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Best Buy Gives New Life To A Tired Model

The consumer technology landscape is shifting rapidly. 

More than ever before, new products are changing the way we interact with our electronics; our electronics are interacting with each other more than ever before as well.

As products change, the way we merchandise and think about sales at retail has to change as well.  In the last year, product displays, sales floors and retail formats have gone through more changes than in the entire previous decade. Progress has been made in many areas, except for one: the home-theater department.

The lack of progress is especially evident in the classic retail TV wall display, which remains much the same as it was originally envisioned at the dawn of the flat-panel era, and that revision was hardly much of a change from the tube world — except you couldn’t mount tubes on the wall.

Yet it is hard to argue that the home-theater market hasn’t changed in the last 10 years.   A reasonable argument could be made that more change has happened in product and usage here in the last year than in just about any other category.  Soundbars, streaming audio, multi-room audio and streaming set-top boxes are the dominant products in today’s home-theater environment, yet they are sold in much the same way that speakers, DVD players and receivers were sold a decade ago. 

And, of course, TVs are different too, much different even than in the advent of the flat-panel era in the mid-2000s, and arguably even very different than just three or four years ago, as the rise of big-screen,   smart, curved and 4K TVs, and the growth of new video services, have altered consumers’ perception of their TVs.

While Best Buy has been a leader in thinking outside the box about how to merchandise a retail store in the age of apps, mobile and connectivity, the TV/home-theater area has gone largely untouched until now.

Big-screen TVs are changing the TV environment.  Sales volume for 60-inch and larger TVs rose five times from Q1 2011 to Q1 2014 while the overall market shrank, and they now represent nearly 10 percent of units and 2.5 times that in dollars. 

Soundbars and streaming boxes were niche devices four years ago, and today they represent almost $1.4 billion in sales — add in streaming audio and it is $2.4 billion. Merchandising, however, has never caught up to this.

With its new model, Best Buy is looking to redefine the mainstream in-store home-theater experience, making it logical and convenient to buy all your home-theater products.  By focusing on the fastest-growing and highest visibility segment of the TV market, Best Buy and its core vendor partners, Sony and Samsung, are looking to re-establish the TV section, and the home-theater area in general, as a go-to place in the store to draw consumers in — the way the mobile area, the Windows department or the Apple or Samsung shops do.

None of this is to definitely declare Best Buy the winner. While there is much to like in a concept that tries to highlight the core high-value, high-touch SKUs,  the TV market —  and Best Buy’s place in it — is very different than their other in-store reinvention attempts. While the home-theater ecosystem is growing, the core TV market is stagnant. 

Best Buy’s position as the leader in sales in large-screen TVs is unassailable. But there is a much more robust competitive marketplace among the installers, regional retailers, warehouse clubs and online for the large-screen TV business than there is in the PC business for example, where Best Buy’s prior efforts appear to be paying off.

And while the concept remains good, the devil is in the details, as all retail is as much about execution as it is anything else.  Much of the reinvention of the home-theater area feels more evolutionary than revolutionary, much as the revamping of its PC department last year changed the focus but did little to alter the footprint and the basics of how PCs are sold.

The home-theater change feels much more like the PC department revamping than it does the mobile area renewal, where the footprint and the model changed.  In many ways, the TV and home-theater in-store experience is much harder to reinvent with so many more moving parts among the home-theater devices, the TVs and the content industry ecosystem.  One can’t help but feel that this is designed more to stabilize than reinvent, and wonder if the home-theater department, more than any other, should have been the subject of a more radical re-merchandising.

Yet after not touching the category in many years, and making this maneuver at a point in time with the category is still largely in flux, this is probably exactly what Best Buy, and others that might copy them, should do — stabilize the core and highlight the growth potential, and then reinvent the category merchandising as the products in the category reinvent themselves.

Stephen Baker is industry analysis VP at The NPD Group.