Holiday season may be full of cheer, but it’s also a time of intense pressure for retailers, especially in electronics. More than 20 percent of annual sales for things such as televisions, phones, cameras, and games occur between Thanksgiving and Christmas. One likely beneficiary is a company that most assumed would be long gone by now, consumed by the retail holocaust that has seen so many once-proud chains go the way of Chapter 11. Far from facing extinction, Best Buy is poised for another year of solid growth. Its relative success stands in sharp contrast to the fate of retail in general, and its formula should serve as a reminder that retailing may be changing, but not everything will be ecommerce.
The tectonic shift from brick-and-mortar retail to online commerce has entered its middle phase. While ecommerce still accounts for little more than 10 percent of overall retail sales, those sales are growing roughly five times as fast as traditional stores; and if you factor out things like fuel and restaurants, ecommerce is more than 15 percent of total sales. So at some point in the coming years, ecommerce could become the majority of retail sales.
But Best Buy’s resurgence suggests that humans will continue to value the physical experience of stores—provided that stores offer a vibrant experience combined with a conduit to services consumers need and value. In a world where just about anything can be bought online and shipped to your door, stores that offer more ephemeral things that can’t be packaged in a cardboard box and that meet needs will find a brighter future than most expected even a few years ago.
In 2012, Forbes confidently declared “Best Buy is going out of business; it’s only a matter of time, perhaps a few more years.” Given the trends at the time, that was a reasonable conclusion. Its main competitor, Circuit City, had already closed its doors, and Best Buy was losing momentum fast; its stock had lost more than 40 percent of its value in a short time, and its market cap was below $10 billion. Its stores were looking increasingly sad, with a sales staff that was forced into untenable quotas and trained to sell rather than serve. And, of course, the drumbeat of Amazon was ever in their ears, drowning out Christmas carols even in the normally robust holiday season. Its holiday sales in both 2012 and 2013 actually declined year-over-year, which more than confirmed that the death knell was near.
Except it wasn’t.
Over the next five years, Best Buy defied expectations and avoided the fate of so many other retailers like Toys “R” Us, Barney’s, and Borders. Rather than being yet another high-profile victim of the ecommerce-fueled retail apocalypse, the Minnesota-headquartered Best Buy, under CEO Hubert Joly and, since June, Corie Barry, has focused on what it can offer that the internet cannot: engaging physical stores, knowledgeable staff, a “Geek Squad” that will install and synchronize your electronics in-home, and a relentless discipline about inventory management, costs, and closing underperforming stores.
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None of those things are earthshaking or radical. Yet when faced with declining sales and overall economic weakness in the years following the Great Recession of 2008–2009, Best Buy and other chains buckled under the pressure and lost sight of what they could do that pointing and clicking could not. As the recently opened American Dream mall in New Jersey provisionally shows, more people are hungry for experiences wrapped up in their shopping and will choose to shop at a physical store if they can have an experience that goes with it. The most extreme example is Changi Airport in Singapore, which has become a retail mecca and fantastical set of enclosed adventures, with waterfalls and trails, attracting not just transit passengers but tourists visiting the airport itself. If an airport can become a retail destination, anything can.
