Best Buy to shutter 50 stores as Apple's iPad strains margins
Best Buy's plans also call for the company to cut about 400 positions in its corporate and support structure, allowing it to reach $250 million in reductions this fiscal year, according to The Wall Street Journal. The company currently has about 1,100 full-fledged retail stores, but about 50 of those will close as part of the reductions.
The report noted that the popularity of Apple's iPad has contributed to Best Buy's struggles, as the device carries "relatively low margins" for the retailer. As a result, its mobile computing sales business has seen "strained margins" of late.
Best Buy reported a loss of $1.7 billion for the quarter that concluded on March 3. It plans to remodel some of its key stores in what it calls a "Connected" format designed to sell smartphones and push video and broadband services.
The company also plans to reduce the footprint of its "big box" stores by 10 percent in the coming years. It has also increased its online offerings in an effort to better compete with retailers like Amazon.com.
Last week it was revealed that Best Buy sells nearly as many iPhones in America as Apple's own direct sales. A poll of iPhone buyers conducted recently found that Apple's retail stores and online store accounted for 15 percent of all U.S. iPhone sales, while Best Buy represented 13 percent of sales.
Best Buy's iPhone sales are significantly higher than Apple's other retail partners, which are Walmart, Target, Radio Shack, and Sam's Club. Together, they were found to account for just 3 percent of iPhone sales in the U.S.
Many Best Buy locations have dedicated Apple sections where other products like the iPad, Macs, and the Apple TV are sold. The "store within a store" concept is found at over 600 Best Buy locations, representing more than half of its retail outlets in the U.S.
110 Comments
As usual, blame Apple. Why not blame the rest of the computing industry for constantly coming out with complete garbage that no one wants to buy?
If Apple's isn't allowing enough of a markup for Best Buy to realize an appropriate profit, then they should shutter the dedicated Apple area. I don't think Apple is too concerned whether they have a large retailer presence outside of their own company stores and on-line anyway.
Best Buy isn't going to be successful, at least in the near-term, in convincing Apple to share more of the device profits so why fight it? Really no advantage to Apple in allowing a larger discount as they'll sell everything they planned to anyway.
IPad is a tiny fraction of Best Buy's sales. There is no way that the iPad is "straining" anything.
IPad is a tiny fraction of Best Buy's sales. There is no way that the iPad is "straining" anything.
Furthermore, people who come in to buy an iPad have, on average, more money than the average shopper. Apple is attracting well-heeled customers to Best Buy.
I agree that it's ridiculous to blame the iPad. If they can't make money on the iPad, then just don't sell it. They would still have the other 999,999 products in their store to sell.
Furthermore, even the 'facts' presented here are distorted. While it may be true that Best Buy sells nearly as many phones as Apple Stores, there are something like 8 times as many Best Buy stores, so it's not that many phones per store.
Finally, if you go to the original article, it's clear that many other factors are getting the blame:
http://www.reuters.com/article/2012/...9?feedType=RSS
- Total sales are down across the board. Forget margins, their sales are off - which will hurt profits
- Best Buy stores are increasingly serving as free showrooms for online retailers. That is, customers view the product at Best Buy and then buy it online.
- Best Buy offered deep discounts across the board last quarter - presumably to try to bring in additional sales to address the previous point
- Best Buy big box stores are too large and expensive. Plans are to close 50 large stores and open 100 small ones.
Note that in the Reuters article, the iPad isn't mentioned at all.
LOL Really?
This is a nice joke, at least the iPad fly out of the shelf compared to the android product they have to put on sale. If their mobile division sucks then they can get rid of it and just sell Apple products and will have a small profit.