Best Buy is on a Fool’s Errand
Written on June 21, 2011 by Brooke Wardlaw
I could not resist commenting on the problems associated with the recent article in the LA Times about Best Buy’s announcement to start an aggressive program of subleasing a portion of their stores to others. I was amazed that so few business analyst chose to comment on what is one of the most massive downsizing effort yet announced.
As most of the readers of my GLG News analyses know by now, I have been watching with interest as so many of the retailers with oversized stores grasp on to the notion that a massive downsizing program is the magic bullet that will solve all their problems. We need not make mention of my previous articles about the folly of such retailers as Blockbuster and Sears attempts to wave their magic wands and use the supposed values of their real estate to either reduce costs or actually make a profit.
It is a testimony to the lack of due diligence by misguided CEOs and if the business press was doing its’ job, they would quickly remind each of these CEOs about how many previous retailers have been embarrassed by their failure to deliver on their promises.
To give credit where it is due, in the last paragraph, the article does make some mention of the difficulties facing Best Buy. However, as a hardened veteran of the “Asset Redeployment” wars, ( in I can attest to the unseen and very expensive difficulties connected with the effort to carve out a sub lease space from an operating store that needs landlord approval.
This analysis does not allow me enough words to detail even a small fraction of the inevitable and almost insurmountable problems connected with trying to do this as a tenant in someone else’s property. I can quickly mention that aside from the hidden costs and difficulties with zoning, fire codes, subtenant negotiations and lack of demand for this kind of space, some of the most difficult problems come from trying to get a consensus from your own operating people about what space should be made available to others and how best to completely reconfigure your remaining space.
If anyone is truly interested in fully understanding all the implications of this latest announcement from Best Buy, they need only to take a close look at how unsuccessful the Sears and Blockbuster efforts have been. It boggles the mind that the Best Buy CEO could be so out of touch that he could not learn from the past mistakes of other troubled retailers.
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