Retail experiments in bad economy
A Best Buy store in San Francisco, Calif.
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KAI RYSSDAL: Given the problems that a lot of retailers are having selling their bread and butter products nowadays, it might seem pretty risky to try to sell something new. But some big name shops are doing exactly that. This week the electronics chain Best Buy started offering fitness equipment, treadmills and heart monitors. It's been test-marketing electric bicycles and Segways since this summer. You can still pick up a big screen TV or a DVD player, sure.
But Marketplace's Mitchell Hartman reports from the Entrepreneurship Desk at Oregon Public Broadcasting, the new items are all about being ready for the recovery.
Mitchell Hartman: Martita Marx is just the kind of consumer Best Buy is looking for in the midst of a recession. While strolling through an outdoor market in Portland, she stopped to check out a pair of shiny new bicycles.
Martita Marx: I saw them, I thought, "Oooh, I'd like to find out what they are."
The bikes were parked next to a couple of shiny young marketing types.
Tim Lyden: It's basically a modern version of a moped.
Tim Lyden was one of those marketing guys, decked out in helmet and bike shorts. He was showing off Best Buy's new line of electric bicycles. Imagine a regular bike, but with battery packs over the rear wheel.
Lyden: So it has a throttle, just like a motorcycle would. And it'll take you about 20 mph for about 20 miles on a single charge. You simply just hit the throttle.
Martita Marx liked what she saw.
Marx: I was interested in it for my son, who is 24 and takes a bike everywhere. And I like the idea that it's ecologically friendly.
Hartman: How does the price range sound to you?
Marx: $400 is feasible.
But bikes? At Best Buy? It might seem like a stretch for a retailer better known for sophisticated electronics, like flat-screen TVs, game consoles and smartphones.
But Rick Rommel, Best Buy's senior VP for new business, says the company's always looking for new products to dangle in front of its gadget-loving customers. Electric bikes with their computer chips and green-energy mystique fit the bill.
Rick Rommel: With the introduction now of a whole new form of personal transportation, we've got the right kind of internal DNA to bring something that's basically a computer and a battery on wheels, to our consumer.
And Best Buy needs to do something to draw customers in, says industry analyst Bradley Thomas at KeyBanc Capital Markets.
Bradley Thomas: Many of their categories are in a period of decline that is likely to continue. DVDs, pre-recorded music, potentially video games, are increasingly downloaded. The consumers less and less need to go into a Best Buy.
Best Buy also has a lot of empty floor space to fill. Giant projection TVs are being replaced by sleek flat screens. Phones and computers are just plain getting smaller. Thomas says a bad economy's a good time to experiment with new products, because you can figure out what consumers might want, when spending picks up again.
Thomas: And so the hope is that perhaps fitness equipment, or the electric bikes or the musical instruments, really become a growth opportunity. I mean, it's a little bit of a stretch to see it become that successful overnight. But the hope is, plant some seeds and they end up yielding some nice results down the road.
Success with electric bikes, though, might be a ways down that road. While demand is soaring overseas, the market's still tiny in the U.S. The recession and lower gas prices haven't helped, says Ed Benjamin of the Light Electric Vehicle Association, a trade group.
Ed Benjamin: Americans think transportation, they think cars. But Americans are very, very sensitive to dollars and cents. And as the price of oil goes up, we're going to have a rapidly developing business here.
Best Buy won't disclose sales figures. VP Rick Rommel says the company will decide whether to roll out electric scooters, bikes, motorcycles and Segways in more markets after the holidays.
I'm Mitchell Hartman for Marketplace.