4 Lies That Best Buy Is Feeding You

I've never met Best Buy (NYSE: BBY  ) CEO Brian Dunn, but I get the feeling I would like him.

  • He's humble enough to accept that he and his consumer electronics chain aren't perfect.
  • He defends his employees, and that's important. Ask football fans why Raiders coach Hue Jackson got canned this week.
  • The guy publicly put out his email address this week, just in case anybody wants to send him a pitch.

Unfortunately, he's in a bad situation, and publicly going to the mattress to defend his company is only making Best Buy look worse.

It's a shame, because Dunn is likable. Unfortunately, he's just not really believable.

Speaking at the annual CES in Las Vegas yesterday afternoon, Dunn was interviewed by Consumer Electronics Association CEO Gary Shapiro. I wasn't there, but Forbes' Eric Savtiz was and he provided some of the head-scratching comments made by Dunn.

Since I can't cover them all, let's go over four of the more unbelievable claims.

1. "I wouldn't put returns and exchanges in the problem bucket."
Wow. Really? The original Larry Downes critique pointed out the company's strict and archaic return policy. Many others chimed in on Dunn's own corporate blog post over the weekend. How is it that Amazon.com (Nasdaq: AMZN  ) provides me with greater convenience (essentially printing out a free shipping label) and looser terms than a store in town?

The reason that Amazon is eating Best Buy's lunch -- and it is, while eyeing dinner and breakfast, too -- is that a seemingly cold and detached company can handle returns and exchanges more effectively than Best Buy. Even in the brick-and-mortar world, several department stores have kinder policies.

If Dunn isn't placing this in the problem bucket it's only because there are so many problems in the bucket that this one just doesn't fit.

2. This is the best time in history to go buy a television.
Are you kidding me? This is the worst time to buy a set. Apple (Nasdaq: AAPL  ) is ready to revolutionize this space later this year, and the competition will have to follow suit.

Sure, prices are going to be low as retailers get desperate about clearing out inventory. I'll admit it. I saw a Cyber Monday deal on Amazon.com for a 32-inch LCD for less than $200 and I pounced on it for my youngest son's room. However, anyone who would fork over good money for a TV now -- and much less a 3-D TV -- is as dumb as anyone buying an iPad 2 this month when the inevitable price cut is coming in a matter of weeks.

Sure, Dunn was being interviewed by the CEA. This is what he had to say. Come on, though. Protect your customers from a regrettable mistake.  

3. Once the state sales tax issue for online retailers results in a level playing field, "it gets interesting."
I agree that online retailers will eventually begin collecting state sales tax. However, does Best Buy really think that the 5% or 7% or 8% state sales tax will make Best Buy competitive with the online retailers?

There are certain cost advantages that online has over physical retail. There are also a lot of people out there who shop online because clicking to the checkout screen doesn't involve having to fend off hard sells for extended warranties, Geek Squad tech support, or the laughably sad buyback protection program.  

At one point Dunn argues that folks like going to stores because we are "social animals," but I don't think he realizes that he's training employees to treat us like wounded gazelles and they're predatory lions on the hunt.

4. "Blue shirt nation" provides a compelling value proposition that no one equals.
Does he not realize that we all know how to comparison-shop these days? Some of the comments on his corporate blog came from employees arguing that even their own heavily discounted purchases as employees are costlier than outside sources.

What is the value proposition of Best Buy? Beyond instant gratification, there isn't a lot left. Now that books, music, video, and video games have gone digital, one doesn't even need to leave the house for instant gratification.

Add it up
I won't take a jab at Dunn for calling ultrabooks "ultra notebooks" or for arguing that Best Buy does offer a "showcase" for its vendors, but it's ultimately Amazon's showroom.

He argues that "there's something for everybody on the floor," but is that really a compliment? Best Buy began selling SodaStream (Nasdaq: SODA  ) home beverage systems this past summer. I remember seeing an ad late last year that had SodaStream soda systems and Keurig single-cup brewers on the same page. I thought I was looking at a Bed Bath & Beyond circular.

Things get even more disjointed online, where I can buy treadmills, safes, and bike helmets.

Either Best Buy has an identity problem or it's really trying to be more like Amazon in offering everything possible.

I'm not impressed. I'm not buying it -- in any sense.

I entered a bearish CAPScall on Best Buy in Motley Fool CAPS last month. The call is beating the market so far -- because Best Buy is not. If you want to play nice with the trends that will pay off in the future, forget Best Buy and begin reading up on the stocks that smart investors are buying. It's a free report, but it will only be available for a limited time, so check it out now.

