Best Buy hates being called "Amazon's showroom." Yet oddly, that insult may reveal a path forward for the struggling electronics giant.
Some analysts think Best Buy's long-term future might rely on turning its business model upside-down. Instead of specializing in selling electronics gear, it could gradually refocus its consumer-electronics business on everything but: instruction, service, support, connections, returns, pickup -- all tricky things to do online.
But most of all, Richfield-based Best Buy could embrace being a showroom. That means welcoming price-checking shoppers into the store to play with the latest electronic gadgets, then helping them buy online, even from another seller.
Sound like a nutty idea? Not to Best Buy's chief marketing officer, Barry Judge, who this month urged the company to become "the best showroom we can."
That vision would upend its old business model, but less radically than you might think. Best Buy already depends on payments from manufacturers like Apple, Hewlett-Packard and Sony.
"We collect...more profit from manufacturers than we do from consumers," Judge told a Minneapolis advertising audience April 2. "People talk about Best Buy as being a showroom. We've always been a showroom. We have a place where Sony and Samsung, etc., they pay to put their products on the floor."
Speaking at the Minneapolis College of Art and Design, Judge described how such a showrooming future might work.
"You're in our store.
You're using it as a showroom. You're looking at that TV, and then our mobile application tells you the TV prices," he said. "If you end up and buy it from one of those (other) people, great. As long as we get a little piece of that, that works out. That is the way we need to think. Now, we didn't think that way 10 years ago, and we should have, in retrospect."
The fate of Best Buy and its long-term future are being widely discussed, both inside and outside the company. The company unveiled Phase 1 of its transformation in late March, closing 50 big-box stores, shrinking others and opening more small Best Buy Mobile stores.
A more sweeping Phase 2 is being debated within the company. That debate is happening without a permanent CEO, following the resignation of Brian Dunn amid a board investigation into his personal conduct. A new CEO is scheduled to join the company later this year, and he or she will steer a new course. Even so, Best Buy isn't waiting for the new CEO. It's already at work on plans to reinvent the business.
Best Buy won't yet reveal details of that plan. It declined comment on this story. Judge's vision does not represent the company-approved road map. But it does suggest the sweep and urgency of the debate among Best Buy's top leadership.
Best Buy's once-booming electronics business is being eroded by online-only retailers like Amazon, coupled with the arrival of younger shoppers armed with price-checking smartphone apps.
"This is not going to change or get any better," said retail analyst Bill Emerson. "It's not like these mobile apps are going to disappear."
For all its recent woes, Best Buy remains an industry powerhouse. The $50 billion-a-year retailer still dominates sales of computers, flat-screen TVs, even tablets, reports NPD Group, a market-research firm.
Nobody expects Best Buy to walk away from those strengths. It will ride them as long as it can. But many analysts believe that sooner or later -- perhaps sooner -- shifts in technology and the marketplace will force Best Buy onto a new path, or it may join Circuit City, Ultimate Electronics and Comp-USA in the brick-and-mortar graveyard.
Research firm Canalys predicts a bloody future for consumer-electronics retailers, with many stores collapsing from the online onslaught. "Some may explore becoming genuine showrooms -- that demonstrate but do not sell -- but this will require funding from vendors," the research firm wrote last week.
The idea of turning retail space over to vendors is a business model widely used overseas, notes David Brennan, retail specialist at the University of St. Thomas.
"In Asia, 40 percent of all the space in a typical department store is actually leased space to companies," Brennan said.
Retail analyst Doug Stephens notes that product manufacturers have reason to be worried about Best Buy's struggles, and should be motivated to help. They need places where customers can touch and explore their products, and there aren't many national electronics chains left.
"Let's face it, Best Buy still sells an incredible amount of electronic equipment," Stephens said. "Manufacturers should be coming to the table, as well. Let's say you're buying a TV, what's the experience....Is that really the best TV-buying experience I can have in the market? That's the conversation Best Buy should be having, not how many stores they should be closing."
If becoming America's Showroom does become Best Buy's new vision, there's a widespread belief that the company will need to step up its game. Griping about Best Buy's sales practices, store associates and customer experience seems to have become a national pastime lately.
When a slashing critique of Best Buy's sales practices ran on Forbes.com in December, and quickly went viral, the company was stung that almost no one rallied to its defense.
Judge told the advertising group that one way to get customers excited again would be to offer the best, most transparent, most detailed comparison-shopping service.
"Why aren't Amazon reviews available on BestBuy.com? They should be," he said. "Why aren't all the top bloggers that we've identified through our curation available on BestBuy.com? When you come to BestBuy.com, why can't you see all the prices for all the products....That's how we become trusted."
He added, "A woman who works in our company says, 'We can't rely that people are too stupid to use their mobile phone -- that can't be our business model.' So we need to embrace the openness, the transparency, the showroom, and be the best showroom we can."
While famed for its big-box stores, Best Buy has been working for a decade to diversify. It has developed its online business, built up services with the Geek Squad, expanded into China, opened small mall-based shops. It recently purchased MindShift Technologies, hoping to beef up its services for small business.
So Best Buy's business model has already begun to shift. How fast, how far, and in what directions is still unclear.
"We need to move beyond, 'The only way to make money is selling products to people,' " Judge said.
"There are lots of other ways -- that's embracing the showroom -- that we could make money."
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