Monday, January 19, 2009

Will Circuit City Liquidation Benefit Best Buy?

Following months of rumors and speculation following the layoffs at Circuit City  , the electronics retailer is ending its 60-year run.
Circuit City's homepage outlines its multi-phase plan to shut down each of its 567 stores across the U.S. An excerpt reads

 Unfortunately, the economic climate is so poor that we have no choice other than liquidation.
Liquidators will start arriving in our 567 stores across the U.S. over the weekend, and closing sales will start as early as Saturday, January 17.  Closing sales will run as long as it takes to sell existing inventory, but are expected to wrap up by the end of March.  When the liquidation sales are completed, the stores will be closed.

Those who don't study history are doomed to repeat it, so Circuit City's demise makes me wonder about Best Buy (NYSE:BBY) and its business model for the months ahead.

How will the leadership at Best Buy react? Will executives breathe a sigh of relief now that a major competitor is out of the equation? Will they analyze the downfall to avoid similar mistakes, such as Circuit City email marketing faux pas?

Another interesting aspect to ponder is the economic model of supply and demand. On one hand, you could argue that Circuit City's collapse represents low demand for electronics in a sluggish economy, which means Best Buy probably won't see a huge influx of traffic. On the other hand, Circuit City WAS a major supplier, so it's only natural to wonder if the subtraction a major supplier increase the overall consumer demand?

Only time will tell, but when Circuit City broke the bad news on Friday, Best Buy's stock went up +2.20 (8.11%). It will be interesting to see if that trend continues in the sluggish economy.

Posted By Matt O'Hern at 03:01 PM
Permanent Link: Will Circuit City Liquidation Benefit Best Buy? | Comments (2)

(2) Comments on Will Circuit City Liquidation Benefit Best Buy?

I abandoned Circuit City a long time ago. They were overpriced and had terrible customer service. I went every week for three months to shop for a TV and only one person came up me. The only thing I'll miss is the fact I could go there and look at the stuff I wanted to buy. Best Buy is like 30 minutes from my house. So they wont get much of my business now.

Comments by Matt Stallbaum : Monday, January 19, 2009 at 04:02 PM

Even with the liquidation "discounts" their prices are still way higher than if you buy the same thing online. Often i'll go into the store, check out a product, and then buy it from Amazon and save 25-50% .. I've been using this site to find some good deals online:

http://www.zingsale.com

It's a site that tracks prices of products from online stores (like amazon) and sends you an email when the price drops.

Comments by usblues : Monday, January 19, 2009 at 09:37 PM

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