Best Buy has closed more US stores than it opened every single year since 2012. This year that ends. The company told investors it expects net domestic store growth for the first time in more than a decade.
Here is the part worth your attention. The stores driving that growth are roughly a third the size of the ones it spent fourteen years closing.
Incoming CEO Jason Bonfig, who takes over from Corie Barry this fall, put it plainly this week: there are markets Best Buy simply cannot serve with a traditional store, and those markets make perfect sense at a smaller footprint. Two of them opened this week, in Jonesboro, Arkansas and on Cape Cod.
I closed Stagnation Assassin on this company. In 2007, Best Buy and Circuit City faced identical pressures and made opposite choices, and the book ends by asking the reader which one they are. Nineteen years later the same company is facing the same question, and the answer it just gave is worth studying.
Every operator I know says they want growth. Almost none of them will accept the price Best Buy just paid for it.
- What is Best Buy actually doing?
- Why does a smaller store make more money?
- What is 80/20 Squared?
- Is this just a retreat with better marketing?
- Why are the small markets the smart fight?
- How do you run this play in your own business?
- Frequently asked questions
- About the Stagnation Assassin
What is Best Buy actually doing?
Best Buy is opening small-format stores of 12,000 to 15,000 square feet in markets that cannot support a traditional location. Medium stores run 20,000 to 25,000 square feet and the New York flagship exceeds 40,000. The company expects net domestic store growth this year for the first time in over a decade.
The model was not invented in a strategy deck. Best Buy piloted it, including a store in Bozeman, and the results showed up in two places: walk-in traffic and local online orders. The company’s own annual report describes a tested smaller store model that drove incremental revenue in smaller markets.
Context matters here. Best Buy is not doing this from a position of strength. The company’s own fiscal 2027 guidance calls for revenue between 41.2 and 42.1 billion dollars and comparable sales somewhere between minus 1 percent and plus 1 percent, which is a polite way of saying flat. Analysts have noted the company keeps underperforming the broader electronics market even in quarters where it beats expectations.
So a struggling retailer, facing a competitor that will always have more selection and faster delivery, decided the path back to growth was to build smaller boxes that carry less. That is not the obvious move. It is the correct one.
Why does a smaller store make more money?
Because a smaller store cannot afford to carry unprofitable inventory. Cutting a 40,000 square foot floor to 13,000 forces someone to identify which products actually earn their shelf space and remove everything else. The remaining assortment has a dramatically higher profit per square foot than the average of what it replaced.
This is the mechanism nobody talks about, so let me be specific about it. In any product portfolio, profitability is not spread evenly. It is concentrated in a small cluster, and a meaningful chunk of the catalog actively destroys value while looking busy on a shelf.
When I ran the numbers on a refrigeration division, 74 of 1,847 product and customer combinations were generating 140 percent of the division’s profit. Not 100 percent. One hundred and forty. Everything else, in aggregate, was pulling money out of the business. Acting on that took the division from a 175 million dollar loss to a 48 million dollar gain.
Nobody had to cut the building in half to find that out. But cutting the building in half would have forced the question, and that is the underrated part of what Best Buy just did. A physical constraint is a decision-forcing device. You cannot hedge on assortment when there is no room for the hedge.
I have never seen a leadership team voluntarily cut 60 percent of a product line. Not once. But I have watched a team find 74 winners inside 1,847 combinations in six weeks when a plant closure forced the question, and turn a 175 million dollar loss into a 48 million dollar gain. Constraint is not the enemy of growth. Constraint is what makes the growth findable.
What is 80/20 Squared?
Standard 80/20 says 20 percent of inputs drive 80 percent of results. 80/20 Squared applies the rule to itself. Take the top 20 percent and run the analysis again, and roughly 4 percent of your activity drives about 64 percent of your value. Most companies never get past the first pass.
The first pass is comfortable. Everybody can name their best customers and their best products. The second pass is where it gets uncomfortable, because it tells you that inside the winners you already celebrate, there is a much smaller group doing nearly all the work.
Illinois Tool Works built an industrial empire on this discipline. Their 80/20 Front-to-Back operating system is not a spreadsheet exercise, it is a willingness to walk away from revenue that does not carry its own weight. I learned the method there and I have applied it in three companies since.
A 13,000 square foot store is 80/20 Squared expressed in drywall. You are not choosing the top 20 percent of the assortment. At that footprint you are choosing something much closer to the top 4 percent, and you are betting that the concentrated version outperforms the comprehensive one on the metric that matters, which is profit per square foot rather than revenue per store.
Is this just a retreat with better marketing?
No, and there is a clean test that separates the two. Retreat cuts square footage to reduce cost, and store count falls. Strategy cuts square footage to enter markets that were previously unreachable, and store count rises. Best Buy’s domestic store count is going up for the first time since 2012.
This objection deserves a serious answer because the skeptics are usually right. Shrinking footprint is exactly what dying retailers do on the way down. Circuit City shrank. Sears shrank. RadioShack shrank. In every case the shrinkage was a cost reaction, the store count collapsed alongside it, and the assortment cuts were driven by what they could no longer afford to stock rather than by what they had decided to stop stocking.
Be precise about this, because Circuit City absolutely did rationalize its portfolio. It ran lean initiatives, it cut assortment, it launched customer experience programs, and its metrics improved right up until the day it filed. Subtraction was never the difference between the two companies. Direction was. Circuit City subtracted to survive. Best Buy subtracted to expand.
The direction of the store count is the entire tell. If you are closing your way to a smaller average footprint, that is a cost story and it ends badly. If you are opening your way to a smaller average footprint, that is a portfolio story and it can compound. Same tactic. Opposite intent. Completely different outcome.