The Motley Fool owns shares of Best Buy, Amazon.com, and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Apple, and SodaStream International. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple and writing covered calls in Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (16) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 12, 2012, at 10:25 AM, Emperor2 wrote:

    I guess told Rick he had to write an article about Best Buy and this was the drivel he concocted. Rick, most of your articles are factual and interesting but this was a waste of your and my time. What Mr. Dunn said were his opinions. They were not presented as facts. Opinions, technically, cannot be lies. Your article, stating his opinions were facts, is a lie. So technically, you lied but he didn't.

  • Report this Comment On January 12, 2012, at 10:26 AM, djayku wrote:

    Completely with you on this, Rick. Best Buy is 90% way overpriced and is only good as a showroom for online retailers.

  • Report this Comment On January 12, 2012, at 10:37 AM, TMFThump wrote:

    Best Buy is to Amazon what Blockbuster is to Netflix. Even focused bricks and mortar retailers like Barnes and Noble are having difficulty staying in business against Amazon and its strong reputation for customer service. Best Buy seems to be headed in the same direction as Sears/KMart.

  • Report this Comment On January 12, 2012, at 12:20 PM, mitches229 wrote:

    Your first 'lie' actually has some 'lies' in it that should be fixed or replaced.

    The DVD return policy at Amazon and Best Buy is identical. They both let you return unopened DVD's within 30 days.

    The only difference is that Amazon would mail back the DVD he tried to return out of policy (probably by being opened) and Best Buy would tell you right in the store.

    If you want to call the policy 'strict and archaic' then that is fine, but don't act like it is not the same for Amazon. They may print out return shipping labels but it doesn't do you any good if you try to return something out of policy.

  • Report this Comment On January 12, 2012, at 4:13 PM, TMFBreakerRick wrote:

    Mitches, you mentioned one item. Why is it that for PCs, monitors, cameras, and a few other items Best Buy is at 14 days while Amazon gives you a full 30?

    More to the point about the "strict and archaic" policies, why do I need to hand over a photo ID with the original receipt at Best Buy as if I'm a thief? Amazon may have the benefit of KNOWING who I am, but the brick-and-mortar process is insulting. Why do I have to wait in a line -- and when I shopped regularly at Best Buy there were times when that wait was considerable -- when online I'm just a couple of clicks away from a resolution?

    If you don't think that Best Buy's return policy is obsolete by online standards and strict by brick-and-mortar standards (i.e. - I have 90 days for a return at Target) then we will have to agree to disagree. Cosnumers are obviously voting with their feet and their pocketbooks.

  • Report this Comment On January 12, 2012, at 5:32 PM, mitches229 wrote:

    Thanks for responding and clarifying - personally, I just think the things in the comment are things that would be helpful in the article in the first place.

    My point was that you referenced the Forbes article calling out a 'strict and archaic' return policy. The return policy in question in the Forbes article was for DVD's. Best Buy and Amazon have the same DVD return policy.

    If it's strict and archaic because they require an ID and receipt for a return then you should call that out...not reference an article where a guy tried to bring back a DVD.

  • Report this Comment On January 12, 2012, at 6:15 PM, jssiegel wrote:

    Blue Shirt Nation is part of the problem. If you can find someone working the floor, they are usually engaged in conversations with other employees rather than helping customers. I've never been proactively asked if I need help finding something. Circuit City was a lot like that.....

  • Report this Comment On January 13, 2012, at 2:01 AM, techfan252 wrote:

    I keep seeing these same types of comments being expressed, like it's a movement spreading, with condescending attitudes towards the retail stores. I know they have their faults, but so does online ordering, when you have to pay shipping and then maybe return shipping too. If we keep it up, ALL of the stores will be closed and boarded up, eventually, We can just go find a Wal-mart, if we are lucky and maybe have to drive 50 miles to get there. I understand it's like that now in some small towns, where all of the businesses went under. WMT is even having trouble competing. All of this will just mean even more JOB LOSSES for people. Is that what we really want?

  • Report this Comment On January 13, 2012, at 4:15 PM, TheDumbMoney wrote:

    Truth, et al,

    It's not just that Amazon has a 30-day return policy, it's that I have let things lapse that, and they have STILL taken it back, and not given me guff, they do it cheerfully. The customer service is just generally amazing. I still shop at stores, I don't think that will ever change, but the frequency has changed.

    General:

    Another company, oddly, that I have had outstanding customer service reaction from is Hewlett Packard. When my battery pack died on my year-old laptop in 2007 and the screen stopped working, they instantly sent me a postage-paid box to send the laptop to them in, verified it wasn't all caused by me downloading a virus or something, fixed it all for free, and sent it back to me literally within a week of me sending it to them. It's still working fine, four years later.

