Best Buy Is Shrinking Stores, Adding Mobile Units

After suffering weaker sales, Best Buy is thinking small: It says it will focus on expanding its petite Best Buy Mobile stores, which are about 1,400 square feet, and shrink its regular stores by about 10% in the next three to five years.

In presentations to investors and analysts, the Minneapolis-based chain says the strategy is all part of its mission to look beyond individual products to larger issues of connectivity. "Technology is connecting the world, and we believe it's changing the world for the better," says CEO Brian J. Dunn, in a release explaining the changes. "We recognize that people need help in navigating our increasingly connected world. And Best Buy has an unparalleled range of ways we can assist -- online, through our stores, over the phone or in their homes. This multifaceted approach allows us to serve customers whenever and wherever they want."

The retailer is beefing up its mobile offerings, adding 150 Best Buy Mobile stand-alone stores in the fiscal year, and expects to have an estimated 600 to 800 stores within five years. The smaller mobile stores emphasize impartial advice, with 10 carriers and 14 manufacturers, as well as straightforward pricing and tech-savvy associates, and had revenue of about $2.5 billion in fiscal 2011. Currently, there are 1,099 store-within-a-store units, expanding to an additional 600 locations, and 191 stand-alones, with about 325 scheduled to be completed by the end of the current fiscal year.

Online sales are also increasingly important: The company expects to double the $2 billion in revenue for Best Buy's U.S. online business in three to five years. It also says it is strongly advocating for e-fairness to address the unfair online pricing advantage.

And the retailer says it's also exploring additional opportunities in mobile phones, tablets, gaming and appliances.

While Best Buy claims to generate the highest sales per square footage of any large format retailer in the U.S. and sells one out of every three U.S. televisions, it has struggled of late, with same-store sales falling 4.6% in its most recent quarter.

The category isn't an easy one: Wal-Mart Stores this week reportedly says it will reduce space for electronics in its U.S. stores, saying that sales in that category have declined.