June 3, 2008
Best Buy Goes to the Mall to Reach Younger Consumers
Best Buy Canada is going to the mall to open smaller outlets offering cell phones and the other wireless gadgets that it expects will bring younger consumers into stores.
The consumer electronics retailer announced that it would open the first two of its Best Buy Mobile stores in Toronto this fall. The chain is said to be actively scouting other locations in malls across Canada.
“We want to be where the action is and where the customers are,” Phil Johnston, director of wireless solutions at Best Buy Canada, told The Globe and Mail.
Best Buy is entering a space already filled with competitors including those operated by phone carriers and The Source by Circuit City (formerly RadioShack).
The 123-store HMV Canada chain is also moving into mobile phone sales. The chain operates the majority of its stores in mall locations.
Humphrey Kadaner, president of HMV, said, “People go to malls with a broader purpose in mind, and tend to spend a bit more time there. It can lead to more impulse purchases.”
Kaan Yigit, president of Solutions Research Group Consultants Inc., told The Globe and Mail that smaller stores address the needs of consumers.
“People don’t want to navigate a huge box store if all they want is a DVD and a new memory card,” he said. “Big boxes are great for the big-ticket items and when you know what you want, but … are not really for casual browsing.”
Discussion Questions: Is Best Buy Canada on target with its small store mall format? Will a similar concept work in the U.S.? Do you think it would be more effective outside the mall?
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Larger box retailers always need to be testing smaller formats. The larger the box, the greater the limitation as to the number that can be built. For example, we have yet to see a successful small format club.
That said, the selection of a mall seems short sighted. In the United States, malls are on the decline. Old malls are being remodeled into condos, offices and entertainment complexes. New malls are not being built. This may be related to changes in the baby-boomer shopping patterns.
Our company has operated mobile phone kiosks in supermarkets for years. Works great. We’ll have to look into other “wireless gadgets.” Maybe Tasers?
Best Buy has been opening small-store formats for a while, so it makes sense to roll out the same idea to malls…as long as the higher occupancy costs make sense for their business model. There are probably more than enough vacant spots to take advantage of this strategy in a cost-effective way (instead of building), especially if closed department store properties can be subdivided between Best Buy and somebody else.
Here’s an idea I’d be interested in hearing about from other panelists: As the Sears story continues to wind down, would it be feasible for Best Buy and a softlines retailer (say, Kohl’s) to occupy a closed Sears location with two concepts under one roof?
Best Buy Mobile is a home run. The current service at cell phone kiosks and small in-line stores is not very good. They push the current “free” phones and have you sign on the dotted line. Most people leave the store not knowing a single thing about their phone.
In comes Best Buy Mobile. In typical Best Buy fashion, they will provide unbiased insight. Their employees likely won’t receive a commission. The result…you know the pros and cons of each phone much like you would a TV or digital camera.
Like current cell phone stores, Best Buy Mobile can be successful in each and every mall. They carry a variety of providers and have no geographical limits. Any size mall will bring a profit. Home Run for Best Buy.
The history of the American retail journey is filled with similar stories; close an irrelevant one, open something compelling. From Main Street to the Maine Mall, it’s an addiction for the incredibly demanding (due to choice) U.S. consumer. So, what’s new?
Department stores have lost their luster in the eyes of most consumers, Best Buy has not, so let it fly! And with Best Buy’s penchant for experimentation and exploration of new ideas (thank you James Damien!) it is certainly no surprise and, in my book, a very good idea.
The only downside is the drop off in Mall traffic over the last few years…but, was that a self-fulfilling prophecy? We’ll see.
Getting in front of your shoppers is critical for any business. Best Buy has succeeded because they are willing to make the effort to understand their consumers and respond to what they learn. Sometimes this means test markets and sometimes it means full-scale roll-outs.
The mall concept makes complete sense. Success will come from having the same knowledgeable, and non-commissioned staff, found in their mainline stores.
Even if mall traffic drops, it certainly hasn’t gone away completely, and small footprint locations are easier to find than big box footprints. Furthermore, Canadian retailing isn’t the same as the USA. In 2007, 1/3 of Radio Shack sales were cell phone related. Why shouldn’t Best Buy increase its market share?
