Retail experiments in bad economy
Best Buy has been test marketing electric bicycles, motorcycles and Segways in 19 stores on the West Coast. Mitchell Hartman cruised his local outlet in Portland, Ore. to explore whether the gear was a stretch for the electronics retailer.
A Best Buy store in San Francisco, Calif. (Justin Sullivan/AFP/Getty Images)
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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.
Comments
Comment | Refresh
From BC, 11/16/2009
The comments by Dave Meleckar brings up an interesting question. Yes, it is ecologically beneficial to use electricity to power vehicles but what if that power is produced by burning coal or petroleum?
The answer is that yes, it is what he calls "filthy to produce" but the difference is that electric motors are more than 300% more efficient than internal combustion engines (efficiency of average gas engine = 25% versus 90% for an average electric motor). In other words, if petroleum were instead used to power electric power plants then re-charge electric vehicles, two-thirds less petroleum would be needed versus using the gasoline to power an internal combustion engine. Is is by far the lesser of the evils.
Matt Blackman
TradeSystemGuru.com
From New, 11/14/2009
Martita Marx has a 24-year old son who takes a bicycle everywhere. She thinks an electric bike might be an "ecologically friendly" alternate. But electricity is only clean to use; it's filthy to produce. And riding a bike under your own power is healthy and fun.
From fairfield, CA, 11/14/2009
I began riding an electric bike about a year ago and now it has become my primary source of transportation for any place I want to go within a 15 to 20 mile radius of my home. We eliminated a family vehicle in the process saving thousands per year. The local paper in Fairfield, CA even came out to feature my wife and me in "Go Green" related article. Glad Best Buy is creating some awareness about this money saving, environmentally friendly, health conscious mode of transportation.
Doug Daut, Fairfield, CA www.GoCarLite.com
From San Francisco, CA, 11/13/2009
I purchased one of Best Buys Currie Technologies brand e-bikes about two months ago and really love riding it. I get questions from those stuck in car traffic at almost every stop light :-)
Best Buy is on the right track!
From Los Angeles, CA, 11/13/2009
I had been hearing about electric bikes and visited bike shops to try to find one to test ride. Most every one looked at me like I had three eyes and most were quite insulting. There are some stores that sell them but not with much enthausiam so I think Best Buy could be in a good place to become the leader in this emerging category. I did finally endure the elite bicycle sales persons rolling eyes and purchased an Izip model and enjoying every minute of riding it.
From Lambertville, NJ, 11/13/2009
Best Buy has made a good decision betting on the future of the electric bike but certain things have to happen for them to win both short and long-term.
In the short-term a spike in gas prices or a "new worsening" in the broader economy could increase the sale of low-end e-bikes. In the long-term and if they expect to sell more e-bikes and high-end models, they will have to follow the lead of Trek and others in campaigning for an overhaul in the attitudes of the American consumer with regard to the bicycle as a convenient and comfortable form of transportation.
The majority of Americans still can't comprehend commuting by bike. They just don't see a bike as a means of getting from point A to point B. But get them to ride an e-bike and the mind and heart begin to open up to the possibility.
If Best Buy and others can convince enough prospective buyers that bicycles aren't just for exercise anymore then their early bet on the future of the electric bike may pay big dividends.
Jason Kraft, E-BikeKit, Lambertville, NJ www.e-bikekit.com
From Portland, OR, 11/13/2009
Part of the success or failure is based on the strength of the US dollar. As long as our currency is favored for international trade, the US will continue to be be a debtor nation. When that changes, energy prices will rise and make eBikes a more attractive option. Wake Gregg, The eBike Store, Portland, OR www.ebikestore.com
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