Best Buy Faces Tough Going

It was accepted wisdom two-plus years ago when Circuit City was closing its stores that Best Buy would be one of the biggest beneficiaries. A RetailWire poll in January 2009, for example, found that 48 percent thought Best Buy would "significantly" or "somewhat" better benefit from the removal of a major rival compared to 21 percent who thought Wal-Mart had the most to gain. The reality for Best Buy, according to a Wall Street Journal report, has been quite different.

The consumer electronics chain has lost share over the past couple of years and has been especially vulnerable in the television and computer categories. While some may assume that a rebound is just a matter of time for Best Buy, the Journal article suggests that the growth of retailers including Amazon.com, Costco, etc. poses a direct threat to the chain's share of market.

Best Buy is hindered by two basic facts: 1) The products it sells are available in many other places and; 2) Prices on those items are easily compared online and through mobile apps. Best Buy itself offers one of those price comparison apps.

Greg Melich of ISI Group told the Journal that Best Buy has become Amazon's "showroom."

Last month, the company revealed it was looking at going to some form of every day low pricing to try and attract shoppers without the need for a sale. Other recent changes have included dropping fees on returns and launching a new product buyback program to encourage consumers to trade up to new technologies.

• Forecast for Best Buy: Worst Is Yet to Come - The Wall Street Journal