Counting More Than Ever on the Geek Squad

While Best Buy is the only national chain still in operation in the consumer electronics industry, a July 18 article in The New York Times suggests that this isn’t much to crow about. The article notes that shipments of electronics in the U.S. are predicted to decline 7.7% this year and that Best Buy’s domestic sales fell 5% in the quarter ending May 30 (14% internationally), compared to a year ago. “Analysts argue that Best Buy has inherited a lump of coal,” the article states, referring to the depleted — and recession-challenged — industry.

Brian Dunn, CEO of the $45 billion company, headquartered in Richfield, Minn., doesn’t agree with that diagnosis. But he does agree that “being the last remaining chain won’t ensure success,” he told The Times. His game plan, as predicted in a recent Knowledge at Wharton article titled, “Best Buy vs. Wal-Mart: Is There Room for Both, and Others?” is to focus on service, service, service. That includes expanding the role of its youthful, somewhat geeky sales force, but also bringing them up to speed on popular consumer products such as mobile phones, laptops and global positioning systems (GPS).

One of Best Buy’s goals, as the Knowledge at Wharton article noted, is to differentiate itself, in both service and products, from the big box atmosphere of Wal-Mart and from other competitors as well, including Dell, Apple, Costco and Target. Yet given the economic downturn that has seen consumers saving rather than spending, the question these days is whether strapped buyers will continue to pay a premium for good service, especially as electronics products become more commoditized.

As one analyst in the Knowledge at Wharton article notes, “technology enthusiasts are willing to buy at a specialty retailer and pay top prices early in the product cycle. As time goes on and many consumers become familiar with a new gadget, they are willing to buy them at mass merchandisers or online. The retail distribution channel may also change as manufacturers become a more important part of the landscape — following the same path as Apple, which has opened its own chain of popular retail outlets.”

For related Knowledge at Wharton articles, see:

Here Today, Discounted Tomorrow: Strategic Shoppers Know When to Buy, and at What Price

Wal-Mart: Is There a Downside to Going Upscale?