Tech

Ex-Best Buy CEO urges big-box chains to make Amazon-type changes or die

Some of the best innovation is happening with television: Anderson
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Some of the best innovation is happening with television: Anderson

The likes of traditionally brick-and-mortar-centric Best Buy and Wal-Mart have made great strides to compete more effectively online, but they need to continue to evolve in order to close the gap with e-commerce powerhouse Amazon, said former Best Buy CEO Brad Anderson.

Appearing on CNBC's "Squawk on the Street" on Cyber Monday, he said Amazon is an "incredible company," built for innovation in the digital age. "In its core culture, [Amazon is] constantly making changes, adapting, making mistakes, using the bottom of the organization as well as the top of the organization."

"Companies like Best Buy and Wal-Mart … are going to have to adapt their cultures to be able to move as fast as Amazon," Anderson said.

He said the slow response by most brick-and-mortar retailers to the rise of Amazon was due to complacency. "I think that occurred in a sense because the warnings of what online would do took about five years."

But physical stores have some inherent advantages, such as having inventory available locally to fill online orders, said Anderson, who was CEO of the electronics retailer from 2002 to 2009. He retired from the board this past summer.

For example, Amazon added 26 fulfillment centers in 2016, nearly double the number it opened last year, as the e-commerce leader looks to establish physical locations to turn orders more quickly. Amazon has a total of 149 fulfillment centers nationwide.

By comparison, Best Buy has 1,400 stores in the U.S. that it could better leverage.

"Over the longer term, they've got to develop value propositions that pure online cannot deliver," Anderson said.

Amazon to do about 2% of total sales on Cyber Monday: Munster
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Amazon to do about 2% of total sales on Cyber Monday: Munster

Meanwhile, Piper Jaffray tech analyst Gene Munster, who follows Amazon with an overweight rating and $900 price target, told CNBC in an earlier interview on Monday that while he sees Best Buy getting its online act together, it may not be enough.

"If you look at Best Buy for example ... they've kind of got their e-commerce offering back in order. Target has too. So they're getting about 20 percent growth for those online businesses," Munster said, but stressed Amazon has been grabbing so much offline share that it's growing much faster.

He told "Squawk Box" that Wal-Mart stands to learn and benefit from its acquisition this year of online e-commerce start-up Jet.com in a $3.3 billion cash and stock deal. "But it doesn't change the fundamental issue that Wal-Mart has, that is they're geared for brick and mortar not to online which is whole different game."

"I think what's more important is what [Amazon is] doing beyond the holiday quarter here. And that is that they are slowly turning the screws down on traditional retail. I think traditional retail long term is in a very bad place," Munster said. "Amazon is building an infrastructure that is going to defeat longer term."