Best Buy’s $10B Plan

Best Buy founder Richard Schulze has dreamed up a $10 billion proposal to cut costs and start competing with online retailers.

It’s no secret physical retailers are being beaten into submission and replaced by online competitors. Remember Circuit City? Gone. CompUSA? Dead. Yet, somehow, in the face of online retailers like Amazon and others like it, Best Buy has been able to dig its claws into the dirt and stick around. More recently, the company has seen that footing slip. Earlier this year, Best Buy cut 2,400 jobs after closing 50 stores. Best Buy founder Richard Schulze, however, isn’t ready to let his baby go the way of its competitors. According to The Wall Street Journal, Schulze is proposing a risky $10 billion plan to buy out the company, slash prices, and ultimately revive Best Buy.

But the questions remain: What is Schulze’s plan exactly, and how will he raise $10 billion to pull it off? For starters, Schulze is targeting online retailers like Amazon, Newegg, and others like them, specifically attempting to offer competitive prices by lowering the current pricing at Best Buy. But it doesn’t take a financial genius to realize Amazon will always have Best Buy beat in the price department. Stocking physical locations with workers and product, paying maintenance bills, utility costs, leases, and whatever else contributes to a functional Best Buy store is always going to be more expensive than the upkeep needed for Amazon’s website and its handful of warehouses.

One redeeming aspect of Schulze’s plan is his desire to offer Apple-like customer service. At best, confident, knowledgeable employees would certainly provide a way in which Best Buy could actually compete with Web-based retailers. However, it may be a case of too little, too late.

As for the money, Schulze plans to use $1 billion from his personal fortune and raise the remaining $9 billion by convincing private equity firms his plan won’t tank. If he manages to pull it off, Schulze predicts Best Buy can cut $800 million in costs by 2015. Again, Schulze is being incredibly optimistic considering the company suffered a $1.2 billion loss in its last fiscal year.

Schulze’s grand vision may be admirable, but given the company’s most recent track, the chances of it succeeding are extremely slim. Do any of you still shop at Best Buy? Will you be sad to see it go? Or do you prefer to visit online options like Amazon?

Credit Digital Trends

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