Best Buy Must Focus On In-Store Experience
Best Buy’s financial report this week, with its net profit and sales off in its fiscal fourth quarter, has set off a firestorm of commentary and conjecture.
Much of the talk has been about Amazon.com taking share away from Best Buy to the point that the chain’s CEO Brian Dunn said it would expand its online-only assortment and shrink the size — but not the number — of its stores as they come off lease.
So are we seeing the end of the “big-box retailing” era?
I’m not going to answer that question.
Dave Workman, executive director of the Progressive Retailers Organization (PRO Group) and a CE retailing veteran, practically predicted the discussion last month. He spoke with TWICE during BrandSource’s Summit meeting in Orlando on Feb. 22, remember? That was a month before Best Buy spoke with analysts this week.
Here is part of what Workman said:
“Inventory used to be an asset for traditional retailers — now it is a liability.” When I asked if the big-box business model is outmoded, Workman, he commented, “It is a liability … but it is a moving target.”
Specifically about Best Buy, he said it is “looking to narrow SKUs. How many $69 DVD players do you display? The bigger issue is inventory. The big box used to be about selection. Now the Internet is selection. Brick-and-mortar should be where you go to find experience. Big box has to change to focus on experience [rather] than create a big box to show everything.”
Workman continued, “The shift that is going to take place may not be a 3,000-square-foot store, but you won’t need a 48,000-square-foot store. How about 20,000 square feet?”
About the everyday low pricing message, Workman said, “The problem is that becomes the central message. The problem is, can the entire operation do that? If you can’t, consumers won’t buy.”
Being No. 1 and maintaining that position is always difficult, especially during changing times.
Best Buy — and other regional chains that follow the big box model — are going to have to maintain their brick-and-mortar business, while beefing up their online sales and becoming more transparent in their pricing and more consumer-friendly in their operation.
This will be a tough task under any circumstances, especially during a time of economic malaise and competing against a retail channel that is virtual, can provide free shipping, and, to a large extent, does not charge state or local sales tax … and where consumers can check on their smartphones whether or not the product in the store has the best price.
Today the challenge for Best Buy, and really all big-box and brick-and-mortar retailers, is to provide a dynamic experience so consumers won’t just shop at their stores — they will buy there too.
Mr Marley commented:
The future will be vendors opening their own stores and the majority of sales coming from the web.
hdtvpete commented:
Best Buy’s roll-out of 3D TV last year was bungled from the start. Broken glasses, glasses with half the temples, 3D TVs showing 2D content (but listed as 3D), 3D TVs located at the end of pegboard aisles, sitting 2 feet off the floor - you name it, Best Buy did it. No wonder the public has largely yawned at 3D TV. If BB can’t show it correctly, how do they expect to sell it? But what can you expect from a store where employees work on a flat rate salary?
Bill H commented:
I gave up on Best Buy some time ago. I found I know more about the product then the salesman, and I can get it at half or less the price elsewhere. I tried this xmas to buy a camera and finally went across the street to Sam’s club and paid half the price. It’s not just the tax thing it is the lack of concern at the store.
Rob commented:
I am tired about hearing about how Apple does it right. Apple has fixed pricing and limited distribution and outstanding products.
Furniture is not shippable via UPS/FedEX and is heavy to move giving local stores an advantage over etailers.
Amazon.com is successful for more reasons then sales tax. They do have a long term weakness in that they have no stores limiting product categories and delivery/ service options.
Virtual Retailers have a huge advantage over brick and morters and most manufacturers are motivated to sell product, not build their brand or dealer network.
It will all change soon that is for sure.
Brick and mortar as we know it will be gone.
There will be an Internet sales tax or a wholesale tax. Wal Mart is pushing for this.
Most Manufacturers will make there choice (Small dealers only, or Wal Mart’s) to late and go out of business.
Alan B. commented:
In-store execution is what's lacking at Best Buy. From the ill-informed salespeople to the incomprehensible signage to the lack of proper demonstration, the in-store experience is marginal. No wonder the Wall Street Journal called Best Buy "Amazon.com's showroom."
LXIX commented:
Customer experience…
At Best Buy my experience was terrible. I was in the Magnolia room and was playing with a Denon receiver when a salesperson started an argument with me telling me to stop touching their products. He insisted that the receivers had been tuned the way they wanted them and I was messing things up. The fact is that they had never changed the speaker settings from factor default (everything was set to large) and the Blu-Ray player was outputting a 2 channel Dolby Digital audio signal instead of the 5.1 DTS audio signal. I was so angry that I walked out and bought the product from an on-line dealer for less.
Your only advantage over an online dealer is the customer experience and consumer impatience with waiting for the UPS guy, do you really believe not allowing your customers to play with the gear before they buy is a wise business practice?
Bob Williams commented:
More Technology than ever matched by poorly informed / motivated sales people creates a less then deluxe experience. Is it time to re-enter the commission sales floor?? Why is inventory not an asset? More and more burden needs to be placed on the vendors to monitor turns and inventory. GMROI is the goal. Vendors that aren’t using sales out data from their retailers are yesterdays vendors. Informed & motivated floor people will improve the customer experience and vendor monitored inventory will increase the bottom line
ZoetMB commented:
The problem with big box retailers is that they currently provide little value-add for the consumer. In spite of their reputations, prices are not inexpensive: most current models sell for list or very close. Except for TV panels, almost nothing can be demonstrated: there are shelves of audio receivers and other components that aren't plugged into anything. 3D sets are on the floor with no 3D glasses. TV sets are mounted on the walls, but there's little information other than size and price to tell me what I want one set over the other.
Music and video software is badly organized and certainly not "curated".
Furniture stores learned a long time ago that you have to sell furniture in room settings. Apple taught us that you must provide an experience where consumers can play and/or be trained. Electronics needs to do the same thing. An electronics store needs to be a "cool place" to visit. Today, most are about as interesting as a chain supermarket. And if that's the case, online will win.
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