At the height of the high-definition TV upgrade cycle, you could walk into just about any store and buy an LCD unit. Even Home Depot was selling TVs. The glut of units on the market pushed the likes of consumer electronics superstore Best Buy
A disconnect on trends?
We're seeing a similar trend now with smartphones, and my guess is we'll have similar outcomes. The question is: Who will be the winners and wanderers?
By now we're familiar with how Best Buy hoped to get struck by lightning twice last year as it doubled down on 3-D and Internet-ready televisions, only to get burnt by having an excess of inventory on hand as supply far exceeded adoption of the technology. So it's turning to smartphones for salvation.
From a dedicated section in its big-box stores, Best Buy is spreading a small-format Best Buy Mobile concept store that has about 1,500 square feet of space. That's significantly smaller than the 38,000-square-foot stores the consumer electronics king typically prefers. It went from having just 74 Best Buy Mobile stores at the beginning of its fiscal 2011 first quarter to 198 by the end of its 2012 first quarter. It opened 21 new mobile shops in the first three months of this year, compared to just three of its big-box stores.
Best Buy is focusing on doing what's working for it right now, with computing and mobile phones the only segment of any size seeing growth. Getting big by going small is another trend that's become fashionable, but the near-5% jump in comps seen by the mobile segment last quarter (when every other sizable one saw declines) was primarily due to smartphone sales.
Spreading like kudzu
It's the same story with Wal-Mart
But you can already buy a Verizon phone at one of that company's gazillion stand-alone wireless stores or mall kiosks. Same with AT&T
Static on the call
Despite Best Buy's decision to go all-in on small-footprint mobile shops, I'm not convinced it's a long-term winning strategy for it or any of its imitators. RadioShack may actually have made the smarter move by not investing in any expensive real estate to spread its phone concept, and Wal-Mart has the luxury of rotating as many ideas as its marketers can come up with to try out what works on that fourth wall.
Yet with everyone pinning their hopes on a wireless solution, the only thing this explosion of retail outlets will do is further commoditize an already weakening trend. Watch out it doesn't blow up on their financial statements.
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Fool contributor Rich Duprey owns shares of Best Buy but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.