4 Lies That Best Buy Is Feeding You

I've never met Best Buy (NYS: BBY) CEO Brian Dunn, but I get the feeling I would like him.

  • He's humble enough to accept that he and his consumer electronics chain aren't perfect.
  • He defends his employees, and that's important. Ask football fans why Raiders coach Hue Jackson got canned this week.
  • The guy publicly put out his email address this week, just in case anybody wants to send him a pitch.

Unfortunately, he's in a bad situation, and publicly going to the mattress to defend his company is only making Best Buy look worse.

It's a shame, because Dunn is likable. Unfortunately, he's just not really believable.

Speaking at the annual CES in Las Vegas yesterday afternoon, Dunn was interviewed by Consumer Electronics Association CEO Gary Shapiro. I wasn't there, but Forbes' Eric Savtiz was and he provided some of the head-scratching comments made by Dunn.

Since I can't cover them all, let's go over four of the more unbelievable claims.

1. "I wouldn't put returns and exchanges in the problem bucket."
Wow. Really? The original Larry Downes critique pointed out the company's strict and archaic return policy. Many others chimed in on Dunn's own corporate blog post over the weekend. How is it that Amazon.com (NAS: AMZN) provides me with greater convenience (essentially printing out a free shipping label) and looser terms than a store in town?

The reason that Amazon is eating Best Buy's lunch -- and it is, while eyeing dinner and breakfast, too -- is that a seemingly cold and detached company can handle returns and exchanges more effectively than Best Buy. Even in the brick-and-mortar world, several department stores have kinder policies.

If Dunn isn't placing this in the problem bucket it's only because there are so many problems in the bucket that this one just doesn't fit.

2. This is the best time in history to go buy a television.
Are you kidding me? This is the worst time to buy a set. Apple (NAS: AAPL) is ready to revolutionize this space later this year, and the competition will have to follow suit.

Sure, prices are going to be low as retailers get desperate about clearing out inventory. I'll admit it. I saw a Cyber Monday deal on Amazon.com for a 32-inch LCD for less than $200 and I pounced on it for my youngest son's room. However, anyone who would fork over good money for a TV now -- and much less a 3-D TV -- is as dumb as anyone buying an iPad 2 this month when the inevitable price cut is coming in a matter of weeks.

Sure, Dunn was being interviewed by the CEA. This is what he had to say. Come on, though. Protect your customers from a regrettable mistake.  

3. Once the state sales tax issue for online retailers results in a level playing field, "it gets interesting."
I agree that online retailers will eventually begin collecting state sales tax. However, does Best Buy really think that the 5% or 7% or 8% state sales tax will make Best Buy competitive with the online retailers?

There are certain cost advantages that online has over physical retail. There are also a lot of people out there who shop online because clicking to the checkout screen doesn't involve having to fend off hard sells for extended warranties, Geek Squad tech support, or the laughably sad buyback protection program.  

At one point Dunn argues that folks like going to stores because we are "social animals," but I don't think he realizes that he's training employees to treat us like wounded gazelles and they're predatory lions on the hunt.

4. "Blue shirt nation" provides a compelling value proposition that no one equals.
Does he not realize that we all know how to comparison-shop these days? Some of the comments on his corporate blog came from employees arguing that even their own heavily discounted purchases as employees are costlier than outside sources.

What is the value proposition of Best Buy? Beyond instant gratification, there isn't a lot left. Now that books, music, video, and video games have gone digital, one doesn't even need to leave the house for instant gratification.

Add it up
I won't take a jab at Dunn for calling ultrabooks "ultra notebooks" or for arguing that Best Buy does offer a "showcase" for its vendors, but it's ultimately Amazon's showroom.

He argues that "there's something for everybody on the floor," but is that really a compliment? Best Buy began selling SodaStream (NAS: SODA) home beverage systems this past summer. I remember seeing an ad late last year that had SodaStream soda systems and Keurig single-cup brewers on the same page. I thought I was looking at a Bed Bath & Beyond circular.

Things get even more disjointed online, where I can buy treadmills, safes, and bike helmets.

Either Best Buy has an identity problem or it's really trying to be more like Amazon in offering everything possible.

I'm not impressed. I'm not buying it -- in any sense.

I entered a bearish CAPScall on Best Buy in Motley Fool CAPS last month. The call is beating the market so far -- because Best Buy is not. If you want to play nice with the trends that will pay off in the future, forget Best Buy and begin reading up on the stocks that smart investors are buying. It's a free report, but it will only be available for a limited time, so check it out now.

At the time this article was published The Motley Fool owns shares of Best Buy, Amazon.com, and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Apple, and SodaStream International. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple and writing covered calls in Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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NELSON

On December 13th 2011 we had ordered several items from BestBuy.com for a combined birthday-Christmas gift. A week, or so
after placing the order we received an email from Best Buy explaining that some of the items we had ordered are on "back order"
and will be shipped in about two weeks. Please keep in mind that when we ordered this there were many, many "out of stock"
items on the website. and, that every item that was selected for our order was "available and ready for shipping" according to the website.
This was very upsetting news, but we understood that things happen and that we would just have to wait. Thursday, January 12, 2012
- we received another email from Best Buy. Informing us that one of the items we ordered is "no longer available" and that our order
has been "canceled" by Best Buy. After getting this email we immediately contacted customer service, they informed us that there is nothing they can do since the items are no longer available, so we contacted the manufacturer of the product and was informed that the items are still being made and being sold worldwide. We checked again with Best Buy and they could not answer why if they still were dealing with the manufacturer, why they could not make the item available. We had to spend a gift less Christmas and a gift less birthday thanks to Best Buy.

January 16 2012 at 9:57 PM Report abuse rate up rate down Reply