Best Buy Eyes Crowded Mobile Phone Retail Market

Last Updated Jul 9, 2009 8:45 AM EDT

Best Buy is jumping into the cellphone retail market with big plans to grab a 15 percent share of the business. But new CEO Brian Dunn, who seems particularly hot on the mobile-retail concept, might want to think twice -- the crowded space is already littered with the bodies of some successful and failed competitors, and Best Buy hasn't explained how and why it can prevail against a bevy of rivals.

What we do know is that the company, which claims it currently has three percent of the cell phone market, will open 40 new stand-alone stores under the Best Buy Mobile banner this fiscal year selling the products.

The plan better work because opening a lot of stores in today's environment is risky, especially given that the retailer's plans come during in a recession that's caused Best Buy's first-quarter earnings to drop and its same-store sales to fall 6.2 percent.

It's also curious that Best Buy's management is entering such a crowded market. Right now, it's hard to find a place that doesn't offer cell phones. You can buy a Virgin Mobile phone at 7-Eleven. Nearly every provider has agreements with Wal-Mart stores. Plus, most providers have their own stores -- lots of them.

In fact, many are starting to shrink those networks. Sprint Nextel, for one, is closing 125 stores this year. And RadioShack, which has a sizable mobile busieness, closed its share of stores over the last few years.

Now that Circuit City is gone, Best Buy is clearly the leading specialty electronics chain out there, even though mass merchandise retailers like Wal-Mart and Target operate large electronics departments and have formidable store counts. But to compete with the many mobile phone options out there, it's going to take more than a big name, or this first major move by new management won't pan out.