Why Best Buy Will Never Be Great Again

Best Buy is in a death spiral. Or so Jeremy Phillips believes. In this video, Jeremy outlines why he thinks Best Buy won't recover from its 50% stock-price decline. One major reason: Best Buy doesn't offer added value to its products for its customers. Other analysts, meanwhile, see Best Buy as a dirt-cheap value play. Jeremy disagrees and sees Best Buy going the way of RadioShack and J.C. Penney.

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (30) | Recommend This Article (19)

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 March 17, 2013, at 6:00 AM, Jackthwack wrote:

    Maybe the CEOs from Best Buy & J C Penny's should talk merger. Then I would only have one store to avoid.

  • Report this Comment On March 17, 2013, at 8:06 AM, omas8 wrote:

    i hope they go down fast.will never shop there again.

  • Report this Comment On March 17, 2013, at 9:59 AM, smt1724 wrote:

    The biggest issue I have noticed, at least with The Best Buy stores that have been "remodeled" around here is they carry far less stock. Instead of, say 2 dozen desktops on display, they'll have 6, and the rest are on the website. If I am going to buy from the website then it should have an extra discount on it to be competitive with and others. The prices are not any less than they were/are in the store, so they all they are doing is lowering overhead by lowering inventory. But the shipping is not cheap, and you still have to pay tax if they have a location in your state. There is more choice of HD TV's at Target that you can actually touch and see, and the prices are lower, plus you take it with you then and there. Most people know enough about TV's to know what they like, and don't need intensive help deciding anymore... if Best Buy kept the in store selection they used to have, they could probably lower overhead with 1 knowledgeable department head and assistant, and the rest can be the low paid worker bees. Right now, their lack of choice in store is reminding me of Circuit City about 3 years before they closed.

  • Report this Comment On March 17, 2013, at 10:07 AM, twhorselover wrote:

    Best Buy treats their customers horribly. I am a reward silver member, which means you have to spend more than $2,500 a year at Best Buy and they still treat me like crap. I have looked the other way a couple of times on their horrid customer service but NO MORE! Amazon all the way! Hasta la vista Best Buy.

  • Report this Comment On March 17, 2013, at 10:09 AM, thebird65 wrote:

    Best Buy like so many other big name companies all have the same problem. They are out of touch with consumers needs and wants.

    Big name stores are neglecting the in-store customers with poor product choices, lousy customer service, over inflated in-store pricing and lack of over all product knowledge by staff.

    Many times while shopping around for products I had to track down an employee for assistance only to find they knew next to nothing about the products they had - if i was even able to find an employee at all. Once spent over 20 minutes in the computer department waiting for an employee to assist me. Finally I left and went else where.

  • Report this Comment On March 17, 2013, at 10:11 AM, doomv wrote:

    My biggest problem with best buy is they changed their no questions asked warrenty. This was a major selling point to me, but now there's no reason to go to best buy over anyone else. But as a consumer we all loose because who does this leave for home electronics?

  • Report this Comment On March 17, 2013, at 10:15 AM, podgida wrote:

    I hope best buy goes down in flames. Then they will learn the importance of GOOD customer service. Don't treat your customers like dirt merchants. Don't charge a restocking fee for returns (their second biggest downfall) And above all else honor the warranties you sell (biggest downfall).

    Best Buy you make it so easy for online retailers to wipe the floor with you. Amazon doesn't have any pushy sales people. They have the best return policy in the business, and they have excellent customer service.

    Oh and Amazon also has everything in stock that they advertise where Best Buy hardly ever has what they advertise in stock.

  • Report this Comment On March 17, 2013, at 10:51 AM, babyleg wrote:

    If I am going to buy online. I am not going to buy until I see it in person. Many times I see what I want online then see it and change my mind. If I just buy off Amazon, I can't imagine shipping a 60" TV back. I'd rather load it in my pick up truck and take it back, best buy 15 minutes away. Amazon...Yeah, I am not shipping and dealing with someone 1000's of miles away.

  • Report this Comment On March 17, 2013, at 11:36 AM, Kajiki wrote:

    If you want a good taste of 'desperation' just walk into a Best Buy. I asked the clerk if it made her nervous to see a ratio of 20 employees to each customer in the store: she had glazed, confused look as she said 'no'.

