Is Dunn’s Resignation the Knockout Punch for Best Buy?
The resignation of Best Buy CEO Brian Dunn last week could be the start of a massive shift for not only Best Buy, but for big-box retailers across a wide range of sectors.
“This is not the end of physical media sales, but that will become a minority niche business,” said Marty Wolf, a merger and acquisitions adviser. “Retailers in general are going to have to realize that retail space in many circumstances is becoming a showroom for the Internet – or retailers need to make the space an entertainment and services facility as Apple has done.”
Along with last week’s announcement of Dunn’s resignation, Best Buy said it would close 50 of its stores. Dunn was a 26-year veteran of the company, and while some allegations of an affair have been raised since he stepped down, most company observers are speculating he was primarily forced out because of his inability to convert the e-commerce business quickly enough to compete with Amazon.
In many ways, Best Buy became a victim of some of the very technology it used. Visitors to its retail shops could instantly comparison shop with tablets and smartphones.
“Dunn’s successor will grapple with consumers’ growing comfort in making purchases with smartphones, sometimes inside of Best Buy stores, as well as the popularity of buying from Apple Inc. and Amazon,” said Adam Hanft, CEO of marketing firm Hanft Projects. “That is the triple demon that they face. They get foot traffic, but they’re not converting that into sales because people are in there with their iPads seeing if they can get a better buy.”
Perhaps ironically, Best Buy had started to position itself for the shift, acquiring mindSHIFT for $167 million to extend its business further beyond retail. But that may have been too little, too late.
“The company could not move fast enough to transform – even as it is closing stores, the market could not wait,” Wolf said.
Dunn joins a string of high-profile CEO ousters in the tech sector, according to Bobby Zafarnia, president of Praecere Interactive. He pointed to HP and former CEO Mark Hurd, Yahoo and former CEO Carol Bartz, and Olympus and former CEO Michael Woodford as recent examples.
“There’s the larger narrative of CEO resignations in the tech and retail industries that results in tremendous negative attention for the company, hurting investor confidence in Best Buy,” he said. “Whether it’s the company that faces scrutiny, board of directors or CEO’s behavior that’s in question, the scandal is what will always dominate the headlines until a new leader is installed and profits are back on track – and that’s never an overnight development.”
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