Best Buy, realizing that their current business model puts them at a disadvantage to smaller retailers and online stores like Amazon.com, is in the process of closing 50 stores with a stated objective of opening new locations with a much smaller footprint than their current 40,000+ square foot stores. The company also announced a price matching initiative for online orders as they target both the physical storefronts of independent electronics dealers and online sellers like Amazon and Rapidbuyr.
While the thought of competing head to head with a big name like Best Buy may seem daunting for smaller retailers, there are three areas where independent electronics dealers have the edge over their larger competitors:
- Service and familiarity – Independent electronics dealers that have focused on providing exceptional service to their customers over the long term have typically built a high level of familiarity and loyalty with their customer base. As a trusted resource for electronics, these stores are positioned as the "go to" place for electronics being purchased for their customers' homes or businesses.
- Best Buy's current over-arching business model – The current business model at Best Buy has two huge disadvantages; stores that are too big and employees that aren't knowledgeable enough with products on the floor. Smaller retailers typically don't have to carry the high overhead of cavernous stores and often have employees with more longevity, knowledge and experience than those at larger stores with a revolving door of new employees on the floor.
- Access to competitively priced equipment through electronics buying groups – Joining an electronics buying group can level the playing field for independent dealers in terms of pricing equipment. These buying groups combine orders from their members to receive pricing discounts that are similar to those of larger singular buyers. These discounted unit costs can play a large role in helping independent electronics dealers price their products competitively while still maintaining solid profit margins.
In many ways, Best Buy has taken an, "...if you can't beat 'em, join 'em," mentality while possibly not fully realizing the advantages that independent electronics dealers already possess. That being said, competition in this industry space will most likely intensify, meaning that independent dealers will continually need to extend advantages where they exist and constantly be on the lookout for new opportunities.
According to a variety of studies, the typical business will derive about 80% of its revenues from 20% of its existing customers.