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Aug 22

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My Rx for Best Buy

On Monday August 20th, Best Buy announced that they would bring in Carlson CEO Hubert Joly to run the company after negotiations with co-founder Richard Schulze to take the company private broke down. Investors, who were likely hoping for a quick cash-out from the deal, punished the stock by ten percent even though Joly has an established record as a turn-around artist.  The day following the Joly announcement, the firm announced prior quarter earnings that, including charges for already announced restructuring actions, were down 90%.

There has been plenty of recent tumult at Best Buy, but the real worry is that Best Buy appears to be following longtime competitor Circuit City into oblivion. Consumers are often using them as a showroom to check out products and then buying them elsewhere for less — often on e-commerce sites before they even leave the store!

Joly certainly has a challenge ahead of him. But I think that many of the suggestions by journalists as to what Best Buy should be doing are wrong. The conventional wisdom is that Best Buy needs to shrink: fewer stores and smaller stores. Smaller is better. But look at the retail space: Costco is doing fine. Walmart is doing fine. Ikea is doing fine. Target is doing fine. Big isn’t bad. You just need to fill it up with stuff that people want to buy at a price that will make them want to buy it. Is there anything about the name Best Buy that says “must only sell electronics”?

So, getting to more specifics:
1. Give the Apple fan club the real clubhouse.

Right now Best Buy is the place where the Appleites go when they can’t get to the real temple. The difference in vibe between the Apple department at Best Buy and an Apple Store is huge. So give them their own store, with their own glittering chrome and glass entrance. Hire people with Apple Store experience to run it. If Joly can get the Apple @ Best Buy floor space to deliver the same revenue per square foot as a corporate owned Apple Store the rest is gravy.

2. Price Match the Major Web Players

Make a list of the major first run e-Commerce sites: Amazon, CGW, etc. and if they sell the same item for less, match it. Once you’ve made that promise you will find that fewer people will be looking at their cell phones. But can it be done profitably? Best Buy is the largest electronics retailer in the country! That certainly should be enough clout, but it does not look like its being used. For instance, my most recent purchase at Best Buy was a monitor. The price was good, but there were two of them available. When I see a monitor at Costco the stock is usually measured by the pallets, not by the unit. Best Buy is trying to sell too many things and stocking too few of them. Stock just a few models, but buy them in large quantities and then price them to fly.

3. Convert your DVD business to Redbox-on-Steroids

Redbox has a pretty nice technology setup for reserving and picking up disks, but the kiosks themselves have limited capacity. Best Buy should use a small portion of the space and most of the stock currently used for very few disk sales for a video rental service.  There should be a Redbox-like front end for picking and reserving disks, but employees to pull and assemble the orders. And if the customer wants to keep the disk, just let them go to the web site and pay to keep it. Put the rental pickup at the back of the store to encourage foot traffic.

4. Have Surprises, Not Just Sales.

Best Buy is selling the same stuff this month as last month. At Costco, perhaps 85 percent will be the same but about 15 percent will be different and temporary. Ikea and Target will also usually have at least something that I had never seen there before. That adds a slight feeling of adventure to shopping that does not exist at Best Buy.

5. Open Your Scope.

What does Best Buy sell? Home Electronics? How about instead say interesting new technology. Why not sell photovoltaic systems? Hydroponics? LED light conversion systems? Home Automation? I’ve made countless unexpected purchases at Costco and Ikea and Target because they surprised me with something interesting. I cannot recall ever making an unplanned purchase at Best Buy.

About the author

Daniel Nolte

Architect, Network Administrator, Computer Forensics Administrator, Voiceovers. website,

Permanent link to this article: http://betweenthenumbers.net/2012/08/my-rx-for-best-buy/

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