold far below their real cost when bundled with the pricey service contract here in the states, whereas a more mature market would involve selling the phones at their real cost and allowing consumers to swap carriers at will. Such a system then applies actual market forces to the cost of the cell phone bill by breaking carrier lock-in, and in doing so destroys the profit of the kickback model Best Buy relies on today. At this point unlocked cell phones get lumped in with the other consumer electronics in point number 2. To put it in perspective, upon landing in Germany last September I walked into a local carrier shop, bought a 5 Euro SIM card which provided me 30 days of unlimited 3G data, no strings attached. They never even knew my name! This could really be a topic for a very large discussion on it's own, but ultimately I believe it's not sustainable long term and when it changes, so will Best Buy's usefulness in this market. Perhaps this won't happen within the span of our wager, but it is inevitable in the long term.
Big Box items / Appliances:
For whatever reason, customers still aren't used to the idea of buying physically large things over the internet. As this changes, so will Best Buy's ability to turn a profit here. These become subjected to all the same market forces as the items in point number 2, only more so because they take up physical space, which costs far more in a strip mall showroom than a shipping warehouse in the middle of nowhere.
Services:
Geek Squad. Serves a purpose, but is ridiculously overpriced. I have no doubt services like this will be a thing in the future, but I have my doubts that a company like Best Buy can hold onto a leader position.
Ultimately I believe they will fail because their brick and mortar business model cannot compete with online retailers in the long run, and because I do not believe they have the corporate culture or executive leadership to be able to develop an online presence capable of competing directly in that arena either.
On one hand, I feel bad for you that you showed up and the store was closed one day. On the other hand, the one constant with capitalist economies is change, and I think Best Buy is doomed on a much larger scale than your area alone because they will not be able to compete. I do not think tech sales floor positions similar those at Best Buy are going to be around for too long - better to figure out something new now.
TL; DR: I bet cash that Best Buy is on it's way down. I bet against a friend that's also a smart dude, with good arguments on his side as well. I could be wrong, but these are my reasons for putting my money down.
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