Best Buy Opens in Mall of America

768 Views 11 Replies 8 Participants Last post by bobnielsen, Aug 8, 2008

Richard King

Discussion Starter · Aug 7, 2008

http://dst.dealerscope.com/story/story.php?sid=115108&var=story

Even though Best Buy's headquarters is located only four miles away from the Mall of America in Bloomington, Minn., the CE retail giant had never placed a major store in the mall, the largest in the U.S., until Thursday. That's when the 45,000 square-foot store is scheduled to hold a grand opening at 6 p.m.

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It's about time. The largest consumer retailer in the world is based just down the street from the largest mall in the US and didn't have a presence.

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1 - 12 of 12 Posts

I bet the only reason they weren't there before is that they couldn't make any money. I know Bang & Olufsen was looking to move into the Mall of America when it was first built, and even making two cuts, both the manufacturer's and the retailer's, they couldn't come up with a way to make a profit.

It would be interesting to see the economics of moving into the Mall of America now.

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Drew2k

· #3 · Aug 7, 2008

I was there once, loved it, especially the Lego store.

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Richard King

Discussion Starter · #4 · Aug 7, 2008

When I lived about 10 miles or so away I would only venture in there for Christmas shopping. It was nice to be able to get everything done in one place without haveing to drive around in Minnesnowta winters. I could get everyone covered in one trip.

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smiddy

· #5 · Aug 8, 2008

Carl Spock said:
I bet the only reason they weren't there before is that they couldn't make any money. I know Bang & Olufsen was looking to move into the Mall of America when it was first built, and even making two cuts, both the manufacturer's and the retailer's, they couldn't come up with a way to make a profit.

It would be interesting to see the economics of moving into the Mall of America now.

What makes it so difficult to run a store there? Taxes?

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Carl Spock

· #6 · Aug 8, 2008

Overhead. The Mall of America wanted way too high a percentage of the store's sales to make a buck. Normally a mall might want 3-4% of sales for an electronics store. I can't remember what the Mall of America wanted but let's say it was around 10%. I remember is was astronmically high. When, at retail, a stereo store will make only 40% of sales in gross profit on average, and with discounts that could well get down closer to 33% (it's been a while since I've checked Best Buy's figures but historically it's been around 25%), the moment you have to give away a quarter or a third of your gross profit before you open the door, it's very hard to make a buck.

I am not saying this is the deal Best Buy signed for. In fact, I bet they signed for quite a different one. This was the deal when the Mall of America was brand spanking new. They aren't any more, and could use the traffic a Best Buy would give them. I'm sure they got a better deal than this.

And Richard, for years my only trip to the Mall of America was to go Christmas shopping.

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spear61

· #7 · Aug 8, 2008

When I lived there, I recall that the small stores were paying blood and the anchors were paying minimal with the pitch being that the anchors brought traffic to the little guys. I think I would still go to the BB across the freeway and a couple miles west. A one minute walk from the parking lot to the door

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Carl Spock

· #8 · Aug 8, 2008

That's often the deal. The anchors spend the money on adverstising, bringing in customers into a mall, and the little guys live off the traffic.

The locals never shop the Mall of America - OK, maybe Christmas - but it's a tourist destination. I don't know if it's still true, but at one point there were even chartered plane flights into the Minneapolis airport that's across the freeway from the Mall of America, filled with people who just wanted to go shopping.

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Pink Fairy

· #9 · Aug 8, 2008

I could not go there. Not without a ton of money - cause I would have too much fun.

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spartanstew

· #10 · Aug 8, 2008

smiddy said:
What makes it so difficult to run a store there? Taxes?

Have you ever noticed that restaurants in food courts at malls have higher prices then their counterparts down the street? Why do you think that is? Malls have notoriously high rents (which is why Best Buy isn't in Malls in general). Now, think about how much rent they must charge at one of the largest tourist attractions in the northern US.

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smiddy

· #11 · Aug 8, 2008

Carl Spock said:
Overhead. The Mall of America wanted way too high a percentage of the store's sales to make a buck. Normally a mall might want 3-4% of sales for an electronics store. I can't remember what the Mall of America wanted but let's say it was around 10%. I remember is was astronmically high. When, at retail, a stereo store will make only 40% of sales in gross profit on average, and with discounts that could well get down closer to 33% (it's been a while since I've checked Best Buy's figures but historically it's been around 25%), the moment you have to give away a quarter or a third of your gross profit before you open the door, it's very hard to make a buck.

I am not saying this is the deal Best Buy signed for. In fact, I bet they signed for quite a different one. This was the deal when the Mall of America was brand spanking new. They aren't any more, and could use the traffic a Best Buy would give them. I'm sure they got a better deal than this.

And Richard, for years my only trip to the Mall of America was to go Christmas shopping.

Thanks, I would have never have known.

spartanstew said:
Have you ever noticed that restaurants in food courts at malls have higher prices then their counterparts down the street? Why do you think that is? Malls have notoriously high rents (which is why Best Buy isn't in Malls in general). Now, think about how much rent they must charge at one of the largest tourist attractions in the northern US.

To be honest, I rarely go to a mall. Mrs. Smiddy does, but she doesn't spend any money at the food court either. I guess I'm living a sheltered life of sorts.

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bobnielsen

· #12 · Aug 8, 2008

spartanstew said:
Have you ever noticed that restaurants in food courts at malls have higher prices then their counterparts down the street? Why do you think that is? Malls have notoriously high rents (which is why Best Buy isn't in Malls in general). Now, think about how much rent they must charge at one of the largest tourist attractions in the northern US.

Restaurants in airports typically charge much higher prices also. When the Seattle-Tacoma airport was remodeled, they added a clause stating that the restaurants must charge the same as their other locations. I don't know if the rent there is more reasonable, however.

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