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Electronics Stores Need to Change or Die

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Best Buy (BBY) is closing 50 of its sizable stores, and its stores that have been open less than a year are experiencing falling sales.

Best Buy has been plagued with bad news and the general feeling of a sinking ship. Founder Richard Schulze has sped up his departure from the company from next year to right now, resigning from the company’s board. He’s also trying to sell his 20.1% stake in the company.

Schulze had previously retired from the chairman position after an internal investigation found he knew of former chief executive Brian J. Dunn’s improper relationship with a female employee.

The actual sales of electronics in stores have not been kind, and many companies are trying to catch what revenue they can from the electronics department. Target (TGT) is now focusing on selling Apple (AAPL) products after dropping online competitor Amazon’s (AMZN) Kindle. Walmart (WMT) is trying to pick up some shoppers with ads targeting Best Buy customers. Abt Electronics installed video game cabinets, shark tanks, and other attractions to help pull in customers of all ages.

The reason for all this hoop jumping comes down to two stats: Online electronics sales have risen an average of 14.7% per year in the last five years and electronics sales in physical stores have gone down an average of 2.6% per year in that same time frame.

Best Buy is still thinking ahead and not just about their store locations. The Best Buy-owned IT service firm MindShift just acquired White Glove Technologies. The purchase of the Austin based company was part of a plan to expand MindShift’s offerings to small and mid-sized businesses.

Best Buy is also looking to the Chinese middle class to help boast sales. They are opening 500 new stores in China by 2016 under their subsidiary Five Star.

Internally, Best Buy knows it has to adapt to the times. In May, interim chief executive G. Mike Mikan said that Best Buy needed to change. Perhaps this summer will show just how willing the company is to meet the modern market.
POSITION:  No positions in stocks mentioned.