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Best Buy Canada layoffs won’t stop slide

People walk past a Best Buy store in New York August 21, 2012. REUTERS/Brendan McDermid (Reuters)

If rearranging the deck chairs on the Titanic didn’t save the ship, the latest layoff announcement from Best Buy Canada won’t keep the electronics retailer afloat, either.

The company announced today it would lay off 950 employees at its Best Buy and Future Shop stores after disappointing holiday sales capped an already troubling year. Best Buy Co. same-store sales fell by 1.4 per cent as the company faced intensifying competition in the electronics space from Amazon and Wal-Mart.

One cut among many

The announcement comes almost a year to the day after the company confirmed it would close 15 stores and lay off 900 workers in Canada. At the time, Best Buy Canada said it was cutting back to “optimize the company’s retail footprint.” Today’s mantra from company president Ron Wilson followed the same playbook.

“We have been focusing on simplifying our store structure and increasing efficiencies to better align with the changing needs of our customers,” he said in a press release. “We have seen our online sales grow by more than 50 per cent in the past year and new services such as in-store reserve and pick up more than doubling. These changes in the way our customers are interacting with us have led us to look at how to best deploy our staff to meet those evolving needs.”

There’s a wide gulf between “best deploy” and “serially turf”, and I see little evidence that this latest round of cuts will magically turn things around.

Doug Stephens, retail expert, speaker and author of The Retail Revival, says big box stores are caught in an uncomfortable middle ground where they’re “not the most convenient like Amazon but also not a high-fidelity experience. They are lost in the market with an outmoded, pre-Internet business model.

“The cuts won't help,” added Stephens. “It will only further exacerbate their service gap and cause more lost store sales, resulting in more layoffs.”

Too little, too late

To keep pace, the company has bolstered its online presence, with expanded and web-exclusive inventory. It’s also partnered with vendors including Microsoft and Samsung on store-within-a-store initiatives at 176 locations in British Columbia, Alberta, Manitoba and Ontario. Stephens calls it a dead end.

“The store-in-store concept won't work either,” he said. “It just dilutes the brand.”

And it's not just Best Buy suffering under in the intensely competitive retail landscape in Canada that has seen more U.S. entrants and consolidation in recent years than ever before. The announcement came, coincidentally, a day after Sears Canada announced its second round of layoffs in as many weeks. Another front-line 624 employees are losing their jobs on top of the 7 per cent cuts announced just two weeks ago.

Stephens says Best Buy won’t cost-cut its way to success. It needs to truly transform itself.

“They need to change the way we shop for electronics and make being in the store a joy,” he said. “It should be Disney World for adults. Awesome products, displays, knowledge and fun. It may mean less stores but they would be stores that could generate far greater gross sales and sales per square foot. They need to be remarkable.”

Instead, Stephens says the chain has pursued a “ridiculous price matching strategy with online sellers that will be nothing short of catastrophic for them. There is simply no way to offer service and great shopping experience while beating Amazon on price. It's death.”

Stephens says research shows consumers aren’t focused exclusively on price, anyway.

“Shoppers are showrooming retailers when they can't find information in store and that is precisely Best Buy's problem,” he said. “When I go to Best Buy, products don't work, there’s no shelf-edge media for information, no product knowledge or service. So why would I shop there instead of Amazon?”

Good question. And unfortunately Best Buy doesn’t have the right answer. As another round of layoffs masquerading as transformative guts an already deficient retail experience, Best Buy needs another plan to stop a death spiral that’s painfully obvious to everyone but the company’s leaders.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own.