Best Buy purchased mindSHIFT back in 2011 - it has since sold the IT services firm to concentrate on its retail stores.
With its $167 million acquisition of mindSHIFT Technologies back in November 2011, Best Buy's entry into small business IT demonstrated how technology (and a nice amount of available capital) permits new market entrants in surprising ways.
The news at that time certainly reminded me of how far Best Buy has come from its creation in 1983. Best Buy once excelled in enticing shoppers to stay in its stores. It became the largest retailer in 2009, and outlasted many competitors, including the now-defunct Circuit City. I remember going to Best Buy in my college days purchasing new release CDs for $10. Best Buy offered the CD sales as a draw for people to also browse its appliances and electronics.
But over time Best Buy gained competition against other retailers that rely on cloud services as much as retail – namely Amazon. Venture Beat once noted that BestBuy has become a “showroom” for Amazon – Best Buy “shoppers” who would purchase online after viewing a product in a Best Buy store. Best Buy has since launch a number of initiatives to fight the showrooming phenomenon, such as offering in-store pick up and expanding technical services such as Geek Squad.
Unlike online retailers, Best Buy has a physical presence, which appeals to shoppers who need to see and feel a product to make a purchase decision. But adding Geek Squad created an understandable reason for shoppers to return for more services, particularly as compact discs were no longer an effective draw.
Many analysts considered Best Buy’s entry into cloud IT services through mindSHIFT intriguing, given the consumer devices IT departments must manage. Who would most be impacted from the mindSHIFT acquisition, small businesses or corporate retail competitors?
The market entry was particularly notable for a small business market of former corporate professionals transitioning into entrepreneurship on the go, adopting mobile devices and working from home. Best Buy’s retail offering, such as Apple computers, placed it in a great potential to be a one-stop shop for small business tech needs. Furthermore mindSHIFT would have provided an interim step for small businesses that must grow their IT along with their capabilities to collaborate with others.
But to some degree Best Buy was pitted against small business IT providers. Small business IT providers who have served other small businesses cannot compete with Best Buy’s Wal-Mart like scale through mindSHIFT. Corporations complimenting small businesses and then competing with them are not new and certainly not restricted to the internet. If you want further proof, consider Duane Reade, a Walgreens-owned New York City pharmacy chain that competes against neighborhood lunch spots as it augments health care products with lunch food and light groceries. I recall from my time in New York hearing about a new Duane Reade on Wall Street that introduced sushi and breakfast pantry products (read more about Duane Reade here).
Small business IT providers can compete through providing service quality to their customers. Furthermore, the increase usage of cloud services and partnership programs through vendors generally helps small business IT providers discover a competitive scale with the right partner.
Mergers come and go, but they do sound competition alarm bells for small business IT providers. The successful providers will always have to increase service quality and enact marketing to let customers know how their service provides value. Analytics and process management application will help these small businesses make the most efficient choices against vibrant, large competitors seeking the same holy grail of technology and service scale.
