Retailers Lost at Sea -- May Not Return

Last Updated Nov 14, 2008 10:44 AM EST

Retailers Lost at Sea -- May Not ReturnBest Buy's Wall Street warning must send shivers through anyone who does retail for a living. As quoted in today's Wall Street Journal, the company announced it can no longer predict its own future.

"Since mid-September, rapid seismic changes in consumer behavior have created the most difficult climate we've ever seen," CEO Brad Anderson was quoted as saying. "Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year."

That's an extraordinary admission from a publicly traded company. Standard operating procedure in tough times is for company execs to announce to investors that they've encountered problems (product delayed, demand slowing) and how they intend to correct the problem (fire the product manager, increase advertising).

Best Buy has just announced its ship is lost at sea without a rudder, and the captain is not sure what comes next.

The timing could not be worse, since Best Buy and many other retailers earn most of their profit after Thanksgiving.

Retailer's Dilemma
That's why Harvard Business Review editor Julia Kirby asks, Will Retail Ever Bounce Back?
Her view: Retail is going through a long overdue correction that is systemic in nature, not a short-term disaster after which all will return to normal. Her reasoning:

  1. Advertising has lost its power to spur demand.
  2. The US has more sales outlets than it needs.
  3. The recession will increasingly spur consumers to shift from bricks-and-mortar to online.
"During this time of economic turmoil, many sense that when we finally emerge, some key aspects of the commercial world will have been fundamentally transformed," writes Kirby. "I suspect retail in America is one of them."

She invites readers to look out five years and predict the future of retailing as we know it. Give her some insights.

(Best Buy image by Ian Muttoo, CC 2.0)

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.