Best Buy Closing 50 Stores, Will Refocus Efforts On E-Commerce, Customer Service

You would think that with Circuit City out of the picture Best Buy would be sitting pretty, it turns out however that the company struggled in the fourth quarter, losing money as it continued to incur restructuring charges.

Now Best Buy has announced plans to close 50 of its big-box electronics stores while focusing on a new model that will compensate employees for better customer service. The company also plans to open 100 new Best Buy Mobile stores and cut costs by $800 million over the next three years.

Along with those cost cutting measures Best Buy executives also hope to increase the company’s online revenue by 15%.

So where exactly does Best Buy’s problems exist? Larrdy Dignan writes for CNET:

“It can’t be the showroom for electronic sales online.”

Essentially Best Buy showcases products while customers then flock to Amazon and other online retailers to find those same products at a cheaper price floor. E-Commerce businesses are typically cheaper to run because they can employ less workers and they don’t have the overhead of a brick and mortar location, thus products can be sold at cheaper prices.

In the meantime Best Buy isn’t shuttering its brick and mortar business completely, instead the company will offer free Geek Squad house calls for Reward Zone Silver members while adding free shipping from their online locations.

Best Buy also needs to figure out how to turn over more products that actually make the company a profit. For example Apple products have increased in sales over the years but offer very little profit margin for the electronics company.