  • Report this Comment On March 17, 2013, at 12:45 PM, GrayPlayer wrote:

    Last visit store personnel were uninformed about their merchandise. Very poor people skills. Suspect I would still be waiting for one to return from backroom.

    Thing that gets me, the executives will rob the company blind with no accountability evident.

  • Report this Comment On March 17, 2013, at 12:59 PM, bp1701b wrote:

    I passed a Best Buy Mobile store in the mall the other day, 3 associates just standing around, NO interaction with people walking past, another example of salespeople expecting customers to come to them,,,,

  • Report this Comment On March 17, 2013, at 1:01 PM, bp1701b wrote:

    I have been a retail manager for over 12 years. I know what to look for and how to hold people, from sales,back of house to upper management accountable for poor performance. I KNOW I can help Best Buy, but as usual, they only hire and keep upper management who have no ideas,they do not have their fingers on the fading pulse. I doubt any executive from BB reads this, but if you do and you are serious,,Contact me.....

  • Report this Comment On March 17, 2013, at 1:57 PM, bestbuysucks wrote:

    Best buy sucks! They screwed me on a return of an ipod ten yrs ago and I haven't spent a dime with them since! I had the original packaging, original receipt, and it was only 24 days since I bought it and they had a 30 day unconditional guarrantee. Boy was that a lie, First the manager tried to say he did not sell it there. When I showed him the at his stores address was on the receipt he said" I don't have to do it and I'm not going to honor this. THEIR LOSS! I went out and bought a 50 " plasma, surround sound amp, and playstation 3 somewhere else. I also used to but DVDs every week, stopped that from them. Have not spent one red cent with them since. GLAD to see them go under.

  • Report this Comment On March 17, 2013, at 2:01 PM, LetsBeReal2013 wrote:

    The bottom line is these employee's are paid minimum wage. What can you expect? Years ago...Best Buy & Circuit City stopped giving incentives to there sales associate workforce. That's why these workers don't engage there customers. Poor educated employee's and poor sales people = poor results.

    I think music piracy on the internet contributed to the decline of Best Buy. They used to lure customer's in who wanted to buy that new cd or dvd every week. That customer would then buy other accessories. Those other accessories had the high profit margins. Now people don't have the need to buy cd's or dvd's. Many people also own a flat-panel tv, so why even go to this store? There weekly sales prices are walmart's everyday prices! Get with the program!!!!

  • Report this Comment On March 17, 2013, at 2:46 PM, MadWorld745 wrote:

    So glad I made the right decision to go to college and get educated. I actually had a BB manager question and berate why I was leaving and going to college since I could stay and become a manager some day. HA HA! Idiot! A manager should encourage his/her people to better themselves in life no matter where they end up. Even if it means not in the company benefitting them directly. I can tell you from experience working at BB, sales at Circuit City, and sales at Ultimate Electronics...(CC and ULT now bankrupt) that leadership matters. Piss poor management not creating new ways to approach a customer in a changing world. Not treating your employees with respect matters also. Example: For the 1st quarter of my last year at CC, I sold more Directv equipment than anyone in the region. I was rewarded with a plastic Directv watch. Literally, the manager laughed when he gave it to me in front of the team. Embarrassing. I used to be rewarded with respect, higher commission from CC, and a commission from DirectV directly...but CC got greedy and started pocketing those Directv rewards and cutting commissions. I knew at that moment it was over. Of course there are other reasons also. Result---CC Bankrupt. What happened to taking care of the customer and the employee? The whole bottom-line sell today management philosophy is BS. Developing rapport even if customers don't buy TODAY doesn't mean they won't tomorrow or next month. Developing relationships is what was lost and now companies like BB are paying for it.

  • Report this Comment On March 17, 2013, at 3:18 PM, tdizz wrote:

    When was the last time they had a great deal on anything. 10% off isn't going to cut it. You have to give a little to get a little. I visit Best Buy maybe 3 times a year and the rest I get on amazon and ebay. You have to have good deals.

  • Report this Comment On March 17, 2013, at 4:01 PM, markfothebeast wrote:

    I have been shopping at Best Buy since the 1990's. They once had a large selection of items. Than the store layout was switched over to the "Magnolia Theater" style which I didn't like one bit. Last time I was in Best Buy I was looking at routers and they had a very slim selection. I'd prefer to shop at WalMart where I'm not being annoyed by an idiot in a blue shirt. Best Buy's return policy is garbage. After I was charged a $150 restocking fee I haven't bought anything there since.

