Let’s Stop Vilifying Best Buy

Best Buy's recent financial problems have nothing to do with its installation operations, which analysts say are “highly profitable.” It's time to stop persecuting Best Buy.

By Jason Knott
May 01, 2012
Everyone hates Goliath, especially when you are David. It’s why in sports so many fans despise teams like the New York Yankees and the Duke men’s basketball program. In business it’s Donald Trump. In tech it was Microsoft (will Apple be next?).

At some point it becomes a herd mentality. We hate the big guys … the winners. (I personally don’t like those sports teams either, but that is beside the point.)

For many years now, Best Buy has been the Yankees and the Blue Devils combined. Its staff already wears blue, why not add pinstripes or devil faces? Now we read that Best Buy is facing turmoil. The company posted a $1.7 billion loss last quarter. It is closing 50 locations. Soon after announcing a restructuring plan, CEO Brian Dunn resigned after 28 years with the company. Pundits immediately started talking about “Best Buy trying to avoid the fate of Circuit City.” All tough news for the big-box retail giant.

I’m sure many custom integrators and specialty retailers are quietly cheering, thinking of all the flat-panel sales they’ve lost over the past 10 years to Best Buy. But I think that cheering is misguided and it’s time for the custom electronics industry to stop demonizing Best Buy.

imageClick image to download CE Pro 100 list.
Remember back in 2009, how everyone said that the $11.7 billion in sales that Circuit City was getting “wouldn’t just disappear but would transfer to specialty retail and the custom market”? Did that happen? No. And it didn’t all transfer to Best Buy either. The bulk of it went to the Internet, Walmart and warehouse stores like Costco and Sam’s Club.

I recall years ago at a PARA convention when someone quoted a Wall Street Journal article that specifically identified Best Buy as a middle-market player in the CE space in between specialty retail and the aforementioned Internet/warehouse stores. There was an audible gasp in the room.

Fast-forward to today and many of you might gasp again when you see Best Buy’s Geek Squad/Magnolia/AudioVisions divisions atop the CE Pro 100 list. You should not be surprised. You’ve been competing against them for years for sales and installations (hence the ongoing hatred). Also, from Best Buy’s perspective, entering the CE Pro 100 is a great way to elevate the company above its retail competitors, who in many cases don’t even offer installation services, and if they do, it is most certainly using subcontractors.

Moreover, the reason the company lost money recently has nothing to do with its installation operations. Indeed, analysts are quoted as saying that Best Buy’s home entertainment installation services are “highly profitable.”

Indeed, Best Buy earned a CE Pro-estimated $680 million in installation revenues from those divisions, which are performing the same hang-and-bang installations that thousands of independent integrators across the nation are doing daily. At the same time, its AudioVisions division is doing ultra-high-end, fully integrated residential systems that rival anything traditional dealers are doing.

So this company no longer deserves your animosity. Let’s hope Best Buy gets its ship in order and is able to stop losing money on its retail operations. And besides, for those of you who ignore my plea, what would you have to hate if Best Buy were gone?

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