Are electronics big-boxes latest Internet victims?

SHOPPING CARTS sit in the parking lot outside a Best Buy store in Alexandria, Virginia, U.S. / BLOOMBERG FILE PHOTO/ANDREW HARRER
SHOPPING CARTS sit in the parking lot outside a Best Buy store in Alexandria, Virginia, U.S. / BLOOMBERG FILE PHOTO/ANDREW HARRER

First went CompUSA, then Circuit City. Could Best Buy be next?
The consumer-electronics chain’s decision to close 50 stores across the country this spring, including its Middletown location and two stores in Massachusetts, has triggered questions about whether the era of big-box supremacy is over.
As it culls a portion of its more-expensive large stores, Best Buy is planning this year to open 100 of its smaller “mobile” stores, such as the ones in the Emerald Square Mall in North Attleboro and the Dartmouth Mall in Dartmouth. By 2016, Best Buy hopes to more than double the number of mobile stores, now 305, to between 600 and 800 nationwide.
The company’s strategy, which will focus more on connections between different products and gadgets, is to “increase points of presence, while decreasing overall square footage,” as it said in a news release announcing its list of condemned locations.
It’s the latest evidence that the “category killer” big-boxes that focused on one type of product and wiped out mom and pops over the last 40 years are now themselves under threat.
“I am not surprised Best Buy is closing stores – I am surprised it took so long,” said Melanie St. Jean, a professor in the marketing department of Johnson & Wales University’s College of Business. “I thought they were going to be closing them sooner and scaling down faster after the recession.”
What’s less clear about the future of electronics sales, and where it may differ from books, home furnishings and other areas where big-box specialists have declined, is which companies will ultimately benefit from the shifting landscape.
The Internet has been credited with killing book, video and music chains, but, as St. Jean pointed out, not many people like to have a $3,000, 64-inch plasma television shipped in the mail, which suggests the changes in electronics aren’t so simple. “The winners are the big retailers: Wal-Mart and Target,” St. Jean said. “Even places we would consider chain stores cannot buy in that kind of bulk and compete on price. Hundreds of Best Buys cannot compete with thousands of Wal-Marts around the world.”
One advantage that brick-and-mortar stores still have over the Internet is their ability to drive impulse buys and sell items customers feel they have to have immediately.
In this, the giant discounters have an edge over specialists because of their wide range of offerings, which customers see on the shelf but never thought about researching online. They can also offer heavy discounts on some items with the knowledge that they can make up the difference in other areas.
Wal-Mart is still opening more than 100 new “supercenters” every year.
In addition to opening more small stores, Best Buy is also remodeling its big-boxes in a new “connected-store” format emphasizing customer service and the “Geek Squad” tech support.
A Best Buy spokeswoman declined to answer any questions about what the remodeling will look like or specifically how it will function, but some have said it looks to mimic some of what Apple has done in brick-and-mortar retail.
Even if Best Buy’s new small-box strategy does put the company on a profitable footing going forward, each big-box that closes will leave a gaping hole in the shopping plaza it leaves.
In Rhode Island, the closure of the Middletown store in the Ames Plaza shopping center off West Main Road, which is expected to be complete by May 12, will leave only one store in the state, off of Bald Hill Road in Warwick. But in Bristol County, Mass., there are five big-box Best Buys, including stores in Seekonk, North Attleboro, Mansfield, Taunton and Dartmouth.
With so many retailers struggling since the recession, filling the space left behind by a big-box will be difficult for shopping-center owners, no matter where they are.
In a 2011 overview of the Providence commercial real estate market released this month, Capstone Properties Vice President Neil Amper noted that while demand for office and industrial space has picked up, the retail property market remains stagnant.
“The retail market continued to suffer with little visibility of improving fundamentals as evidenced by transaction activity,” Amper wrote. “Both the aggregate square footage sold and aggregate sales value fell from 2010 levels, 29 percent and 19 percent respectively. Retail leasing continues to be sluggish, indicative of the retail market overall.”
Joel Evans, the Providence-based vice president of application development for Mobiquity Inc., which creates mobile programs for retailers, said with electronics customers increasingly shopping with their smartphones, retailers will have to use the Internet to entice people into their stores instead of trying to fight it.
“Best Buy has done a solid amount of innovating, but they still present a price online that is different than the one in stores – and the only time you are going to buy something for more is if you have to have it instantly,” Evans said. •

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