    Here's another: send an email to Sodastream investor relations, and you get a pretty instant personal reply, at least I did in August/September.

    Foolishly,

    DTAF

  • Report this Comment On January 13, 2012, at 4:49 PM, DJDynamicNC wrote:

    Re: Online vs Brick and Mortar - I can honestly say that if I go into a brick and mortar store for anything but food, it's only to stop and ask for directions. I did all my Christmas shopping in 40 monites on two websites (Amazon and Think Geek). If I want to be social - and I frequently do - I go to a club or a party, which I have the time and money to do because I've saved a lot of both by shopping exclusively online. There's just no getting around the benefits.

  • Report this Comment On January 13, 2012, at 4:50 PM, DJDynamicNC wrote:

    "Monites," obviously, are an obscure unit of time measurement roughly analagous to what you Earthlings would call "minutes."

  • Report this Comment On January 13, 2012, at 4:56 PM, esbita wrote:

    "There are also a lot of people out there who shop online because clicking to the checkout screen doesn't involve having to fend off hard sells for extended warranties, Geek Squad tech support, or the laughably sad buyback protection program. "

    This is really the stake in Best Buy's heart. There is a Best Buy three miles up the road from my house and i don't ever bother going in there. The shopping experience is about as fun as a dentist visit. When I did go into the store, the item I wanted was out of stock more often than not ($1500 computer, popular software package, basic stereo component...wasn't as much a matter of price).

    If your store offers a terrible shopping experience, and you're selling discretionary items, AND your prices are so-so at best...the result should be no surprise.

    I don't go into a Barnes and Noble so much either anymore, but that's because there isn't one nearby. Shopping at a handful of other stores is still a pleasure. For most customers the expectation of customer service is still pretty low- have things in stock, don't act like a car dealer's F&I guy when your customer gets to the register, and keep the line short.

    Heck, Borders at least had computer stations where customers could check if a book was in inventory (and order it there if you wished).

    It's not that hard, people.

  • Report this Comment On January 16, 2012, at 10:31 PM, baxlash04 wrote:

    On December 13th 2011 we had ordered several items from BestBuy.com for a combined birthday-Christmas gift. A week, or so

    after placing the order we received an email from Best Buy explaining that some of the items we had ordered are on "back order"

    and will be shipped in about two weeks. Please keep in mind that when we ordered this there were many, many "out of stock"

    items on the website. and, that every item that was selected for our order was "available and ready for shipping" according to the website.

    This was very upsetting news, but we understood that things happen and that we would just have to wait. Thursday, January 12, 2012

    - we received another email from Best Buy. Informing us that one of the items we ordered is "no longer available" and that our order

    has been "canceled" by Best Buy. After getting this email we immediately contacted customer service, they informed us that there is nothing they can do since the items are no longer available, so we contacted the manufacturer of the product and was informed that the items are still being made and being sold worldwide. We checked again with Best Buy and they could not answer why if they still were dealing with the manufacturer, why they could not make the item available. We had to spend a gift less Christmas and a gift less birthday thanks to Best Buy.

  • Report this Comment On January 20, 2012, at 12:18 PM, eam2012 wrote:

    Ok, so he says This is the best time in history to go buy a television. Your argument is that in some future time it will be better. Are you kidding me? Stupidest argument ever! So if someone says Jordan is the best player ever will you say "no way, someday there will be a cyborg clone that can dunk from half court!" ? The future is not part of history. Dumb, dumb comment...

  • Report this Comment On January 21, 2012, at 8:37 AM, spike1299 wrote:

    `About 5 years ago was the last time I purchased anything from best buy! I gave the Geek Squad myt PDA to repair, paid 25.00 dollars, and they lost it. It took over a year to get a replacement, I definitely got the run around and yes I was pissed. I paid a 1000.00 dollars for it and all the accessories for an HP. Finally they Did not have a replacement HP (Hewlett Packard). What I got was a new Palm worth at half the purchase price of the old one, and still had a bunch of accessories that aint worth crap from the HP.That wasn.t the only issue, another problem with extended warranties. But ill stop at that. It appears Mr Dunn extends to his employees, a lot of Bull crap that he obviously uses to portray his company as great customer support and service ......................................, Well im waiting for Best Buy to park its ass next to Sun TV and Circuit City, Believe me it wont be long!!!!

  • Report this Comment On January 27, 2012, at 8:56 AM, woodNfish wrote:

    I don't shop at best buy because of their return policy. It is obvious they don't like their customers, so why should I give them my money?

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