Best Buy Shrinking Store Space By 10% Over Next 3-5 Years

Recently, it was reported that Wal-mart stores would begin carving the size of their electronics department due to shrinking sizes of gadgets, and now it feels like Best Buy is following suit. Now that Circuit City no longer exists (that's STILL hard to believe!), Best Buy has become the go-to big box retailer when it comes to electronics. But it's still a tough market to be in; online sales are creeping up, and it's just easier to shop for electronics, music and the like on a computer versus heading into a store for a lot of devices that the company sells.

Now, a Reuters report is suggesting that Best Buy will be boosting their presence on the Web while shrinking some of their larger stores. The tradeoff? They'll be opening more "smaller U.S. stores" in an attempt to win back market share from Amazon and Wal-mart. The motivations stem from investor concerns that Best Buy's overhead is just too high, not to mention the fact that same-store sales have been falling in recent quarters. RBC Capital Markets analyst Scot Ciccarelli had this to say about the news: "I do believe that a lot of their bigger box stores have to be downsized. If there was a disappointment, I was kind of hoping they would be even a little bit more aggressive than what they outlined."

Currently, the company has around 1,100 stores, and they expect that by slashing that square footage by 10% (over the next 3 to 5 years), they'll see an annual savings of around $70 million or so. Would you be startled to see your local Best Buy shrinking? And moreover, what does Best Buy intend to do with the freed up space? Should be interesting to see, but as the times change, so must retailers.