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Why Best Buy should double down on mobile and entertainment

Alright, Best Buy, it’s time to get rid of the washing machines. You are a consumer electronics store. You always have been.

Best Buy’s revenue fell 1.1 percent as in-store sales fell 5 percent in its most recent fiscal quarter when compared to the same quarter a year earlier. The declining revenue is largely a result of declines in video game and TV sales.

That shouldn’t come as much of a surprise. Video game sales have been declining for several months, despite a spike last month thanks to Call of Duty and Microsoft’s new Kinect motion controller. Big-name televisions are largely seen as big-ticket items that can be a tough sell during economic hardship, especially when stores like Walmart can sell less popular brands on the cheap.

But Best Buy’s appliance sales, while stable when compared to the same quarter a year ago, only represent about five percent of the company’s total revenue. Compare that to the massive amount of space appliances take up, which requires additional real estate and staff. There also doesn’t seem to be a real synergy between a fridge and a plasma television.

The real estate boom — arguably the best time to sell appliances — is already over, and it’s now time to lean down and focus on one specific sector. Best Buy’s niche has always been consumer electronics and gadgets. Sales at its Best Buy Mobile stores — which focus solely on gadgets and consumer electronics —  saw healthy growth and helped buffer the company’s profit in its most recent quarter, according to the company’s most recent earnings report.

Best Buy is even showing signs of putting a lot of focus on mobile by offering the iPhone 3GS for free for a day and is confident enough to launch Google’s next phone running its Android mobile operating system, the Nexus S, without a pre-order sale beforehand. Its online sales on its consumer-facing website, which largely focus on electronics and gadgets, were up 7 percent in the third quarter when compared to the same quarter a year ago.

Times are tough all around. With the success of Best Buy Mobile, it seems like a pretty good time to strip off some of the fat that Best Buy has been carrying around. Imagine what the company’s profit would be if it shaved off all the costs associated with housing and selling those appliances, compared to the just about $600 million in revenue appliances bring in.