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Monday, 19 January 2009 06:32

Circuit City closing is good for Best Buy

Written by David Stellmack

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Consumers in U.S. to have fewer choices

The news that Circuit City will be closing the remaining 567 stores in the U.S. comes as little surprise. The bigger surprise is likely to be felt by consumers later this year when they realize that because of the Circuit City closing, they will have fewer choices of places to make their electronics purchases.

While some consumers in the U.S. are lucky enough to have other local electronics retailers, such as Frys and HH Gregg, among others, the loss of Circuit City is likely to mean less competition; which will, in fact, lead to higher prices.

While it could be argued that many consumers in the U.S. have given up on local retailers in favor of Internet purchases, there are many times, especially with major purchases, when nothing beats the ability to be able to personally see a potential purchase and have a hands-on experience with it prior to a major outlay of cash.

While Best Buy has the best market penetration in the U.S. with the largest number of stores, they will immediately benefit by the Circuit City store closings. Best Buy has also been lucky to see other major chains, such as close giving the company a stranglehold on the local electronics sales at the retail level in many areas that are not lucky enough to have other retail options.

As a by-product of the Circuit City closings, Best Buy will now have an increased say-so with the manufacturers over which products and what models are going to be offered for sale at the local retail level. This, of course, means Best Buy’s purchasing department will, in many cases, be able to nearly single handedly decide which products will make it or not. In addition, consumers can expect prices to be higher at Best Buy because Best Buy simply won’t have to be as competitive as they were in the past.

It is likely that Circuit City will be not missed right away; but once all of the clearance sales have taken place and the liquidation all of the product has taken place, then we will start to see the real effect of the future of retail electronics sales in the U.S. It is likely that in addition to Best Buy, smaller retailers as well as general merchandisers who also sell electronics (such as Wal-Mart), will see a bump in their electronics sales numbers.

In the end many analysts believe that Circuit City did themselves in with a series of bad business decisions and a growth plan that just was not working. The company has been famous for making many boneheaded decisions that helped contribute to its death knell.

The news of the Circuit City closing will have far reaching implications in the U.S. for several years to come, and besides the very sad news that nearly 34,000 employees will get the axe as a result of the store closings, the longer term effect on electronics sales in the U.S. will be felt by manufacturers for many years to come.

Last modified on Tuesday, 20 January 2009 04:54

David Stellmack

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