Electronics retailers are apparently feeling the heat from competition: CompUSA says it will close down more than half of its stores. It's logical to ask whether this is good news for Best Buy (NYSE:BBY), or whether it spells doom and gloom for electronics retailers across the board.
CompUSA plans to close 126 stores over the next two or three months in order to focus on its locations that are doing well. It will receive a $400 million cash investment, and it also plans to cut costs and restructure.
It's not just CompUSA that's feeling the pinch. Circuit City (NYSE:CC) recently said it plans to close 70 stores.
It might be easier if these companies only competed with one another, but everybody knows that's not the case. They also face Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and Costco (NASDAQ:COST), all of which offer electronics on the cheap. (Last autumn, Wal-Mart made aggressive price cuts on electronics, starting up a holiday-season price war.)
Of all the electronics retailers, though, I feel most confident about Motley Fool Stock Advisor recommendation Best Buy. From purely anecdotal evidence, I've noticed its sales reps seem friendlier, more helpful, and more knowledgeable than their counterparts at Circuit City or even smaller Radio Shack (NYSE:RSH). (In my experience, the most passionate and knowledgeable electronics sales reps of all tend to be found in the Apple (NASDAQ:AAPL) stores.)
Anecdotal evidence aside, Best Buy has tried to foster an innovative approach to its business. Its customer-centric initiatives gear certain stores to particular demographics, like soccer moms or hardcore geeks. Furthermore, I recently read that Best Buy has been experimenting with what seems unthinkable for most businesses: a "results-only work environment," or ROWE.
ROWE is flex time in overdrive, and radical at that. It's about working when and where you want to, and focused on output, not just whether folks show up between 9 and 5. Best Buy has said that ROWE has decreased employee turnover and improved productivity in its corporate offices. That's why Best Buy has also launched a subsidiary called CultureRx to help other companies implement the system. Best Buy is experimenting with ROWE among workers and managers in its retail stores this year, which should yield fascinating results in an industry known for time clocks on the retail floor. Maybe it won't work, but I'd say we should give Best Buy props for trying.
My point is, of all the electronics retailers, I'd say Best Buy's continued focus on putting the customer first and innovating like crazy gives it a serious advantage over the competition. Companies like Best Buy should do well by thinking out of the "big box."
For related Foolishness, see the following articles:
- Last December, Circuit City went haywire.
- Best Buy fought in the price war last holiday season.
- Here's Best Buy's 2006 in review.
Best Buy and Costco are Motley Fool Stock Advisor recommendations. Wal-Mart is a Motley Fool Inside Value pick.
Alyce Lomax does not own shares of any of the companies mentioned. The Fool's disclosure policy looks even better in HD.
