AppleInsider Staff
U.S. big box retailer Best Buy on Wednesday announced the imminent closure of 250 satellite stores dedicated to mobile phone sales, pinning the nationwide shutdown on sluggish sales amidst increased competition from cellphone carriers, etailers and first-party shops like the Apple store.
In a statement to The Wall Street Journal, Best Buy chief executive Hubert Joly said the company's mobile phone outlets, which on average run about 1,400 square feet, are more expensive to operate than a 40,000-square foot full-size location.
The smaller stores, commonly found in malls, will cease operations by the end of May.
Perhaps more important to Best Buy's bottom line, the mobile stores are not as lucrative as they were at the start of the smartphone boom. Currently, sales from the specialized outlets contribute about 1 percent to Best Buy's revenue, Joly said.
No single event or product is to blame for Best Buy's mobile slump. The overall cellphone industry has simply condensed since the company diverted capital to take advantage of what once was a fledgling market more than ten years ago.
Along with cellular network stores run by AT&T, Sprint, T-Mobile, Verizon and countless regional operators, handset makers began selling their wares through their own shops. Apple, for example, built out its retail chain to cover nearly 300 locations in the U.S.
"We began to open them more than a decade ago, before the iPhone was even launched," Joly told employees in an internal letter. "Fast forward to 2018 and the mobile-phone business has matured, margins have compressed and the cost of operations in our Mobile stand-alone stores is higher than in our Big Box stores."
In addition to brick-and-mortar sales, consumers are increasingly purchasing — and in the case of iPhone, preordering — smartphones online, meaning Best Buy's competitor list includes e-commerce giant Amazon. While the big box retailer has done well to ramp up its own online efforts to find success where others, like Radio Shack, have failed, the cellphone business is a different beast.
Ironically, Best Buy in 2012 expanded the mobile phone store initiative at the cost of its big box business to take advantage of emerging smartphone trends. At the time, reports estimated the retailer sold as many iPhones as Apple did, though that metric is thought to have shifted in Apple's favor over the past couple years.
Most recently, Best Buy caused a minor controversy when it charged iPhone X buyers a $100 premium when purchasing the handset at full price. Less than a week later, the company stopped selling unactivated iPhone X and iPhone 8 units, moving instead to installment-based purchases through AT&T, Sprint or Verizon.
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20 Comments
Another one bites the dust. I hope not many employees lose their jobs because of these closings. However, there's not much point in Best Buy keeping something that's losing money. I'm sure there's already more than enough smartphone sellers in the U.S.
never even knew these existed
I always liked retail stores selling iPhones.
But did these stores give you support?
But having 100s of Apple Stores does not give you much advantage.
I went into Best Buy a month ago to get the iPhone X because I wanted to use my Best Buy Credit Card for the free warranty and all that. Turns out the 256gb version that I wanted was $1260, a little over $100 more than MSRP which I could get anywhere else. The cell phone sales guy couldn't tell me why it cost more at BB, which also sorely needs the business.
A week later it hit me. BB gives rewards bucks which is about 10% of the purchase price, so BB bumped up the price to avoid handing out 10% off. But what I can't reconcile is why? If I had bought a toaster, video games, whatever that amounted to $1260, I'd still get 10% back as in-store rewards bucks. So if BB didn't want to lose that narrow profit margin to the 10% back, didn't they consider that they would gain it in the profit margins of whatever else I buy in-store? Like phone cases, screen protectors, games, headphones, etc.?
So long BB, you've lost any incentive I've had to use your CC. I just bought it at Apple anyway with my bank's CC.
Who needs Best Buy when there’s Bobby Allison Wireless? :). Ahh Best Buy...yet another step toward trying to prevent your inevitable road trip down Circuit City and HH Gregg lane. Yet i am truly sad! Where will I go to handle and try out products before I go buy them online for less and with no tax and free shipping?