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Wednesday, April 11, 2012
Best Buy CEO Resigns


In a surprising bit of news, the CEO of Best Buy, Brian Dunn, announced his resignation. Analysts are comcerned that this could signal a new era for the CE industry.

The news come after Best Buy announced it would shut 50 stores and try to cut almost a billion dollars in costs over the next 4 years. The retailer is struggling against a changing consumer technology landscape, both in terms of the types of products it sells and how people shop for them. With mobile connectivity on the rise, consumers can "test drive" products in stores then shop for the best price without ever having to leave the store. This type of transparency is great for consumers, but a nightmare for retailers.

Key traditional CE categories for Best Buy, like televisions, have seen slowing growth and razor thin profit margins. DisplaySearch is forecasting the North America TV market to remain flat in 2012, but start a slow revenue decline in 2013. In addition, consumers are gravitating towards mobile devices that competitors/suppliers like Apple can sell in their own branded stores, quite successfully. The result is that Best Buy has been under pressure to transform their model, radically if needed.

"While consumers may still need to touch and feel products to reassure themselves about an expensive purchase, or to ask clarifying questions, there is less incentive to buy on the spot when you can one-click purchase the product on Amazon with free two-day shipping, even though the difference in price might be trivial. That's going to be a tough problem to solve," commented Paul Gagnon and Stephen Baker, alalysts with DisplaySearch.

"While Best Buy is the first to be feeling the winds of change all retailers, regardless of channel, are feeling the impact of product disruption in the marketplace. Strong sales from categories with a smaller footprint in traditional third-party retail, declining sales in content-related categories, and slowing sales in the product segments that retailers have traditionally dominated are causing enormous marketplace dislocation. While the last few years have been difficult for most brands and retailers, the landscape is not getting any easier and announcements like this remind us all how challenging the consumer electronics industry continues to be," the analysts added.


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