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In Hard Times, Is Best Buy's Best Good Enough?
source: New York Times

Amy Adoniz, at the center of the table, with her employees in the break room of the Best Buy store she manages in Manhattan.
Chester Higgins Jr./The New York Times

BEST BUY'S winter holiday shopping season is crucial, as it is for every retailer. A good Christmas can make the difference between a mediocre year and a fantastic one. Ten percent of a retailer's sales can come on Black Friday alone, and typically, almost 60 percent of Best Buy's profit comes from fourth-quarter sales.

Now that it's clear that fourth-quarter sales and profits will be down substantially from last year, the chain is scrambling to cut costs. There will be fewer national TV commercials and more targeted e-mail crowing about low prices.

Best Buy stores are stocked with thousands of boxes of the hit video games Rock Band 2, Guitar Hero and Wii Fit, along with myriad camcorders, digital cameras, flat-screen TVs and GPS devices. Nevertheless, to make sure that the company isn't stuck with mountains of unsold merchandise after Christmas, Best Buy is cutting inventory levels to match reduced demand, Mr. Dunn says. But the company will not say by how much.

"Suppliers are being flexible," Mr. Dunn says. "Apple, HP, Samsung and Sony have answered the bell nicely and worked with us on inventory levels."

To accommodate shoppers, Best Buy is offering more lenient financing. Customers who charge at least $499 worth of merchandise on a store credit card don't have to pay interest for 18 months. "We donít push it," Mr. Dunn says, "but customers are grabbing the 18-month financing options." Last year, shoppers had to spend at least $499 on one item to receive such financing. "Now you can put whatever you want into your cart to get it up to $499," he says.

That strategy worked for Nadia Lora and her husband, Carlos, both 21. The couple work at Nunzio's Grill, a restaurant in Vauxhall, N.J., where she is the manager and he is a cook.

They were shopping at a Best Buy near the restaurant on the Friday after Thanksgiving, and they bought a JVC camcorder and a Garmin Nuvi GPS system, purposely spending enough to hit the $499 financing threshold. Ms. Lora said the Best Buy incentives allowed her to justify her purchases: "I like that they don't charge interest for stuff for months."

IN this stressed-out holiday season, Best Buy is trying to be hip and friendly. The chain is the only retailer to have exclusive rights to sell the new Guns N' Roses album, "Chinese Democracy," in its stores and has hired Magic Johnson to open stores in urban areas. Free limousine rides and mini-camcorders were offered to 25 customers in New York, Los Angeles, Boston, Miami and other major markets who wrote compelling, 250-word essays about why shopping at Best Buy on the day after Thanksgiving was a meaningful ritual for their families.

Claudia Di Folco, 35, an actress and former television news reporter, was shopping at Best Buy two days before Thanksgiving. She bought a $299 Slingbox, which transfers whatever is playing on your home television onto a laptop, cellphone or PC, so her husband could watch the New York Jets game during a trip to Rome. Ms. Di Folco lives a few blocks from the Best Buy store at 86th Street and Lexington Avenue on the Upper East Side and shops there often. "They always have special sales, or at least the big yellow signs make you think they do," she says.

On the day after Thanksgiving back at 62nd and Broadway, hundreds of electronics fans lined up. "We had a fabulous day," says Ms. Adoniz, 41, that store's manager, though she says she was less confident earlier in the week. "With everything happening with the economy, we didn't know if that was going to scare customers away."

But when she arrived at 1:30 a.m. on Friday, 500 people were waiting. Customers had been outside since Thanksgiving morning: they sat huddled in sleeping bags; the line went around the block to Central Park West and back. Ms. Adoniz gave out coffee and sales fliers.

Samsung employees played trivia contests with shoppers, doling out T-shirts, tote bags and other prizes. Ms. Adoniz's fliers detailed the store's so-called doorbuster sales -- 50-inch plasma televisions for $799, laptops starting at $329, GPS devices for $99, digital cameras for $50. Prices have inched up since then, but, Ms. Adoniz says, "there is still a lot of holiday traffic and a lot more online ordering." Laptops are particularly popular.

Among televisions, the best seller at her store was the 42-inch Dynex, the chain's private label; it sold for $499. Margins on private-label items are much higher than margins on name-brand electronics, so Best Buy is pushing Dynex as well as its Insignia line of digital cameras, televisions and GPS devices.

"The TVs were flying out the door; they were huge," Ms. Adoniz says.

The company hasn't released official figures for Black Friday, but analysts say sales were better than expected. In an effort to keep customers buying, Best Buy aggressively promoted low prices on its Web site every day last week.