In a major overhaul of its assortment, Best Buy will increase its plasma and flat-panel LCD display offering by 50 percent, double the number of notebook computers, and boost its mobile video selection over the next six months.
The increased commitment to those categories, along with wireless and home networking, will come at the expense of analog TV, conventional audio and PDAs, whose floor space and inventory levels will be reduced, senior executives said.
The news came in a conference call that followed the release of the company's first fiscal quarter earnings. (See coverage of Best Buy and Circuit City's financials, p. 4.) VP/general merchandise manager Ron Boire described a "major reset" for Best Buy's flat-panel display assortment that will grow the category from 40 to 60 models. "We're taking the assortment up significantly," he said, giving Best Buy an "industry leading" position in flat-panel TVs. President/chief operating officer Al Lenzmeier stressed that despite the popularity of DLP and rear-projection LCD, the expansion will come largely in plasma and flat-panel LCD displays.
Digital TVs sales grew more than 50 percent and represented more than 2 percent of the company's comp store gains last quarter, and Best Buy is growing its digital and flat-panel TV business at twice the industry pace, the execs noted. Boire said that increased production will bring category pricing down to Best Buy's "power zone range," and that the chain has secured sufficient supplies of LCD, plasma and DLP sets with vendors.
Boire added that in addition to offering more flat-panel models, the units will be sold in a "more holistic home-theater selling" approach, which is being adapted from Best Buy's Customer Centricity stores.
Also derived from the test stores is a new notebook fixture that will accommodate 25 models, up from the current 12, which will be rolled out to all stores in advance of the back-to-school season. Sales associates manning the notebook stations will also receive increased training, Lenzmeier said.
Similarly, Best Buy will introduce a new display for mobile video that will accommodate five overhead systems, up from the current three, plus two in-dash models.
CFO Darren Jackson said the increased investment in the video and PC categories, which represents an 8 percent average increase in inventory per store, is designed to drive comp sales and improve in-stocks.
Elsewhere, Best Buy Stores president Mike Keskey noted that the planned expansion of the Customer Centricity initiative to upwards of 110 stores this year in California, Chicago and Washington, D.C., has been reduced to a maximum of 74 locations in California alone. Stores in the Chicago and Washington markets are not considered "ready" for the transformation in terms of either their operational performance and/or the commitment to and understanding of Customer Centricity by local managers, he explained.
Besides displays, Best Buy will roll out other best practices from the Customer Centricity stores this fall. Those practices include reduced freight deliveries, a better balance between mass marketing with local and personal marketing, and a change in promotions that minimizes losses to "extreme price shoppers" without impacting store traffic.
In his opening remarks, CEO Brad Anderson observed that besides boosting sales and earnings, Customer Centricity "is the right thing to do for our customers, and I believe that the days are numbered for retailers who remain product centered."
Separately, Best Buy noted that its major appliance business enjoyed double-digit sales increases last quarter due in part to its greater investment in and training of its white goods sales staff.