Best Buy announced on Thursday that it plans to axe 50 U.S. stores, lay off 400 employees and slash $250 million in spending by 2013. The drastic measures follow a less-than-exceptional fourth quarter performance report for the retail giant -- one more sign that big box stores may be fast approaching their twilight years.
Part of the problem, as Business Insider notes, is that consumers are savvier than ever before. They know that those pricey whiz-bang devices and DVD box sets on display at their local Best Buy can usually be had for far less through online shops. Shoppers use stores to try before they buy. Unfortunately for Best Buy and others, where they buy is more and more someplace else.
Best Buy CEO Brian Dunn believes that cutting a few dozen auditorium-size superstores while opening 100 small-scale Best Buy Mobile shops will help the company in the long run.
"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," said Dunn.
That doesn't really address the root problem facing the business: consumers are increasingly becoming online shoppers, and the road to the lowest possible prices does not end at brick-and-mortar shops. Why should I spend $34.99 for Justified: Season 2 on Blu-ray at Best Buy when I can buy it for $10 less at Amazon?
To Best Buy's credit, some improvements to its Reward Zone Silver loyalty program sound nice. Members will receive first crack at big sales, a free visit from Geek Squad, free expedited shipping and more, the company said. Employee training will also be revamped, playing to one of the few aces left up retail stores' sleeves: human interaction.
It'll be interesting to see if Best Buy can remain relevant to consumers in the next few years. Last summer, bookseller Borders collapsed as consumers took their business online and snatched up ebooks.
