Best Buy, Inc. (NYSE: BBY) will be ushering in Brian Dunn as its new CEO next month. Dunn, a company veteran, has some solid plans to keep the largest consumer electronics retailer in the U.S. afloat throughout the ongoing economic recession.

But before that happens, current CEO Brad Anderson won't be going out with a bang. A pay bang, that is.

When Best Buy, Inc. (NYSE: BBY) announced that CEO Brad Anderson would retire this summer, the obvious choice to replace him was current COO and President Brian Dunn. After all, Dunn is a Best Buy vet and has had a hand in making Best Buy the top consumer electronics retailer in the U.S. With Anderson and Dunn running the show, Best Buy rose past every competitor and held the larger mass merchants at bay.

The retailer has not had an easy time with the recent consumer spending slowdown, but its fundamentals are very solid and it retains a competitive advantage. Consumers continue spending money at Best Buy, and voting with dollars is a sign of success. Dunn will face one of the hardest times in Best Buy's history since consumers have tightened their collective purse strings. Still, he is the right pick and Best Buy's long-term future continues to be very bright, the current retail malaise not withstanding.

Best Buy, Inc. (NYSE: BBY) has been predicting dire times recently. Strangely, though, the retailer's locations in my area seem to be packed every single time I pay a visit. Yet, the nation's largest consumer electronics retailer, which has a "virtual monopoly" in the market it serves, is seeing the worst sales period in its entire history. What gives?

The retailer this week reported Q3 sales of $11.5 billion, with earnings of $52 million. That's a sharp drop from the year-ago earnings amount of $228 million, causing CEO Brad Anderson to indicate cutbacks were afoot at the retailer soon. Among them: offering voluntary buyouts to nearly all of its 4,000 corporate employees along with the possibility for layoffs if too few of these employees take up the retailer on its offer.

Best Buy dare not cut staff at its stores unless it is 100% needed. Any company who takes away from the direct customer experience -- in any form -- is just asking for trouble. Since Best Buy now has what could be considered a marketplace pretty much open to just itself, the world will be its oyster once the economy recovers. Until then, shoppers may be looking elsewhere for their electronics, looking but not buying or buying a whole lot less. And that will keep Best Buy behind the eight ball for quite a while regardless of its dominant market position.

Best Buy (NYSE: BBY) says that its sales will fall fast. But that creates opportunities to snag bargains if you've got the cash. I think the key is to go into your local Best Buy armed with information about the lowest prices on the item you want to buy. Then ask the manager for a price break.

How much trouble is Best Buy in? It cut its earnings estimates 29% from between $3.25 and $3.40 per share expects to between $2.30 and $2.90 for the fiscal year ending in February. And its same-store sales dropped 7.6% in October -- a situation that prompted CEO Brad Anderson to complain that "seismic" changes in consumer behavior have created "the most difficult climate" his company has ever seen.

What's sad for Best Buy could be good for you though. Let's say you want to buy a flat screen TV. Wholesaleconnection.com offers the Sharp LC 32D43U 32" LCD TV for $577.54. Best Buy offers what looks like the same item for $599.99 on its web site. I don't know whether Wholesaleconnection.com is a reliable vendor or even whether there's a better deal out there.

But I think it would be worth trying to bring the better offer in to your local Best Buy store and ask them to match or beat it. If you have a better idea, please comment below.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Best Buy securities.

When Best Buy (NYSE: BBY) blew through analyst estimates earlier this week and made a larger-than-expected profit, many industry watchers probably wondered what Best Buy is doing right that fellow retailer Circuit City (NYSE: CC) is doing wrong. Now we know: Circuit City saw sales plummeted 3.1% as Peter reported this morning in another quarterly loss as it continued losing market share to its much larger rival.

Best Buy is probably not only taking market share away from Wal-Mart -- the world's largest retailer -- but it's stomping Circuit City into the ground as well. Circuit City CEO Phil Schoonover said his company's poor performance in its most recent quarter was due to the fact management "underestimated the financial impact from the disruption of our transformation work." What else is the company transforming? From a slightly-bad retailer to a completely inept one?

I'm not so sure how Schoonover has kept his job with three consecutive quarterly disappointments, but perhaps 2008 will see a brighter future for the retailer. Best Buy has its success formula pretty much down perfect, and the immense challenge Circuit City will face should be quite formidable next year.

But, there may be signs of things to come. Take this: Best Buy's quarterly report this week said sales surged on flat-panel televisions (hopefully, profitable sales), which Circuit City continues to say -- every quarter -- that flat-panel television pricing depression is contributing to its financial woes. How can these types of sales be diametrically opposed at the two retailers? Something's fishy there.

