Can Best Buy's PC business survive?

Reports from the field by PC shoppers say Best Buy is doing a disastrous job of showcasing Microsoft's Surface RT tablets. And this is a surprise? The company has offered a miserable retail experience for years. How much longer can they keep this up?
Written by Ed Bott, Senior Contributing Editor

If you want to learn how not to sell PCs, just visit your neighborhood Best Buy. That's my takeaway from a recent spate of reports from the field. They can, without exception, be summarized in one sentence: "OMG I just visited Best Buy and you won't even believe how awful it was."

My friend Richard Hay, who runs the Windows Observer website, visited both Staples and Best Buy last week and said both outlets "leave a lot to be desired in retailing."

The poor part of this display was the Surface RT had a dead battery and there was no power hookup for the tablet. That means anyone who walks up and wants to interact with the device will see a blank screen.  The next thing they do is walk away from the device!


Photo credit: Richard Hay, WindowsObserver.com. Used with permission.

A separate, self-described "rant about the Surface at Best Buy" from the Verge forums told a more detailed story of a visit to a different Best Buy. This part was my favorite:

I saw no sign of the Surface when I went into the store, and actually had to look for it. I eventually found it, sitting in the row of Android Tablets. That's right, Android. Windows 8 PCs were at the other end of the store's computer/tablet area, but the Surface was sitting, quite literally, in the middle of the Android section. ... Finally, I looked at the pricing information tag to see something rather shocking: the Surface was tagged as "Microsoft 32GB Android Tablet."

It's pretty much a disaster from start to finish.

Former Microsoft manager Hal Berenson had a similarly frustrating Best Buy experience over the weekend:

The Surface is just dumped onto an ASUS table next to an ASUS Android tablet.  There is no Surface signage at all other than the price labels you can see in front of the unit.

Now to be fair there is a Windows-themed table over in the Smartphone section of the store that has another Surface on it along with an HP Touchsmart All-In-One and an HTC 8x Windows Phone.  And on the flip side of that table was an ASUS VivoTab RT, a Samsung ATIV Smart PC, and a Windows 8 notebook.  But there is no actual signage for the Surface.  The price tag over there reads $699, with no explanation whatsoever of what you are getting.  Literally all you know is “Microsoft Surface, $699″.  But why is this table over by Smartphones?  Why isn’t it in the Tablet/PC section of the store?

He concludes: "Really Best Buy, this is embarrassing."

I guess I should add my story to the mix.

Typically, I walk into a Best Buy two or three times a year, usually to buy a specific part that I need right away and am willing to overpay for (doesn't happen often) or just to remind myself what the masses have to deal with. My latest visit was a stop at my local Best Buy a couple weeks ago, and it seemed just as dreary as ever.

Notebook computers and tablets need to be set up so they can show off their capabilities. Most of the Windows 8 notebooks I saw were bolted down (understandable, but it ruins the tactile experience) and password-protected, which meant I had to get someone's attention before I could actually use a demo system.

The Surface RT wasn't yet available when I was there, but there was an Asus Vivo Tab RT on display. The salesperson knew a little bit about the device and seemed uninterested in learning much more. He volunteered that he'd heard rumors  the store would be selling Microsoft's Surface "in a few weeks." As it turns out, he was right.

At any rate, the problem with Best Buy's entire approach to computers is that the area is treated as a department rather than as a mini-store. The staff seem to take it for granted that the demo units won't work most of the time. The real product is the stuff in boxes underneath the demo units, and the sales people seem more incentivized to sell an extended warranty than exokain how things work.

I certainly didn't feel like buying anything while I was there.

The big problem for Best Buy, it seems to me, is that the technically sophisticated buyers they need aren't shopping there, not when online outlets have better prices and will deliver to your door. The people who walk into Best Buy are desperately in need of information, which they're unlikely to get.

Oddly enough, sites like Home Shopping Network and QVC are doing a better job of serving this market lately. HSN's page full of Windows 8 systems is well organized and includes some very approachable "watch and learn" videos. HSN was ready weeks ahead of the official launch.

On November 24, the Saturday after Thanksgiving, QVC sold roughly 64,000 units of HP 15-inch and 17-inch Windows 8 notebooks via its cable channel during the few hours I was watching. That's about $40 million worth of PCs.


The QVC format, which most geeks would find unbearably hokey, turns out to be a very effective way to give a controlled and thorough demo of Windows 8. The cheery hostesses were the polar opposites of a Best Buy sales clerk, not young, not male, and surprisingly well trained. They knew how to show off the features of Windows 8, with an emphasis on Facebook and family photos. The whole thing has a feeling of community to it as well, with callers asking questions and expressing how happy they were with the deal they had just gotten.

They wouldn't have been nearly as comfortable on the cluttered, chaotic, geeky Best Buy sales floor.

Best Buy isn't the picture of a healthy business. Its attempts to move out of its mostly-brick-and-mortar world have been a flop. Best Buy's executive vice president in charge of digital services, Stephen Gillett, resigned this week after only nine months on the job.

The company's financial performance has been disappointing. Its stock price is down exactly two-thirds in the past two years. Indeed, founder Richard Schultze is expected to submit an offer to buy back the company early next year, after the company reports its year-end results.

The big question is whether Schultze is planning to simply downsize the business or whether he can fundamentally change it. My question: Who are his customers? Penny-pinching PC buyers are shopping at Amazon and Walmart and Sam's Club and Costco, which have the kind of scale and efficiencies that Best Buy can't compete with.

And as for the shopping experience? Best Buy looks like the Before picture in a before-and-after seminar on modern retailing. Apple has done a good job of showing how technology products should be sold and serviced.

To be fair, not many retailers can afford to do things the Apple way. Which is why Microsoft is opening new stores as fast as it can, incorporating lessons from Apple's retail operations along the way. (After all these years, Microsoft is still proficient at cloning things.) As a result, if you can find one of those stores you can get a good hands-on demo of the Surface RT. That's a big if, though.

Of course, Microsoft can afford to lose money on its retail outlets for years, subsidizing operations from its profitable divisions, as it builds the business up. Best Buy doesn't have that luxury.

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