Written by Mark Heschmeyer CoStar Group, April 4, 2012
Best Buy Co. Inc. sent a shock through the retail real estate industry last week after it reported a $1.7 billion loss for its most recent quarter, which included 2011 holiday shopping sales, and announced plans to close 50 big box stores in the coming year and lay off 400 workers.
Media and industry analysts were quick to speculate that Best Buy might befall the same fate as former rival Circuit City chain, which filed for bankruptcy in November 2008. At the time, many analysts were caught off guard by Circuit City’s abrupt departure. Five months before its bankruptcy filing, Circuit City reported that it planned to continue rolling out more superstores. Then one month before the filing, it put the brakes on expansion and skidded into bankruptcy operating 712 superstores; now all closed.
While there are parallels, Best Buy’s competitive situation appears far different from the one Circuit City faced, according to several analysts.
While Best Buy was expected to have abetter time of it with Circuit City out of the way, things have not turned out as expected for the electronics retailer.
What changed and what’s different?
According to The Wharton School, University of Pennsylvania marketing professors Best Buy’s troubles are, in part, a sign of the weak economy.
Most of the products Best Buy sells are not necessities, and Best Buy has been facing fierce competition from other large retailers, such as Staples, Costco, Walmart and Target.
In addition, like Best Buy several other big chains are also trimming back their number of larger stores: Sears and Kmart, Gap and Abercrombie & Fitch.
Wharton marketing professor Stephen Hoch “I have admired the way that they [Best Buy] have survived when others have failed, such as Circuit City and that they have adapted to an unpredictable high tech market better than anyone else. They just don’t need as many stores right now and don’t need as much space in the stores that they keep – probably at least as difficult a problem as completely closing 50 stores.”
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Bob Kirby, a commercial leasing and sales consultant with Saurage Rotenberg Commercial Real Estate, has over 37 years of sales and management experience. Licensed in Louisiana and Mississippi, Bob is a member of the Mississippi Commercial Association of REALTORS® (MCAR); the Greater Baton Rouge Association of REALTORS® Commercial Investment Division; a candidate member of the Certified Commercial Investment Member Institute (CCIM); and an affiliate member of the National Association of REALTORS® (NAR) and NAR Commercial.
Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).