Best Buy was once the rock star of Big Box electronic retailing. The other electronic boxes are gone.
First we need to break down Best Buy revenue by category. From their December 2011 report (Best Buy, 2012):
Brick & Mortar locations, both a positive and negative for Best Buy. People love to touch and look at items they want to buy, however too many people are touching at Best Buy and ordering online. Best Buy needs to covert these touches into sales in the store, or through their online web presence.
Customer Service Issues
There have been regular stories reported of employees holding the hot new electronics for themselves, not having enough in stock, and repackaging returns and selling as new. There have been many allegations of involuntary enrolling people (without consent) into Best Buy’s Rewards Zone program, and charging customers without consent for a Best Buy Performance Service Plan (PSP). Employees may have hours cut if enough PSP’s are not sold, so some unethical employees have simply added PSP’s onto simple items like a DVD where the customer may not notice an extra dollar. How many news stories were out there for customers bringing in a computer to the Geek Squad only to have personal files held hostage for extra money, or to have personal documents placed publicly on the web?
Best Buy holds sales, including on Black Friday, without enough staff resulting in long lines. It’s just too easy to buy at Amazon for people to want to deal with improperly staffed stores with surly employees.
I have read on The Consumerist many times how a customer would try to match a Best Buy store with Best Buy’s online website. Stores don’t want to lose sales to the web, even Best Buy’s web, so they created their own internal Best Buy website with prices the same as the store. You would have to bring your own device in with cellular web coverage to prove a price match was needed. They have corrected this, I’m told, but the memory lingers. The competition between stores and the Best Buy website still exists when people buy online to pick up at the store, some managers won’t hand the item over to an online customer.
The Best Buy website itself is not very consumer friendly and is prone to crashing during big sales, and product launches. This is unacceptable.
Discussion of alternative solutions
Fix relationship with employees; get them to buy-in with overall company direction. People hate the hard sell on Best Buy’s Rewards Zone program and Best Buy Performance Service Plan and employees hate to sell them. Holding employees hours hostage over sales quotas has to end. Fix the hours for employees, look into benefits.
Occasional weeding of the garden via personnel changes may be necessary to get a good mix of sales of high margin Rewards Zone and Performance Service Plans sold. Correct the ratio of part-time employees with the Affordable Care Act coming soon, and the added costs for the Act. Make sure you have staff for big sales and product launches.
Continue branding of Rocketfish and Insignia. Store brands can be developed into desired products. Insignia is a entry-level product line, while RocketFish occupies the middle-level product line. Market them appropriately, and create or purchase a top-level product line. Having a high end brand allows customer to grow with Best Buy coming back to purchase their way up with in-house brands.
A Social Media Department!
Create partnerships with home builders, one firm to take place of many subcontractors. Wire whole houses both high & low voltage, TV and Internet connections, whole house sound systems, PA systems, and alarms. If you’re in the house, you might as well stock it with Best Buy appliances. Start small and learn how to build the business, or buy an existing firm that will get this plan running.
After Best Buy learns how to work with home building contractors it will be time for commercial construction partnerships. Corporate tower building downtown need high voltage, low voltage TV and internet connections, sound systems, PA systems, and alarms only higher grade typically. That tower is going to need a bunch of refrigerators, microwaves. Once in the building, they will need printers and computers. If you can do the network wiring, Best Buy might as well install all the networking equipment.
Become KINGS of video conferencing. Everybody wants it; nobody knows how to get started. Video conferencing saves money.
More revenue opportunities, once you can do the bigger project it may be time to get contracts to do whole chains of movie theaters. After you learn to install everything everywhere, it’s time for service contracts. Service contracts are regular streams of income.
Work out a deal to put an Apple Store inside every Best Buy. Best Buy already sells 13% of all iPhones compared to Apple at 15%. (Paczkowski, 2012)
I was personally told each store may only have 3 phone carriers per store. I bought a Nexus S Android phone at the Mall of America, but when I went in for service on the PSP in Shakopee the employee wasn't familiar with that carrier. I was told each store may only carry 3 carriers. I did get a replacement phone ordered after the employee did some research, but it was a massive inconvenience.
Maybe the difference is corporate stores vs. stores owned by franchisees. I had one Best Buy employee tell me at the Mall of America that she was held to a higher standard because it was a corporate store. Homogenize the experience.
Finally determine margins and reallocate floor space in stores.
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