Best Buy & Circuit City Become Fast Fashion Victims

An article in the Financial Times suggests that the big box retailer have failed to innovate and have got themselves into jumping on every bandwagon rather than leading consumer expectations and experience:

Michael Collins, retail consultant at Bain & Partners in Chicago, says that while the turmoil is being exacerbated by the economic slowdown, the causes are more deep-rooted, and include the rapid commoditisation of the new “hot” items that traditionally deliver the highest margins for retailers.

A boom in demand for flat-screen televisions supported both Best Buy and Circuit City during 2006. But the following year, Wal-Mart, the mass discounter, aggressively cut prices on brand-name flat-screen models, triggering a price collapse that delivered a blow to Circuit City’s earnings and marked the start of its current decline. At Christmas, Wal-Mart turned its attention to satellite navigation units, the latest hot category to move rapidly towards market saturation, adding to downward pressure on pricing for the units.

“Consumer electronics has become a fashion industry . . . You can buy a Vizio 30in flat screen TV in a gas station in California for less than $400,” says Jeff Smith, head of Accenture’s global retail consultancy, whose clients include Best Buy.

Financial Times