In the field of retail, there are surge years and flat years. Finding ways to grow when the chips are down takes innovative thinking and quick action, and that strategy appears to be at the root of why Best Buy Inc. (NYSE: BBY) is able to open newer stores in existing markets without cannibalizing sales from older stores. How does it manage this? The premise is pretty simple, and it will be playing out in retail sectors from general merchandise to electronics from this point forward.

Similar to discounter Wal-Mart Stores, Inc. (NYSE: WMT), Best Buy grew in the 1990s by using the "big box" strategy of having all merchandise in its stables under one large roof. In effect, the "one stop shop" mentality, although Best Buy's was limited to consumer electronics more than any other category. These are different times, and consumer niches are now the fuel for growth. As such, the nation's largest consumer electronics retailer is opening newer stores in markets it already serves that tailor product selections to the surrounding consumer demographics.

In some cases, providing only niche stores can kill you. But, when you add niche stores to the mix with "do everything" locations in the same market, things have a tendency to work out rather well.

Best Buy Inc. (NYSE: BBY) has really turned up the heat lately on its recent marketing strategy of placing "customers first," while downplaying drops in sales and a bleak outlook for many of its electronic product categories. I don't particularly subscribe to a bleak outlook on cutting-edge tech (unless consumer credit scrunching gets worse), but regardless, Best Buy CEO, Brad Anderson, continues to make waves to ensure the company he leads treats the customer right.

In the latest installment of this customer-first mentality, the nation's largest consumer electronics retailer has touted the efforts of one of its employees to serve deaf customers in a friendly and efficient way. Kathryn Cannon, a Best Buy assistant manager, has spearheaded efforts to educate Best Buy employees in the basics of serving the deaf population. Training includes basic sign language for employees -- things like finger spelling and introducing themselves to deaf customers.

The deaf-serving initiative was very successful, so Cannon went to Best Buy's main headquarters to push the effort further and it looks like the rest is history. I'll bet that Best Buy is one of a handful of retailers that marks a customer in its national database as being deaf so that the appropriate level of service can be given when that customer needs Best Buy services like computer software installation. What a unique program for a retailer the size of Best Buy; other retailers would be keen to pay attention to this one. Customer loyalty is a good thing, right?

Earlier this morning, Best Buy Co Inc (NYSE: BBY) let investors and analysts know that even it was not immune to a slowdown in consumer spending. The company reported a nearly 18% drop in Q1 income, reporting Q1 EPS of 39c (vs. Reuters consensus of 50c) and Q1 revenue of $7.93B (vs. Reuters consensus of $7.83B). As a result, the company cut its fiscal-year earnings forecast, and now sees FY08 EPS of $2.95-$3.15 (vs. Reuters consensus of $3.16), down from April's forecast of $3.10-$3.25 per share. Shares of the retailer fell 5% from Monday's closing price of $48.01 to open at $45.61.

Best Buy's disappointing earnings may not be a good sign for retail competitors like Tweeter Home Entertainment Group Inc (NASDAQ: TWTR) - Tweeter filed for bankruptcy last week - and Circuit City Stores Inc (NYSE: CC). Analysts believe the companies are likely to face pressure this year from falling prices of flat-screen TVs and increased competition from other retailers like Wal-Mart Stores Inc (NYSE: WMT) and Costco Wholesale Corporation (NASDAQ: COST) that are increasing their consumer electronics offerings. This morning, following Best Buy's earnings report, Circuit City shares dropped 2.6%; the company is scheduled to report its own earnings Wednesday morning.

Despite a challenging environment, analysts believe Best Buy remains the best-positioned in the consumer electronics segment. Executives, too, are optomistic about the second half of the year, expecting "materially better sales" in home theater and digital imaging, as well as with the company's Geek Squad service. Executives expect flat panels, notebooks and gaming will remain "very appealing." Additionally, the company is planning to expand Apple Inc's (NASDAQ: AAPL) store-within-a-store concept, and anticipates to have just under 300 of these by the end of the year.

While Best Buy's performance and expansion have helped it in this area until now, let's hope that CEO Brad Anderson's comment that the company's strategy is consistent with the long-term results the company hopes to achieve, even if Q1 results may not have shown it, holds true.

It what looks like another effort to win business from money-spending parents, Best Buy's (NYSE: BBY) website at www.BestBuy.com is set to start giving parents guidance on video game choices for their kids. This appears to go past the ESRB "Ratings" system for current games that tries with a single letter ("T" or "M" for example) to describe games for parents. Often, though, the actual content of games is unknown unless parents do a little research beforehand. Common Sense Media, Best Buy's partner here, will be providing reviews and content descriptions on video game choices so that parents can have the work done for them.

