Best Buy Stock Plummet

BBY is a dinosaur. It will go the way of Circuit City and CompUSA as an overpriced online only.

The only way they could compete is to match Amazon's pricing, and they did, and they couldn't make money when they did.

quote:

---

Why would you invest in a company at any price that just provides a showroom for Amazon.com for free?

BBY and GME will not be around in 5 years without a drastic change in business model.

---

Maybe he's looking for a short term bounce back. The bottom today was 25.78, closed at 26.83, so a 4% gain. Will there be additional bounce back tomorrow?

Just yesterday it was being touted as one of the great retail turnaround stories of our time. Today it's down over 30%. Who knows what the price will be a year from now, but I do know that their business model sucks.

I don't claim to be any sort of expert as I don't have enough time to research as I'd like.

That said I hold ECA and will continue to hold ECA as I think they stand to do well in the next few years will focusing on liquid production and high quality gas plays (which should benefit them when nat gas exports begin in 2015).

I think HPQ has bright days ahead, but I do not own it myself.

In regard to bestbuy dropping and considering buying bc of that. As rule, that's not a good way to look at it because if a stock goes down 30% it's likely that the company is broken. Like Kodak around 1998, in goes down 50%, but that doesn't make it a cheap value stock, that makes it a piece of shite stock. As you can see it trades for pennies today.

On the other hand when Visa dropped 12% a few months back, that wasn't because it was a broken company. It was because people were uncertain about certain rulings a judge made and what that meant. Had nothing to do with the company's business model and it's viability. Buy great companies when people are scared.

No idea... They didn't break it down on their latest 10Q. Probably means it's not a good mix.

Best Buy is sinking fast, im not sure if they will be around in 3 years.

quote:

---

Best Buy is sinking fast, im not sure if they will be around in 3 years.

---

Not disagreeing with you in the overall thought... But people were saying this a yr and a half ago with the stock was in the $10-15 range and it ran all the way up to the mid $40's.

If I was the Best Buy CEO, then it is time for a drastic new approach to the business. I haven't given it a ton of thought, but here is the general approach I would take.

Problem: You are primarily dealing with a showrooming effect and the cost of carrying inventory relative to etailers makes your brick and mortar shop ineffective.

Solution: It is time to take a page out of Bonobos. Best buy needs to innovate on virtual displays providing the consumer with copious amounts of product information. It needs to save the consumer time by bringing together consumer reviews from data sources across the net and providing critical reviews of each device it sells. I imagine this as being a combination of CNET, newegg, Amazon and manufacturer information all in an instant access format within the store environment. What this does is it allows the consumer to expedite the information absorption. A one-stop shop of practical consumer information.

Next, you have got to move to a sister store supply chain model. Downsize the footprint of the B&M stores but then create mini-distribution centers across the country that fulfill the demand for the local stores. Within the B&M environment, there should be dynamic pricing - one price for the consumer to leave the store with the item (limited in-stock inventory keeps cost low and consumers pay a premium for immediate satisfaction of walking out of the store with the item) and a second price that guarantees the item will be shipped to one's home within 24 hours (ideally 12 hours) that resembles online pricing. This price is lower and is fulfilled from the mini-DC 'sister'. This allows for consumers to showroom at a low cost to Best Buy, still feel like they are receiving a good price and also receive the item in a reasonable period of time (but not immediate, so lower pricing).

These two things would be game changers for Best Buy. It embraces the showrooming to its advantage over etailers.

This also puts a massive strain on the IT and supply chain capabilities of the system. I would be interested to see how these would impact fixed and variable expenditures throughout the fulfillment, but this would be the strategic direction that I would set.

If they keep the status quo, then Best Buy will die. Leadership has an opportunity to challenge the way that retail has worked since inception and the risk of failing is on the table whether they are revolutionaries or they die a slow death through quarterly hemorrhage.

Interested in the boards thoughts on these topics. This is in my wheelhouse in terms of the type of work I do, so it would be great to bounce ideas around.

That defeats the purpose if you keep the same store footprint. The idea is to limit the square footage and hold less inventory/quicker turnover.