This sounds a lot like the failed “Circuit City Express” outlet that closed up shop 5-10 years ago at the mall in my hometown (Natick, MA). I hope Best Buy has some better ideas on how to make the format work.
I question whether small mall-based BB stores will be able to generate the volume to cover the four-wall expenses. Best Buy’s big-box business model revolves around being a destination store. Mall-based stores would, by definition, be far more impulse oriented. Are mall customers going to make enough purchases in these categories, which are far more often planned purchases, to make these stores profitable:? Or are these stores really intended to feed local big-box BB stores with younger mall customers who first stopped in there?
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Larger box retailers always need to be testing smaller formats. The larger the box, the greater the limitation as to the number that can be built. For example, we have yet to see a successful small format club.
That said, the selection of a mall seems short sighted. In the United States, malls are on the decline. Old malls are being remodeled into condos, offices and entertainment complexes. New malls are not being built. This may be related to changes in the baby-boomer shopping patterns.
Our company has operated mobile phone kiosks in supermarkets for years. Works great. We’ll have to look into other “wireless gadgets.” Maybe Tasers?
Best Buy has been opening small-store formats for a while, so it makes sense to roll out the same idea to malls…as long as the higher occupancy costs make sense for their business model. There are probably more than enough vacant spots to take advantage of this strategy in a cost-effective way (instead of building), especially if closed department store properties can be subdivided between Best Buy and somebody else.
Here’s an idea I’d be interested in hearing about from other panelists: As the Sears story continues to wind down, would it be feasible for Best Buy and a softlines retailer (say, Kohl’s) to occupy a closed Sears location with two concepts under one roof?
Best Buy Mobile is a home run. The current service at cell phone kiosks and small in-line stores is not very good. They push the current “free” phones and have you sign on the dotted line. Most people leave the store not knowing a single thing about their phone.
In comes Best Buy Mobile. In typical Best Buy fashion, they will provide unbiased insight. Their employees likely won’t receive a commission. The result…you know the pros and cons of each phone much like you would a TV or digital camera.
Like current cell phone stores, Best Buy Mobile can be successful in each and every mall. They carry a variety of providers and have no geographical limits. Any size mall will bring a profit. Home Run for Best Buy.
The history of the American retail journey is filled with similar stories; close an irrelevant one, open something compelling. From Main Street to the Maine Mall, it’s an addiction for the incredibly demanding (due to choice) U.S. consumer. So, what’s new?
Department stores have lost their luster in the eyes of most consumers, Best Buy has not, so let it fly! And with Best Buy’s penchant for experimentation and exploration of new ideas (thank you James Damien!) it is certainly no surprise and, in my book, a very good idea.
The only downside is the drop off in Mall traffic over the last few years…but, was that a self-fulfilling prophecy? We’ll see.
Getting in front of your shoppers is critical for any business. Best Buy has succeeded because they are willing to make the effort to understand their consumers and respond to what they learn. Sometimes this means test markets and sometimes it means full-scale roll-outs.
The mall concept makes complete sense. Success will come from having the same knowledgeable, and non-commissioned staff, found in their mainline stores.
Even if mall traffic drops, it certainly hasn’t gone away completely, and small footprint locations are easier to find than big box footprints. Furthermore, Canadian retailing isn’t the same as the USA. In 2007, 1/3 of Radio Shack sales were cell phone related. Why shouldn’t Best Buy increase its market share?
This sounds a lot like the failed “Circuit City Express” outlet that closed up shop 5-10 years ago at the mall in my hometown (Natick, MA). I hope Best Buy has some better ideas on how to make the format work.
I question whether small mall-based BB stores will be able to generate the volume to cover the four-wall expenses. Best Buy’s big-box business model revolves around being a destination store. Mall-based stores would, by definition, be far more impulse oriented. Are mall customers going to make enough purchases in these categories, which are far more often planned purchases, to make these stores profitable:? Or are these stores really intended to feed local big-box BB stores with younger mall customers who first stopped in there?