For the record, I don't think that Best Buy (NYSE:BBY) is perfect. Over the past few days, Dave Marino-Nachison and I have been going back and forth -- and back again -- on the state of consumer electronics. While I singled out many Circuit City (NYSE:CC) miscues, I would have to say that the biggest tactical blunder may have actually come from Best Buy two years ago.
Why did it ever buy into music retailing the way it did with Musicland? Here it was cutting the sector's throat by selling CDs as loss leaders to get traffic into its superstores, and it makes a costly gamble on the very currency that it was in the process of devaluing.
Yes, that's in the past. More important, it was a mistake that was transparent to the Best Buy customer. After all, Circuit City spent years forgetting that the word "consumer" comes first in "consumer electronics" by employing commission-fed associates who stalked big spenders around the store. Thus, the act of reinvention has been made even harder by the need to cleanse its reputation. Best Buy only had to battle its bean counters.
Yesterday Dave raised some concerns about discounting in this promising sector. I don't quite see it that way. While it's easy to see how Wal-Mart (NYSE:WMT) has made mincemeat out of grocery store chains -- and has unseated Toys "R" Us (NYSE:TOY) to become the world's largest seller of playthings -- let's draw the line here.
Big-ticket items come with certain expectations of handholding that you're just not going to get at a discounter. Over the next few years, there are going to be millions of people who will flock to consumer electronics stores for guidance on satellite radio. Will it be Sirius (NASDAQ:SIRI) or XM Satellite Radio (NASDAQ:XMSR)? You're going to have questions that discounters may not be able to answer. Don't you almost have to pity the folks who walk into Kmart (NASDAQ:KMRT) trying to decide between video game consoles for their children or the right digital camera for their needs?
Consumer electronics will continue to grow. We are smitten by high-tech gadgetry, and that infatuation will only become stronger. For those who do it right -- like Best Buy and, I'll concede, maybe even Circuit City in due time -- the barriers to entry will remain higher than it seems.
If you've enjoyed the exchanges between Dave Marino-Nachison and Rick Munarriz over consumer electronics, what else would you like to see them tackle? Is Best Buy set to rule the sector forever? All this and more -- in the Best Buy discussion board. Only on Fool.com.
