The Motley Fool Previous Page


Is Best Buy Doomed?

http://www.fool.com/investing/general/2012/04/12/is-best-buy-doomed.aspx

Robert Eberhard
April 12, 2012

Its CEO left, and you would think that most of Best Buy's (NYSE: BBY  ) stores had burned to the ground -- at least based on all funeral marches that were cued yesterday morning.

I am currently bearish on Best Buy's performance, and a lot needs to change for it to survive, but the departure of CEO Brian Dunn is not the final straw. Liquidation sales are not right around the corner. Everybody just needs to take a deep breath and wait to see who the new CEO might be. Then we can happily jump back on the anti-Best Buy wagon and merrily ride down the trail to obsolescence.

Why all the hostility?
I think everyone can agree that Best Buy's recent failures have been primarily because of the rise of Amazon.com (Nasdaq: AMZN  ) , with Best Buy becoming the place where consumers go play with the latest electronics before purchasing them online at Amazon. Best Buy truly failed to embrace the online model; simply having a website where one can make purchases does not an e-tailer make. If a retail store cannot convert visitors into customers, it might as well close the doors to save on the rent payments.

The workforce at Best Buy hasn't helped. Instead of the helpful Geniuses found at an Apple store, you are left with mostly apathetic employees who know the bare minimum about the products they sell. There was a time when Best Buy's employees were knowledgeable of products, and top performers were rewarded with pay often not found in retail. However, in the name of cost-saving, this system has been replaced by one that pays a lower hourly rate and offers incentives for selling add-ons like the notorious buyback protection plan at checkout.

Change from outside would be better
Regardless of the reasons for his departure, it may have truly been time for CEO Brian Dunn to leave the company. He has worked for the company for 28 years in various capacities, but some fresh thinking from outside the Best Buy family may be essential to the company's survival. Transitions from within have worked for other companies recently, including Tim Cook taking the reins at Apple and Craig Jelinek taking over for James Sinegal at Costco. The obvious difference is that while both of those companies were thriving at the time of the transition, Best Buy f