The second tell is where the smaller stores go. Best Buy is putting them in Jonesboro and on Cape Cod, not next door to existing locations. That is expansion geography, not consolidation geography.
One more thing that story teaches, and it is the part most people miss. Best Buy answered this question in 2007 and it is answering it again in 2026, with its own full-year guidance calling for comparable sales somewhere between minus 1 and plus 1 percent. The choice is not a single event in a company’s life. It comes back roughly every decade, and choosing correctly last time buys you nothing when it returns. If you read that chapter and decided you were already on the right side of it, that is exactly the moment to check whether the question is being asked again.
Why are the small markets the smart fight?
Because nobody else wants them. Best Buy cannot beat Amazon on selection, price, or delivery speed, and it should stop trying. A physical presence in a town too small for a big box is a dimension Amazon has no reason to contest and no other electronics retailer can afford to enter. That is where the fight is winnable.
This is the Karelin Method in its purest commercial form. Aleksandr Karelin did not win by being better at the techniques everyone trained for. He won by developing a lift nobody else could defend because nobody else thought it was worth building. The advantage was not superiority on a contested dimension. It was ownership of an uncontested one.
Every electronics retailer is fighting the same three battles: assortment breadth, price, and fulfillment speed. Amazon has structurally won all three. Continuing to compete there is what I would call an orthodoxy problem, where an entire industry keeps optimizing the dimension that stopped deciding outcomes years ago.
Meanwhile there is a town of 40,000 people where somebody wants to hold a laptop before buying it and there is no store within ninety minutes. That customer is not price-shopping. That customer is presence-shopping, and presence is the one thing a warehouse in another state cannot deliver in an afternoon.
How do you run this play in your own business?
Start with profit per unit of your scarcest resource, not revenue. For a retailer that is square feet. For a manufacturer it is machine hours. For a services firm it is billable capacity. Rank everything on that single measure, then find out how much of your total profit the top 4 percent produces.
Four steps, in this order:
- Pick the constrained resource. Not the one you have the most data on, the one you actually run out of. If you never run out of it, it is not your constraint and it will not tell you anything useful.
- Rank the full portfolio on profit per unit of that resource. Fully loaded, not gross margin. Gross margin hides the cost of complexity, and complexity is where the money goes to die.
- Run the second pass. Take the top 20 percent and rank them again. The concentration in that second cut is what will surprise your leadership team, and it is the number that makes the decision obvious.
- Impose an artificial constraint. This is the Best Buy move. Do not ask what you should cut. Declare that the next facility, product line, or territory gets 35 percent of the resources of the last one, and let the constraint force the rationalization that a voluntary process never produces.
Every transformation I have run started the same way: somebody imposed a limit, and the limit did the work that eighteen months of analysis could not. Best Buy did not discover which products deserve shelf space by studying the question. They discovered it by building a store with 65 percent less shelf. Give your team an unlimited floor and they will fill it. Give them 13,000 square feet and they will finally tell you the truth about your catalog.
Bonfig also told CNBC that he is leaning into AI, with customer-facing tools and partnerships involving Meta, OpenAI, and Google, while treating AI as a complement to staff rather than a replacement. Notice that the AI work is downstream of the format decision, not a substitute for it. The technology makes a curated store feel bigger. It does not decide what belongs on the shelf.
Frequently asked questions
These are the questions operators ask most often about applying an 80/20 Squared subtraction to a live business, and about how to tell the difference between a strategic downsizing and a retailer quietly running out of money.
How can cutting selection increase sales?
Because selection and profit are not the same thing. A curated assortment concentrated on the highest profit per square foot items can outperform a broad one, and a smaller footprint lets you place stores in markets a large format cannot support. Fewer products per store, more stores, higher total profit.
What is the difference between 80/20 and 80/20 Squared?
Standard 80/20 identifies the 20 percent of inputs producing 80 percent of results. 80/20 Squared applies the same analysis to that top 20 percent, isolating roughly 4 percent of activity that drives about 64 percent of value. The second pass is where the actionable concentration shows up.
How do I know if a downsizing is strategic or a retreat?
Watch the unit count, not the unit size. If average footprint is falling while total store or product count also falls, that is cost-driven retreat. If average footprint falls while total count rises, the company is using subtraction to reach markets it previously could not serve.
Does this only work in retail?
No. The constrained resource changes but the method does not. Manufacturers rank on profit per machine hour, distributors on profit per pallet position, services firms on profit per billable hour. The discipline is identifying your true constraint and refusing to spend it on anything outside the top tier.
Why do companies resist cutting products that lose money?
Because revenue is visible and complexity cost is not. A product with sales attached feels like an asset, while the overhead, inventory, tooling, and management attention it consumes is spread across the business where nobody owns it. Fully loaded profitability analysis is what makes the cost visible enough to act on.
About the Stagnation Assassin
Todd Hagopian is a Fortune 500 transformation executive who has generated $3B+ in shareholder value across Berkshire Hathaway, Illinois Tool Works, Whirlpool, and JBT Marel, where he serves as VP of Global Product Strategy. Known as The Stagnation Assassin, he is the author of two published books: The Unfair Advantage: Weaponizing the Hypomanic Toolbox and Stagnation Assassin: The Anti-Consultant Manifesto. His blog is published in 15+ languages and read by operators worldwide. Bring him to your stage via his speaking page or connect with him on LinkedIn.
Most executives can name their top 20 percent. Almost none can name their top 4 percent, and that is the group carrying the company. A 15-minute 80/20 Portfolio Performance Audit runs the second pass on your product and customer portfolio and shows you exactly how much of your profit is coming from how little of your business. The number is never what leadership expects. Book the audit.