I’ll start with electronics chain Best Buy (NYSE:BBY). Best Buy posted earnings this week that were wide off the mark, sending the share price down a quick 8%.
Big deal; companies miss earnings all the time, right? Yes, but Best Buy’s problems run far deeper than that.
The company has become the unofficial (and unpaid) showroom for the entire electronics industry. Want to check out the new Samsung (PINK:SSNLF) Galaxy phone or Microsoft (NASDAQ:MSFT) tablet? Then you drive to Best Buy.
But do you whip out the credit card and buy it there? No, probably not. Not when you can go to your smartphone and order it on Amazon.com (NASDAQ:AMZN) or another discount online retailer for far cheaper … and get free shipping to boot. The Washington Post reported that fully 20% of shoppers plan to “showroom” their Christmas shopping this year. And this number should only continue to grow.
There is no easy way out of this problem. Best Buy can improve its web presence and try to attack Amazon head-on, as Walmart (NYSE:WMT) is attempting to do. But it still will be at an enormous cost disadvantage for having to maintain an expensive network of stores and employees.
Perhaps Best Buy should accept its role as Samsung, Sony (NYSE:SNE) and Apple’s (NASDAQ:AAPL) showroom and ask that these manufactures pay them for the publicity. I don’t see that approach working, mind you, but its current approach isn’t working either.