Best Buy feels Amazon squeeze, to close 50 big-box stores
Selling consumer electronics isn't as easy as it used to be for Best Buy. The big-box retailer is closing 50 stores and compensating employees based on customer service after its fiscal fourth-quarter sales fell short of expectations.
Context & Ripple Effects
The store-closure announcement caps a deteriorating year for the chain: back in September 2011, Best Buy had already cut its holiday-season hiring in half, a signal that it expected a weak peak season before the numbers arrived. The fiscal fourth-quarter miss confirms that caution was warranted.
The story traveled widely on the day — pickups at the Wall Street Journal, The Verge, Engadget, GeekWire and others — reflecting how closely retail watchers treat Best Buy's results as a proxy for whether big-box consumer-electronics selling can survive Amazon's price pressure.
First-order effects
- Fifty big-box locations close, putting those stores' staff and leases directly in play while remaining stores shift to compensation tied to customer-service performance rather than sales volume.
- Best Buy concedes that its Q4 shortfall was competitive, not just cyclical — management is explicitly framing Amazon as the cause rather than waiting out a weak economy.
Second-order effects
- Service-based pay changes what the floor workforce optimizes for: with price comparisons one scan away, Best Buy is betting advice and experience are the last things a physical store can charge for, which pressures rivals' commission-driven sales cultures to follow or differentiate.
- Vendors and mall landlords lose incremental shelf space and foot traffic as the largest electronics showroom operator shrinks its footprint, strengthening the hand of any channel that can still guarantee display volume.
Third-order effects
- If showrooming keeps converting store visits into Amazon purchases, the big-box electronics format structurally reprices from profit center to cost center, forcing chains toward smaller footprints, services like Geek Squad, and labor models paid for experience rather than units moved.
The trend: Consumer-electronics retail is splitting between online price leaders and physical showrooms forced to monetize service, with each earnings report accelerating the shrinkage of the middle.