Have you ever heard the term “Creative Destruction”? It was first coined by Joseph Schumpeter in 1942 and it’s used to describe how the nature of capitalism is constant change. In the process one type of business is often destroyed as another type is built. This may be happening before our very eyes when we look at Best Buy.
I can remember the first time I walked into Best Buy and was absolutely blown away by the feeling it created for the shopper. Sure, I’d shopped around and looked at TVs, but never had a seen a giant wall dedicated to the latest and greatest technology on the market. It was like a giant man-cave. And that was exactly the aura they wanted to create. How could the little ‘ma and pa’ TV shop compete with that? Heck, Circuit City couldn’t compete with it. Buyers flocked to the incredible Best Buy showrooms.
But think about how much of an investment it takes to get every single Best Buy up and running. Huge amounts of space to lease. Constant turnover of equipment on the showroom floor. Staff to explain how to use the equipment…and don’t forget the Geek Squad. It’s all very impressive…and very expensive. As long as people are buying it all works very effectively.
The problem for Best Buy is that people are buying; they’re just not buying from Best Buy. If you haven’t guessed it yet, people are going on line and buying electronics from Amazon. You can buy it cheaper, have it shipped directly to your house, and do your shopping at 3 in the morning in your pajamas if you feel like it. What makes it even more frustrating for Best Buy executives is that people are going to their stores to look over the equipment, then going on-line to make the actual purchase. That’s like to going to your local hardware store to pump the owner of all the information on how to fix your plumbing problem and then saying, “Thanks. Now I’m going to go to Home Depot to get all the stuff I need.”
At Best Buy, profits are down 91% from this time last year and executives have suspended guidance for the future because they lack confidence in their projections. I’m certain the owners of all the little ma and pa electronic stores that were forced to out of business by Best Buy are far from sympathetic. What goes around comes around!
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Mark joined WHAM in January of 1998 when his weekly call in financial show "Money and More" first aired. The show ran for eleven years and became one of the stations highest rated programs. Recently Mark has returned to provide daily commentary and analysis on the WHAM afternoon news. His segment can be heard at 4:26pm Monday through Friday, with an extended appearance with Randy Gorbman on Thursdays.
Mark started his financial services career in 1986 with IDS/American Express. He is a Certified Fund Specialist and Certified Long Term Care Specialist with a Bachelor's Degree in Economics and Management from SUNY Geneseo. He has designed, authored, and presented retirement and long term care workshops for clients, corporations, and non-profit organizations such as Xerox, Kodak, Agway, and the United Way.
In 2007, Registered Rep magazine listed Mark among the Top 100 Independent Advisors in the country. He lives in Geneseo with his wife Susan and has four children. Mark is an avid fisherman and enjoys spending time at his family cottage in the Thousand Islands. Mark also collects Civil War and Underground Railroad memorabilia for a museum he keeps in the basement of the historic Henrietta office.
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The views expressed in Mark's commentaries are to be considered for informational and entertainment purposes only. Before making decisions based on any content in Mark's commentaries you should always consult your financial or tax professional.
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