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Best Buy Talks TVs, Handhelds For Holidays

10/04/2010 12:01:00 AM Eastern
NEW YORK – The TV business and the growth in handheld CE devices of all types were two key subjects discussed by Best Buy CEO Brian Dunn and Mike Vitelli, president/Americas, at the chain’s annual holiday preview, here, last Tuesday.

Best Buy is calling this holiday season a “connected Christmas,” emphasizing its ability to provide a breadth of product, installation and service support via the Geek Squad, and strong pricing in any category when needed. (For specifics on details on Best Buy’s plans.)

In outlining its strategy for the quarter, as well as answering media questions, it was evident that Best Buy’s full complement of e-readers, iPads, smartphones and large flat-screen TVs will be a “really compelling value proposition for us,” according to Dunn.

But, he noted, “Let’s be really clear. It is a tough environment out there. It is episodic with the highest highs … but the holiday episode is upon us, and it could be a great holiday season.”

The concern for CE retailers is that if TV sales remain sluggish and consumers go with more handheld gift choices, the average sale will go down.

When asked if consumers are more price conscious, Dunn noted, “not any more than a year ago.” He stated that store traffic has been “down year over year,” but “we don’t view a modest decline as a concern.”

Maybe it is because Dunn has seen “a modest improvement in the basket,” or average sale, at Best Buy. Both Dunn and Vitelli indicated that in-store financing plans for qualified consumers will be available and easier to obtain, but no details were provided about the program.

Dunn commented that consumers this holiday season will be “smart and careful.” The savings rate in the U.S. is higher than in previous years but, “they will come out for our categories. We think our brands will be very important. Consumers buy brands that they trust.”

But sales will be “hard fought” in Q4, as Dunn put it. For instance, when asked about sluggish TV sales and about pricing for Black Friday and the entire season, he replied, “I think great prices are table stakes. There will be smoking-hot prices at Black Friday and then it will be about [value-added services]. We are confident about winning because there we will be there in pricing and services” as well as selection.

Concerning the “episodic” market, in this case the sluggish summer for TVs, Dunn said, “It would not have been good to promote TVs [then] when consumers were not focused on them. You must strike when they are focused.”

Best Buy is betting that consumers will be focused on TVs this fall. Vitelli said the TV industry was “subdued” in the first half when it came to promotion, but that will change now with a major push behind 3D TV, Blu-ray and 3D gaming that will create demand.

Vitelli said that there were higher expectations for 3D earlier in the year, but cited “marketing problem in the stores” and expressed regret over the way it has been advertised. “[3D TV] should have been positioned like a high-end feature in your car … a high-end feature for the best TVs.” Dunn noted, “We underestimated the complexity to explain [3D] to consumers.”

As for the overall TV market Vitelli commented that “HD was soft” in the first half and that top TV suppliers “will look to change their outcome for the year” with strong Q4 efforts.

When asked about the theory that iPad, along with a plethora of smartphone introductions and e-readers cut back on TV sales, Vitelli told TWICE, “There is no question that iPad may have had an impact,” especially when consumers have a specific amount of money to spend.

Best Buy’s holiday strategy illustrates the popularity of mobile computing products. Last week it announced that Best Buy Mobile, which has 100 stand-alone stores currently, will grow by as many as 50 more by Thanksgiving if construction in all locations is completed on time.

And when asked what three game changers would be for the holiday season, Vitelli said, “it’s not that simple” but mentioned smartphones, tablet PCs, as well as computers, TVs and Blu-ray decks that can download content from the internet.

Dunn quipped, “To put it in a holiday frame — ‘Dickensesque — the Ghost of Christmas Past will be games, Microsoft Kinect and Sony Move will be very compelling. Christmas Present will be smartphones and other [connectable devices and services] and mobility, and for the foreshadowing of Christmases to come will be the advent of Google TV and other smart TVs from Sony and others.”

Their responses reflect Best Buy’s holiday gift hit predictions.
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