5 Ways That Best Buy Could Make This Work

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There isn't a lot of positive buzz around Best Buy's (NYS: BBY) decision to throw its hat into the crowded and competitive tablet ring.

Even around Fooldom, fellow Fools Rich Duprey and Evan Niu blasted the move yesterday.

Well, I'm going to tell you how the Insignia Flex -- despite a name that sounds more like a brand of fitness apparel than a tablet -- might work.


Don't get me wrong. I'm no Best Buy bull. There are inherent flaws in the meandering retailer's model that just can't be fixed. However, before rushing to the popular conclusion that this new tablet is a colossal mistake, let's take a look at some of the things that Best Buy can do to make Insignia Flex work out for the company.

1. Use the Flex to encourage in-store visits
One of the things that Barnes & Noble (NYS: BKS) got right with its Nook e-reader was tethering it to the in-store experience. Once a Nook owner walked into a Barnes & Noble bookstore, there would be treats, including in-store coupons or free downloads.

This is a no-brainer for Best Buy. A big knock on Best Buy's push into the tablet market is that it will be weaning its customers off of the physical books, CDs, DVDs, and video games that it sells. A tablet sale is as good as a "Bon voyage!"

However, what if Best Buy offered weekly freebies? Surely it can whip up enough partnerships with content creators to have weekly song, book, app, and maybe even video downloads for anyone that powers up an Insignia Flex in their stores. Sure, some freeloaders will just walk in, pig out, and leave. However, getting them back to the store will at least give the store a shot at generating a sale.

2. Separate full-sized tablets from the 7-inchers
If the rumored specs are true -- that the Insignia Flex will be priced at about $250 for 9.7-inch tablet, it's time for Best Buy to skew things in its favor.

Outside of perhaps Samsung's Galaxy, the devices that have managed to sell briskly are the cheaper 7-inch tablets. Best Buy doesn't want consumers to write off its chances just because there are plenty of small devices selling for $200 or less. One way that Best Buy can accomplish this is by making a clear in-store distinction between full-priced tablets -- where the Insignia Flex would be pitted against the more expensive Surface, Galaxy Tab 2, and Apple (NAS: AAPL) iPad -- and the smaller entry-level models. Separating the display and selling areas will drive the point home, and at the same time showcase its in-house option as the cheapest of the full-sized alternatives. There can also be bonus points scored here if it finds a way to belittle the 7-inch tablets as petite or small.

3. Get rid of the cheaper Android tablets
Best Buy offers plenty of cheap tablets, with many of the smaller Android devices starting at less than $100. Sure, most of the truly cheap ones are available only online. However, as far as the in-store experience goes, Best Buy is now best served by making sure that the Insignia Flex will be the cheapest of the full-sized tablets.

Best Buy may be able to compete against Samsung and Apple on price, but the last thing its needs is to win the value argument only to find a shopper going for an even cheaper full-sized tablet on the same basis.

4. Flex that ecosystem
Best Buy has been a reluctant digital media merchant. It may have bought Napster for music and the CinemaNow brand for movies, but it never truly championed either service. It eventually unloaded Napster, and now even a trek to BestBuy.com's music category features the embarrassingly dated option of choosing between CD and vinyl.

If Best Buy respects Amazon.com (NAS: AMZN) as a threat to its physical stores, it may as well embrace Amazon's approach to creating vibrant marketplaces for all forms of digital media. After all, the reason why Amazon can presumably take a hit on its Kindle Fire hardware is because it's banking on a steady flow of digital revenue.

5. Give every employee an Insignia Flex next month
There's something to be said about eating your own dog food, and there's an opportunity here to boost employee morale while also creating knowledgeable employees that are motivated by an important product.

Best Buy handed out meaty and ill-advised retention bonuses to dozens of executives earlier this year, just as it was laying off employees and closing down stores. Maybe it's time to reverse the tide.

I see the obvious problem with this. Many cash-strapped employees will simply flip their tablets on the open market, flooding the market with even cheaper Insignia Flex devices. Well, this can be solved a few ways. One way is to only offer the tablet to employees that have been working at Best Buy for at least six months or a year. This will also give newer hires a reason to stick around. Another option is to use the tablets for training exercises in the future -- giving folks a reason to hold on to their tabs -- or require returns if employees leave the company.

In the end, Best Buy has a lot that it can accomplish with a cheap full-sized tablet with reasonable features.

Don't blow it, Best Buy.

Best Buy is not a good buy
I entered a bearish CAPScall on Best Buy in Motley Fool CAPS last year. The call is beating the market so far -- because Best Buy is not. It's a gutsy call now, but I'll stick with it on paper. I wouldn't short Best Buy with real money.

If you want to play nice with the trends that will pay off in the future, forget Best Buy and begin reading up on the stocks that smart investors are buying. It's a free report, but it will only be available for a limited time, so check it out now.

The article 5 Ways That Best Buy Could Make This Work originally appeared on Fool.com.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Best Buy. Motley Fool newsletter services recommend Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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