From the outside, we early adopters see Best Buy as a dinosaur in a dying world. The company recently announced the closing of 50 stores in the U.S. and 400 layoffs, mostly in corporate. It would be easy to say “Good riddance” and ignore the slow decline of bricks and mortar, but I wanted to speak to someone inside the company.
I got a hold of a manager who wished to remain anonymous and was considered a solid and dedicated employee. I asked him what it’s like inside his store right now.
“Basically what’s going on is that we got to work and heard about the 50 store closings and we started wondering about job security. Immediately my reaction was ‘Oh, crap, what am I going to do?’” he said.
Management told the employees that the stores to be closed were “bottom performers” and that all of the job cuts were “almost exclusively at the corporate level.” In an organization as Byzantine as Best Buy – simply spreading news of the cuts will take a week as corporate talks to management, who in turn talks to the districts – the move to “cut the fat” heartened his employees.
Best Buy will also open 100 or so new Best Buy Mobile stores with a smaller footprint. There they will sell higher margin items like phones and mobile devices.
“It’s an $800 million cost reduction,” he said. Employees will also be part of a newer profit sharing structure, essentially “raising wages.”
“A lot of these trims are happening so they can expand the appliance market and the high end computer market along with custom integration and whole home networking,” he said. “I’m really excited about that. That they’re expanding that from West Coast to East Coast is a huge opportunity.”
Even the long-daunting price differential between online stores and physical Best Buy shops is slowly changing. For example, there is a new “unilateral merchant retail pricing” rule appearing in some distribution contracts which means a merchant cannot sell an item below the UMRP without facing a fine. This means Best Buy and Amazon would both be forced to sell at the UMRP and no lower.
“Works in huge favor for brick and mortar stores,” he said.
While he feels comfortable and he hasn’t been fired, he’s hedging his bets by going back to school. “Everyone was nervous,” he said. “Once they found the facts, they got more comfortable. We’re basically repositioning ourselves to be more like Starbucks. More, smaller stores and a focus on premium items.”
“It did shake me up a little bit,” he said. “Just in case something doesn’t go right I want to be able to do something else.”