  • Report this Comment On March 17, 2013, at 4:26 PM, shadowman3149 wrote:

    Shopped at a Best Buy in 1998 and never went back because they HAVE THE ABSOLUTE WORST CUSTOMER SERVICE I HAVE EVER EXPERIENCED.

    Wouldn't accept merchandise from Best Buy if they were giving it away.

  • Report this Comment On March 17, 2013, at 4:56 PM, RMengineer wrote:

    Smaller store format? I don't see how that can possibly be beneficial.

    The problem I have with BB as a consumer is fundamentally this:

    I don't even find BB (or brick-and-mortar in general) useful even for the much mentioned "show-rooming" let alone actually buying anything. I can spend all day driving to multiple stores looking for a product to meet a particular need or desire with some set of requirements. I may spend that day plus gas and mileage with nothing to show for it.

    On the other hand, with a few keystrokes and mouse-clicks I can find 10s or even 100s of products to suit my needs and buy it and have it show up on my doorstep. And those 10s or 100s of products found on the web? If I can't even find any of them in any store for the purposes of "show-rooming" how can they make any sales? And smaller formats/less inventory on exacerbates that problem. That is, they can't even make any sales if they don't even have sufficient inventory (or promise thereof) to get people to even go there in the first place, "show-rooming" or not.

    People, such as myself, are going to end up not even setting foot in a brick-and-mortar store when there isn't even any realistic promise of even finding a suitable product let alone actually buy it.

    And so you try to make up for that with you own on-line sales? Well, now you are not just in virtual competition with Amazon, but in direct competition. Which means, if you hope that is going to somehow save your bacon, then you have to compete full on and not have this delusion that somehow half-heartedly straddling the fence between is going to somehow be your secret sauce to success.

    And what it comes down to, as stated, is the value added proposition. You have to actually offer some added value to customers that they can't get anywhere else -AND- it has to be of enough value to _customers_ that they will willingly pay for that added value. It does no good to offer a "value" if customers won't pay for it. And the sad reality is that in most cases, when it comes right down to it, there is _nothing_ customers value more than the cheapest price. They may say they want this, that, or any number of things, but the only thing they actually open their wallets for is whatever has the lowest price. They say they want "customer service" or "made in America" but the only thing they actually open their wallets for is whatever has the lowest price regardless of anything else they _say_ they want.

  • Report this Comment On March 17, 2013, at 5:03 PM, DrGastro wrote:

    I guess this is what happens when you put a bunch of kids trying sell you a product they have no idea about. Best Buy staff will say just about anything to get a sale in. Last time I went laptop shopping the Best Buy guy could only say "the best in the world" no matter which manufacturer I pointed to. Comical!

  • Report this Comment On March 17, 2013, at 5:22 PM, herky46q wrote:

    I have had good success with Best Buy, so it is strange reading all the negative comments.

  • Report this Comment On March 17, 2013, at 5:38 PM, claims24 wrote:

    I stopped buying at best buy 4 years ago. Brought a brand new laptop. had problems and the geek squad has no customer service. No Value! They do not stand behind products.

  • Report this Comment On March 17, 2013, at 6:00 PM, Kent1234 wrote:

    Fact is this: Many a time I went into Best Buy only to see older people being exploited in the computer department. In spite of Toshiba's and Asus machines both rated as the top two lap tops, they were pushing the over priced, poorly constructed problem prone Dell clown machines. You see them in repair shops or being sold on Craig s List all the time. Seems Dell sells them cheap to B.B. and they jack up the price and snow people on them. That is so rude. To push Dell. Then, the alleged "Geek Squad" put in the wrong anti virus for an Operating system, 32 bit vs 64 bit, and made many other errors like this as I talked with people at work in my Hospital I work at. Most never have built a machine , and most lack experience. And while, some say the P.C. is dying in sales, it is not: it is just so much crap is being offered. Fancy box with cheap components. Give me a i-7 3950 in a Z79 Asus Mother board, with 24 gigs of ram, at 4. 5 on air, and having blue ray, and solid state and W.D. 7200 rpm drives holding 2 T. bytes, over an I pad, and guess what, I will take the tower. B.B does not sell these things. I was astonished to find the cost of RAM was double what you would pay on Amazon. Double! Shopping on line is the way to go-it is here, you can read many customer reviews of the product and the experience is trouble free. And much cheaper, and a wider offering of products. Yes, at Beast Buy lots of blue shirts with empty heads, no real discounts, absent at the helm alleged management, and limited selections. I can see why they will be gone soon. They made there bed and the public now knows, all those old people with Dell machines-what a dreary crime.

