Since its founding in 1966, Best Buy Co., Inc. (NYSE:BBY) has been a promised land for tech consumers who want to get their hands on the latest and greatest offerings. Customers could look at, and often try out, what they’re interested in and then make their purchases on the spot.
That trend is fading fast in the online era. Customers no longer do a lot of their shopping in the bricks-and-mortar stores that made Best Buy so successful. Instead, they’re looking toward online retailers such as Amazon.com, Inc. (NASDAQ:AMZN).
As consumers shift toward online retail, Best Buy Co., Inc. (NYSE:BBY) faces hard times. Revenues have been showing negative growth since the end of 2011, with the most recent quarter shrinking by 9.6%.
Out with the old, in with the new?
Amazon.com, Inc. (NASDAQ:AMZN) should send Best Buy Co., Inc. (NYSE:BBY) a thank-you note for effectively acting as its product showroom. More and more, consumers have been leaving Best Buy stores empty-handed and logging on to Amazon when they get home. While they’re there, customers can search through just about anything they could ask for at competitive prices — much more than they could get at Best Buy.
Amazon.com, Inc. (NASDAQ:AMZN) is clearly the go-to hub for e-commerce regarding just about any type of product. On top of that, the company has been doing a great job expanding product lines of its own, such as the Kindle. According to the its April 25 conference call, of Amazon’s top 10 selling products, all 10 of them are Kindle or digital-related.
Where Best Buy Co., Inc. (NYSE:BBY)’s revenue generation has been struggling as of late, Amazon.com, Inc. (NASDAQ:AMZN) has been posting solid numbers. Yearly revenue growth has been strictly positive, showing rates in the 20%-30% range for two years running.
Let’s talk quantity
However, the numbers at Best Buy Co., Inc. (NYSE:BBY) may not be quite as bad as they seem, since management attributes 7.1% of its revenue contraction since 2011 to a shift in fiscal-quarter dates. Of the remaining portion, comparable-store sales were down by just 1.2% compared with the same quarter in 2012.
With the help of new CEO Hubert Joly, Best Buy Co., Inc. (NYSE:BBY) is incorporating a new business strategy called “Renew Blue,” in which the company will hope to increase store sales through the use of partnerships, such as the ones it has already secured with Samsung and Microsoft. These agreements should go a long way in increasing Best Buy’s store image and marketability.
On top of revamping its bricks-and-mortar stores, Best Buy Co., Inc. (NYSE:BBY) is investing heavily in e-commerce and is already finding success, including a 16.3% increase in domestic comparable online sales.
But when it comes to success at bricks-and-mortar companies, one company stands above the pack. Costco Wholesale Corporation (NASDAQ:COST) is similar to Amazon.com, Inc. (NASDAQ:AMZN), in that it sells a vast array of products, from deli meats to electronics.