Best Buy is planning to close all of its roughly 250 smaller-format mobile phone stores by the end of May, according to a report in the a StarTribune. The stores, most of which are in shopping malls and much smaller than Best Buy’s big-box locations — have become less profitable for the company. Best Buy CEO Hubert Joly said in a letter to employees that changes in the mobile phone business led to the decision. “Margins have compressed and the cost of operations in our mobile standalone stores is higher than in our big-box stores,” Joly wrote in a note Wednesday that was obtained by the StarTibune. Best Buy first began operating the mobile phone stores in 2006, a year before the iPhone launched. Best Buy's standalone mobile stores represents roughly 1 percent of the company's overall sales, Joly said. The retailer hopes to transfer the business to its 1,000 U.S. big-box stores and website, where it has been working to improve the experience and ease of the often-confusing process of buying a new phone. Best Buy’s mobile phone stores in Canada will remain intact
Total Retail's Take: This is a rare setback in what has been a pretty great run for Best Buy. Last year, after emerging from a multiyear turnaround, the consumer electronics retailer posted strong end-of-year sales. And this may not really be a setback, but just a reorganization. The mobile phone category is still important to Best Buy. Last year, Best Buy began remodeling some of the mobile phone departments in its big-box stores. The company likely decided that its real estate dollars were being wasted as more consumers head to carrier's stores — e.g., AT&T, Verizon, Sprint, T-Mobile — instead of traditional retailers. Perhaps the real victim here isn't Best Buy, but shopping malls, which have been grappling with declining traffic and a rash of store closures. Best Buy's decision to close its mobile phone stores means more empty storefronts for malls across the country.