Best Buy and CompUSA: retail electronics comparison

Best buy & Comp USA

Best Buy

Declining customer demand, increasing competition

As its name implies, Best Buy is a discount retailer that specializes in selling 'big ticket' items for the home. It concentrates in technology like refrigerators, washing machines, and especially televisions. One of the problems for any company specializing in such items is that consumers do not buy these goods on a regular basis. Eventually, even after the introduction of a new, popular form of technology, the market becomes saturated, and everyone that 'wants one, has one.' "From televisions to stereos to DVD players, profit margins are moving closer to extinction. Margins have been squeezed so much that retailers are essentially getting paid to hold electronics equipment (Malhotra, 2007).

Such is the case with LCD TVs. At present, "there are too many LCD TVs chasing too few consumers" (Comeau, 2006). Even though the sets are still being bought in huge numbers from Best Buy, smaller retailers are already experiencing LCD-related problems as "a result of overexpansion on the part of the panel makers... LCD technology itself is an issue here, because it performs better in well-lit rooms. Bar and restaurant owners, big buyers of flat-panel televisions, likely opted for plasma, which is better suited to darker rooms" (Comeau, 2006). A similar problem exists with Microsoft Windows-powered desktops, which Best Buy has attempted to circumvent by selling Apple computers, enabling it to compete with the Apple Store.

In the short-term, introducing Apple Computers will offset some of the slowdown in Windows demand, as will balancing the stocks of LCD and plasma screens. But rising gas prices, especially in the winter when big ticket items will tend to 'move' more as gifts, may prove problematic, if consumers are forced to cut back. Additionally, DVDs are likely to go the way of CDs as consumers favor downloads rather than buying in the store, undercutting yet another source of revenue for the company. To increase consumer loyalty, offering services like Best Buy's Geek Squad, may be one of the last profit margin frontiers for retailers like Best Buy to offer (Malhotra, 2007). Customers may seek out experienced staff and knowledgeable service, in contrast to retailers that sell at a discount like Amazon.com and do not have brick-and-mortar expenses like Best Buy. In the long-term, shifting to a service-based model that caters to more localized regional needs may be necessary, as the traditional 'low, low price' model of the company may cause profit margins to dwindle too low, as consumers have more comparative options and access to discount retailers.

CompUSA

Issue: Poor Customer Service

Like Best Buy, CompUSA is an electronics store. Thus, there is always a chance of dealing with a supersaturated market. With computers, there tends to be a higher turnover than other items than in other technological markets, 18 months according to so-called 'Moore's Law' (Malhotra, 2007). Thus saturated demand may prove less of an issue, despite underperformance by Microsoft's new Vista operating system. But CompUSA has another problem -- poor customer service and customer relations. "Did I mention that some of the most tedious moments of my life have come when I've waited in line to buy something at a CompUSA," notes one recent shopper (McCracken, 2007).