An Illustration Of Changing Consumer Patterns And System Evolution: Best Buy To Close 50 Stores

Big box retailer Best Buy announced today that it is closing 50 of its large-format stores around the country. This news comes on the heels of the company's announcement that it lost $1.7 billion last quarter and has seen four straight quarters of earnings declines. This move could be a sign of what's to come: at the same time it closes its big box stores, it plans to open 100 small-format "Best Buy Mobile" stores.

To be sure, Best Buy's decline is a consequence both of changing consumer habits and of continuing decreases in the prices of consumer electronics. People continue to prefer shopping online over the in-store experience, particularly given that many have grown disenchanted with spotty customer service at large retail stores. To buy movies and music, you used to have to buy a physical CD or DVD; now, you can download media easily without leaving your home. As times change, Best Buy finds itself in the position of having to evolve to survive in the market.

The Best Buy lesson is an important one for franchise companies. The habits of your customers will change and evolve over time, and what works now as a business model may not have the same impact five or ten years from now. As a result, it's important for businesses to continually evaluate and re-evaluate their format in light of changing consumer tastes and behaviors, and to make changes when the public demands them. Franchisors should ensure that their franchise documents allow them the flexibility to make these changes over time, and to require their franchisees to comply with these changing conditions to ensure system uniformity.

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