This is another value-added service from the consumer electronics giant. Those who are concerned about the content of what their kids are seeing (like screening for appropriate television shows) will certainly be glad for this proactive service Best Buy will be providing. Additionally, where do you think those parents will go to buy the game? Hint: the initials are "BB."

The ratings system from Common Sense Media will give parents information about the violence, sexual and profanity content of video games, with it's CEO stating that "Our goal is to give parents the information they need, when and where they need it to make the right video game choices for their families." Sounds pretty straightforward to me and it's probably going to turn into a heavy customer retention tool for Best Buy's growing entertainment area from the launch point of this program forward.

In the light of consumer electronics giant Best Buy (NYSE:BBY) beating up all over the competition, has its CEO earned his pay recently? Best Buy CEO Brad Anderson received $5.6 million in fiscal year 2007, which I say I say is underpaid according to how Best Buy has performed in the same period. In other words, this is probably a case of a CEO not being compensated enough. When some CEOs take home packages worth tens of millions for under-performance (with incompetent boards blessing them highly), it's refreshing to see a CEO who has taken his company to the top, has taken the share price for a ride (it's not done fabulous, but it has not sunk) and is being paid according to that effort.

If you were a BBY shareholder back in August 2005 when a 3:2 split happened and ended up selling late in the summer of 2006 (as fears of losses from flat-panel TV price plummeting gripped the industry), you may be sitting pretty right now. Are you? If so, do you agree with Anderson's pay package for Best Buy's fiscal 2007?

Although BBY has not made much movement in the most recent year, Best Buy as a company continues to make what I consider to be all the right moves from a merchandising and services standpoint. At the same time, competitor Circuit City (NYSE:CC) has told 3,400 employees to take off and CompUSA us in the midst of closing half of its stores in the U.S. that show under-performance. That leaves Best Buy as a top PC retailer (where margins can be very thin) as well as a burgeoning provider of all kinds of services (Geek Squad and the purchase of Speakeasy). Things appear on track for Anderson and Co., in other words.

Best Buy (NYSE: BBY) has been doing great recently. The largest consumer electronics retailer in the U.S. continues to hold a commanding lead over all other retailers in its segment, it's generating a very healthy profit, it's expanding, and it is really becoming involved in the service provider business. The Geek Squad service business, the Best Buy for Business division, and even the recent purchase of Speakeasy all indicate that Best Buy is broadening its horizons. Retail margins, except for flat-panel TVs, are still giving Best Buy decent profit growth.

Meanwhile, its competitors are struggling hard. Circuit City Stores (NYSE: CC) has had losses in recent quarters and is shutting stores and canning over 3,500 employees. CompUSA is reportedly closing over half of its U.S. stores to return to profitability. How can one retailer do so well while others in roughly the same space do so poorly? That and other questions were posed to Best Buy CEO Brad Anderson recently in a Q&A session.

Best Buy's secret? To be a "fast follower" and adopt retail strategies from discount retailers like Wal-Mart Stores (NYSE: WMT) and Target Corp. (NYSE: TGT). Sound odd? It does a little -- but it's worked for Best Buy to a very large degree. Can Best Buy keep it up and continue winning in the retail electronics sector moving forward? By looking at Anderson's answers at CNN Money, it appears that Best Buy may be able to do just that.

Will Wal-Mart be able to increase its higher-margin consumer electronics business to compete with the likes of Best Buy, the nation's largest consumer electronics retailer? If recent events are any indication, the answer would be an emphatic "no." Best Buy has been stampeding across the consumer electronics marketplace while leaving most competitors in the dust, as its most recent quarterly results demonstrate. What is a global, growth-obsessed retailer like Wal-Mart to do?

If Wal-Mart wants to emulate Best Buy's success, perhaps it should solicit feedback from employees about the electronics that are carried and displayed inside Wal-Mart stores. Best Buy CEO Brad Anderson has made this strategy commonplace among Best Buy employees. It's a smart move: Who is closer to actual customers than employees in the stores? Nobody is, regardless of what marketing and PR folks think.

The only "real" feedback, when measured and collected appropriately, is from front-line people. Sadly, the top brass at most companies still refuse to acknowledge this. Harvard marketing MBAs can't hold a candle to finding out what delights the customer when compared to the employees that actually interact one-on-one with customers. That's my story, and I'm sticking to it.

Can Wal-Mart be successful merchandising and, selling, higher-margin electronics items? By building an in-store cubicle and just stacking Plasma TVs and high-end audio gear, I doubt it. Display the merchandise correctly, have informed employees in the electronics section (that'll be a tough one) and listen to what customers want -- and it may have a chance to compete with the likes of Best Buy.