Facing high operational costs and changes in the smartphone market, Best Buy plans to shutter its 250 mobile phone stores in the U.S. by May 2018. The stores are not as lucrative as they once were since the smartphone market's maturation, the Wall Street Journal reported.
“We began to open them more than a decade ago, before the iPhone was even launched,” Hubert Joly, Best Buy chief executive officer, wrote in a letter. “Fast forward to 2018 and the mobile-phone business has matured, margins have compressed and the cost of operations in our mobile stand-alone stores is higher than in our big box stores.”
In contrast to the costs associated with running such stores, they only bring in a little more than 1 percent of the retailer’s revenue. Each averages 1,400 square feet, while standard BestBuy locations tend toward around 40,000 square feet. The mobile stores were facing competition from wireless carriers, which also sell smartphones. Apple also sells phones directly to consumers, as do Amazon and other eCommerce retailers.
In 2017, Best Buy’s third-quarter earnings results were particularly hurt by Apple’s two-tiered product release schedule, which saw the iPhone X phone released late to the market. According to Best Buy, Apple's decision to delay the release cost the tech retailer approximately $100 million in revenue that quarter.
The iPhone X has already caused Best Buy some trouble this year, with the firm adding a $100 upcharge to the base price of the already expensive phone. It now says it will offer the high-end phone at its original price but on an installment basis.
Overall, smartphone sales worldwide fell in the fourth quarter of 2017 compared to the same period in 2016, marking the first decline Gartner has seen since the firm began tracking sales in 2004. A little more than 400 million smartphones were sold to consumers in the last three months of 2017, marking a 5.6 decline from 2016, according to Financial Times reports.