  • Report this Comment On March 17, 2013, at 7:10 PM, mike2959 wrote:

    I guess I don't understand what most of you are saying. Lost touch with consumers? There's no customer interaction with Amazon. Just cheaper prices guys,c'mon now don't say it's about service. It's all about price, not even convenience. Everyone wants the cheap prices and don't kid yourself saying you have no problem paying extra for service, because nobody does.

  • Report this Comment On March 17, 2013, at 7:55 PM, Bones2406 wrote:

    "going under?" Just doubled their Free Flowing Cash to $1B. Growing their business (comparable same stores). Look it up.

    "Restocking Fees?" Haven't charged them for nearly 10 years. Look it up.

    "Overpriced?" compare Amazon and Best Buy. price parity. Look it up.

    "no good deals?" Was just there last week. Samsung originally priced at $3299--down to $1899. That's not 10% as you state their sale prices are.

    "better selection at Target?" They (Best Buy) carry every major brand in store and nearly every current model they make. Look it up.

    Have your opinions, but don't broadcast them as fact. Don't be lazy--do your research. Be educated. Be respectful.

  • Report this Comment On March 17, 2013, at 9:51 PM, lpcustom69 wrote:

    I've never been charged a restocking fee, and I've changed my mind on alot of items. Always a cash refund, even when I said store credit would be fine, as I was purchasing something else. Personnel have always been courteous, and helpful. If I'm in a department for 5-7 minutes, at least one person will ask if I need any help. I'm sure the customer treatment varies tremendously from different locations.

  • Report this Comment On March 18, 2013, at 9:08 AM, dfenn58 wrote:

    Best Buy doesnt charge restocking fees and if you buy an appliance they come pick up the return/ exchange no fee just do it what a bunch of clowns

  • Report this Comment On March 18, 2013, at 11:14 AM, adam6669 wrote:

    I had THE WORST warranty experience. After 3 months, of no product in my hand, I wanted my money baclk (paid cash), would only give me store credit. Moved 125 miles. The new store didn't have ANY PRODUCT that could handle what I needed. Settled on aSONY laptop (NEVER BUY a Sony Computer. JUNK), I hope they crash and burn.

  • Report this Comment On March 18, 2013, at 3:51 PM, TMFBreakerRob wrote:

    Putting the anecdotes aside, BB does not compete well over the long haul with Amazon. Amazon has lower costs and can price items at a level that results in a slow decline at BB. The "only hope"? Offer something Amazon cannot.

    Perhaps better service? Hard to do.

    Better selection? Not likely.

    More convenient? Hardly.

    Cater only to people who won't buy online?

    That's a poor business strategy. :)

    Buh-by...Best Buy....

  • Report this Comment On March 19, 2013, at 9:21 AM, Bones2406 wrote:

    What TMFBreakerRob forgot to note is that more and more vendors have greater (read: stricter) price control than in the past--many now electing to impose UMRP pricing policies. UMRP pricing takes away the ability of Amazon (or anyone for that matter) to discount at their descretion. It used to be just Apple or Bose, now it has extended to Nikon (DSLR), Sony (TVs), Samsung (TVs). UMRP is a Unilateral Pricing strategy that brings price parity in to play, and then it becomes solely about experience and convenience. Argue experience all you want, but don't discount the convenience factor--something that Amazon is trying to figure out as a result of the online game changing rapidly out of their favor (e-fairness, UMRP, etc). And all applicable options will continue to chip away at Amazon's bottom line and leaves them behind traditional brick and mortar retailing that offer immediate in store pick up when placing an order online.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2316869, ~/Articles/ArticleHandler.aspx, 9/27/2016 4:55:17 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 7 hours ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:06 PM
BBY $37.51 Down -0.48 -1.26%
Best Buy CAPS Rating: *
AMZN $799.16 Down -6.59 -0.82% CAPS Rating: ****
JCP $9.57 Down -0.21 -2.15%
J.C. Penney CAPS Rating: *
RSHCQ $0.00 Down +0.00 +0.00%
RadioShack CAPS Rating: *