Posts Tagged ‘Best Buy’

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DOES COST CUTTING WORK?

March 12, 2014

When a business is losing money, instead of investing in solving a broken business or marketing model, many businesses rush to cut costs, starting with marketing.  This can work for a while. Barnes & Noble returned to profitability in their recent third quarter, “thanks to new steps taken by its cost-conscious CEO, but a decline of its e-book sales and stagnant retail performance renewed questions about its future,”  reported the Wall St. Journal. Best Buy also returned to a profit in their fourth quarter and topped Wall Street expectations as it cut costs to offset declining sales. 

Now, why should you care about Best Buy or Barnes & Noble?  Because it is a classic tale of businesses focusing on short-term profits (thanks to the power of the stock market), than long-term solutions. Are you just trying to make a profit without regard to long-term strategies to make your business grow? If so, as Bob Newhart said in a classic TV skit, “Just stop it!”.

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WHERE ARE PEOPLE SHOPPING?

December 19, 2012

As we head into the final days of holiday shopping, it’s interesting to compare Amazon, the e-commerce gorilla with $46.5 billion in retail sales in 2011, with the king of bricks-and-mortar Walmart, which expects only $9 billion in global e-commerce in their next fiscal year (it begins in February, 2013). Of course, $9 billion isn’t exactly chump change in the small business world.

Amazon uses computer algorithms to adjust prices in real time. Walmart can’t move as rapidly because online prices must match those in stores. Walmart and other bricks-and-mortar retailers do use their websites to draw consumers into their stores. Walmart told the Wall St. Journal that it is “channel-agnostic,” (i.e. they make marketing decisions impartially, without inherent bias for or against any one kind of channel – TV, print, online, direct mail, etc.). Walmart reports that over 50% of its online sales are picked up in stores.

The percentage of total U.S. retail sales going to e-commerce is still small, just 5.2% in the third quarter, according to the Commerce Department. But it has been growing every year since late 1999. If you are a bricks-and-mortar retailer, you need to be as pro-active as you can in 2013 to developing online strategies to protect and enhance your business.

This means finding ways to get beyond competing on price. One way is to try strategies that offer unique experiences such as pushing emails with a special collection of products and designing and selling more exclusive products. Another strategy is creating an online shopping experience that promotes browsing. But as long as the vast majority of retailers carry they same things as Amazon, they aren’t likely to dent its online dominance. Just ask Best Buy.