Are Best Buy’s Troubles a Sign That Specialty Retailers are Dying?

For some time now, the advent of the Internet and the growing popularity of so-called “big-box” retailers have conspired to make life very difficult on some specialty stores that we’ve come to know and love for decades. Although consumers will always say that customer service is a significant priority when it’s time to decide where and how to shop, there is no question that price remains the chief consideration, and on that basis, the traditional bricks-and-mortar specialty retail store chains are at a significant disadvantage. Despite the demise of its chief competitor, Circuit City, Best Buy has been struggling greatly these days; since Circuit City went belly-up, Best Buy has been losing market share, and its stock price has declined over 20% since December…a period during which the overall equities markets have been up over 8%. Beyond the troubles facing the consumer electronics retailers, bookstore Barnes and Noble is trying to reinvent itself at a time when (former) competitor Borders is in bankruptcy and shuttering a huge number of its locations, and shopping malls, once the answer to everyone’s question about where to go to shop because of their composition of nothing but specialty stores, remain painfully empty in many locations through the U.S. All of this activity, or lack thereof, beckons the question…is the death of the traditional specialty retail store inevitable?

In short, yes. While not every specialty retailer based in physical locations may go under at some point, the heavy influence on consumer behavior wrought by both the Internet as well as the giant discount retailers has made the prospects of their continued survival suspect.

In Best Buy’s case, the acute irony is that the very technology that the company sells is the mechanism that people are using to help kill it and other specialty retailers. The symbiosis between the overall increase in “consumerism” and access to information as consumers…and the ease with which that information can be obtained and processed, courtesy of technology…is undeniable.

Bookstores, to cite another example, have famously become the victims of this seismic shift, as well; the Internet has brought us Amazon.com as the cheapest place to find new books, and has also brought us the ability to read books without having to buy an actual book at all.

I wrote a piece when Circuit City went under that declared that the overriding reason for the company’s demise was that we were fast becoming a society that had little use for specialty retailers. The troubles facing Best Buy are more testimony to that end. When Circuit City went under, the feeling in some quarters was the Best Buy had “won,” but those who believed that didn’t see the real competition; the real competition for all of the largest specialty retailers is not each other, but rather, the non-specialty and/or Internet-centered retailers who will always be able to win out on price.

Is Best Buy done for? More generally, are specialty retailers permanently headed the way of the wind? Only time will tell, but when the evolution of Internet-only and big-box retailers, both separately and together, becomes so impactful that the leading specialty stores find themselves fighting for their very lives, their long-term prognosis is anything but good.

Agree or disagree; please register your comments below.

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Bob Yetman, Editor-at-Large at Christian Money.com (www.christianmoney.com), is an author of a variety of materials on personal finance and investing, as well as on topics of fitness and self defense, to include the book Investor's Passport to Hedge Fund Profits (John Wiley & Sons, Inc.) and the unarmed combat training DVD Thunderstrikes – How to Develop One Shot, One Kill Striking Power (Paladin Press).

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