The leading consumer electronics retailer in the United States, Best Buy, has indicated that it will shutter 250 of its small stores which sell mobile phones. This comes amidst heightened competition and the need by the retailer to find ways of operating profitably and turning around its business.
Beginning May 31 the retail outlets which brought in a little more than 1% of the firm’s overall revenues and which occupy around 1% of the overall square footage will be shuttered. On average the size of each mobile store is around 130 square meters compared to around 3,716 square meters that is occupied by a regular Best Buy store.
Big box outlets
Best Buy will not however stop selling mobile phones at its big box outlets that number around 1,000 across the United States. The Minneapolis, Minnesota-based retailer will also continue selling mobile phones online as well. Best Buy’s 52 mobile phone stores located in Canada will not be impacted.
According to the chief executive officer of Best Buy, Hubert Joly, the mobile stores were launched over ten years ago and that was before the launch of the iPhone and it was at a time when the sector enjoyed high margins.
“Fast forward to 2018 and the mobile phone business has matured, margins have compressed and the cost of operations in our mobile standalone stores is higher than in our big box stores,” wrote Joly in a letter sent to employees.
Best Buy did not however reveal what number of workers would be impacted by the decision to close the stores. According to the letter the electronics retailer will assist the employees in finding other positions that exist with the company in a period of three months. Severance pay will be given to the employees who will depart the firm after May 31. The company will also help them find jobs externally.
Around six years ago the retail witness a decline in sales and profits due to a phenomenon known as showrooming where consumers browsed for potential purchases at traditional stores and then went on to buy online. Since then Best Buy has made turnaround efforts which have involved shutting down retail outlets that were underperforming as well as making improvements to customer service.
Best Buy has also lowered its prices to match those offered by Amazon. These efforts have been rewarded and the past six of the last eight quarters comparable sales have grown in stores that have been open for a period of at least one year.